EX-99.1 2 a14-10834_1ex99d1.htm EX-99.1

Exhibit 99.1

 

News Release

 

 

TE Connectivity Reports Strong Second Quarter Earnings

Sales Up 5 Percent; GAAP EPS Up 32 Percent; Adjusted EPS Up 25 Percent

 

SCHAFFHAUSEN, Switzerland — April 23, 2014 — TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 28, 2014.

 

Second Quarter Highlights

 

·                  Net sales increased to $3.43 billion, up 6 percent organically versus the prior year

 

·                  Adjusted Earnings Per Share were $0.95, up 25 percent versus the prior year

 

·                  Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $0.87, up 32 percent versus the prior year

 

·                  Free Cash Flow was $273 million; returned $281 million to shareholders through share repurchases and dividends

 

·                  Shareholders approved an annual dividend of $1.16 per share representing a 16 percent increase

 

·                  Announced on April 2, 2014, the planned acquisition of the SEACON Group

 

“Orders and sales were up organically in all regions, driven by strong performance in most of our markets including automotive, industrial transportation, aerospace, oil and gas, industrial equipment, appliances and broadband networks,” said Tom Lynch, TE Connectivity Chairman and Chief Executive Officer. “I continue to be pleased with our execution as we improved our adjusted operating margins to 15.5 percent, up 190 basis points over the prior year, and had another quarter of solid cash flow.

 

“During the quarter, orders increased 4 percent, keeping us on track for continued double digit adjusted earnings growth in the second half of the year,” said Lynch. “We expect continued strength in our transportation and industrial markets in the second half.

 

“Subsequent to the quarter, we announced the acquisition of the SEACON Group, a leader in providing connectivity solutions to the offshore oil and gas industry,” said Lynch. “This is another step in our strategy to expand our leading position in connectivity solutions for harsh environment applications.”

 

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FISCAL SECOND QUARTER RESULTS

 

The company reported net sales of $3.43 billion, compared to prior year sales of $3.27 billion. Adjusted EPS were $0.95, compared to $0.76 in the prior year. GAAP EPS were $0.87 for the quarter, compared to $0.66 in the prior year. Free cash flow was $273 million for the quarter.

 

GAAP EPS includes $0.03 of restructuring and other charges and $0.05 of charges related to tax items.

 

Excluding Subsea Communications, total company orders were $3.46 billion, up 4 percent organically, and the book-to-bill ratio was 1.03.

 

OUTLOOK

 

For the third quarter, the company expects net sales of $3.54 to $3.64 billion and adjusted EPS of $0.96 to $1.00. GAAP EPS are expected to be $0.93 to $0.97, including restructuring charges of $0.02 and acquisition related charges of $0.01.

 

For the full year, the company expects net sales of $13.8 to $14.1 billion and adjusted EPS of $3.72 to $3.84. GAAP EPS are expected to be $3.62 to $3.74, including restructuring charges of $0.07, acquisition related charges of $0.02, and expense from tax-related items of $0.01.

 

This 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 described at the end of this press release. For a reconciliation of these non-GAAP financial measures, see the attached tables.

 

ABOUT TE CONNECTIVITY

 

TE Connectivity (NYSE: TEL) is a $13 billion world leader in connectivity. The company designs and manufactures products at the heart of electronic connections for the world’s leading industries including automotive, energy and industrial, broadband communications, consumer devices, healthcare, and aerospace and defense. TE Connectivity’s long-standing commitment to innovation and engineering excellence helps its customers solve the need for more energy efficiency, always-on communications and ever-increasing productivity. With nearly 90,000 employees in over 50 countries, TE Connectivity makes connections the world relies on to work flawlessly every day. To connect with the company, visit: www.TE.com.

 

CONFERENCE CALL AND WEBCAST

 

·                  The company will hold a conference call for investors today beginning at 8:30 a.m. EDT.

 

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·                  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.

 

·                  For both “listen-only” participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the United States is (800) 230-1059. The telephone dial-in number for participants outside the United States is (612) 234-9960.

 

·                  An audio replay of the conference call will be available beginning at 10:30 a.m. on April 23, 2014 and ending at 11:59 p.m. on April 30, 2014. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the replay dial-in number is (320) 365-3844. The replay access code for all callers is 322058.

 

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” (FCF) are non-GAAP measures and should not be considered replacements for GAAP results.

 

“Organic Sales Growth” is a useful measure used by us to measure the underlying results and trends in the business. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth (the non-GAAP measure) 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. The limitation of this measure is that it excludes items that have an impact on our sales. This limitation is best addressed by using organic sales growth in combination with the GAAP results.

 

We present operating income before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any (“Adjusted Operating Income”). 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. The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any, that may mask the underlying operating results and/or business trends. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported operating income. This limitation is best addressed by using Adjusted Operating Income in combination with operating income (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

 

We present operating margin before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any (“Adjusted Operating Margin”). We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. It also is a significant component in our incentive compensation plans. This measure should be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and

 

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impact of adjustments to operating margin.

 

We present other income, net before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any (“Adjusted Other Income, Net”). 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. The difference between Adjusted Other Income, Net and other income, net (the most comparable GAAP measure) consists of tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease other income, net. This limitation is best addressed by using Adjusted Other Income, Net in combination with other income, net (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

 

We present income tax expense 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 (“Adjusted Income Tax Expense”). 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). The difference between Adjusted Income Tax Expense and income tax expense (the most comparable GAAP measure) is the tax effect of adjusting items and certain significant special tax items, if any. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease income tax expense. This limitation is best addressed by using Adjusted Income Tax Expense in combination with income tax expense (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

 

We present income from continuing operations attributable to TE Connectivity Ltd. before special items including charges or income related to legal settlements and reserves, 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, related tax effects (“Adjusted Income from Continuing Operations”). 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. The difference between Adjusted Income from Continuing Operations and income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, 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, related tax effects. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using Adjusted Income from Continuing Operations in combination with income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

 

We present diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. before special items, including charges or income related to legal settlements and reserves, 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, related tax effects (“Adjusted Earnings Per Share”). 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 a picture of our results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between

 

4



 

periods more difficult. It also is a significant component in our incentive compensation plans. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using Adjusted Earnings Per Share in combination with diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

 

“Free Cash Flow” (FCF) is a useful measure of our ability to generate cash.  It also is a significant component in our incentive compensation plans.  The difference between net cash provided by continuing operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) 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.

 

FCF 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 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, also are considered by management in evaluating free cash flow.  We believe investors should also consider these items in evaluating our free cash flow.  We forecast our cash flow results excluding any voluntary pension contributions because we have not yet made a determination about the amount and timing of any such future contributions.  In addition, our forecast excludes the cash impact of special items because we cannot predict the amount and timing of such items.

 

FCF as presented herein may not be comparable to similarly-titled measures reported by other companies.  The primary limitation of this measure is that it excludes items that have an impact on our GAAP cash flow.  Also, it 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.  This limitation is best addressed by using FCF in combination with the GAAP cash flow results.  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 industry and the telecommunications networks and consumer devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and

 

5



 

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; and the possible effects on us of changes in tax laws, tax treaties and other legislation. 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. 27, 2013 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.

 

# # #

 

Contacts:

Media Relations:

 

Investor Relations:

 

Jane Crawford

 

Keith Kolstrom

 

610-893-9689 Office

 

610-893-9551 Office

 

jane.crawford@te.com

 

keith.kolstrom@te.com

 

 

 

 

 

Brian Schaffer

 

Will Ruthrauff

 

212-279-3115 Office

 

610-893-9565 Office

 

bschaffer@prosek.com

 

will.ruthrauff@te.com

 

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TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 28,

 

March 29,

 

March 28,

 

March 29,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in millions, except per share data)

 

Net sales

 

$

3,431

 

$

3,265

 

$

6,757

 

$

6,399

 

Cost of sales

 

2,258

 

2,213

 

4,467

 

4,358

 

Gross margin

 

1,173

 

1,052

 

2,290

 

2,041

 

Selling, general, and administrative expenses

 

471

 

438

 

938

 

866

 

Research, development, and engineering expenses

 

170

 

171

 

334

 

342

 

Acquisition and integration costs

 

1

 

3

 

1

 

8

 

Restructuring and other charges, net

 

21

 

81

 

28

 

173

 

Operating income

 

510

 

359

 

989

 

652

 

Interest income

 

4

 

5

 

9

 

9

 

Interest expense

 

(30

)

(35

)

(64

)

(72

)

Other income (expense), net

 

16

 

9

 

48

 

(217

)

Income from continuing operations before income taxes

 

500

 

338

 

982

 

372

 

Income tax (expense) benefit

 

(136

)

(60

)

(263

)

185

 

Income from continuing operations

 

364

 

278

 

719

 

557

 

Loss from discontinued operations, net of income taxes

 

(2

)

(1

)

(4

)

(3

)

Net income attributable to TE Connectivity Ltd.

 

$

362

 

$

277

 

$

715

 

$

554

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to TE Connectivity Ltd.:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.89

 

$

0.66

 

$

1.75

 

$

1.32

 

Loss from discontinued operations

 

 

 

(0.01

)

(0.01

)

Net income

 

0.88

 

0.66

 

1.74

 

1.32

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to TE Connectivity Ltd.:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.87

 

$

0.66

 

$

1.72

 

$

1.31

 

Loss from discontinued operations

 

 

 

(0.01

)

(0.01

)

Net income

 

0.87

 

0.65

 

1.71

 

1.30

 

 

 

 

 

 

 

 

 

 

 

Dividends and cash distributions paid per common share

 

$

0.25

 

$

0.21

 

$

0.50

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

410

 

420

 

411

 

421

 

Diluted

 

417

 

424

 

417

 

425

 

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

March 28,

 

September 27,

 

 

 

2014

 

2013

 

 

 

(in millions, except share data)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,429

 

$

1,403

 

Accounts receivable, net of allowance for doubtful accounts of $38 and $48, respectively

 

2,402

 

2,323

 

Inventories

 

1,850

 

1,762

 

Prepaid expenses and other current assets

 

543

 

487

 

Deferred income taxes

 

342

 

334

 

Total current assets

 

6,566

 

6,309

 

Property, plant, and equipment, net

 

3,181

 

3,166

 

Goodwill

 

4,355

 

4,326

 

Intangible assets, net

 

1,197

 

1,244

 

Deferred income taxes

 

2,009

 

2,146

 

Receivable from Tyco International Ltd. and Covidien plc

 

1,013

 

1,002

 

Other assets

 

307

 

268

 

Total Assets

 

$

18,628

 

$

18,461

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

$

625

 

$

711

 

Accounts payable

 

1,421

 

1,383

 

Accrued and other current liabilities

 

1,983

 

1,762

 

Deferred revenue

 

58

 

68

 

Total current liabilities

 

4,087

 

3,924

 

Long-term debt

 

2,370

 

2,303

 

Long-term pension and postretirement liabilities

 

1,140

 

1,155

 

Deferred income taxes

 

321

 

321

 

Income taxes

 

1,996

 

1,979

 

Other liabilities

 

315

 

393

 

Total Liabilities

 

10,229

 

10,075

 

Commitments and contingencies

 

 

 

 

 

Equity:

 

 

 

 

 

TE Connectivity Ltd. shareholders’ equity:

 

 

 

 

 

Common shares, 428,527,307 shares authorized and issued, CHF 0.57 par value

 

189

 

189

 

Contributed surplus

 

5,623

 

6,136

 

Accumulated earnings

 

3,187

 

2,472

 

Treasury shares, at cost, 19,278,903 and 17,020,636 shares, respectively

 

(924

)

(720

)

Accumulated other comprehensive income

 

318

 

303

 

Total TE Connectivity Ltd. shareholders’ equity

 

8,393

 

8,380

 

Noncontrolling interests

 

6

 

6

 

Total Equity

 

8,399

 

8,386

 

Total Liabilities and Equity

 

$

18,628

 

$

18,461

 

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 28,

 

March 29,

 

March 28,

 

March 29,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in millions)

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

Net income attributable to TE Connectivity Ltd.

 

$

362

 

$

277

 

$

715

 

$

554

 

Loss from discontinued operations, net of income taxes

 

2

 

1

 

4

 

3

 

Income from continuing operations

 

364

 

278

 

719

 

557

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

154

 

158

 

303

 

310

 

Deferred income taxes

 

36

 

(28

)

67

 

93

 

Provision for losses on accounts receivable and inventories

 

13

 

14

 

36

 

39

 

Tax sharing (income) expense

 

(17

)

(10

)

(51

)

216

 

Share-based compensation expense

 

21

 

19

 

43

 

40

 

Other

 

18

 

14

 

43

 

34

 

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

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(134

)

(74

)

(107

)

49

 

Inventories

 

(26

)

(30

)

(133

)

(74

)

Inventoried costs on long-term contracts

 

10

 

(10

)

20

 

6

 

Prepaid expenses and other current assets

 

(35

)

(47

)

(12

)

(36

)

Accounts payable

 

59

 

145

 

40

 

107

 

Accrued and other current liabilities

 

(74

)

24

 

(218

)

(52

)

Income taxes

 

32

 

 

72

 

(451

)

Other

 

32

 

(7

)

18

 

1

 

Net cash provided by continuing operating activities

 

453

 

446

 

840

 

839

 

Net cash used in discontinued operating activities

 

(4

)

(1

)

(6

)

(2

)

Net cash provided by operating activities

 

449

 

445

 

834

 

837

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(168

)

(127

)

(301

)

(253

)

Proceeds from sale of property, plant, and equipment

 

9

 

2

 

21

 

4

 

Other

 

(16

)

(2

)

(18

)

17

 

Net cash used in investing activities

 

(175

)

(127

)

(298

)

(232

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

Net increase in commercial paper

 

50

 

 

25

 

50

 

Proceeds from issuance of long-term debt

 

 

 

323

 

 

Repayment of long-term debt

 

(57

)

 

(360

)

(714

)

Proceeds from exercise of share options

 

52

 

70

 

109

 

86

 

Repurchase of common shares

 

(182

)

(198

)

(392

)

(365

)

Payment of common share dividends and cash distributions to shareholders

 

(102

)

(88

)

(205

)

(177

)

Other

 

(3

)

 

(6

)

(2

)

Net cash used in continuing financing activities

 

(242

)

(216

)

(506

)

(1,122

)

Net cash provided by discontinued financing activities

 

4

 

1

 

6

 

2

 

Net cash used in financing activities

 

(238

)

(215

)

(500

)

(1,120

)

Effect of currency translation on cash

 

(4

)

(2

)

(10

)

(1

)

Net increase (decrease) in cash and cash equivalents

 

32

 

101

 

26

 

(516

)

Cash and cash equivalents at beginning of period

 

1,397

 

972

 

1,403

 

1,589

 

Cash and cash equivalents at end of period

 

$

1,429

 

$

1,073

 

$

1,429

 

$

1,073

 

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

16

 

$

23

 

$

63

 

$

88

 

Income taxes paid, net of refunds

 

68

 

89

 

124

 

173

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to Free Cash Flow:

 

 

 

 

 

 

 

 

 

Net cash provided by continuing operating activities

 

$

453

 

$

446

 

$

840

 

$

839

 

Capital expenditures, net

 

(159

)

(125

)

(280

)

(249

)

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

 

(21

)

32

 

(21

)

67

 

Free cash flow (1)

 

$

273

 

$

353

 

$

539

 

$

657

 

 


(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 28,

 

 

 

March 29,

 

 

 

March 28,

 

 

 

March 29,

 

 

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

 

 

 

 

($ in millions)

 

 

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

1,571

 

 

 

$

1,385

 

 

 

$

3,011

 

 

 

$

2,649

 

 

 

Industrial Solutions

 

789

 

 

 

758

 

 

 

1,552

 

 

 

1,478

 

 

 

Network Solutions

 

688

 

 

 

725

 

 

 

1,401

 

 

 

1,459

 

 

 

Consumer Solutions

 

383

 

 

 

397

 

 

 

793

 

 

 

813

 

 

 

Total

 

$

3,431

 

 

 

$

3,265

 

 

 

$

6,757

 

 

 

$

6,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

347

 

22.1

%

$

241

 

17.4

%

$

643

 

21.4

%

$

433

 

16.3

%

Industrial Solutions

 

106

 

13.4

%

79

 

10.4

%

205

 

13.2

%

151

 

10.2

%

Network Solutions

 

23

 

3.3

%

19

 

2.6

%

69

 

4.9

%

55

 

3.8

%

Consumer Solutions

 

34

 

8.9

%

20

 

5.0

%

72

 

9.1

%

13

 

1.6

%

Total

 

$

510

 

14.9

%

$

359

 

11.0

%

$

989

 

14.6

%

$

652

 

10.2

%

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)

 

 

 

 

 

Percentage of

 

 

 

 

 

Segment’s Total

 

 

 

Change in Net Sales for the Quarter Ended March 28, 2014

 

Net Sales for the

 

 

 

versus Net Sales for the Quarter Ended March 29, 2013

 

Quarter Ended

 

 

 

Organic (1)

 

Translation (2)

 

Divestitures

 

Total

 

March 28, 2014

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

184

 

13.3

%

$

2

 

$

 

$

186

 

13.4

%

100

%

Total

 

184

 

13.3

 

2

 

 

186

 

13.4

 

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

22

 

7.5

 

3

 

 

25

 

8.2

 

42

 

Aerospace, Defense, Oil, and Gas

 

12

 

4.5

 

1

 

 

13

 

5.0

 

35

 

Energy

 

(1

)

(0.6

)

(2

)

(4

)

(7

)

(3.6

)

23

 

Total

 

33

 

4.4

 

2

 

(4

)

31

 

4.1

 

100

%

Network Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telecom Networks

 

19

 

6.3

 

(1

)

 

18

 

6.0

 

46

 

Data Communications

 

(13

)

(7.2

)

(2

)

(20

)

(35

)

(17.9

)

23

 

Enterprise Networks

 

7

 

4.9

 

(6

)

 

1

 

0.7

 

22

 

Subsea Communications

 

(22

)

(26.5

)

1

 

 

(21

)

(25.6

)

9

 

Total

 

(9

)

(1.3

)

(8

)

(20

)

(37

)

(5.1

)

100

%

Consumer Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Devices

 

(19

)

(7.5

)

(2

)

 

(21

)

(8.6

)

58

 

Appliances

 

7

 

4.6

 

 

 

7

 

4.6

 

42

 

Total

 

(12

)

(2.9

)

(2

)

 

(14

)

(3.5

)

100

%

Total

 

$

196

 

6.1

%

$

(6

)

$

(24

)

$

166

 

5.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment’s Total

 

 

 

Change in Net Sales for the Six Months Ended March 28, 2014

 

Net Sales for the

 

 

 

versus Net Sales for the Six Months Ended March 29, 2013

 

Six Months Ended

 

 

 

Organic (1)

 

Translation (2)

 

Divestitures

 

Total

 

March 28, 2014

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

360

 

13.6

%

$

2

 

$

 

$

362

 

13.7

%

100

%

Total

 

360

 

13.6

 

2

 

 

362

 

13.7

 

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

51

 

8.5

 

1

 

 

52

 

8.7

 

42

 

Aerospace, Defense, Oil, and Gas

 

20

 

4.1

 

4

 

 

24

 

4.8

 

34

 

Energy

 

7

 

1.9

 

(1

)

(8

)

(2

)

(0.5

)

24

 

Total

 

78

 

5.3

 

4

 

(8

)

74

 

5.0

 

100

%

Network Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telecom Networks

 

49

 

8.5

 

1

 

 

50

 

8.6

 

45

 

Data Communications

 

(30

)

(7.7

)

(1

)

(39

)

(70

)

(17.8

)

23

 

Enterprise Networks

 

18

 

5.4

 

(11

)

 

7

 

2.4

 

22

 

Subsea Communications

 

(44

)

(23.4

)

(1

)

 

(45

)

(23.7

)

10

 

Total

 

(7

)

(0.5

)

(12

)

(39

)

(58

)

(4.0

)

100

%

Consumer Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Devices

 

(28

)

(5.3

)

(10

)

 

(38

)

(7.3

)

61

 

Appliances

 

19

 

6.4

 

(1

)

 

18

 

6.1

 

39

 

Total

 

(9

)

(1.1

)

(11

)

 

(20

)

(2.5

)

100

%

Total

 

$

422

 

6.6

%

$

(17

)

$

(47

)

$

358

 

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 28, 2014

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

347

 

$

 

$

(1

)

$

 

$

346

 

Industrial Solutions

 

106

 

1

 

5

 

 

112

 

Network Solutions

 

23

 

 

16

 

 

39

 

Consumer Solutions

 

34

 

 

1

 

 

35

 

Total

 

$

510

 

$

1

 

$

21

 

$

 

$

532

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

14.9

%

 

 

 

 

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

16

 

$

 

$

 

$

(14

)

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(136

)

$

 

$

(10

)

$

36

 

$

(110

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

364

 

$

1

 

$

11

 

$

22

 

$

398

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

0.87

 

$

 

$

0.03

 

$

0.05

 

$

0.95

 

 


(1) Includes income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.

(2) 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 29, 2013

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

241

 

$

1

 

$

18

 

$

 

$

260

 

Industrial Solutions

 

79

 

2

 

21

 

 

102

 

Network Solutions

 

19

 

 

26

 

 

45

 

Consumer Solutions

 

20

 

 

16

 

 

36

 

Total

 

$

359

 

$

3

 

$

81

 

$

 

$

443

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

11.0

%

 

 

 

 

 

 

13.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

9

 

$

 

$

 

$

(1

)

$

8

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(60

)

$

(1

)

$

(24

)

$

(13

)

$

(98

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

278

 

$

2

 

$

57

 

$

(14

)

$

323

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

0.66

 

$

 

$

0.13

 

$

(0.03

)

$

0.76

 

 


(1) Reflects income tax benefits recognized in connection with the lapse of statutes of limitations for examinations of prior year income tax returns in certain non-U.S. locations partially offset by income tax expense related to adjustments to prior year income tax returns.

(2) 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 28, 2014

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

643

 

$

 

$

 

$

 

$

643

 

Industrial Solutions

 

205

 

1

 

6

 

 

212

 

Network Solutions

 

69

 

 

21

 

 

90

 

Consumer Solutions

 

72

 

 

1

 

 

73

 

Total

 

$

989

 

$

1

 

$

28

 

$

 

$

1,018

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

14.6

%

 

 

 

 

 

 

15.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

48

 

$

 

$

 

$

(39

)

$

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(263

)

$

 

$

(11

)

$

43

 

$

(231

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

719

 

$

1

 

$

17

 

$

4

 

$

741

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

1.72

 

$

 

$

0.04

 

$

0.01

 

$

1.78

 

 


(1) Includes income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters, including $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary.

(2) 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 29, 2013

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

433

 

$

4

 

$

28

 

$

 

$

465

 

Industrial Solutions

 

151

 

4

 

33

 

 

188

 

Network Solutions

 

55

 

 

50

 

 

105

 

Consumer Solutions

 

13

 

 

62

 

 

75

 

Total

 

$

652

 

$

8

 

$

173

 

$

 

$

833

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

10.2

%

 

 

 

 

 

 

13.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

$

(217

)

$

 

$

 

$

230

 

$

13

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax (Expense) Benefit

 

$

185

 

$

(2

)

$

(51

)

$

(314

)

$

(182

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

557

 

$

6

 

$

122

 

$

(84

)

$

601

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

1.31

 

$

0.01

 

$

0.29

 

$

(0.20

)

$

1.41

 

 


(1) Includes $331 million of income tax benefits associated with the settlement of an audit of prior year income tax returns as well as the related impact of $231 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.  Also includes income tax benefits recognized in connection with the lapse of statutes of limitations for examinations of prior year income tax returns in certain non-U.S. locations and income tax expense related to adjustments to prior year income tax returns.

(2) 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 28, 2013

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

282

 

$

1

 

$

1

 

$

 

$

284

 

Industrial Solutions

 

84

 

2

 

22

 

 

108

 

Network Solutions

 

48

 

 

26

 

 

74

 

Consumer Solutions

 

25

 

 

18

 

 

43

 

Total

 

$

439

 

$

3

 

$

67

 

$

 

$

509

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

12.7

%

 

 

 

 

 

 

14.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

18

 

$

 

$

 

$

(8

)

$

10

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(93

)

$

(1

)

$

(21

)

$

 

$

(115

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

332

 

$

2

 

$

46

 

$

(8

)

$

372

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

0.79

 

$

 

$

0.11

 

$

(0.02

)

$

0.88

 

 


(1) Relates to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.

(2) 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 27, 2013

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

972

 

$

7

 

$

38

 

$

 

$

1,017

 

Industrial Solutions

 

362

 

7

 

62

 

 

431

 

Network Solutions

 

136

 

 

125

 

 

261

 

Consumer Solutions

 

86

 

 

86

 

 

172

 

Total

 

$

1,556

 

$

14

 

$

311

 

$

 

$

1,881

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

11.7

%

 

 

 

 

 

 

14.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

$

(183

)

$

 

$

 

$

213

 

$

30

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax (Expense) Benefit

 

$

29

 

$

(5

)

$

(90

)

$

(354

)

$

(420

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

1,276

 

$

9

 

$

221

 

$

(141

)

$

1,365

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

3.02

 

$

0.02

 

$

0.52

 

$

(0.33

)

$

3.23

 

 


(1) Includes $331 million of income tax benefits associated with the settlement of an audit of prior year income tax returns as well as the related impact of $231 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax expense related to adjustments to prior year income tax returns, income tax benefits recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards, and income tax benefits recognized in connection with the lapse of statutes of limitations for examinations of prior year income tax returns. In addition, the other income adjustment includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.

 

(2) 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 23, 2014

(UNAUDITED)

 

 

 

Outlook for

 

 

 

 

 

Quarter Ending

 

 

 

 

 

June 27,

 

Outlook for

 

 

 

2014

 

Fiscal 2014

 

Diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (GAAP)

 

$0.93 - 0.97

 

$3.62 - 3.74

 

Restructuring and other charges, net

 

0.02

 

0.07

 

Acquisition related charges

 

0.01

 

0.02

 

Tax items

 

 

0.01

 

Adjusted diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (non-GAAP) (1)

 

$0.96 - 1.00

 

$3.72 - 3.84

 

 


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