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Tyco Electronics Reports Fiscal Fourth Quarter and Full-Year 2008 Results

November 06, 2008
PEMBROKE, Bermuda, Nov. 6 /PRNewswire-FirstCall/ -- Fourth Quarter Highlights -- Net Sales Increased 6 Percent to $3.7 Billion; Organic Sales Growth of 2 Percent -- Earnings Per Share (EPS) From Continuing Operations of $0.23 on a GAAP Basis; Adjusted EPS of $0.69, an Increase of 19 Percent Over Prior Year Full-Year Highlights -- Net Sales Increased 14 Percent to $14.8 Billion; Organic Sales Growth of 8 Percent -- EPS From Continuing Operations of $3.28 on a GAAP Basis; Adjusted EPS of $2.67, an Increase of 25 Percent Over Prior Year First Quarter Outlook -- Company Expects a Sales Decline of 16 to 19 Percent With Organic Sales Decline of 12 to 15 Percent -- EPS From Continuing Operations Expected to be $0.19 to $0.23; Adjusted EPS Expected to be in Range of $0.24 to $0.28, Which Includes Approximately $0.10 of Currency Losses 

Tyco Electronics Ltd. (NYSE: TEL; BSX: TEL) today reported results for the fiscal fourth quarter and full-year ended Sept. 26, 2008. The company reported net sales of $3.7 billion for the fiscal fourth quarter, an increase of 6 percent over the prior-year period. Excluding currency effects, organic sales growth was 2 percent. GAAP diluted earnings per share (EPS) from continuing operations were $0.23 for the quarter, compared to $0.48 in the prior-year period. Included in EPS from continuing operations were $0.46 of net charges -- primarily related to $0.29 per share of restructuring costs and $0.23 per share of charges related to asset impairments, partially offset by $0.06 per share of income related to tax and other items. This compares to $0.10 per share of charges in the prior-year quarter. Adjusted EPS from continuing operations were $0.69 in the quarter, an increase of 19 percent over last year's adjusted EPS of $0.58.

For the full-year ended Sept. 26, 2008, net sales were $14.8 billion, an increase of 14 percent over the prior year. Organic sales growth was 8 percent, driven by growth in all segments. GAAP diluted EPS from continuing operations were $3.28 for the year, compared to a loss of $0.36 in the prior year. Included in EPS from continuing operations was $1.23 per share of income related to tax items which was partially offset by $0.37 per share of restructuring costs, $0.25 per share of charges related to asset impairments and other charges -- compared to $0.14 per share of restructuring costs and $2.36 per share of other charges in the prior year. Adjusted EPS from continuing operations were $2.67 for the year, an increase of 25 percent over last year's adjusted EPS of $2.14.

"Our fourth quarter results were in line with our expectations and capped a solid first year of progress toward our strategic objectives," said Tyco Electronics Chief Executive Officer Tom Lynch. "However, since late September we have seen a sharp decrease in demand in most of our key end markets, especially in European automotive. This is driving the significant decline in our first quarter outlook. In response to these conditions, we are taking actions to accelerate our restructuring efforts and to reduce overhead."

Organic Sales Growth, Adjusted Operating Income, Adjusted EPS, Adjusted Operating Margin and Free Cash Flow are all non-GAAP financial measures and are described at the end of this press release. For a reconciliation of these non-GAAP measures, see the attached tables. All dollar amounts are pre-tax and stated in millions. All comparisons are to the quarter ended Sept. 28, 2007 unless otherwise indicated.

 ($ in millions) Sept. 26, 2008 Sept. 28, 2007 $ Change % Change Net Sales $3,706 $3,488 $218 6% Operating Income $236 $416 $(180) NM Restructuring-Related Costs $(131) $(58) Other Items, Net $(137) $(15) Adjusted Operating Income $504 $489 $15 3% Operating Margin 6.4% 11.9% Adjusted Operating Margin 13.6% 14.0% 

GAAP operating income was $236 million, compared to $416 million in the prior-year period. The operating margin on a GAAP basis was 6.4 percent. Included in the current quarter operating income were restructuring costs of $131 million and $137 million of impairment charges related to goodwill and other assets. Included in prior-year operating income were $58 million of restructuring costs, $19 million of separation-related costs and $4 million of income for the company's share of an insurance recovery related to Tyco International's securities class action litigation settlement. Excluding these items in both periods, adjusted operating income was $504 million compared to $489 million a year ago, an increase of 3 percent. The adjusted operating margin was 13.6 percent, compared to 14.0 percent a year ago -- primarily reflecting declines in the company's Electronic Components and Network Solutions segments partially offset by higher volumes in the Undersea Telecommunications segment.

CASH FLOW

Free cash flow was $476 million in the quarter, a slight decrease from the prior-year quarter, primarily reflecting higher capital expenditures. For the full year, free cash flow was $1.4 billion compared to $837 million a year ago. The increase was primarily due to higher income levels and lower capital expenditures compared to the prior-year period.

 OTHER ITEMS -- The company completed the sales of the Radio Frequency Components and Subsystems business for $427 million in cash and the automotive radar sensors business for $42 million in cash during the fourth quarter. As a result, the company recorded pre-tax gains of $215 million, which are included in Income from Discontinued Operations. -- The company entered into a definitive agreement to sell its Battery Systems business for $30 million in cash. A pre-tax impairment charge of $22 million was recorded in the fourth quarter to write the carrying value down to the negotiated sale price. The results of this business are included in the Electronic Components segment. The company expects to complete this transaction in the spring of 2009. -- As a result of its annual goodwill assessment, the company recorded a goodwill impairment of $103 million related to its Application Tooling business in the Electronic Components segment. -- The company recorded $22 million of income related to various tax matters, including a tax settlement. 

ORDERS

Total company orders grew 2 percent compared to the prior year. On an organic basis, excluding the effects of currency translation, orders declined 2 percent and the book-to-bill ratio was 0.90. Excluding the company's Undersea Telecommunications and Wireless Systems segments, which are project-oriented businesses with uneven order patterns, orders declined 1 percent overall and 6 percent organically in the quarter, and the book-to-bill ratio was 0.94. Order rates in the Electronic Components segment declined 8 percent organically compared to the prior year, reflecting weakness in most end markets.

FIRST QUARTER FISCAL 2009 OUTLOOK

For the first quarter of fiscal 2009, the company expects a sales decline of 16 to 19 percent below prior-year sales of $3.6 billion, with an organic sales decline of 12 to 15 percent. The company further expects diluted EPS from continuing operations of $0.19 to $0.23, which includes restructuring costs of approximately $0.05 per share. Adjusted EPS from continuing operations are expected to be $0.24 to $0.28, compared to adjusted EPS of $0.62 in the prior-year period. The adjusted EPS guidance includes $0.10 per share of estimated losses related to foreign currency hedging activity. These estimated losses include the mark-to-market of forward exchange currency contracts due to significant volatility in currencies during the month of October, particularly in Eastern European countries. This outlook assumes current foreign exchange rates.

SEGMENT RESULTS

Tyco Electronics is comprised of four reporting segments: Electronic Components, Network Solutions, Undersea Telecommunications and Wireless Systems.

Electronic Components

The Electronic Components segment is one of the world's largest suppliers of passive electronic components, including connectors and interconnect systems, relays, switches, circuit protection devices, touchscreens, sensors, and wire and cable.

 Organic ($ in millions) Sept. 26, 2008 Sept. 28, 2007 $ Change % Change Growth Net Sales $2,713 $2,630 $83 3% (2)% Operating Income $99 $347 $(248) (71)% Restructuring- Related Costs $(125) $(23) Other Items $(145) $0 Adjusted Operating Income $369 $370 $(1) 0% Operating Margin 3.6% 13.2% Adjusted Operating Margin 13.6% 14.1% 

Sales in the segment grew 3 percent year over year and declined 2 percent organically. On an organic basis, growth in the industrial (+13 percent), aerospace and defense (+9 percent) and communications (+4 percent) markets was more than offset by sales declines in the automotive (-6 percent) and computer (-11 percent) markets. In automotive, growth of 8 percent in Asia was more than offset by declines of 7 percent in Europe and 26 percent in North America.

Operating income decreased by $248 million and adjusted operating income was flat. The adjusted operating margin decreased due primarily to the organic sales decline. Restructuring costs in the quarter were $125 million and other charges were $145 million, compared to $23 million of restructuring costs in the prior-year quarter.

Network Solutions

The Network Solutions segment is one of the world's largest suppliers of infrastructure components and systems for the communication service provider, building networks and energy markets.

 Organic ($ in millions) Sept. 26, 2008 Sept. 28, 2007 $ Change % Change Growth Net Sales $561 $522 $39 7% 3% Operating Income $66 $46 $20 43% Restructuring- Related Costs $(5) $(31) Adjusted Operating Income $71 $77 $(6) (8)% Operating Margin 11.8% 8.8% Adjusted Operating Margin 12.7% 14.8% 

Segment sales grew 7 percent compared to the prior-year quarter, or 3 percent organically. On an organic basis, sales to the building networks and energy markets grew 6 percent and 5 percent respectively, while sales to the communication service provider market declined 4 percent.

Operating income increased by $20 million and adjusted operating income decreased by $6 million. The decrease in the adjusted operating margin primarily relates to a lower-margin sales mix and lower productivity levels in the communication service provider business due to the sales decline. Restructuring costs in the quarter were $5 million, compared to $31 million in the prior-year quarter.

Undersea Telecommunications

The company's Undersea Telecommunications segment is a world leader in developing, manufacturing, installing and maintaining the world's most advanced fiber optic undersea networks.

 Organic ($ in millions) Sept. 26, 2008 Sept. 28, 2007 $ Change % Change Growth Net Sales $301 $213 $88 41% 42% Operating Income $39 $19 $20 105% Restructuring- Related Costs $(2) $(2) Adjusted Operating Income $41 $21 $20 95% Operating Margin 13.0% 8.9% Adjusted Operating Margin 13.6% 9.9% 

Sales in the segment grew 42 percent organically versus the prior year, due to continued investment in undersea fiber optic network capacity, primarily in emerging markets. Adjusted operating income increased $20 million and the adjusted operating margin increased to 13.6 percent, driven by higher sales levels. Restructuring-related costs were $2 million in both the current and prior-year quarters.

Wireless Systems

The Wireless Systems segment is a leading innovator of wireless technology for critical communications.

 Organic ($ in millions) Sept. 26, 2008 Sept. 28, 2007 $ Change % Change Growth Net Sales $131 $123 $8 7% 6% Operating Income $24 $19 $5 26% Restructuring- Related Costs $1 $(2) Adjusted Operating Income $23 $21 $2 10% Operating Margin 18.3% 15.4% Adjusted Operating Margin 17.6% 17.1% 

Sales in the segment grew 6 percent organically, primarily due to increased radio systems deployments and implementations. Adjusted operating income increased $2 million due to the higher sales volumes. Restructuring-related income in the quarter was $1 million, compared to $2 million of costs in the prior-year quarter. Sales and operating income in both periods benefitted from the federally-mandated rebanding efforts of a customer.

ABOUT TYCO ELECTRONICS

Tyco Electronics Ltd. is a leading global provider of engineered electronic components, network solutions, undersea telecommunication systems and wireless systems, with 2008 sales of $14.8 billion to customers in more than 150 countries. We design, manufacture and market products for customers in industries from automotive, appliance and aerospace and defense to telecommunications, computers and consumer electronics. With nearly 8,000 engineers and worldwide manufacturing, sales and customer service capabilities, Tyco Electronics' commitment is our customers' advantage. More information on Tyco Electronics can be found at www.tycoelectronics.com.

CONFERENCE CALL AND WEBCAST

The company will hold a conference call for investors today beginning at 8:30 a.m. EST. The call can be accessed in three ways:

 -- At Tyco Electronics' website: http://investors.tycoelectronics.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) 398-9367. The telephone dial-in number for participants outside the United States is (612) 338-1917. -- An audio replay of the conference call will be available beginning at 10:30 a.m. on Nov. 6, 2008 and ending at 11:59 p.m. on Nov. 13, 2008. 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 962724. 

NON-GAAP MEASURES

"Organic Sales Growth," "Adjusted Operating Income," "Adjusted Earnings Per Share," "Adjusted Operating Margin," and "Free Cash Flow" (FCF) are non-GAAP measures and should not be considered replacements for GAAP results.

"Organic Sales Growth" is a useful measure used by the company to measure the underlying results and trends in the business. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures. Organic Sales Growth is a useful measure of the company's performance because it excludes items that: i) are not completely under management's control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity. It is also a component of the company's compensation programs. The limitation of this measure is that it excludes items that have an impact on the company's sales. This limitation is best addressed by using organic sales growth in combination with the GAAP numbers. See the accompanying tables to this press release for the reconciliation presenting the components of Organic Sales Growth.

The company has presented its operating income before unusual items including costs related to the separation, legal settlements, restructuring costs, impairment charges and other income or charges ("Adjusted Operating Income"). The company utilizes 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 is also a significant component in the company's incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it better reflects the company's underlying operating results, trends and the comparability of these results between periods. The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges related to litigation settlement costs, separation-related costs and restructuring costs and other income or charges 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 the company's reported operating income. This limitation is best addressed by using Adjusted Operating Income in combination with operating income (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

The company has presented adjusted diluted earnings per share, which is earnings per share from continuing operations before unusual items, including costs related to the separation, legal settlements, restructuring costs, impairment charges, loss on retirement of debt and other income or charges ("Adjusted Earnings Per Share"). The company presents Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider results excluding these items in addition to our 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 unusual items, which may recur occasionally, but tend to be irregular as to timing, thereby making comparisons between periods more difficult. This limitation is best addressed by using Adjusted Earnings Per Share in combination with earnings per share (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

The company has presented its operating margin before unusual items including costs related to the separation, legal settlements, restructuring costs and other income or charges ("Adjusted Operating Margin"). The company presents and forecasts its Adjusted Operating Margin before unusual items to give investors a perspective on the underlying business results. Because the company cannot predict the amount and timing of such items and the associated charges or gains that will be recorded in the company's financial statements, it is difficult to include the impact of those items in the forecast.

"Free Cash Flow" (FCF) is a useful measure of the company's cash generation which is free from any significant existing obligation. The difference between cash flows from operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows that the company believes are useful to identify. FCF permits management and investors to gain insight into the number that management employs to measure cash that is free from any significant existing obligation. The difference reflects the impact from:

 -- net capital expenditures, -- voluntary pension contributions, and -- cash impact of unusual items. 

Net capital expenditures are subtracted because they represent long-term commitments. Voluntary pension contributions are subtracted from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity. The company forecasts its cash flow results excluding any voluntary pension contributions because it has not yet made a determination about the amount and timing of any future such contributions. In addition, the company's forecast excludes the cash impact of unusual items because the company cannot predict the amount and timing of such items.

The limitation associated with using FCF is that it subtracts cash items that are ultimately within management's and the Board of Directors' discretion to direct and that therefore may imply that there is less or more cash that is available for the company's programs than the most comparable GAAP measure. This limitation is best addressed by using FCF in combination with the GAAP cash flow numbers.

FCF as presented herein may not be comparable to similarly-titled measures reported by other companies. The measure should be used in conjunction with other GAAP financial measures. Investors are urged to read the company's financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this press release that show all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of the company's total cash and cash equivalents for the period. See the accompanying tables to this press release for a cash flow statement presented in accordance with GAAP and a reconciliation presenting the components of FCF.

FORWARD-LOOKING STATEMENTS

This release may contain certain "forward-looking statements" within the meaning of the United States 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 or achievements to differ materially from anticipated results, performance 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. The forward-looking statements in this release include statements addressing the following subjects: future financial condition and operating results. Business, competitive, regulatory and/or economic factors (including recent developments in the credit markets and volatility in currencies) affecting Tyco Electronics' businesses are examples of factors, among others, that could cause actual results to differ materially from those described in the forward-looking statements. In addition, Tyco Electronics' historical combined financial information is not necessarily representative of the results it would have achieved as an independent, publicly-traded company and may not be a reliable indicator of its future results. Tyco Electronics has no intention and is under no obligation to update or alter (and expressly disclaims any such intention or obligation to do so) its forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. More detailed information about these and other factors is set forth in Tyco Electronics' Annual Report on Form 10-K for the fiscal year ended September 28, 2007, as retrospectively adjusted to reflect the Radio Frequency Components and Subsystem and Automotive Sensors businesses as discontinued operations in the Company's Current Report on Form 8-K filed June 27, 2008, and Quarterly Reports on Form 10-Q for the quarterly periods ended December 28, 2007, March 28, 2008 and June 27, 2008, as well as in current reports on Form 8-K filed by Tyco Electronics.

 TYCO ELECTRONICS LTD. CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) For the Quarters Ended For the Years Ended Sept. 26, Sept. 28, Sept. 26, Sept. 28, 2008 2007 2008 2007 (in millions, except per share data) Net sales $3,706 $3,488 $14,834 $12,959 Cost of sales 2,795 2,605 11,064 9,620 Gross income 911 883 3,770 3,339 Selling, general, and administrative expenses 423 402 1,680 1,600 Litigation settlement, net (8) (4) 22 887 Separation costs - 19 - 44 Restructuring and other charges, net 123 50 185 92 Impairment of goodwill and long-lived assets 137 - 137 - Income from operations 236 416 1,746 716 Interest income 7 13 32 53 Interest expense (46) (56) (188) (231) Other income (expense) (39) 13 567 (219) Income from continuing operations before income taxes and minority interest 158 386 2,157 319 Income taxes (50) (144) (558) (491) Minority interest (1) (3) (5) (6) Income (loss) from continuing operations 107 239 1,594 (178) Income (loss) from discontinued operations, net of income taxes 95 17 188 (376) Net income (loss) $202 $256 $1,782 $(554) Basic earnings (loss) per share: Income (loss) from continuing operations $0.23 $0.48 $3.30 $(0.36) Income (loss) from discontinued operations 0.20 0.04 0.39 (0.75) Net income (loss) $0.43 $0.52 $3.69 $(1.11) Diluted earnings (loss) per share: Income (loss) from continuing operations $0.23 $0.48 $3.28 $(0.36) Income (loss) from discontinued operations 0.20 0.03 0.39 (0.75) Net income (loss) $0.43 $0.51 $3.67 $(1.11) Weighted-average number of shares outstanding: Basic 470 496 483 497 Diluted 473 500 486 497 TYCO ELECTRONICS LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Sept. 26, Sept. 28, 2008 2007 (in millions, except share data) Assets Current Assets: Cash and cash equivalents $1,086 $942 Accounts receivable, net of allowance for doubtful accounts of $42 and $57, respectively 2,726 2,594 Inventories 2,312 2,049 Class action settlement escrow - 928 Class action settlement receivable - 2,064 Prepaid expenses and other current assets 767 589 Deferred income taxes 204 325 Assets of discontinued operations - 505 Total current assets 7,095 9,996 Property, plant, and equipment, net 3,517 3,412 Goodwill 7,068 7,177 Intangible assets, net 486 526 Deferred income taxes 1,915 1,397 Receivable from Tyco International Ltd. and Covidien 1,218 844 Other assets 301 336 Total Assets $21,600 $23,688 Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $20 $5 Accounts payable 1,469 1,343 Class action settlement liability - 2,992 Accrued and other current liabilities 1,596 1,417 Deferred revenue 247 181 Liabilities of discontinued operations - 266 Total current liabilities 3,332 6,204 Long-term debt 3,161 3,373 Long-term pension and postretirement liabilities 721 607 Deferred income taxes 289 271 Income taxes 2,291 1,242 Other liabilities 723 599 Total Liabilities 10,517 12,296 Commitments and contingencies Minority interest 10 15 Shareholders' equity: Preferred shares, $0.20 par value, 125,000,000 shares authorized; none outstanding - - Common shares, $0.20 par value, 1,000,000,000 shares authorized; 500,241,706 and 497,467,930 issued, respectively 100 99 Capital in excess: Share premium 61 13 Contributed surplus 10,106 10,029 Accumulated earnings 1,141 186 Treasury stock, at cost, 36,904,702 and 44,454 shares, respectively (1,264) (2) Accumulated other comprehensive income 929 1,052 Total Shareholders' Equity 11,073 11,377 Total Liabilities and Shareholders' Equity $21,600 $23,688 TYCO ELECTRONICS LTD. CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Quarters Ended For the Years Ended Sept. 26, Sept. 28, Sept. 26, Sept. 28, 2008 2007 2008 2007 (in millions) Cash Flows From Operating Activities: Net income (loss) $202 $256 $1,782 $(554) (Income) loss from discontinued operations, net of income taxes (95) (17) (188) 376 Income (loss) from continuing operations 107 239 1,594 (178) Adjustments to reconcile net cash provided by operating activities: Class action settlement - (4) (936) 887 Depreciation and amortization 145 133 559 514 Deferred income taxes (29) 42 174 163 Tax sharing expense (income) 39 (13) (567) (13) Impairment of goodwill and long-lived assets 137 - 137 - Loss on retirement of debt - - - 232 Other 64 9 131 96 Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Accounts receivable, net 54 (12) (106) (96) Inventories 27 113 (280) (89) Accounts payable (28) 43 49 84 Accrued and other liabilities 166 129 126 103 Income taxes 15 54 15 (109) Deferred revenue (3) (25) 112 33 Other (54) (74) 6 (119) Net cash provided by continuing operating activities 640 634 1,014 1,508 Net cash (used in) provided by discontinued operating activities (2) 9 (25) 17 Net cash provided by operating activities 638 643 989 1,525 Cash Flows From Investing Activities: Capital expenditures (169) (143) (619) (875) Proceeds from sale of property, plant, and equipment 5 9 42 41 Class action settlement escrow - (7) 936 (928) Proceeds from divestiture of discontinued operations, net of cash retained by businesses sold 469 - 571 227 Other (8) (14) (29) (3) Net cash provided by (used in) continuing investing activities 297 (155) 901 (1,538) Net cash (used in) provided by discontinued investing activities (1) 24 (6) 10 Net cash provided by (used in) investing activities 296 (131) 895 (1,528) Cash Flows From Financing Activities: Net (decrease) increase in commercial paper (21) - 630 - Repayment of long-term debt (400) (2,381) (1,751) (2,455) Proceeds from long-term debt 400 2,045 900 5,676 Allocated debt activity - - - (3,743) Net transactions with former parent - (27) - 1,112 Repurchase of common shares (410) - (1,242) - Payment of common dividends (66) - (271) - Proceeds from exercise of share options 3 13 54 13 Transfers to discontinued operations (69) 47 (80) (134) Other - (12) (12) (15) Net cash (used in) provided by continuing financing activities (563) (315) (1,772) 454 Net cash provided by (used in) discontinued financing activities 21 (34) 33 (23) Net cash (used in) provided by financing activities (542) (349) (1,739) 431 Effect of currency translation on cash (18) 24 1 46 Net increase in cash and cash equivalents 374 187 146 474 Less: net (increase) decrease in cash and cash equivalents related to discontinued operations (18) 1 (2) (4) Cash and cash equivalents at beginning of period 730 754 942 472 Cash and cash equivalents at end of period $1,086 $942 $1,086 $942 Supplemental Cash Flow Information: Income taxes paid, net of refunds $64 $62 $369 $450 Reconciliation to Free Cash Flow: Net cash provided by continuing operating activities $640 $634 $1,014 $1,508 Capital expenditures, net (164) (134) (577) (834) Class action settlement - - 936 - Income tax advance payment - - - 163 Free cash flow (1) $476 $500 $1,373 $837 (1) Free cash flow is a non-GAAP measure. See description of non-GAAP measures contained in this release. TYCO ELECTRONICS LTD. CONSOLIDATED AND COMBINED SEGMENT DATA (UNAUDITED) For the Quarters Ended For the Years Ended Sept. 26, Sept. 28, Sept. 26, Sept. 28, 2008 2007 2008 2007 ($ in millions) Net Sales: Electronic Components $2,713 $2,630 $11,043 $10,111 Network Solutions 561 522 2,163 1,897 Undersea Telecommunications 301 213 1,165 565 Wireless Systems 131 123 463 386 Total $3,706 $3,488 $14,834 $12,959 Income from Operations: Electronic Components $99 3.6% $347 13.2% $1,287 11.7% $1,339 13.2% Network Solutions 66 11.8% 46 8.8% 254 11.7% 231 12.2% Undersea Telecommunications 39 13.0% 19 8.9% 160 13.7% 38 6.7% Wireless Systems 24 18.3% 19 15.4% 67 14.5% 39 10.1% Litigation settlement, net and separation costs 8 (15) (22) (931) Total $236 6.4% $416 11.9% $1,746 11.8% $716 5.5% TYCO ELECTRONICS LTD. NET SALES GROWTH RECONCILIATION (UNAUDITED) Percentage of Segment's Total Net Change in Net Sales for the Sales Quarter Ended Sept. 26, 2008 for the versus Net Sales for the Quarter Quarter Ended Sept. 28, 2007 Ended Trans- lation Sept. 26, Organic(1) (2) Total 2008 ($ in millions) Electronic Components (3): Automotive $(60) (6.0)% $62 $2 0.2% 37% Computer (32) (11.2) 8 (24) (8.3) 10 Communications 9 4.0 14 23 10.0 9 Industrial 21 13.1 12 33 20.8 7 Aerospace and Defense 14 8.9 4 18 11.8 6 Appliance - 0.3 7 7 5.3 5 Consumer Electronics 2 2.5 2 4 7.0 2 Other (1) (0.1) 21 20 3.3 24 Total (47) (1.8) 130 83 3.2 100% Network Solutions (3): Energy 11 4.8 14 25 10.7 46% Communication Service Provider (5) (4.0) 3 (2) (1.4) 26 Building Networks 7 5.8 6 13 10.2 25 Other 2 11.7 1 3 20.0 3 Total 15 2.8 24 39 7.5 100% Undersea Telecommunications 88 41.5 - 88 41.3 Wireless Systems 7 6.1 1 8 6.5 Total $63 1.8% $155 $218 6.3% Percentage of Segment's Total Net Change in Net Sales for the Year Ended Sales Sept. 26, 2008 versus Net Sales for the for the Year Ended Year Sept. 28, 2007 Ended Trans- lation Sept. 26, Organic(1) (2) Total 2008 ($ in millions) Electronic Components (3): Automotive $110 2.8% $354 $464 11.8% 40% Computer (66) (6.2) 38 (28) (2.6) 9 Communications 98 12.1 58 156 19.2 9 Industrial 87 15.0 55 142 24.5 6 Aerospace and Defense 51 8.7 30 81 13.9 6 Appliance (9) (1.8) 33 24 4.7 5 Consumer Electronics (7) (3.1) 12 5 2.3 2 Other (21) (0.9) 109 88 3.7 23 Total 243 2.4 689 932 9.2 100% Network Solutions (3): Energy 49 5.7 78 127 15.0 45% Communication Service Provider 17 3.2 31 48 9.0 27 Building Networks 51 11.3 37 88 19.3 25 Other (1) (2.5) 4 3 4.9 3 Total 116 6.1 150 266 14.0 100% Undersea Telecommunications 597 105.7 3 600 106.2 Wireless Systems 69 18.0 8 77 19.9 Total $1,025 7.9% $850 $1,875 14.5% (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 about net sales is presented consistently with our internal management reporting and may be periodically revised as management deems necessary. TYCO ELECTRONICS LTD. ADJUSTED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) For the Quarter Ended Sept. 26, 2008 Adjustments Impairment of Restruc- Goodwill turing and Adjusted and Long- Other Results Other lived Tax Items, (Non- U.S. Charges, Assets Items Net GAAP) GAAP Net (1) (2) (3) (4) (in millions, except per share data) Net sales $3,706 $- $- $- $- $3,706 Cost of sales 2,795 (8) - - - 2,787 Gross income 911 8 - - - 919 Selling, general, and administrative expenses 423 - - - (8) 415 Litigation settlement, net (8) - - - 8 - Restructuring and other charges, net 123 (123) - - - - Impairment of goodwill and long-lived assets 137 - (137) - - - Income from operations 236 131 137 - - 504 Interest income 7 - - - - 7 Interest expense (46) - - - - (46) Other income (39) - - 54 - 15 Income from continuing operations before income taxes and minority interest 158 131 137 54 - 480 Income taxes (50) 5 (27) (76) (4) (152) Minority interest (1) - - - - (1) Income from continuing operations $107 $136 $110 $(22) $(4) $327 Basic earnings per share: Income from continuing operations $0.23 $0.70 Diluted earnings per share: Income from continuing operations $0.23 $0.69 Weighted-average number of shares outstanding: Basic 470 470 Diluted 473 473 ADJUSTED CONSOLIDATED INCOME FROM OPERATIONS BY SEGMENT (UNAUDITED) For the Quarter Ended Sept. 26, 2008 Adjustments Impairment of Restruc- Goodwill turing and Adjusted and Long- Other Results Other lived Tax Items, (Non- U.S. Charges, Assets Items Net GAAP) GAAP Net (1) (1) (1) (2) (in millions) Income from Operations: Electronic Components $99 $125 $137 $- $8 $369 Network Solutions 66 5 - - - 71 Undersea Telecommunications 39 2 - - - 41 Wireless Systems 24 (1) - - - 23 Litigation settlement, net 8 - - - (8) - Total $236 $131 $137 $- $- $504 (1) Consists of goodwill impairment of $103 million and long-lived asset impairment of $34 million. (2) Includes $22 million of income related to various tax matters, including a tax settlement. (3) Consists of $8 million of income related to insurance recoveries on legacy securities litigation and $8 million of costs related to a customs settlement. (4) Adjusted results is a non-GAAP measure. See description of non- GAAP measures contained in this release. TYCO ELECTRONICS LTD. ADJUSTED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) For the Quarter Ended Sept. 28, 2007 Adjustments Restructuring and Other Charges, Net Adjusted Separation and Other Results Related Related Items, (Non- U.S. Costs Costs Net GAAP) GAAP (1) (2) (3) (4) (in millions, except per share data) Net sales $3,488 $- $- $- $3,488 Cost of sales 2,605 - (8) - 2,597 Gross income 883 - 8 - 891 Selling, general, and administrative expenses 402 - - - 402 Litigation settlement, net (4) - - 4 - Separation costs 19 (19) - - - Restructuring and other charges, net 50 - (50) - - Income from operations 416 19 58 (4) 489 Interest income 13 - - - 13 Interest expense (56) - - - (56) Other expense 13 - - - 13 Income from continuing operations before income taxes and minority interest 386 19 58 (4) 459 Income taxes (144) (6) (18) - (168) Minority interest (3) - - - (3) Income from continuing operations $239 $13 $40 $(4) $288 Basic earnings per share: Income from continuing operations $0.48 $0.58 Diluted earnings per share: Income from continuing operations $0.48 $0.58 Weighted-average number of shares outstanding: Basic 496 496 Diluted 500 500 ADJUSTED CONSOLIDATED INCOME FROM OPERATIONS BY SEGMENT (UNAUDITED) For the Quarter Ended Sept. 28, 2007 Adjustments Restructuring and Other Charges, Net Adjusted Separation and Other Results Related Related Items, (Non- U.S. Costs Costs Net GAAP) GAAP (1) (2) (3) (4) (in millions) Income from Operations: Electronic Components $347 $- $23 $- $370 Network Solutions 46 - 31 - 77 Undersea Telecommunications 19 - 2 - 21 Wireless Systems 19 - 2 - 21 Litigation settlement, net and separation costs (15) 19 - (4) - Total $416 $19 $58 $(4) $489 (1) Includes $19 million of separation costs, primarily related to employee costs. (2) Includes $55 million of net restructuring and other charges, of which $5 million is recorded in cost of sales, and $3 million of restructuring related moving costs (recorded in cost of goods sold). (3) Consists of $4 million of income related to an insurance recovery on legacy securities litigation. (4) Adjusted results is a non-GAAP measure. See description of non-GAAP measures contained in this release. TYCO ELECTRONICS LTD. ADJUSTED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) For the Year Ended Sept. 26, 2008 Adjustments Impairment of Restruc- Goodwill turing and Adjusted and Long- Other Results Other lived Tax Items, (Non- U.S. Charges, Assets Items Net GAAP) GAAP Net (1) (2) (3) (4) (in millions, except per share data) Net sales $14,834 $- $- $- $- $14,834 Cost of sales 11,064 (9) - - - 11,055 Gross income 3,770 9 - - - 3,779 Selling, general, and administrative expenses 1,680 - - - 28 1,708 Litigation settlement, net 22 - - - (22) - Restructuring and other charges, net 185 (185) - - - - Impairment of goodwill and long-lived assets 137 - (137) - - - Income from operations 1,746 194 137 - (6) 2,071 Interest income 32 - - - - 32 Interest expense (188) - - - - (188) Other income 567 - - (518) - 49 Income from continuing operations before income taxes and minority interest 2,157 194 137 (518) (6) 1,964 Income taxes (558) (14) (27) (76) 16 (659) Minority interest (5) - - - - (5) Income from continuing operations $1,594 $180 $110 $(594) $10 $1,300 Basic earnings per share: Income from continuing operations $3.30 $2.69 Diluted earnings per share: Income from continuing operations $3.28 $2.67 Weighted-average number of shares outstanding: Basic 483 483 Diluted 486 486 ADJUSTED CONSOLIDATED INCOME FROM OPERATIONS BY SEGMENT (UNAUDITED) For the Year Ended Sept. 26, 2008 Adjustments Impairment of Restruc- Goodwill turing and Adjusted and Long- Other Results Other lived Tax Items, (Non- U.S. Charges, Assets Items Net GAAP) GAAP Net (1) (2) (3) (4) (in millions) Income from Operations: Electronic Components $1,287 $166 $137 $- $(28) $1,562 Network Solutions 254 23 - - - 277 Undersea Telecommunications 160 5 - - - 165 Wireless Systems 67 - - - - 67 Litigation settlement, net (22) - - - 22 - Total $1,746 $194 $137 $- $(6) $2,071 (1) Consists of goodwill impairment of $103 million and long-lived asset impairment of $34 million. (2) In connection with the adoption of FIN 48, the Company recorded other income of $545 million pursuant to its Tax Sharing Agreement with Tyco International and Covidien. The Company also recorded income of $49 million related to various tax matters, (3) Consists of $22 million of net costs related to the settlement of legacy securities litigation, $36 million gain on the sale of real estate, and $8 million of costs related to a customs settlement. (4) Adjusted results is a non-GAAP measure. See description of non-GAAP measures contained in this release. TYCO ELECTRONICS LTD. ADJUSTED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS (UNAUDITED) For the Twelve Months Ended Sept. 28, 2007 Adjustments Restructuring and Other Charges, Net Adjusted Separation and Other Results Related Related Items, (Non- U.S. Costs Costs Net GAAP) GAAP (1) (2) (3) (4) (in millions, except per share data) Net sales $12,959 $- $- $- $12,959 Cost of sales 9,620 - (8) - 9,612 Gross income 3,339 - 8 - 3,347 Selling, general, and administrative expenses 1,600 (41) - - 1,559 Litigation settlement, net 887 - - (887) - Separation costs 44 (44) - - - Restructuring and other charges, net 92 - (92) - - Income from operations 716 85 100 887 1,788 Interest income 53 - - - 53 Interest expense (231) - - - (231) Other (expense) income, net (219) - - 232 13 Income from continuing operations before income taxes and minority interest 319 85 100 1,119 1,623 Income taxes (491) (25) (32) - (548) Minority interest (6) - - - (6) Income (loss) from continuing operations $(178) $60 $68 $1,119 $1,069 Basic earnings (loss) per share: Income (loss) from continuing operations $(0.36) $2.15 Diluted earnings (loss) per share: Income (loss) from continuing operations $(0.36) $2.14 Weighted-average number of shares outstanding: Basic 497 497 Diluted 497 500 ADJUSTED CONSOLIDATED AND COMBINED INCOME FROM OPERATIONS BY SEGMENT (UNAUDITED) For the Twelve Months Ended Sept. 28, 2007 Adjustments Restructuring and Other Charges, Net Adjusted Separation and Other Results Related Related Items, (Non- U.S. Costs Costs Net GAAP) GAAP (1) (2) (3) (4) (in millions) Income from Operations: Electronic Components $1,339 $33 $57 $- $1,429 Network Solutions 231 5 35 - 271 Undersea Telecommunications 38 1 5 - 44 Wireless Systems 39 2 3 - 44 Litigation settlement, net and separation costs (931) 44 - 887 - Total $716 $85 $100 $887 $1,788 (1) Includes $44 million of separation costs, primarily related to employee costs, and $41 million of costs related to building separate company functions that did not exist in the prior year. (2) Includes $97 million of net restructuring and other charges, of which $5 million is recorded in cost of sales, and $3 million of restructuring related moving costs (recorded in cost of goods sold). (3) Consists of $887 million of net costs related to legacy securities litigation and a $232 million loss on retirement of debt. (4) Adjusted results is a non-GAAP measure. See description of non- GAAP measures contained in this release. 

SOURCE Tyco Electronics Ltd.

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