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8-K - 8-K - TE Connectivity Ltd.a16-8517_18k.htm
EX-99.2 - EX-99.2 - TE Connectivity Ltd.a16-8517_1ex99d2.htm

Exhibit 99.1

 

 

TE CONNECTIVITY POSTS SOLID FISCAL 2016 SECOND QUARTER RESULTS

 

Adjusted EPS of $0.90, above the mid-point of guidance; GAAP EPS of $1.06

 

SCHAFFHAUSEN, Switzerland — April 20, 2016 — TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 25, 2016.

 

Second Quarter Highlights

 

·                  Net sales of $2.95 billion

·                  Adjusted Earnings Per Share (EPS) were $0.90, above the mid-point of guidance

·                  Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $1.06

·                  Free cash flow was $165 million

·                  Returned $1.2 billion to shareholders through share buybacks and dividends

·                  Completed the acquisition of Creganna Medical Group (closed April 4, 2016), and the sale of the Circuit Protection business

·                  Named a 2016 World’s Most Ethical Company by Ethisphere Institute

 

“I am pleased we exceeded the midpoint of our adjusted EPS guidance range. The company continues to execute well in a sluggish global economic environment,” said TE Connectivity Chairman and CEO Tom Lynch. “Organic growth in our Transportation Solutions segment and SubCom business was offset by continued weakness in industrial-related markets.

 

“We strengthened our harsh environment portfolio with the acquisition of Creganna and the sale of the Circuit Protection business. The Creganna acquisition doubles our medical business to about $500 million in revenue and establishes TE as a leader in the high-growth minimally invasive medical device market.

 

“For the full year, we are reiterating our adjusted EPS guidance of $4.00 at the midpoint, an increase of 11 percent over the prior year. This outlook reflects a return to sales growth in the second half of the fiscal year and continued benefits from our strong operating model.”

 

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FISCAL SECOND QUARTER RESULTS

 

The company reported net sales of $2.95 billion, compared to prior year sales of $3.08 billion. Adjusted EPS were $0.90, compared to $0.91 in the prior year. GAAP EPS were $1.06, compared to $0.77 in the prior year. Free cash flow was $165 million for the quarter.

 

GAAP EPS included $64 million of income from net restructuring and other charges (credits) partially offset by $6 million of expense from acquisition related charges and tax items.

 

Total company orders were $2.7 billion, up 1 percent sequentially, excluding SubCom. The book-to-bill ratio was 1.00, excluding SubCom.

 

OUTLOOK

 

For the fiscal third quarter 2016, the company expects net sales of $3.0 billion to $3.2 billion and adjusted EPS of $1.00 to $1.06. GAAP EPS are expected to be $0.90 to $0.96, including acquisition related charges of $0.03, and restructuring and other charges of $0.07.

 

For the full year, the company expects net sales of $12.1 billion to $12.5 billion and adjusted EPS of $3.90 to $4.10. GAAP EPS are expected to be $3.92 to $4.12, including acquisition related charges of $0.06, net restructuring and other credits of $0.01, and tax-related income of $0.07. The outlook includes the Creganna acquisition, reduced impact from foreign exchange headwinds and the impact of a 53rd week.

 

The outlook assumes foreign exchange and commodity rates that are consistent with current levels. Information about TE Connectivity’s use of non-GAAP financial measures is provided below. For a reconciliation of these non-GAAP financial measures, see the attached tables.

 

OTHER ITEMS

 

Earlier today, the company announced the acquisition of Jaquet Technology Group AG (JAQUET), a sensor company with speed sensing products for the automotive and industrial markets. The transaction is subject to obtaining the necessary regulatory approvals and is expected to close later in the company’s fiscal year. Learn more at http://www.te.com/usa-en/products/sensors.html

 

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CONFERENCE CALL AND WEBCAST

 

·                  Internet users will be able to access the company’s earnings webcast, including slide materials, at the Investors section of TE Connectivity’s website: http://investors.te.com.

·                  The company will hold a conference call for investors today at 8:30 a.m. ET. For both listen-only participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (800) 230-1074, and for international callers, the dial-in number is (612) 234-9960.

·                  An audio replay of the conference call will be available beginning at 10:30 a.m. ET on April 20, 2016, and ending at 11:59 p.m. ET on April 27, 2016. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the dial-in number is (320) 365-3844. The replay access code for all callers is 390294.

 

NON-GAAP MEASURES

 

“Organic Sales Growth,” “Adjusted Operating Income,” “Adjusted Operating Margin,” “Adjusted Other Income, Net,” “Adjusted Income Tax Expense,” “Adjusted Income from Continuing Operations,” “Adjusted Earnings Per Share” and “Free Cash Flow” are non-GAAP measures and should not be considered replacements for results in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP measures may not be comparable to similarly-titled measures reported by other companies. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP measures in combination with the most directly comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease in reported amounts. The following provides additional information regarding these non-GAAP measures:

 

·                  Organic Sales Growth — is a useful measure of our underlying results and trends in the business. It is also a significant component in our incentive compensation plans. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Sales Growth is a useful measure of our performance because it excludes items that: i) are not completely under management’s control, such as the impact of changes in foreign currency exchange rates; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.

 

·                  Adjusted Operating Income — represents operating income (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We utilize Adjusted Operating Income to assess segment level core operating performance and to provide insight to management in evaluating segment operating plan execution and underlying market conditions. It also is a significant component in our incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods.

 

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·                  Adjusted Operating Margin — represents operating margin (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. This measure should be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and impact of adjustments to operating margin.

 

·                  Adjusted Other Income, Net — represents other income, net (the most comparable GAAP measure) before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. We present Adjusted Other Income, Net as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP.

 

·                  Adjusted Income Tax Expense — represents income tax expense (the most comparable GAAP measure) after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, impairment charges, other income or charges, and certain significant special tax items, if any. We present Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used in determining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).

 

·                  Adjusted Income from Continuing Operations — represents income from continuing operations (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Income from Continuing Operations as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. Adjusted Income from Continuing Operations provides additional information regarding our underlying operating results, trends and the comparability of these results between periods.

 

·                  Adjusted Earnings Per Share — represents diluted earnings per share from continuing operations (the most comparable GAAP measure) before special items, including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. We believe such a measure provides insight into our underlying operating results, trends and the comparability of these results between periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing. It also is a significant component in our incentive compensation plans.

 

·                  Free Cash Flow (FCF) — is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.

 

Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Net capital expenditures consist of capital expenditures less proceeds from the sale of property, plant, and

 

4



 

equipment. These items are subtracted because they represent long-term commitments. Voluntary pension contributions are excluded from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters, are also considered by management in evaluating Free Cash Flow.

 

Free Cash Flow subtracts certain cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and may imply that there is less or more cash available for our programs than the most comparable GAAP measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.

 

FORWARD-LOOKING STATEMENTS

 

This release contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive and data and devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; the possible effects on us of changes in tax laws, tax treaties and other legislation; the risk that the conditions precedent to our proposed tax litigation settlement with the IRS relating to our intercompany debt dispute are not met and the intercompany debt dispute is not settled; the risk that Creganna’s operations will not be successfully integrated into ours; and the risk that revenue opportunities, cost savings and other anticipated synergies from the Creganna acquisition may not be fully realized or may take longer to realize than expected.  More detailed information about these and other factors is set forth in TE Connectivity Ltd.’s Annual Report on Form 10-K for the fiscal year ended Sept. 25, 2015 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports filed by us with the U.S. Securities and Exchange Commission.

 

ABOUT TE CONNECTIVITY

 

TE Connectivity (NYSE: TEL) is a $12 billion global technology leader. Our connectivity and sensor solutions are essential in today’s increasingly connected world. We collaborate with engineers to transform their concepts into creations — redefining what’s possible using intelligent, efficient and high-performing TE products and

 

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solutions proven in harsh environments. Our 72,000 people, including over 7,000 engineers, partner with customers in close to 150 countries across a wide range of industries. We believe EVERY CONNECTION COUNTS — www.TE.com.

 

# # #

 

Contacts:

Media Relations:

Amy Shah

TE Connectivity

610-893-9555

media@te.com

Investor Relations:

Sujal Shah

TE Connectivity

610-893-9790

Sujal.shah@te.com

 

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TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 25,

 

March 27,

 

March 25,

 

March 27,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(in millions, except per share data)

 

Net sales

 

$

2,952

 

$

3,082

 

$

5,785

 

$

6,131

 

Cost of sales

 

1,990

 

2,031

 

3,878

 

4,060

 

Gross margin

 

962

 

1,051

 

1,907

 

2,071

 

Selling, general, and administrative expenses

 

367

 

391

 

707

 

777

 

Research, development, and engineering expenses

 

156

 

160

 

318

 

320

 

Acquisition and integration costs

 

3

 

14

 

8

 

38

 

Restructuring and other charges (credits), net

 

(99

)

38

 

(59

)

63

 

Operating income

 

535

 

448

 

933

 

873

 

Interest income

 

4

 

4

 

10

 

9

 

Interest expense

 

(32

)

(37

)

(62

)

(71

)

Other income (expense), net

 

12

 

(5

)

20

 

(75

)

Income from continuing operations before income taxes

 

519

 

410

 

901

 

736

 

Income tax (expense) benefit

 

(130

)

(94

)

(188

)

15

 

Income from continuing operations

 

389

 

316

 

713

 

751

 

Income (loss) from discontinued operations, net of income taxes

 

(9

)

283

 

20

 

320

 

Net income

 

$

380

 

$

599

 

$

733

 

$

1,071

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.07

 

$

0.78

 

$

1.90

 

$

1.85

 

Income (loss) from discontinued operations

 

(0.02

)

0.70

 

0.05

 

0.79

 

Net income

 

1.04

 

1.47

 

1.95

 

2.63

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.06

 

$

0.77

 

$

1.88

 

$

1.82

 

Income (loss) from discontinued operations

 

(0.02

)

0.69

 

0.05

 

0.77

 

Net income

 

1.03

 

1.45

 

1.93

 

2.59

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.33

 

$

0.29

 

$

0.66

 

$

0.58

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

364

 

407

 

375

 

407

 

Diluted

 

368

 

413

 

379

 

413

 

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

March 25,

 

September 25,

 

 

 

2016

 

2015

 

 

 

(in millions, except share data)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,150

 

$

3,329

 

Accounts receivable, net of allowance for doubtful accounts of $17 and $18, respectively

 

2,095

 

2,120

 

Inventories

 

1,635

 

1,615

 

Prepaid expenses and other current assets

 

534

 

476

 

Deferred income taxes

 

 

345

 

Total current assets

 

5,414

 

7,885

 

Property, plant, and equipment, net

 

2,899

 

2,920

 

Goodwill

 

4,673

 

4,824

 

Intangible assets, net

 

1,435

 

1,555

 

Deferred income taxes

 

2,458

 

2,144

 

Receivable from Tyco International plc and Covidien plc

 

679

 

964

 

Other assets

 

283

 

297

 

Total Assets

 

$

17,841

 

$

20,589

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

$

152

 

$

498

 

Accounts payable

 

1,116

 

1,143

 

Accrued and other current liabilities

 

1,719

 

1,749

 

Deferred revenue

 

110

 

185

 

Total current liabilities

 

3,097

 

3,575

 

Long-term debt

 

3,732

 

3,386

 

Long-term pension and postretirement liabilities

 

1,315

 

1,327

 

Deferred income taxes

 

291

 

329

 

Income taxes

 

1,552

 

1,954

 

Other liabilities

 

448

 

433

 

Total Liabilities

 

10,435

 

11,004

 

Commitments and contingencies

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Common shares, 414,064,381 shares authorized and issued, CHF 0.57 par value

 

182

 

182

 

Contributed surplus

 

3,765

 

4,359

 

Accumulated earnings

 

7,406

 

6,673

 

Treasury shares, at cost, 56,563,475 and 20,071,089 shares, respectively

 

(3,498

)

(1,256

)

Accumulated other comprehensive loss

 

(449

)

(373

)

Total Shareholders’ Equity

 

7,406

 

9,585

 

Total Liabilities and Equity

 

$

17,841

 

$

20,589

 

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 25,

 

March 27,

 

March 25,

 

March 27,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

(in millions)

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

380

 

$

599

 

$

733

 

$

1,071

 

(Income) loss from discontinued operations, net of income taxes

 

9

 

(283

)

(20

)

(320

)

Income from continuing operations

 

389

 

316

 

713

 

751

 

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

144

 

147

 

290

 

307

 

Non-cash restructuring charges

 

6

 

 

8

 

15

 

Deferred income taxes

 

6

 

25

 

(52

)

(54

)

Provision for losses on accounts receivable and inventories

 

2

 

10

 

23

 

28

 

Tax sharing (income) expense

 

(11

)

5

 

(19

)

74

 

Share-based compensation expense

 

21

 

21

 

43

 

44

 

Gain on divestiture

 

(146

)

 

(146

)

 

Other

 

39

 

16

 

54

 

46

 

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(228

)

(53

)

9

 

(19

)

Inventories

 

38

 

(19

)

(61

)

(180

)

Prepaid expenses and other current assets

 

286

 

8

 

302

 

11

 

Accounts payable

 

14

 

(19

)

(41

)

(11

)

Accrued and other current liabilities

 

(8

)

(39

)

(138

)

(241

)

Deferred revenue

 

1

 

(24

)

(70

)

(80

)

Income taxes

 

(424

)

(17

)

(396

)

(132

)

Other

 

26

 

(27

)

3

 

(4

)

Net cash provided by continuing operating activities

 

155

 

350

 

522

 

555

 

Net cash provided by (used in) discontinued operating activities

 

(1

)

48

 

(2

)

138

 

Net cash provided by operating activities

 

154

 

398

 

520

 

693

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(131

)

(156

)

(270

)

(291

)

Proceeds from sale of property, plant, and equipment

 

 

1

 

1

 

6

 

Acquisition of businesses, net of cash acquired

 

(6

)

(218

)

(6

)

(1,729

)

Proceeds from divestiture of business, net of cash retained by business sold

 

261

 

 

261

 

 

Other

 

12

 

1

 

29

 

(2

)

Net cash provided by (used in) continuing investing activities

 

136

 

(372

)

15

 

(2,016

)

Net cash used in discontinued investing activities

 

 

(7

)

 

(14

)

Net cash provided by (used in) investing activities

 

136

 

(379

)

15

 

(2,030

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

Net increase (decrease) in commercial paper

 

150

 

(362

)

150

 

(92

)

Proceeds from issuance of long-term debt

 

350

 

617

 

350

 

617

 

Repayment of long-term debt

 

(500

)

(250

)

(500

)

(473

)

Proceeds from exercise of share options

 

27

 

72

 

61

 

88

 

Repurchase of common shares

 

(1,274

)

(130

)

(2,523

)

(285

)

Payment of common share dividends to shareholders

 

(118

)

(118

)

(245

)

(236

)

Transfers (to) from discontinued operations

 

(1

)

41

 

(2

)

124

 

Other

 

(1

)

(3

)

(5

)

(2

)

Net cash used in continuing financing activities

 

(1,367

)

(133

)

(2,714

)

(259

)

Net cash provided by (used in) discontinued financing activities

 

1

 

(41

)

2

 

(124

)

Net cash used in financing activities

 

(1,366

)

(174

)

(2,712

)

(383

)

Effect of currency translation on cash

 

3

 

(16

)

(2

)

(40

)

Net decrease in cash and cash equivalents

 

(1,073

)

(171

)

(2,179

)

(1,760

)

Cash and cash equivalents at beginning of period

 

2,223

 

868

 

3,329

 

2,457

 

Cash and cash equivalents at end of period

 

$

1,150

 

$

697

 

$

1,150

 

$

697

 

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

20

 

$

18

 

$

62

 

$

64

 

Income taxes paid, net of refunds

 

547

 

85

 

635

 

170

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to Free Cash Flow:

 

 

 

 

 

 

 

 

 

Net cash provided by continuing operating activities

 

$

155

 

$

350

 

$

522

 

$

555

 

Capital expenditures, net

 

(131

)

(155

)

(269

)

(285

)

Payments related to pre-separation U.S. tax matters, net

 

139

 

22

 

140

 

26

 

Payments related to income taxes on the sale of the Broadband Network Solutions business

 

2

 

 

9

 

 

Free cash flow (1)

 

$

165

 

$

217

 

$

402

 

$

296

 

 


(1) Free cash flow is a non-GAAP measure.  See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 25,

 

March 27,

 

March 25,

 

March 27,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

($ in millions)

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

1,608

 

 

 

$

1,610

 

 

 

$

3,115

 

 

 

$

3,222

 

 

 

Industrial Solutions

 

738

 

 

 

797

 

 

 

1,447

 

 

 

1,581

 

 

 

Communications Solutions

 

606

 

 

 

675

 

 

 

1,223

 

 

 

1,328

 

 

 

Total

 

$

2,952

 

 

 

$

3,082

 

 

 

$

5,785

 

 

 

$

6,131

 

 

 

 

 

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

 

 

Income

 

Margin

 

Income

 

Margin

 

Income

 

Margin

 

Income

 

Margin

 

Transportation Solutions

 

$

289

 

18.0

%

$

323

 

20.1

%

$

550

 

17.7

%

$

618

 

19.2

%

Industrial Solutions

 

63

 

8.5

 

84

 

10.5

 

129

 

8.9

 

170

 

10.8

 

Communications Solutions

 

183

 

30.2

 

41

 

6.1

 

254

 

20.8

 

85

 

6.4

 

Total

 

$

535

 

18.1

%

$

448

 

14.5

%

$

933

 

16.1

%

$

873

 

14.2

%

 

 

 

Adjusted

 

Adjusted

 

Adjusted

 

Adjusted

 

Adjusted

 

Adjusted

 

Adjusted

 

Adjusted

 

 

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

 

 

Income (1)

 

Margin (1)

 

Income (1)

 

Margin (1)

 

Income (1)

 

Margin (1)

 

Income (1)

 

Margin (1)

 

Transportation Solutions

 

$

305

 

19.0

%

$

333

 

20.7

%

$

585

 

18.8

%

$

670

 

20.8

%

Industrial Solutions

 

84

 

11.4

 

112

 

14.1

 

162

 

11.2

 

210

 

13.3

 

Communications Solutions

 

51

 

8.4

 

61

 

9.0

 

137

 

11.2

 

127

 

9.6

 

Total

 

$

440

 

14.9

%

$

506

 

16.4

%

$

884

 

15.3

%

$

1,007

 

16.4

%

 


(1) Adjusted operating income and adjusted operating margin are non-GAAP measures. See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

Change in Net Sales for the Quarter Ended March 25, 2016

 

Segment’s Total

 

 

 

versus Net Sales for the Quarter Ended March 27, 2015

 

Net Sales for the

 

 

 

 

 

 

 

Acquisitions

 

 

 

 

 

Quarter Ended

 

 

 

Organic (1) 

 

Translation (2)

 

(Divestiture)

 

Total

 

March 25, 2016

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

47

 

3.9

%

$

(43

)

$

 

$

4

 

0.3

%

76

%

Commercial Transportation

 

1

 

0.7

 

(4

)

 

(3

)

(1.4

)

13

 

Sensors

 

4

 

1.9

 

(7

)

 

(3

)

(1.6

)

11

 

Total

 

52

 

3.2

 

(54

)

 

(2

)

(0.1

)

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

(26

)

(7.9

)

(4

)

14

 

(16

)

(4.9

)

42

 

Aerospace, Defense, Oil, and Gas

 

(29

)

(9.6

)

(3

)

2

 

(30

)

(9.9

)

37

 

Energy

 

(4

)

(2.4

)

(9

)

 

(13

)

(7.6

)

21

 

Total

 

(59

)

(7.4

)

(16

)

16

 

(59

)

(7.4

)

100

%

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and Devices

 

(72

)

(24.2

)

(3

)

(12

)

(87

)

(25.1

)

43

 

Subsea Communications

 

30

 

17.6

 

 

 

30

 

17.6

 

33

 

Appliances

 

(10

)

(6.4

)

(2

)

 

(12

)

(7.5

)

24

 

Total

 

(52

)

(8.3

)

(5

)

(12

)

(69

)

(10.2

)

100

%

Total

 

$

(59

)

(2.0

)%

$

(75

)

$

4

 

$

(130

)

(4.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

Change in Net Sales for the Six Months Ended March 25, 2016

 

Segment’s Total

 

 

 

versus Net Sales for the Six Months Ended March 27, 2015

 

Net Sales for the

 

 

 

 

 

 

 

Acquisitions

 

 

 

 

 

Six Months Ended

 

 

 

Organic (1) 

 

Translation (2)

 

(Divestiture)

 

Total

 

March 25, 2016

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

58

 

2.4

%

$

(138

)

$

 

$

(80

)

(3.3

)%

75

%

Commercial Transportation

 

(9

)

(2.1

)

(17

)

 

(26

)

(6.2

)

13

 

Sensors

 

19

 

5.3

 

(20

)

 

(1

)

(0.3

)

12

 

Total

 

68

 

2.1

 

(175

)

 

(107

)

(3.3

)

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

(49

)

(7.6

)

(19

)

30

 

(38

)

(6.0

)

41

 

Aerospace, Defense, Oil, and Gas

 

(62

)

(10.3

)

(15

)

7

 

(70

)

(11.8

)

36

 

Energy

 

2

 

0.5

 

(28

)

 

(26

)

(7.4

)

23

 

Total

 

(109

)

(6.9

)

(62

)

37

 

(134

)

(8.5

)

100

%

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and Devices

 

(142

)

(23.8

)

(11

)

(31

)

(184

)

(26.0

)

43

 

Subsea Communications

 

119

 

39.1

 

 

 

119

 

39.1

 

34

 

Appliances

 

(31

)

(9.8

)

(9

)

 

(40

)

(12.6

)

23

 

Total

 

(54

)

(4.4

)

(20

)

(31

)

(105

)

(7.9

)

100

%

Total

 

$

(95

)

(1.6

)%

$

(257

)

$

6

 

$

(346

)

(5.6

)%

 

 

 


(1) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes in foreign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this release.

(2) Represents the change in net sales resulting from changes in foreign currency exchange rates.

(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended March 25, 2016

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

Restructuring

 

 

 

 

 

 

 

 

 

Acquisition

 

and Other

 

 

 

 

 

 

 

 

 

Related

 

Charges

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)

 

(Credits), Net (1)(2)

 

Items

 

(Non-GAAP) (3)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

289

 

$

1

 

$

15

 

$

 

$

305

 

Industrial Solutions

 

63

 

3

 

18

 

 

84

 

Communications Solutions

 

183

 

 

(132

)

 

51

 

Total

 

$

535

 

$

4

 

$

(99

)

$

 

$

440

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

18.1

%

 

 

 

 

 

 

14.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

12

 

$

 

$

 

$

 

$

12

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(130

)

$

(1

)

$

35

 

$

3

 

$

(93

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

389

 

$

3

 

$

(64

)

$

3

 

$

331

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

1.06

 

$

0.01

 

$

(0.17

)

$

0.01

 

$

0.90

 

 


(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2) Includes the gain on the divestiture of our Circuit Protection Devices business.

(3) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended March 27, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)(2)

 

Charges, Net (2)

 

Items (3)

 

(Non-GAAP) (4)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

323

 

$

10

 

$

 

$

 

$

333

 

Industrial Solutions

 

84

 

12

 

16

 

 

112

 

Communications Solutions

 

41

 

 

20

 

 

61

 

Total

 

$

448

 

$

22

 

$

36

 

$

 

$

506

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

14.5

%

 

 

 

 

 

 

16.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

$

(5

)

$

 

$

 

$

11

 

$

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(94

)

$

(4

)

$

(10

)

$

5

 

$

(103

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

316

 

$

18

 

$

26

 

$

16

 

$

376

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

0.77

 

$

0.04

 

$

0.06

 

$

0.04

 

$

0.91

 

 


(1) Includes $6 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, $14 million of acquisition and integration costs, and $2 million of restructuring costs.

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) Includes an income tax charge for the estimated tax impacts of certain intercompany dividends related to the restructuring and anticipated sale of the Broadband Network Solutions business. Also includes an income tax benefit associated with the settlement of audits of prior year income tax returns and the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(4) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Six Months Ended March 25, 2016

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

Restructuring

 

 

 

 

 

 

 

 

 

Acquisition

 

and Other

 

 

 

 

 

 

 

 

 

Related

 

Charges

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)

 

(Credits), Net (1)(2)

 

Items (3)

 

(Non-GAAP) (4)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

550

 

$

4

 

$

31

 

$

 

$

585

 

Industrial Solutions

 

129

 

6

 

27

 

 

162

 

Communications Solutions

 

254

 

 

(117

)

 

137

 

Total

 

$

933

 

$

10

 

$

(59

)

$

 

$

884

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

16.1

%

 

 

 

 

 

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

20

 

$

 

$

 

$

 

$

20

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(188

)

$

(3

)

$

23

 

$

(25

)

$

(193

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

713

 

$

7

 

$

(36

)

$

(25

)

$

659

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

1.88

 

$

0.02

 

$

(0.09

)

$

(0.07

)

$

1.74

 

 


(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(2) Includes the gain on the divestiture of our Circuit Protection Devices business.

(3) Includes income tax benefits related to deferred tax assets recognized in connection with the sale of the Circuit Protection Devices business.

(4) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Six Months Ended March 27, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)(2)

 

Charges, Net (2)

 

Items (3)

 

(Non-GAAP) (4)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

618

 

$

51

 

$

1

 

$

 

$

670

 

Industrial Solutions

 

170

 

22

 

18

 

 

210

 

Communications Solutions

 

85

 

 

42

 

 

127

 

Total

 

$

873

 

$

73

 

$

61

 

$

 

$

1,007

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

14.2

%

 

 

 

 

 

 

16.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

$

(75

)

$

 

$

 

$

94

 

$

19

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax (Expense) Benefit

 

$

15

 

$

(18

)

$

(11

)

$

(206

)

$

(220

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

751

 

$

55

 

$

50

 

$

(112

)

$

744

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

1.82

 

$

0.13

 

$

0.12

 

$

(0.27

)

$

1.80

 

 


(1) Includes $33 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, $38 million of acquisition and integration costs, and $2 million of restructuring costs.

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) Includes $202 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $94 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax benefits related to the impacts of certain non-U.S. tax law changes and the associated reduction in the valuation allowance for tax loss carryforwards and an income tax charge for the estimated tax impacts of certain intercompany dividends related to the restructuring and anticipated sale of the Broadband Network Solutions business.

(4) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 26, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)(2)

 

Charges, Net (2)

 

Items

 

(Non-GAAP) (3)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

303

 

$

5

 

$

9

 

$

 

$

317

 

Industrial Solutions

 

98

 

5

 

6

 

 

109

 

Communications Solutions

 

68

 

 

3

 

 

71

 

Total

 

$

469

 

$

10

 

$

18

 

$

 

$

497

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

15.0

%

 

 

 

 

 

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

11

 

$

 

$

 

$

(5

)

$

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(100

)

$

(5

)

$

(1

)

$

2

 

$

(104

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

351

 

$

5

 

$

17

 

$

(3

)

$

370

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

0.85

 

$

0.01

 

$

0.04

 

$

(0.01

)

$

0.90

 

 


(1) Includes $8 million of acquisition and integration costs, $1 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $1 million of restructuring costs.

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 25, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)(2)

 

Charges, Net (2)

 

Items (3)

 

(Non-GAAP) (4)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

1,193

 

$

61

 

$

39

 

$

 

$

1,293

 

Industrial Solutions

 

352

 

33

 

44

 

 

429

 

Communications Solutions

 

204

 

 

66

 

 

270

 

Total

 

$

1,749

 

$

94

 

$

149

 

$

 

$

1,992

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

14.3

%

 

 

 

 

 

 

16.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

$

(55

)

$

 

$

 

$

84

 

$

29

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(337

)

$

(22

)

$

(29

)

$

(36

)

$

(424

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

1,238

 

$

72

 

$

120

 

$

48

 

$

1,478

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations

 

$

3.01

 

$

0.18

 

$

0.29

 

$

0.12

 

$

3.60

 

 


(1) Includes $55 million of acquisition and integration costs, $36 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $3 million of restructuring costs.

(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

(3) Includes $264 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $84 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc. and $29 million of income tax charges for the tax impacts of certain intercompany dividends related to the restructuring and sale of the Broadband Network Solutions business.

(4) See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of April 20, 2016

(UNAUDITED)

 

 

 

Outlook for

 

 

 

 

 

Quarter Ending

 

 

 

 

 

June 24,

 

Outlook for

 

 

 

2016

 

Fiscal 2016

 

Diluted earnings per share from continuing operations (GAAP)

 

$0.90 - $0.96

 

$3.92 - $4.12

 

Restructuring and other charges (credits), net

 

0.07

 

(0.01

)

Acquisition related charges

 

0.03

 

0.06

 

Tax items

 

 

(0.07

)

Adjusted diluted earnings per share from continuing operations (non-GAAP) (1)

 

$1.00 - $1.06

 

$3.90 - $4.10

 

 

 

 

 

 

 

Net sales growth (GAAP)

 

(3) - 4

%

(1) - 2

%

Translation

 

1

 

2

 

(Acquisitions) divestitures

 

(1

)

 

Organic net sales growth (non-GAAP) (1)

 

(3) - 4

%

1 - 4

%

 


(1) See description of non-GAAP measures contained in this release.