EX-99.1 2 a15-9394_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

TE Connectivity Posts Strong Fiscal 2015 Second Quarter Earnings

 

Sales Up 4 Percent and Up 6 Percent Organically;

 

Adjusted EPS Up 6 Percent; GAAP EPS Down 6 Percent;

 

Company Maintains Full Year Adjusted EPS Guidance of $3.60 to $3.74;

 

Strong Business Performance More Than Offsets Foreign Exchange Headwinds

 

SCHAFFHAUSEN, Switzerland — April 22, 2015 — TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 27, 2015. On January 28, 2015, TE announced the sale of its Broadband Network Solutions (BNS) business. The financial results of the BNS business have been classified as discontinued operations. TE’s ongoing business, results and guidance are included below and classified as continuing operations.

 

Second Quarter Highlights

·                  Net sales increased to $3.1 billion, up 4 percent versus the prior year and up 6 percent organically

·                  Adjusted Earnings Per Share (EPS) from continuing operations were $0.91, up 6 percent versus the prior year

·                  Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.77

·                  Free cash flow of $217 million; returned $261 million to shareholders

·                  Acquisition of AdvancedCath completed, expanding TE’s position in the medical device market

·                  On track to complete the sale of the Broadband Network Solutions (BNS) business by December 2015

 

Tom Lynch, TE Connectivity Chairman and CEO stated, “I am very pleased with our performance for the quarter. We delivered revenue growth of 4 percent, adjusted EPS growth of 6 percent and adjusted operating margins of 16.4 percent, overcoming significant foreign exchange headwinds. Our growth in the quarter was led by strong performance in automotive, commercial aerospace, industrial equipment, appliances and SubCom. Our TEOA (TE Operating Advantage) business system continued to drive higher profitability, with adjusted operating margins up 50 basis points year over year.

 

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“We also made good progress on our strategy to expand our leadership position in connectivity and sensor solutions,” said Lynch. “Our plan to divest BNS is on track and the integration of our recent acquisitions — Measurement Specialties, American Sensor Technologies, and AdvancedCath — is going well. These transactions support our strategy to focus on the growing $165 billion connectivity and sensor markets, and strengthen our portfolio in harsh environment applications.

 

“The increasing demand for connectivity continues to drive the need for more electronics and TE products,” said Lynch. “For the full year, we expect to deliver 6 percent organic growth and double-digit adjusted EPS growth, consistent with prior guidance. New product introductions and continued strong performance in our harsh environment and SubCom businesses more than offset $1 billion of revenue foreign exchange headwinds.”

 

NEW SEGMENT STRUCTURE

 

Following the announced divestiture of BNS, effective for the second quarter of fiscal 2015, we are reporting our results under three segments. The following represents the new segment structure. The Transportation Solutions and Industrial Solutions segments remain unchanged:

·                  Transportation Solutions—the Automotive, Commercial Transportation, and Sensors businesses are included in this segment.

·                  Industrial Solutions—this segment contains the Industrial Equipment; Aerospace, Defense, Oil, and Gas; and Energy businesses.

·                  Communications Solutions—the Data and Devices, Appliances, and Subsea Communications businesses are included in this segment.

 

FISCAL SECOND QUARTER RESULTS

 

The company reported net sales of $3.1 billion, compared to prior year sales of $3.0 billion. Adjusted EPS were $0.91, compared to $0.86 in the prior year. GAAP EPS were $0.77, compared to $0.82 in the prior year. Free cash flow was $217 million for the quarter.

 

GAAP EPS included $60 million of acquisition related, restructuring and other charges.

 

Total company orders were $3.0 billion, flat year over year, and up 1 percent excluding SubCom. The book-to-bill ratio was 1.03, excluding SubCom.

 

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OUTLOOK

 

For the fiscal third quarter 2015, the company expects net sales of $3.13 billion to $3.23 billion, reflecting 3 percent year over year growth at the mid-point, and adjusted EPS of $0.85 to $0.89. GAAP EPS are expected to be $0.80 to $0.84, including acquisition related charges of $0.04, and restructuring and other charges of $0.01. This outlook includes foreign exchange headwinds, reducing expected sales by $330 million and adjusted EPS by $0.13.

 

For the full year, the company expects net sales of $12.35 to $12.65 billion, reflecting 4 percent growth versus prior year at the mid-point; and adjusted EPS of $3.60 to $3.74 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.51 to $3.65, including acquisition related charges of $0.22, restructuring and other charges of $0.18, and income from tax related items of $0.31. The outlook includes foreign exchange headwinds, reducing expected sales by $1.01 billion and adjusted EPS by $0.38.

 

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.

 

CONFERENCE CALL AND WEBCAST

 

·                  The company will hold a conference call for investors today beginning at 8:30 a.m. EDT. Information about the conference call is available at TE Connectivity’s website: http://investors.te.com.

·                  By telephone: 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) 230-1085. The telephone dial-in number for participants outside the United States is (612) 234-9959.

·                  An audio replay of the conference call will be available beginning at 10:30 a.m. on April 22, 2015, and ending at 11:59 p.m. on April 29, 2015. 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 355778.

 

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.

 

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“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 (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 net sales growth.

 

We present operating income 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 (“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 special items 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 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 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. 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.

 

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 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

 

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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 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 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 special items 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. 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 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 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. The difference between net cash provided by continuing operating activities (the most comparable GAAP measure) and Free Cash Flow (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.

 

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 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

 

5



 

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.

 

Free Cash Flow 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 Free Cash Flow 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 and our planned sale of the Broadband Network Solutions business. 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 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 operations of Measurement Specialties will not be successfully integrated into ours; the risk that revenue opportunities, cost savings and other anticipated synergies from the Measurement Specialties acquisition may not be fully realized or may take longer to realize than expected; and the risk that the sale of the Broadband Network Solutions business may not be consummated, or if consummated, we do not realize the anticipated benefits from such transaction. 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. 26, 2014 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.

 

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ABOUT TE CONNECTIVITY

 

TE Connectivity (NYSE: TEL) is a $14 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 solutions proven in harsh environments. Our 80,000 people, including 7,500 design engineers, partner with customers in 150 countries across a wide range of industries. We believe EVERY CONNECTION COUNTS — www.TE.com.

 

# # #

 

Contacts:

Media Relations:

Investor Relations:

 

Jane Crawford

Sujal Shah

 

TE Connectivity

TE Connectivity

 

610-893-9689

610-893-9790

 

Jane.crawford@te.com

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 27,

 

March 28,

 

March 27,

 

March 28,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in millions, except per share data)

 

Net sales

 

$

3,082

 

$

2,964

 

$

6,131

 

$

5,826

 

Cost of sales

 

2,031

 

1,969

 

4,060

 

3,886

 

Gross margin

 

1,051

 

995

 

2,071

 

1,940

 

Selling, general, and administrative expenses

 

391

 

379

 

777

 

758

 

Research, development, and engineering expenses

 

160

 

145

 

320

 

286

 

Acquisition and integration costs

 

14

 

1

 

38

 

1

 

Restructuring and other charges (credits), net

 

38

 

(1

)

63

 

5

 

Operating income

 

448

 

471

 

873

 

890

 

Interest income

 

4

 

4

 

9

 

9

 

Interest expense

 

(37

)

(31

)

(71

)

(65

)

Other income (expense), net

 

(5

)

16

 

(75

)

48

 

Income from continuing operations before income taxes

 

410

 

460

 

736

 

882

 

Income tax (expense) benefit

 

(94

)

(120

)

15

 

(229

)

Income from continuing operations

 

316

 

340

 

751

 

653

 

Income from discontinued operations, net of income taxes

 

283

 

22

 

320

 

62

 

Net income attributable to TE Connectivity Ltd.

 

$

599

 

$

362

 

$

1,071

 

$

715

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to TE Connectivity Ltd.:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.78

 

$

0.83

 

$

1.85

 

$

1.59

 

Income from discontinued operations

 

0.70

 

0.05

 

0.79

 

0.15

 

Net income

 

1.47

 

0.88

 

2.63

 

1.74

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to TE Connectivity Ltd.:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.77

 

$

0.82

 

$

1.82

 

$

1.57

 

Income from discontinued operations

 

0.69

 

0.05

 

0.77

 

0.15

 

Net income

 

1.45

 

0.87

 

2.59

 

1.71

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.29

 

$

0.25

 

$

0.58

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

407

 

410

 

407

 

411

 

Diluted

 

413

 

417

 

413

 

417

 

 



 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

March 27,

 

September 26,

 

 

 

2015

 

2014

 

 

 

(in millions, except share data)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

697

 

$

2,457

 

Accounts receivable, net of allowance for doubtful accounts of $14

 

2,094

 

2,057

 

Inventories

 

1,684

 

1,509

 

Prepaid expenses and other current assets

 

659

 

519

 

Deferred income taxes

 

617

 

324

 

Assets held for sale

 

1,861

 

2,000

 

Total current assets

 

7,612

 

8,866

 

Property, plant, and equipment, net

 

2,878

 

2,920

 

Goodwill

 

4,832

 

3,739

 

Intangible assets, net

 

1,630

 

1,087

 

Deferred income taxes

 

2,018

 

2,047

 

Receivable from Tyco International plc and Covidien plc

 

948

 

1,037

 

Other assets

 

325

 

456

 

Total Assets

 

$

20,243

 

$

20,152

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

$

736

 

$

577

 

Accounts payable

 

1,233

 

1,230

 

Accrued and other current liabilities

 

1,715

 

1,594

 

Deferred revenue

 

96

 

176

 

Liabilities held for sale

 

361

 

416

 

Total current liabilities

 

4,141

 

3,993

 

Long-term debt

 

3,390

 

3,281

 

Long-term pension and postretirement liabilities

 

1,199

 

1,280

 

Deferred income taxes

 

300

 

229

 

Income taxes

 

1,907

 

2,044

 

Other liabilities

 

311

 

312

 

Total Liabilities

 

11,248

 

11,139

 

Commitments and contingencies

 

 

 

 

 

Equity:

 

 

 

 

 

TE Connectivity Ltd. shareholders’ equity:

 

 

 

 

 

Common shares, 419,070,781 shares authorized and issued, CHF 0.57 par value

 

184

 

184

 

Contributed surplus

 

4,625

 

5,231

 

Accumulated earnings

 

5,324

 

4,253

 

Treasury shares, at cost, 11,985,784 and 11,383,631 shares, respectively

 

(728

)

(644

)

Accumulated other comprehensive loss

 

(416

)

(17

)

Total TE Connectivity Ltd. shareholders’ equity

 

8,989

 

9,007

 

Noncontrolling interests

 

6

 

6

 

Total Equity

 

8,995

 

9,013

 

Total Liabilities and Equity

 

$

20,243

 

$

20,152

 

 



 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Six Months Ended

 

 

 

March 27,

 

March 28,

 

March 27,

 

March 28,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in millions)

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

599

 

$

362

 

$

1,071

 

$

715

 

Income from discontinued operations, net of income taxes

 

(283

)

(22

)

(320

)

(62

)

Income from continuing operations

 

316

 

340

 

751

 

653

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

147

 

138

 

307

 

270

 

Non-cash restructuring charges

 

 

4

 

15

 

6

 

Deferred income taxes

 

25

 

29

 

(54

)

44

 

Provision for losses on accounts receivable and inventories

 

10

 

14

 

28

 

29

 

Tax sharing (income) expense

 

5

 

(17

)

74

 

(51

)

Share-based compensation expense

 

21

 

20

 

44

 

40

 

Other

 

16

 

13

 

46

 

35

 

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

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(53

)

(131

)

(19

)

(104

)

Inventories

 

(19

)

(17

)

(180

)

(95

)

Prepaid expenses and other current assets

 

8

 

(37

)

11

 

(19

)

Accounts payable

 

(19

)

71

 

(11

)

50

 

Accrued and other current liabilities

 

(39

)

(82

)

(241

)

(209

)

Deferred revenue

 

(24

)

(19

)

(80

)

(10

)

Income taxes

 

(17

)

32

 

(132

)

72

 

Other

 

(27

)

53

 

(4

)

29

 

Net cash provided by continuing operating activities

 

350

 

411

 

555

 

740

 

Net cash provided by discontinued operating activities

 

48

 

38

 

138

 

94

 

Net cash provided by operating activities

 

398

 

449

 

693

 

834

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(156

)

(155

)

(291

)

(281

)

Proceeds from sale of property, plant, and equipment

 

1

 

9

 

6

 

21

 

Acquisition of businesses, net of cash acquired

 

(218

)

(18

)

(1,729

)

(18

)

Other

 

1

 

2

 

(2

)

 

Net cash used in continuing investing activities

 

(372

)

(162

)

(2,016

)

(278

)

Net cash used in discontinued investing activities

 

(7

)

(13

)

(14

)

(20

)

Net cash used in investing activities

 

(379

)

(175

)

(2,030

)

(298

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

Net increase (decrease) in commercial paper

 

(362

)

50

 

(92

)

25

 

Proceeds from issuance of long-term debt

 

617

 

 

617

 

323

 

Repayment of long-term debt

 

(250

)

(57

)

(473

)

(360

)

Proceeds from exercise of share options

 

72

 

52

 

88

 

109

 

Repurchase of common shares

 

(130

)

(182

)

(285

)

(392

)

Payment of common share dividends to shareholders

 

(118

)

(102

)

(236

)

(205

)

Transfer from discontinued operations

 

41

 

25

 

124

 

74

 

Other

 

(3

)

1

 

(2

)

 

Net cash used in continuing financing activities

 

(133

)

(213

)

(259

)

(426

)

Net cash used in discontinued financing activities

 

(41

)

(25

)

(124

)

(74

)

Net cash used in financing activities

 

(174

)

(238

)

(383

)

(500

)

Effect of currency translation on cash

 

(16

)

(4

)

(40

)

(10

)

Net increase (decrease) in cash and cash equivalents

 

(171

)

32

 

(1,760

)

26

 

Cash and cash equivalents at beginning of period

 

868

 

1,397

 

2,457

 

1,403

 

Cash and cash equivalents at end of period

 

$

697

 

$

1,429

 

$

697

 

$

1,429

 

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

18

 

$

15

 

$

64

 

$

62

 

Income taxes paid, net of refunds

 

85

 

61

 

170

 

114

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to Free Cash Flow:

 

 

 

 

 

 

 

 

 

Net cash provided by continuing operating activities

 

$

350

 

$

411

 

$

555

 

$

740

 

Capital expenditures, net

 

(155

)

(146

)

(285

)

(260

)

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

 

22

 

(21

)

26

 

(21

)

Free cash flow (1)

 

$

217

 

$

244

 

$

296

 

$

459

 

 


(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 27,

 

 

 

March 28,

 

 

 

March 27,

 

 

 

March 28,

 

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

 

 

 

 

($ in millions)

 

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

1,610

 

 

 

$

1,571

 

 

 

$

3,222

 

 

 

$

3,011

 

 

 

Industrial Solutions

 

797

 

 

 

789

 

 

 

1,581

 

 

 

1,552

 

 

 

Communications Solutions

 

675

 

 

 

604

 

 

 

1,328

 

 

 

1,263

 

 

 

Total

 

$

3,082

 

 

 

$

2,964

 

 

 

$

6,131

 

 

 

$

5,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

323

 

20.1

%

$

338

 

21.5

%

$

618

 

19.2

%

$

623

 

20.7

%

Industrial Solutions

 

84

 

10.5

%

102

 

12.9

%

170

 

10.8

%

197

 

12.7

%

Communications Solutions

 

41

 

6.1

%

31

 

5.1

%

85

 

6.4

%

70

 

5.5

%

Total

 

$

448

 

14.5

%

$

471

 

15.9

%

$

873

 

14.2

%

$

890

 

15.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

333

 

20.7

%

$

337

 

21.5

%

$

670

 

20.8

%

$

623

 

20.7

%

Industrial Solutions

 

112

 

14.1

%

107

 

13.6

%

210

 

13.3

%

204

 

13.1

%

Communications Solutions

 

61

 

9.0

%

27

 

4.5

%

127

 

9.6

%

69

 

5.5

%

Total

 

$

506

 

16.4

%

$

471

 

15.9

%

$

1,007

 

16.4

%

$

896

 

15.4

%

 


(1) Adjusted operating income is a non-GAAP measure. See description of non-GAAP measures contained in this release.

 



 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment’s Total

 

 

 

Change in Net Sales for the Quarter Ended March 27, 2015

 

Net Sales for the

 

 

 

versus Net Sales for the Quarter Ended March 28, 2014

 

Quarter Ended

 

 

 

Organic (1)

 

Translation (2)

 

Acquisitions

 

Total

 

March 27, 2015

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

49

 

3.8

%

$

(127

)

$

 

$

(78

)

(6.0

)%

75

%

Commercial Transportation

 

(3

)

(1.3

)

(18

)

 

(21

)

(9.2

)

13

 

Sensors

 

1

 

1.7

 

(6

)

143

 

138

 

281.6

 

12

 

Total

 

47

 

3.0

 

(151

)

143

 

39

 

2.5

 

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

19

 

5.8

 

(27

)

2

 

(6

)

(1.8

)

41

 

Aerospace, Defense, Oil, and Gas

 

15

 

5.5

 

(20

)

35

 

30

 

11.0

 

38

 

Energy

 

7

 

3.5

 

(23

)

 

(16

)

(8.6

)

21

 

Total

 

41

 

5.2

 

(70

)

37

 

8

 

1.0

 

100

%

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and Devices

 

(23

)

(6.0

)

(14

)

 

(37

)

(9.7

)

51

 

Appliances

 

10

 

6.0

 

(11

)

 

(1

)

(0.6

)

24

 

Subsea Communications

 

109

 

180.7

 

 

 

109

 

180.7

 

25

 

Total

 

96

 

15.9

 

(25

)

 

71

 

11.8

 

100

%

Total

 

$

184

 

6.2

%

$

(246

)

$

180

 

$

118

 

4.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment’s Total

 

 

 

Change in Net Sales for the Six Months Ended March 27, 2015

 

Net Sales for the

 

 

 

versus Net Sales for the Six Months Ended March 28, 2014

 

Six Months Ended

 

 

 

Organic (1)

 

Translation (2)

 

Acquisitions

 

Total

 

March 27, 2015

 

 

 

($ in millions)

 

 

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

144

 

5.8

%

$

(188

)

$

 

$

(44

)

(1.8

)%

76

%

Commercial Transportation

 

12

 

2.7

 

(26

)

 

(14

)

(3.3

)

13

 

Sensors

 

4

 

4.5

 

(9

)

274

 

269

 

277.3

 

11

 

Total

 

160

 

5.3

 

(223

)

274

 

211

 

7.0

 

100

%

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial Equipment

 

20

 

3.1

 

(40

)

3

 

(17

)

(2.6

)

40

 

Aerospace, Defense, Oil, and Gas

 

34

 

6.5

 

(29

)

69

 

74

 

14.2

 

38

 

Energy

 

8

 

2.1

 

(36

)

 

(28

)

(7.4

)

22

 

Total

 

62

 

4.0

 

(105

)

72

 

29

 

1.9

 

100

%

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and Devices

 

(74

)

(9.3

)

(24

)

 

(98

)

(12.2

)

53

 

Appliances

 

20

 

6.3

 

(15

)

 

5

 

1.6

 

24

 

Subsea Communications

 

158

 

108.6

 

 

 

158

 

108.6

 

23

 

Total

 

104

 

8.2

 

(39

)

 

65

 

5.1

 

100

%

Total

 

$

326

 

5.6

%

$

(367

)

$

346

 

$

305

 

5.2

%

 

 

 


(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 27, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)

 

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

)

$

8

 

$

(13

)

$

(103

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

316

 

$

18

 

$

44

 

$

(2

)

$

376

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.77

 

$

0.04

 

$

0.11

 

$

 

$

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) 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.

(3) 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 Quarter Ended March 28, 2014

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

Restructuring

 

 

 

 

 

 

 

 

 

Acquisition

 

and Other

 

 

 

 

 

 

 

 

 

Related

 

Charges

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

(Credits), Net

 

Items (1)

 

(Non-GAAP) (2)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

338

 

$

 

$

(1

)

$

 

$

337

 

Industrial Solutions

 

102

 

1

 

4

 

 

107

 

Communications Solutions

 

31

 

 

(4

)

 

27

 

Total

 

$

471

 

$

1

 

$

(1

)

$

 

$

471

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

15.9

%

 

 

 

 

 

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

16

 

$

 

$

 

$

(14

)

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(120

)

$

 

$

(3

)

$

36

 

$

(87

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

340

 

$

1

 

$

(4

)

$

22

 

$

359

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.82

 

$

 

$

(0.01

)

$

0.05

 

$

0.86

 

 


(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 Six Months Ended March 27, 2015

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)

 

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

)

$

7

 

$

(224

)

$

(220

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

751

 

$

55

 

$

68

 

$

(130

)

$

744

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

1.82

 

$

0.13

 

$

0.16

 

$

(0.31

)

$

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) 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.

(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.

(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 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

 

$

623

 

$

 

$

 

$

 

$

623

 

Industrial Solutions

 

197

 

1

 

6

 

 

204

 

Communications Solutions

 

70

 

 

(1

)

 

69

 

Total

 

$

890

 

$

1

 

$

5

 

$

 

$

896

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

15.3

%

 

 

 

 

 

 

15.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

48

 

$

 

$

 

$

(39

)

$

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(229

)

$

 

$

(4

)

$

43

 

$

(190

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

653

 

$

1

 

$

1

 

$

4

 

$

659

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

1.57

 

$

 

$

 

$

0.01

 

$

1.58

 

 


(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 Quarter Ended June 27, 2014

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

Related

 

and Other

 

Adjusted

 

 

 

U.S. GAAP

 

Charges

 

Charges, Net

 

(Non-GAAP) (1)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

325

 

$

 

$

 

$

325

 

Industrial Solutions

 

121

 

1

 

1

 

123

 

Communications Solutions

 

18

 

 

9

 

27

 

Total

 

$

464

 

$

1

 

$

10

 

$

475

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

15.1

%

 

 

 

 

15.4

%

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

9

 

$

 

$

 

$

9

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(102

)

$

 

$

(3

)

$

(105

)

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

347

 

$

1

 

$

7

 

$

355

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.83

 

$

 

$

0.02

 

$

0.85

 

 


(1) 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 26, 2014

(UNAUDITED)

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Acquisition

 

Restructuring

 

 

 

 

 

 

 

 

 

Related

 

and Other

 

Tax

 

Adjusted

 

 

 

U.S. GAAP

 

Charges (1)

 

Charges, Net

 

Items (2)

 

(Non-GAAP) (3)

 

 

 

($ in millions, except per share data)

 

Operating Income:

 

 

 

 

 

 

 

 

 

 

 

Transportation Solutions

 

$

1,245

 

$

4

 

$

4

 

$

 

$

1,253

 

Industrial Solutions

 

431

 

31

 

7

 

 

469

 

Communications Solutions

 

129

 

 

8

 

 

137

 

Total

 

$

1,805

 

$

35

 

$

19

 

$

 

$

1,859

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

15.1

%

 

 

 

 

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Other Income, Net

 

$

63

 

$

 

$

 

$

(39

)

$

24

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

$

(146

)

$

(7

)

$

(4

)

$

(239

)

$

(396

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Attributable to TE Connectivity Ltd.

 

$

1,614

 

$

28

 

$

15

 

$

(278

)

$

1,379

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

3.87

 

$

0.07

 

$

0.04

 

$

(0.67

)

$

3.31

 

 


(1) Includes $31 million of acquisition and integration costs and $4 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales.

(2) Includes income tax benefits of $282 million recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards and 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.

(3) 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 22, 2015

(UNAUDITED)

 

 

 

Outlook for the

 

 

 

 

 

Quarter Ending

 

 

 

 

 

June 26,

 

Outlook for

 

 

 

2015

 

Fiscal 2015

 

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

 

$

0.80 - 0.84

 

$

3.51 - 3.65

 

Restructuring and other charges, net

 

0.01

 

0.18

 

Acquisition related charges

 

0.04

 

0.22

 

Tax items

 

 

(0.31

)

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

 

$

0.85 - 0.89

 

$

3.60 - 3.74

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales growth (GAAP)

 

2 - 5%

 

3 - 6%

 

Translation

 

10 - 11

 

8

 

(Acquisitions) divestitures

 

(7

)

(6

)

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

 

5 - 9%

 

5 - 8%

 

 


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