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TE Connectivity Announces Results for Third Quarter of Fiscal Year 2018

July 25, 2018
Company reports double-digit growth in quarterly sales, with organic sales growth of 6 percent, exceeds sales and earnings expectations for the third quarter, and raises full-year guidance

SCHAFFHAUSEN, Switzerland, July 25, 2018 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter, which ended June 29, 2018.

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

Third Quarter Highlights

  • Net sales were $3.8 billion, up 12 percent as reported and 6 percent organically over the third quarter of 2017
  • Diluted earnings per share (EPS) from continuing operations were $1.29, up 7 percent from the third quarter of 2017, and adjusted EPS were $1.43, 15 percent growth over the same period in 2017
  • Cash flow from continuing operating activities was $800 million and free cash flow was $504 million, with $382 million returned to shareholders
  • Orders, excluding the company's SubCom business, were $3.7 billion in the quarter, up 9 percent organically from the third quarter of 2017

Third Quarter Results
For the third quarter, the company reported net sales of $3.8 billion, with diluted EPS from continuing operations of $1.29, and adjusted EPS of $1.43. Cash flow from continuing operating activities was $800 million and free cash flow was $504 million. Excluding SubCom, total orders were $3.7 billion, up 15 percent as reported and 9 percent organically over the third quarter of 2017. The book-to-bill ratio for the quarter, excluding SubCom, was 1.05.

"We exceeded our guidance for the quarter, delivering strong double-digit growth in both sales and adjusted earnings per share through our positive alignment with long-term global growth trends in our markets, the customer focus of our global teams and our industrial technology leadership position," said TE Connectivity Chief Executive Officer Terrence Curtin. "Our performance reflects the benefits of our strong business model, effective execution of our strategy and our focus on co-creating a safer, sustainable, productive and connected future with our customers."

2018 Outlook
For the fiscal fourth quarter of 2018, the company expects net sales of $3.59 billion to $3.69 billion, reflecting an increase of 5 percent on both an actual and organic basis year-over-year, at the mid-point. Diluted EPS from continuing operations are expected to be $1.23 to $1.25, including net restructuring and acquisition-related charges of $0.08. The company expects adjusted EPS of $1.31 to $1.33 which represents a 6 percent improvement at the mid-point versus the fourth quarter of 2017.

For the full year, the company expects net sales of $14.58 to $14.68 billion, reflecting 12 percent actual and 6 percent organic growth at the mid-point versus the prior year. Diluted EPS from continuing operations are expected to be $3.79 to $3.81, including net restructuring, acquisition-related, tax and other charges of $1.77. The company expects adjusted EPS of $5.56 to $5.58, reflecting 15 percent growth at the mid-point compared to fiscal year 2017.

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) 230-1085, and for international callers, the dial-in number is (612) 288-0337.              
  • An audio replay of the conference call will be available beginning at 10:30 a.m. ET on July 25, 2018, and ending at 11:59 p.m. ET on August 1, 2018. 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 450417.

About TE Connectivity
TE Connectivity Ltd. (NYSE: TEL) is a $13 billion global technology and manufacturing leader creating a safer, sustainable, productive, and connected future. For more than 75 years, our connectivity and sensor solutions, proven in the harshest environments, have enabled advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. With 78,000 employees, including more than 7,000 engineers, working alongside customers in nearly 150 countries, TE ensures that EVERY CONNECTION COUNTS. Learn more at www.te.com and on LinkedIn, Facebook, WeChat and Twitter.

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 adjusted measures in combination with operating income and operating margin 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 (Expense), Net – represents net other income (expense) (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.
  • 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, including the effects of the U.S. Tax Cuts and Jobs Act. 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. 29, 2017 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 29,


June 30,


June 29,


June 30,


2018


2017


2018


2017


(in millions, except per share data)

Net sales

$  3,764


$  3,367


$ 10,989


$  9,657

Cost of sales 

2,547


2,227


7,352


6,340

Gross margin

1,217


1,140


3,637


3,317

Selling, general, and administrative expenses

409


408


1,220


1,182

Research, development, and engineering expenses

181


168


539


485

Acquisition and integration costs

4


1


9


5

Restructuring and other charges, net

65


19


106


125

   Operating income  

558


544


1,763


1,520

Interest income

3


3


11


14

Interest expense

(25)


(32)


(80)


(95)

Other income (expense), net

(1)


(12)


2


(31)

   Income from continuing operations before income taxes

535

1

503


1,696

1

1,408

Income tax expense

(81)


(71)


(789)


(164)

   Income from continuing operations

454


432


907


1,244

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

-


3


(3)


5

Net income

$     454


$     435


$      904


$  1,249









Basic earnings per share:








   Income from continuing operations

$    1.30


$    1.22


$     2.58


$    3.50

   Income (loss) from discontinued operations

-


0.01


(0.01)


0.01

   Net income 

1.30


1.23


2.58


3.52









Diluted earnings per share:








   Income from continuing operations

$    1.29


$    1.21


$     2.56


$    3.47

   Income (loss) from discontinued operations

-


0.01


(0.01)


0.01

   Net income

1.29


1.22


2.55


3.48









Dividends paid per common share

$    0.44


$    0.40


$     1.24


$    1.14









Weighted-average number of shares outstanding: 








   Basic

349


355


351


355

   Diluted

352


358


354


359

  









TE CONNECTIVITY LTD.





CONSOLIDATED BALANCE SHEETS (UNAUDITED)






















June 29,


September 29,






2018


2017






(in millions, except share data)





Assets








Current assets:








Cash and cash equivalents

$      770


$            1,218





Accounts receivable, net of allowance for doubtful accounts of $21

2,591


2,290





Inventories

1,961


1,813





Prepaid expenses and other current assets

619


605





  Total current assets

5,941


5,926





Property, plant, and equipment, net

3,633


3,400





Goodwill

5,616


5,651





Intangible assets, net

1,698


1,841





Deferred income taxes

1,672


2,141





Other assets

453


444





Total Assets

$ 19,013


$          19,403













Liabilities and Shareholders' Equity








Current liabilities:








Short-term debt

$      714


$               710





Accounts payable

1,583


1,436





Accrued and other current liabilities

1,625


1,626





Deferred revenue

124


75





Total current liabilities

4,046


3,847





Long-term debt

3,294


3,634





Long-term pension and postretirement liabilities

1,119


1,160





Deferred income taxes

227


236





Income taxes

311


293





Other liabilities

524


482





Total Liabilities

9,521


9,652





Commitments and contingencies








Shareholders' equity:








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

157


157





Accumulated earnings 

10,432


10,175





Treasury shares, at cost, 8,658,869 and 5,356,369 shares, respectively

(798)


(421)





Accumulated other comprehensive loss

(299)


(160)





Total Shareholders' Equity

9,492


9,751





Total Liabilities and Shareholders' Equity

$ 19,013


$          19,403






















  









TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)







For the Quarters Ended


For the Nine Months Ended


June 29,


June 30,


June 29,


June 30,


2018


2017


2018


2017


(in millions)

Cash Flows From Operating Activities:








Net income 

$     454


$     435


$     904


$  1,249

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

-


(3)


3


(5)

Income from continuing operations

454


432


907


1,244

Adjustments to reconcile income from continuing operations to 








net cash provided by operating activities:








Depreciation and amortization

173


157


514


469

Deferred income taxes

(52)


(28)


447


(146)

Provision for losses on accounts receivable and inventories

5


6


28


15

Share-based compensation expense

22


26


74


73

Other 

5


11


(12)


23

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








and divestitures:








Accounts receivable, net

20


(45)


(317)


(260)

Inventories

60


(126)


(184)


(195)

Prepaid expenses and other current assets

55


(38)


(52)


(6)

Accounts payable

(7)


69


180


217

Accrued and other current liabilities

70


43


(154)


56

Deferred revenue

(23)


(67)


49


(150)

Income taxes

22


21


24


54

Other

(4)


63


23


55

Net cash provided by continuing operating activities

800


524


1,527


1,449

Net cash used in discontinued operating activities

-


(1)


-


(1)

Net cash provided by operating activities

800


523


1,527


1,448

Cash Flows From Investing Activities:








Capital expenditures

(239)


(163)


(686)


(452)

Proceeds from sale of property, plant, and equipment

12


4


19


12

Acquisition of business, net of cash acquired

-


(77)


-


(77)

Other

(6)


(5)


(8)


(21)

Net cash used in investing activities

(233)


(241)


(675)


(538)

Cash Flows From Financing Activities:








Net increase (decrease) in commercial paper

46


-


271


(162)

Proceeds from the issuance of debt

-


-


119


89

Repayment of debt

-


-


(708)


-

Proceeds from exercise of share options

2


22


96


86

Repurchase of common shares

(230)


(178)


(611)


(376)

Payment of common share dividends to shareholders

(154)


(142)


(435)


(405)

Other

(2)


(2)


(34)


(24)

Net cash used in continuing financing activities

(338)


(300)


(1,302)


(792)

Net cash provided by discontinued financing activities

-


1


-


1

Net cash used in financing activities

(338)


(299)


(1,302)


(791)

Effect of currency translation on cash

(18)


(1)


2


(11)

Net increase (decrease) in cash and cash equivalents

211


(18)


(448)


108

Cash and cash equivalents at beginning of period

559


773


1,218


647

Cash and cash equivalents at end of period

$     770


$     755


$     770


$     755









Supplemental Cash Flow Information:








Interest paid

$       18


$       40


$       97


$     106

Income taxes paid, net of refunds

109


79


317


256

  

 









TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


















For the Quarters Ended


For the Nine Months Ended


June 29,


June 30,


June 29,


June 30,


2018


2017


2018


2017


(in millions)

Net cash provided by continuing operating activities

$     800


$     524


$  1,527


$  1,449

Excluding:








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

-


(15)


(5)


(23)

Cash paid (collected) pursuant to collateral requirements related








to cross-currency swap contracts

(69)


58


10


19

Capital expenditures, net

(227)


(159)


(667)


(440)

Free cash flow (1)

$     504


$     408


$     865


$  1,005









(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 29,


June 30,


June 29,


June 30,


2018


2017


2018


2017


($ in millions)


Net Sales



Net Sales



Net Sales



Net Sales


Transportation Solutions

$     2,112



$     1,765



$     6,278



$     5,195


Industrial Solutions

988



905



2,842



2,553


Communications Solutions

664



697



1,869



1,909


Total

$     3,764



$     3,367



$   10,989



$     9,657



























Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income

Margin


Income

Margin


Income

Margin


Income

Margin

Transportation Solutions

$        394

18.7%


$        333

18.9%


$     1,242

19.8%


$        986

19.0%

Industrial Solutions

93

9.4


100

11.0


321

11.3


258

10.1

Communications Solutions

71

10.7


111

15.9


200

10.7


276

14.5

Total

$        558

14.8%


$        544

16.2%


$     1,763

16.0%


$     1,520

15.7%


























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

$        407

19.3%


$        337

19.1%


$     1,264

20.1%


$     1,048

20.2%

Industrial Solutions

142

14.4


117

12.9


404

14.2


320

12.5

Communications Solutions

79

11.9


113

16.2


218

11.7


287

15.0

Total

$        628

16.7%


$        567

16.8%


$     1,886

17.2%


$     1,655

17.1%













(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 29, 2018





 versus Net Sales for the Quarter Ended June 30, 2017





Net


Organic Net









Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions





($ in millions)




Transportation Solutions (3):













Automotive

$    247

19.1%


$ 130

10.0%


$                63


$              54




Commercial transportation

73

27.9


57

21.9


16


-




Sensors

27

12.9


17

8.0


10


-




Total

347

19.7


204

11.6


89


54




Industrial Solutions (3):













Industrial equipment

50

11.0


27

6.0


18


5




Aerospace, defense, oil, and gas

24

8.9


16

6.0


8


-




Energy

9

5.1


4

2.2


5


-




Total

83

9.2


47

5.3


31


5




Communications Solutions (3):













Data and devices

32

13.1


27

10.8


5


-




Subsea communications

(87)

(32.1)


(87)

(32.1)


-


-




Appliances

22

12.2


16

8.8


6


-




Total

(33)

(4.7)


(44)

(6.3)


11


-




Total 

$    397

11.8%


$ 207

6.2%


$              131


$              59































Change in Net Sales for the Nine Months Ended June 29, 2018





 versus Net Sales for the Nine Months Ended June 30, 2017





Net


Organic Net









Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions





($ in millions)




Transportation Solutions (3):













Automotive

$    751

19.4%


$ 352

9.0%


$              238


$            161




Commercial transportation

245

33.9


192

26.4


53


-




Sensors

87

14.6


51

8.7


36


-




Total

1,083

20.8


595

11.5


327


161




Industrial Solutions (3):













Industrial equipment

216

17.2


130

10.4


64


22




Aerospace, defense, oil, and gas

56

7.1


25

3.1


31


-




Energy

17

3.4


(8)

(1.6)


25


-




Total

289

11.3


147

5.8


120


22




Communications Solutions (3):













Data and devices

65

9.2


49

6.8


16


-




Subsea communications

(196)

(27.8)


(196)

(27.8)


-


-




Appliances

91

18.4


73

14.5


18


-




Total

(40)

(2.1)


(74)

(3.9)


34


-




Total 

$ 1,332

13.8%


$ 668

7.0%


$              481


$            183

















(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 29, 2018






(UNAUDITED)



































Adjustments










Acquisition


Restructuring











Related


and Other


Adjusted







U.S. GAAP


Charges (1)


Charges, Net (1)


(Non-GAAP) (2)







($ in millions, except per share data)






Operating Income:













Transportation Solutions

$         394


$              2


$                  11


$                407






Industrial Solutions

93


3


46


142






Communications Solutions

71


-


8


79






    Total 

$         558


$              5


$                  65


$                628



















Operating Margin

14.8%






16.7%



















Other Expense, Net

$           (1)


$               -


$                     -


$                  (1)



















Income Tax Expense

$         (81)


$             (2)


$                 (19)


$              (102)



















Effective Tax Rate

15.1%






16.9%



















Income from Continuing Operations 

$         454


$              3


$                  46


$                503



















Diluted Earnings per Share from 













   Continuing Operations

$        1.29


$         0.01


$               0.13


$               1.43



















(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 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

$         333


$              1


$                    3


$        -


$                337






Industrial Solutions

100


3


14


-


117






Communications Solutions

111


-


2


-


113






    Total 

$         544


$              4


$                  19


$        -


$                567





















Operating Margin

16.2%








16.8%





















Other Expense, Net

$         (12)


$               -


$                     -


$        7


$                  (5)





















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 Nine Months Ended June 29, 2018

(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

$      1,242


$              9


$                   13


$        -


$             1,264

Industrial Solutions

321


8


75


-


404

Communications Solutions

200


-


18


-


218

    Total 

$      1,763


$            17


$                 106


$        -


$             1,886











Operating Margin

16.0%








17.2%











Other Income, Net

$             2


$               -


$                     -


$      (1)


$                    1











Income Tax Expense

$       (789)


$             (4)


$                 (27)


$   506


$              (314)











Effective Tax Rate

46.5%








17.3%











Income from Continuing Operations

$         907


$            13


$                   79


$   505


$             1,504











Diluted Earnings per Share from 










   Continuing Operations 

$        2.56


$         0.04


$                0.22


$  1.43


$               4.25











(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 $567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act and a $61 million income tax benefit related to certain legal entity restructurings.

(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 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

$         986


$              2


$                   60


$        -


$             1,048

Industrial Solutions

258


8


54


-


320

Communications Solutions

276


-


11


-


287

    Total 

$      1,520


$            10


$                 125


$        -


$             1,655











Operating Margin

15.7%








17.1%











Other Expense, Net

$         (31)


$               -


$                     -


$        7


$                (24)











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 Quarter Ended September 29, 2017










(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

$         321


$              1


$                      7


$                329










Industrial Solutions

111


-


19


130










Communications Solutions

109


-


(3)


106










    Total 

$         541


$              1


$                    23


$                565



























Operating Margin

15.7%






16.3%



























Other Income, Net

$             8


$               -


$                      -


$                    8



























Income Tax Expense

$         (91)


$             (1)


$                    (7)


$                (99)



























Effective Tax Rate

17.5%






18.2%



























Income from Continuing Operations 

$         429


$               -


$                    16


$                445



























Diluted Earnings per Share from 

















   Continuing Operations 

$        1.21


$               -


$                 0.04


$               1.25



























(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 29, 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

$      1,307


$              3


$                  67


$        -


$             1,377







Industrial Solutions

369


8


73


-


450







Communications Solutions

385


-


8


-


393







    Total 

$      2,061


$            11


$                148


$        -


$             2,220























Operating Margin

15.7%








16.9%























Other Expense, Net

$         (23)


$               -


$                     -


$        7


$                (16)























Income Tax Expense

$       (255)


$             (3)


$                 (40)


$    (66)


$              (364)























Effective Tax Rate

13.2%








17.4%























Income from Continuing Operations 

$      1,673


$              8


$                108


$    (59)


$             1,730























Diluted Earnings per Share from 
















   Continuing Operations

$        4.67


$         0.02


$               0.30


$ (0.16)


$               4.83























(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 FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES








TO FORWARD-LOOKING GAAP FINANCIAL MEASURES








As of July 25, 2018








(UNAUDITED)




















Outlook for











Quarter Ending











September 28,


Outlook for









2018


Fiscal 2018








Diluted earnings per share from continuing operations (GAAP)

 $1.23 - $1.25 


 $3.79 - $3.81 








Restructuring and other charges, net

0.07


0.29








Acquisition related charges

0.01


0.05








Tax items

-


1.43








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

 $1.31 - $1.33 


 $5.56 - $5.58 






























Net sales growth (GAAP)

4 - 6%


11 - 12%








Translation

2


(3)








(Acquisitions) divestitures, net

(2)


(2)








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

4 - 6%


6 - 7%






























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










 

 

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SOURCE TE Connectivity Ltd.