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NYSE: TEL $88.27 +0.00 (+0%) Volume: 492,600 20 minute delay October 16, 2017

TE Connectivity Reports Third Quarter 2017 Financial Results

July 26, 2017

Net sales and earnings per share exceed guidance; company raises full year sales and earnings outlook

SCHAFFHAUSEN, Switzerland, July 26, 2017 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter that ended June 30, 2017.

TE Connectivity Ltd. Logo. (PRNewsFoto/TE Connectivity Ltd.)

Third Quarter Highlights

  • Net sales were $3.4 billion, up 8 percent, as reported and organically, from third quarter of 2016;
  • Orders, excluding the company's SubCom business, were $3.3 billion, up 12 percent from the prior year;
  • Diluted earnings per share from continuing operations were $1.21;
  • Adjusted earnings per share were $1.24;
  • Cash flow from continuing operating activities was $524 million, with free cash flow of $408 million, and $324 million returned to shareholders.

Third Quarter Results

For the third quarter, the company reported net sales of $3.4 billion, with growth of 8 percent year-over-year. Diluted earnings per share (EPS) from continuing operations (GAAP EPS) were $1.21 and adjusted EPS were $1.24. Cash flow from continuing operating activities was $524 million, and free cash flow was $408 million. The company returned $324 million to shareholders in the quarter through dividends and share repurchases. Orders for the quarter, excluding the company's SubCom business, totaled $3.3 billion, up 12 percent from the prior year, with a book-to-bill ratio of 1.06.

"Our teams continued to deliver strong financial performance and growth across all segments and regions, reflecting our strategy to create safer, sustainable, productive and connected solutions for our customers," said TE Connectivity Chief Executive Officer Terrence Curtin. "This quarter's results were driven by content growth in Transportation Solutions; strength in our Industrial Solutions segment, particularly in factory automation and medical applications; and strong results in our Communications Solutions segment, especially in areas connected to cloud solutions.

"In connection with these results, we are raising the midpoint of our fiscal 2017 sales and adjusted EPS guidance to $12.9 billion and $4.73 respectively, representing 7 percent organic sales growth and 20 percent adjusted EPS growth versus the prior year," Curtin added. "This increase in our guidance is due to above market growth in all of our segments and strong execution of our strategy."

During the third quarter, the company announced a definitive agreement to acquire Hirschmann Car Communication, which focuses on vehicle connectivity technology used in antenna and infotainment systems and acquired MicroGroup, a producer of specialized shafts for medical applications. These acquisitions will enable further content growth in key applications for the automotive and medical markets.

2017 Outlook

For the fiscal fourth quarter of 2017, the company expects net sales of $3.2 billion to $3.3 billion, reflecting an increase of 5 percent on an as reported basis and 4 percent organically, at the midpoint versus the fourth quarter of 2016, excluding the additional week in fiscal year 2016. GAAP EPS are expected to be $1.07 to $1.09, including net restructuring, acquisition-related and other charges of $0.07. TE expects adjusted EPS of $1.14 to $1.16, which includes a $0.09 favorable impact from growth and margin improvements year-over-year, offset by a $0.08 tax rate impact due to an unusually low tax rate in the prior year.

For the full year, the company expects net sales of $12.85 billion to $12.95 billion, reflecting 8 percent growth on an as reported basis and 7 percent organically at the mid-point versus the prior year, excluding the additional week in fiscal year 2016. GAAP EPS are expected to be $4.54 to $4.56, including net restructuring, acquisition-related and other charges of $0.34 and a tax-related benefit of $0.16. TE expects adjusted EPS of $4.72 to $4.74 reflecting 20 percent growth at the mid-point compared to 2016, when excluding the additional week.

Information about TE Connectivity's use of non-GAAP financial measures is provided below. For reconciliations of these non-GAAP financial measures, see the attached tables.

Conference Call and Webcast

The company will hold a conference call today beginning at 8:30 a.m. ET. The dial-in information is provided here:

  • 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 dial-in number in the United States is (800) 230-1059, and for international callers, the dial-in number is (612) 234-9959.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on July 26, 2017, and ending at 11:59 p.m. ET on August 2, 2017. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the dial-in number is (320) 365-3844. The replay access code for all callers is 426345.

About TE Connectivity

TE Connectivity (NYSE: TEL) is a global technology leader with revenues of approximately $13 billion. Our commitment to innovation enables advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. TE's unmatched breadth of connectivity and sensor solutions, proven in the harshest of environments, helps build a safer, greener, smarter and more connected world. With 75,000 people – including more than 7,000 engineers – working alongside customers in nearly 150 countries, we help ensure that EVERY CONNECTION COUNTS – www.TE.com

Non-GAAP Financial Measures

We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.

The following provides additional information regarding our non-GAAP financial measures:

  • Organic Net Sales Growth – represents net sales growth (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth is a useful measure of our performance because it excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
  • Adjusted Operating Income and Adjusted Operating Margin – represent operating income and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition related charges, and other income or charges, if any. We utilize these measures to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income is a significant component in our incentive compensation plans.
  • Adjusted Other Income, Net – represents net other income (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
  • Adjusted Income Tax Expense and Adjusted Effective Tax Rate – represent income tax expense and effective tax rate, respectively (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition related charges, other income or charges, and certain significant tax items, if any.
  • Adjusted Income from Continuing Operations – represents income from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
  • Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
  • Net Sales Excluding the Impact of the Additional Week, Net Sales Growth Excluding the Impact of the Additional Week, Organic Net Sales Growth Excluding the Impact of the Additional Week, Adjusted Operating Income Excluding the Impact of the Additional Week, Adjusted Operating Margin Excluding the Impact of the Additional Week, and Adjusted Earnings Per Share Excluding the Impact of the Additional Week – represent certain GAAP and non-GAAP financial measures excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. The impact of the additional week is estimated using an average weekly sales figure for the last month of the fiscal year.
  • 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 financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.

Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP financial 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 and cash paid (collected) pursuant to collateral requirements related to cross currency swaps, are also excluded by management in evaluating Free Cash Flow. 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.

In the calculation of Free Cash Flow, we subtract 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 financial measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.

Forward-Looking Statements

This release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive and data and devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; 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. 30, 2016 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.

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


















For the Quarters Ended


For the Nine Months Ended


June 30,


June 24,


June 30,


June 24,


2017


2016


2017


2016


(in millions, except per share data)

Net sales

$  3,367


$  3,121


$  9,657


$  8,906

Cost of sales 

2,229


2,099


6,346


5,977

Gross margin

1,138


1,022


3,311


2,929

Selling, general, and administrative expenses

412


367


1,196


1,074

Research, development, and engineering expenses

170


161


490


479

Acquisition and integration costs

1


11


5


19

Restructuring and other charges (credits), net

19


31


125


(28)

   Operating income  

536


452


1,495


1,385

Interest income

3


2


14


12

Interest expense

(32)


(31)


(95)


(93)

Other expense, net

(4)


(651)


(6)


(631)

   Income (loss) from continuing operations before income taxes

503


(228)


1,408


673

Income tax (expense) benefit

(71)


1,019


(164)


831

   Income from continuing operations

432


791


1,244


1,504

Income from discontinued operations, net of income taxes

3


48


5


68

Net income

$     435


$     839


$  1,249


$  1,572









Basic earnings per share:








   Income from continuing operations

$    1.22


$    2.22


$    3.50


$    4.08

   Income from discontinued operations

0.01


0.13


0.01


0.18

   Net income  

1.23


2.35


3.52


4.26









Diluted earnings per share:








   Income from continuing operations

$    1.21


$    2.19


$    3.47


$    4.03

   Income from discontinued operations

0.01


0.13


0.01


0.18

   Net income  

1.22


2.32


3.48


4.21









Dividends paid per common share

$    0.40


$    0.37


$    1.14


$    1.03









Weighted-average number of shares outstanding: 








   Basic

355


357


355


369

   Diluted

358


361


359


373

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)










June 30,


September 30,


2017


2016


(in millions, except share data)

Assets




Current assets:




Cash and cash equivalents

$      755


$               647

Accounts receivable, net of allowance for doubtful accounts of $20 and $17, respectively

2,271


2,046

Inventories

1,787


1,596

Prepaid expenses and other current assets

541


486

  Total current assets

5,354


4,775

Property, plant, and equipment, net

3,165


3,052

Goodwill

5,516


5,492

Intangible assets, net

1,790


1,879

Deferred income taxes

2,287


2,111

Other assets

408


299

Total Assets

$ 18,520


$          17,608





Liabilities and Shareholders' Equity




Current liabilities:




Short-term debt

$      878


$               331

Accounts payable

1,309


1,090

Accrued and other current liabilities

1,623


1,437

Deferred revenue

62


208

Total current liabilities

3,872


3,066

Long-term debt

3,113


3,739

Long-term pension and postretirement liabilities

1,494


1,502

Deferred income taxes

197


207

Income taxes

283


247

Other liabilities

420


362

Total Liabilities

9,379


9,123

Commitments and contingencies




Shareholders' equity:




Common shares, CHF 0.57 par value, 357,069,981 shares authorized and issued, and




382,835,381 shares authorized and issued, respectively

157


168

Contributed surplus

-


1,801

Accumulated earnings 

9,747


8,682

Treasury shares, at cost, 3,380,507and 27,554,005 shares, respectively

(257)


(1,624)

Accumulated other comprehensive loss

(506)


(542)

Total Shareholders' Equity

9,141


8,485

Total Liabilities and Shareholders' Equity

$ 18,520


$          17,608

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


















For the Quarters Ended


For the Nine Months Ended


June 30,


June 24,


June 30,


June 24,


2017


2016


2017


2016


(in millions)

Cash Flows From Operating Activities:








Net income

$     435


$     839


$  1,249


$  1,572

Income from discontinued operations, net of income taxes

(3)


(48)


(5)


(68)

Income from continuing operations

432


791


1,244


1,504

Adjustments to reconcile income from continuing operations to net cash 








provided by operating activities:








Depreciation and amortization

157


148


469


438

Deferred income taxes

(28)


214


(146)


162

Provision for losses on accounts receivable and inventories

6


4


15


27

Tax sharing expense

5


651


6


632

Share-based compensation expense

26


23


73


66

(Gain) loss on divestiture

-


3


-


(143)

Other 

6


22


17


84

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








and divestitures:








Accounts receivable, net

(45)


6


(260)


15

Inventories

(126)


59


(195)


(2)

Prepaid expenses and other current assets

(38)


-


(6)


302

Accounts payable

69


12


217


(4)

Accrued and other current liabilities

43


70


56


(68)

Deferred revenue

(67)


48


(150)


(22)

Income taxes

21


(1,339)


54


(1,735)

Other

63


3


55


6

Net cash provided by continuing operating activities

524


715


1,449


1,262

Net cash provided by (used in) discontinued operating activities

(1)


3


(1)


1

Net cash provided by operating activities

523


718


1,448


1,263

Cash Flows From Investing Activities:








Capital expenditures

(163)


(150)


(452)


(420)

Proceeds from sale of property, plant, and equipment

4


2


12


3

Acquisition of businesses, net of cash acquired

(77)


(988)


(77)


(994)

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

4


65


4


326

Other

(9)


(1)


(25)


28

Net cash used in investing activities

(241)


(1,072)


(538)


(1,057)

Cash Flows From Financing Activities:








Net increase (decrease) in commercial paper

-


150


(162)


300

Proceeds from issuance of debt

-


-


89


350

Repayment of debt

-


-


-


(500)

Proceeds from exercise of share options

22


16


86


77

Repurchase of common shares

(178)


(134)


(376)


(2,657)

Payment of common share dividends to shareholders

(142)


(132)


(405)


(377)

Other

(2)


3


(24)


(29)

Net cash used in continuing financing activities

(300)


(97)


(792)


(2,836)

Net cash provided by (used in) discontinued financing activities

1


(3)


1


(1)

Net cash used in financing activities

(299)


(100)


(791)


(2,837)

Effect of currency translation on cash

(1)


(2)


(11)


(4)

Net increase (decrease) in cash and cash equivalents

(18)


(456)


108


(2,635)

Cash and cash equivalents at beginning of period

773


1,150


647


3,329

Cash and cash equivalents at end of period

$     755


$     694


$     755


$     694









Supplemental Cash Flow Information:








Interest paid

$       40


$       40


$     106


$     102

Income taxes paid, net of refunds

79


107


256


742

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


















For the Quarters Ended


For the Nine Months Ended


June 30,


June 24,


June 30,


June 24,


2017


2016


2017


2016


(in millions)

Net cash provided by continuing operating activities

$     524


$     715


$  1,449


$  1,262

Excluding:








Payments (receipts) related to pre-separation U.S. 








tax matters, net

(15)


5


(23)


145

Payments related to income taxes on the sale of the








Broadband Network Solutions business

-


17


-


26

Cash paid pursuant to collateral requirements related








to cross currency swaps

58


-


19


19

Capital expenditures, net

(159)


(148)


(440)


(417)

Free cash flow (1)

$     408


$     589


$  1,005


$  1,035









(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)


























For the Quarters Ended 


For the Nine Months Ended 


June 30,


June 24,


June 30,


June 24,


2017


2016


2017


2016


($ in millions)


Net Sales



Net Sales



Net Sales



Net Sales


Transportation Solutions

$     1,765



$     1,652



$     5,195



$     4,767


Industrial Solutions

905



849



2,553



2,296


Communications Solutions

697



620



1,909



1,843


Total

$     3,367



$     3,121



$     9,657



$     8,906



























Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income

Margin


Income

Margin


Income

Margin


Income

Margin

Transportation Solutions

$        328

18.6%


$        297

18.0%


$        971

18.7%


$        847

17.8%

Industrial Solutions

98

10.8


95

11.2


251

9.8


224

9.8

Communications Solutions

110

15.8


60

9.7


273

14.3


314

17.0

Total

$        536

15.9%


$        452

14.5%


$     1,495

15.5%


$     1,385

15.6%


























Adjusted

Adjusted


Adjusted

Adjusted


Adjusted

Adjusted


Adjusted

Adjusted


Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income (1)

Margin (1)


Income (1)

Margin (1)


Income (1)

Margin (1)


Income (1)

Margin (1)

Transportation Solutions

$        332

18.8%


$        320

19.4%


$     1,033

19.9%


$        905

19.0%

Industrial Solutions

115

12.7


112

13.2


313

12.3


274

11.9

Communications Solutions

112

16.1


69

11.1


284

14.9


206

11.2

Total

$        559

16.6%


$        501

16.1%


$     1,630

16.9%


$     1,385

15.6%













(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)






















Change in Net Sales for the Quarter Ended June 30, 2017


 versus Net Sales for the Quarter Ended June 24, 2016


Net


Organic Net






Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):










Automotive

$   49

3.9%


$   70

5.6%


$              (21)


$                 -

Commercial transportation

45

20.7


50

23.1


(5)


-

Sensors

19

10.0


14

7.2


(4)


9

Total

113

6.8


134

8.1


(30)


9

Industrial Solutions (3):










Industrial equipment

61

15.4


40

10.2


(7)


28

Aerospace, defense, oil, and gas

(5)

(1.8)


(2)

(0.6)


(3)


-

Energy

-

-


4

1.7


(4)


-

Total

56

6.6


42

4.9


(14)


28

Communications Solutions (3):










Data and devices

10

4.3


14

5.8


(4)


-

Subsea communications

48

21.5


48

21.5


-


-

Appliances

19

11.7


22

13.6


(3)


-

Total

77

12.4


84

13.5


(7)


-

Total 

$ 246

7.9%


$ 260

8.3%


$              (51)


$              37






















Change in Net Sales for the Nine Months Ended June 30, 2017


 versus Net Sales for the Nine Months Ended June 24, 2016


Net


Organic Net




Acquisitions


Sales Growth


Sales Growth (1)


Translation (2)


(Divestiture)


($ in millions)

Transportation Solutions (3):










Automotive

$ 277

7.7%


$ 326

9.1%


$              (49)


$                 -

Commercial transportation

113

18.5


123

20.1


(10)


-

Sensors

38

6.8


18

3.2


(10)


30

Total

428

9.0


467

9.8


(69)


30

Industrial Solutions (3):










Industrial equipment

265

26.7


56

5.7


(17)


226

Aerospace, defense, oil, and gas

(10)

(1.2)


(1)

(0.1)


(10)


1

Energy

2

0.4


9

1.8


(7)


-

Total

257

11.2


64

2.8


(34)


227

Communications Solutions (3):










Data and devices

(49)

(6.5)


34

4.1


(13)


(70)

Subsea communications

60

9.3


60

9.3


-


-

Appliances

55

12.5


63

14.0


(8)


-

Total

66

3.6


157

8.5


(21)


(70)

Total 

$ 751

8.4%


$ 688

7.7%


$            (124)


$            187











(1) Organic net sales growth is a non-GAAP financial measure. See description of non-GAAP financial measures.

(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 June 30, 2017

(UNAUDITED)
























Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)


Charges, Net (1)


Items(2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$         328


$              1


$                     3


$        -


$                332

Industrial Solutions

98


3


14


-


115

Communications Solutions

110


-


2


-


112

    Total 

$         536


$              4


$                   19


$        -


$                559











Operating Margin

15.9%








16.6%











Other Income (Expense), Net

$           (4)


$               -


$                     -


$       7


$                    3











Income Tax Expense

$         (71)


$             (1)


$                   (3)


$    (14)


$                (89)











Effective Tax Rate

14.1%








16.7%











Income from Continuing Operations 

$         432


$              3


$                   16


$      (7)


$                444











Diluted Earnings per Share from 










   Continuing Operations 

$        1.21


$         0.01


$                0.04


$ (0.02)


$               1.24











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

(2) Income tax benefits associated with pre-separation tax matters and the related impact to other expense pursuant to the tax sharing agreement with
Tyco International and Covidien.

(3) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 24, 2016

(UNAUDITED)
























Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


Charges, Net (2)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$         297


$               2


$                   21


$          -


$                320

Industrial Solutions

95


16


1


-


112

Communications Solutions

60


-


9


-


69

    Total 

$         452


$             18


$                   31


$          -


$                501











Operating Margin

14.5%








16.1%











Other Expense, Net

$       (651)


$                -


$                     -


$     650


$                  (1)











Income Tax (Expense) Benefit

$      1,019


$              (3)


$                 (10)


$ (1,086)


$                (80)











Effective Tax Rate

446.9%








17.0%











Income from Continuing Operations 

$         791


$             15


$                   21


$    (436)


$                391











Diluted Earnings per Share from 










   Continuing Operations 

$        2.19


$          0.04


$                0.06


$   (1.21)


$               1.08











(1) Includes $11 million of acquisition and integration costs and $7 million of non-cash amortization associated with fair value adjustments related to
acquired inventories and customer order backlog recorded in cost of sales.

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

(3) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all
aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the
tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation
allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions,
as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(4) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Nine Months Ended June 30, 2017

(UNAUDITED)
























Adjustments






Acquisition


Restructuring








Related


and Other


Tax


Adjusted


U.S. GAAP


Charges (1)


Charges, Net (1)


Items (2)


(Non-GAAP) (3)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$         971


$              2


$                   60


$        -


$             1,033

Industrial Solutions

251


8


54


-


313

Communications Solutions

273


-


11


-


284

    Total 

$      1,495


$            10


$                 125


$        -


$             1,630











Operating Margin

15.5%








16.9%











Other Income (Expense), Net

$           (6)


$               -


$                     -


$        7


$                    1











Income Tax Expense

$       (164)


$             (2)


$                 (33)


$    (66)


$              (265)











Effective Tax Rate

11.6%








17.1%











Income from Continuing Operations 

$      1,244


$              8


$                   92


$    (59)


$             1,285











Diluted Earnings per Share from 










   Continuing Operations

$        3.47


$         0.02


$                0.26


$ (0.16)


$               3.58











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

(2) Includes income tax benefits associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation
allowance for U.S. tax loss carryforwards. Also includes income tax benefits associated with pre-separation tax matters and the related impact to
other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(3) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Nine Months Ended June 24, 2016

(UNAUDITED)
























Adjustments








Restructuring








Acquisition


and Other








Related


Charges


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


(Credits), Net (2)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$         847


$               6


$                    52


$          -


$                905

Industrial Solutions

224


22


28


-


274

Communications Solutions

314


-


(108)


-


206

    Total 

$      1,385


$             28


$                  (28)


$          -


$             1,385











Operating Margin

15.6%








15.6%











Other Income (Expense), Net

$       (631)


$                -


$                      -


$     650


$                  19











Income Tax (Expense) Benefit

$         831


$              (6)


$                    13


$ (1,111)


$              (273)











Effective Tax Rate

(123.5)%








20.6%











Income from Continuing Operations 

$      1,504


$             22


$                  (15)


$    (461)


$             1,050











Diluted Earnings per Share from 










   Continuing Operations

$        4.03


$          0.06


$               (0.04)


$   (1.24)


$               2.82











(1) Includes $19 million of acquisition and integration costs and $9 million of non-cash amortization associated with fair value adjustments related to
acquired inventories and customer order backlog recorded in cost of sales.

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

(3) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all
aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax
sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance
for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the
related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(4) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 30, 2016

(UNAUDITED)




















Adjustments







Restructuring






Acquisition


and Other






Related


Charges


Adjusted


U.S. GAAP


Charges (1)


(Credits), Net (1)


(Non-GAAP) (2)


($ in millions, except per share data)

Operating Income:








Transportation Solutions

$         344


$              3


$                    (6)


$                341

Industrial Solutions

119


1


3


123

Communications Solutions

54


-


33


87

    Total 

$         517


$              4


$                    30


$                551









Operating Margin

15.5%






16.5%









Other Expense, Net

$           (1)


$               -


$                      -


$                  (1)









Income Tax Expense

$         (52)


$             (1)


$                  (15)


$                (68)









Effective Tax Rate

10.6%






13.0%









Income from Continuing Operations 

$         437


$              3


$                    15


$                455









Diluted Earnings per Share from 








   Continuing Operations

$        1.22


$         0.01


$                 0.04


$               1.27









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

(2) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 30, 2016

(UNAUDITED)
























Adjustments








Restructuring








Acquisition


and Other








Related


Charges


Tax


Adjusted


U.S. GAAP


Charges (1)(2)


(Credits), Net (2)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating Income:










Transportation Solutions

$      1,191


$               9


$                    46


$          -


$             1,246

Industrial Solutions

343


23


31


-


397

Communications Solutions

368


-


(75)


-


293

    Total 

$      1,902


$             32


$                      2


$          -


$             1,936











Operating Margin

15.5%








15.8%











Other Income (Expense), Net

$       (632)


$                -


$                      -


$     650


$                  18











Income Tax (Expense) Benefit

$         779


$              (7)


$                    (2)


$ (1,111)


$              (341)











Effective Tax Rate

(67.0)%








18.5%











Income from Continuing Operations 

$      1,941


$             25


$                      -


$    (461)


$             1,505











Diluted Earnings per Share from 










   Continuing Operations

$        5.26


$          0.07


$                      -


$   (1.25)


$               4.08











(1) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related
to acquired inventories and customer order backlog recorded in cost of sales.

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

(3) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all
aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the
tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation
allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions,
as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.

(4) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

IMPACT OF ADDITIONAL WEEK (UNAUDITED)

For the Quarter Ended September 30, 2016


















































Change in Net Sales for the Quarter Ended
September 30, 2016 versus Net Sales for the
Quarter Ended September 25, 2015


Change in Organic Net Sales for the Quarter Ended
September 30, 2016 versus Organic Net Sales for the
Quarter Ended September 25, 2015 (2)












For the Quarter Ended September 30, 2016


For the
Quarter Ended
September 25,
2015






Adjustment







Adjustment






Adjustment




14 Weeks


Impact of


13 Weeks



14 Weeks


Impact of


13 Weeks


14 Weeks


Impact of


13 Weeks


U.S. GAAP


14th Week


(Non-GAAP) (1)(2)



U.S. GAAP


14th Week


(Non-GAAP) (1)(2)


(Non-GAAP) (2)


14th Week


(Non-GAAP) (1)(2)


 ($ in millions)

Net Sales:




















Transportation Solutions




















Automotive

$      1,311


$         (102)


$                1,209


$             1,128


16.2%


(9.0)%


7.2%


15.3%


(9.0)%


6.3%

Commercial Transportation

215


(15)


200


190


13.2


(7.9)


5.3


12.1


(7.9)


4.2

Sensors

210


(13)


197


190


10.5


(6.8)


3.7


4.2


(6.5)


(2.3)

Total

1,736


(130)


1,606


1,508


15.1


(8.6)


6.5


13.4


(8.5)


4.9

Industrial Solutions




















Industrial Equipment

427


(32)


395


343


24.5


(9.3)


15.2


0.7


(7.8)


(7.1)

Aerospace, Defense, Oil, and Gas

299


(20)


279


276


8.3


(7.2)


1.1


8.0


(7.1)


0.9

Energy

193


(13)


180


173


11.6


(7.6)


4.0


13.4


(7.6)


5.8

Total

919


(65)


854


792


16.0


(8.2)


7.8


6.0


(7.5)


(1.5)

Communications Solutions




















Data and Devices

262


(21)


241


323


(18.9)


(6.5)


(25.4)


(5.8)


(7.5)


(13.3)

Subsea Communications

239


(11)


228


202


18.3


(5.4)


12.9


18.3


(5.2)


13.1

Appliances

176


(11)


165


159


10.7


(6.9)


3.8


10.4


(7.4)


3.0

Total

677


(43)


634


684


(1.0)


(6.3)


(7.3)


5.9


(6.8)


(0.9)

Total

$      3,332


$         (238)


$                3,094


$             2,984


11.7%


(8.0)%


3.7%


9.8%


(7.9)%


1.9%
































































Adjustments




Adjustment














Acquisition


Restructuring


















Related


and Other


14 Weeks


Impact of


13 Weeks










U.S. GAAP


Charges


Charges, Net 


(Non-GAAP) (2)


14th Week


(Non-GAAP) (1)(2)










 ($ in millions, except per share data)





























Operating Income

$         517


$               4


$                     30


$                551


$           (55)


$                   496





























Operating Margin

15.5%






16.5%




16.0%





























Diluted Earnings per Share from 




















   Continuing Operations

$        1.22


$          0.01


$                  0.04


$               1.27


$        (0.13)


$                  1.14

















































(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year.

(2) See description of non-GAAP financial measures.

 

 

 

TE CONNECTIVITY LTD.

IMPACT OF ADDITIONAL WEEK (UNAUDITED)

For the Year Ended September 30, 2016






























Change in Net Sales for Fiscal 2016
versus Net Sales for Fiscal 2015


Change in Organic Net Sales for Fiscal 2016
versus Organic Net Sales for Fiscal 2015(2)












Fiscal 2016


Fiscal 2015






Adjustment







Adjustment






Adjustment




53 Weeks


Impact of


52 Weeks



53 Weeks


Impact of


52 Weeks


53 Weeks


Impact of


52 Weeks


U.S. GAAP


53rd Week


(Non-GAAP) (1)(2)



U.S. GAAP


53rd Week


(Non-GAAP) (1)(2)


(Non-GAAP) (2)


53rd Week


(Non-GAAP) (1)(2)


 ($ in millions)

Net Sales:




















Transportation Solutions




















Automotive

$      4,912


$         (102)


$                4,810


$        4,780


2.8%


(2.2)%


0.6%


5.6%


(2.2)%


3.4%

Commercial transportation

825


(15)


810


820


0.6


(1.8)


(1.2)


2.6


(1.8)


0.8

Sensors

766


(13)


753


751


2.0


(1.7)


0.3


3.1


(1.7)


1.4

Total

6,503


(130)


6,373


6,351


2.4


(2.1)


0.3


4.9


(2.1)


2.8

Industrial Solutions




















Industrial equipment

1,419


(32)


1,387


1,323


7.3


(2.5)


4.8


(5.2)


(2.1)


(7.3)

Aerospace, defense, oil, and gas

1,100


(20)


1,080


1,151


(4.4)


(1.8)


(6.2)


(3.8)


(1.7)


(5.5)

Energy

696


(13)


683


705


(1.3)


(1.8)


(3.1)


3.6


(1.9)


1.7

Total

3,215


(65)


3,150


3,179


1.1


(2.0)


(0.9)


(2.8)


(1.9)


(4.7)

Communications Solutions




















Data and devices

1,020


(21)


999


1,357


(24.8)


(1.6)


(26.4)


(17.8)


(1.7)


(19.5)

Subsea communications

885


(11)


874


709


24.8


(1.5)


23.3


24.8


(1.3)


23.5

Appliances

615


(11)


604


637


(3.5)


(1.7)


(5.2)


(1.8)


(1.9)


(3.7)

Total

2,520


(43)


2,477


2,703


(6.8)


(1.6)


(8.4)


(1.6)


(1.7)


(3.3)

Total

$    12,238


$         (238)


$              12,000


$      12,233


-%


(1.9)%


(1.9)%


1.5%


(2.0)%


(0.5)%
































































Adjustments




Adjustment












Acquisition


Restructuring


















Related


and Other




53 Weeks


Impact of


52 Weeks








U.S. GAAP


Charges (3)


Charges, Net 


Tax Items (4)


(Non-GAAP) (2)


53rd Week


(Non-GAAP) (1)(2)








 ($ in millions, except per share data)



























Operating Income

$      1,902


$             32


$                       2


$               -


$             1,936


$           (55)


$                1,881



























Operating Margin

15.5%








15.8%




15.7%



























Diluted Earnings per Share from 




















   Continuing Operations

$        5.26


$          0.07


$                       -


$        (1.25)


$               4.08


$        (0.13)


$                  3.95















































(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year.

(2) See description of non-GAAP financial measures.

(3) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.

(4) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007,
as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation
allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million to other expense pursuant to the
tax sharing agreement with Tyco International and Covidien.

 

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of July 26, 2017

(UNAUDITED)






Outlook for




Quarter Ending




September 29,


 Outlook for 


2017


Fiscal 2017

Diluted earnings per share from continuing operations (GAAP)

 $1.07 - $1.09 


 $4.54 - 4.56 

Restructuring and other charges, net

0.06


0.31

Acquisition related charges

0.01


0.03

Tax items

-


(0.16)

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

 $1.14 - 1.16 


 $4.72 - 4.74 









Net sales growth (GAAP)

(5) - (1)%


5 - 6%

Impact of additional week in fiscal 2016

8


2

Net sales growth excluding the impact of the additional week in fiscal 2016 (non-GAAP) (1)

3 - 7%


7 - 8%

Translation

-


1

(Acquisitions) divestitures, net

(1)


(2)

Organic net sales growth excluding the impact of the additional week in fiscal 2016 (non-
GAAP) (1)

2 - 6%


6 - 7%









Effective tax rate (GAAP)

18.5%


13.8%

Effective tax rate adjustments (2)

0.5


4.2

Adjusted effective tax rate (non-GAAP) (1)

19.0%


18.0%





(1) See description of non-GAAP financial measures.

(2) Includes adjustments for special tax items and the tax effect of acquisition related charges and restructuring and other charges, calculated based on
the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

 

 

 

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SOURCE TE Connectivity Ltd.

Media Relations: B.J. Talley, TE Connectivity, 610-893-9553, bj.talley@te.com ; Investor Relations: Sujal Shah, TE Connectivity, 610-893-9790, sujal.shah@te.com