July 22, 2015
Source: TE Connectivity Ltd.
Sales grew 4 percent organically and 1 percent on an actual basis
Adjusted EPS of $0.90 and above the high end of guidance; GAAP EPS of $0.85
SCHAFFHAUSEN, Switzerland, July 22, 2015 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 26, 2015.
Experience the interactive Multimedia News Release here: http://www.multivu.com/players/English/7576551-te-connectivity-fy-2015-q3-earnings/
Third Quarter Highlights
- Net sales increased to $3.12 billion, up 1 percent versus the prior year and up 4 percent organically
- Adjusted Earnings Per Share (EPS) from continuing operations were $0.90, up 6 percent versus the prior year and above the high end of guidance
- Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.85, up 2 percent versus the prior year
- Free cash flow of $391 million; returned $386 million to shareholders including $252 million of share repurchase
- SubCom business announced New Cross Pacific (NCP) program contract in force; total value of programs in force for SubCom reached $1.5 billion
Tom Lynch, TE Connectivity Chairman and CEO stated, "We delivered solid results in the quarter, with EPS above the high end of guidance despite a mixed macro environment. Organic sales were up 4 percent in the quarter led by continued strength in our Automotive, Sensors, Commercial Air and SubCom businesses. This 4 percent sales growth was slightly below our expectations due to weakness in China and supply chain adjustments in some industrial markets.
"For the fourth quarter, we expect sales to be up 3 percent organically over the prior year and adjusted EPS to be up 6 percent at the mid-point of guidance," said Lynch. "For the full year, we expect to deliver 5 percent organic sales growth and 10 percent adjusted EPS growth. This guidance is down slightly from what we provided 90 days ago due to weaker orders in certain emerging markets, particularly China. In constant currency, adjusted EPS growth is expected to be 19 percent year over year.
"We had another good quarter of strategic progress," said Lynch. "Our harsh environment businesses, which make up 80 percent of our portfolio, continue to perform well and deliver strong profitability. I am very pleased with the progress in our Sensors business which is winning programs in attractive automotive, consumer and security applications. The integration of the AdvancedCath acquisition, which expands our position in the growing medical device industry, is on track and gaining momentum.
"We expect to close the sale of the Broadband Network Solutions (BNS) business within the next 90 days," said Lynch. "Upon the transaction close, 90 percent of our business will be connectivity and sensor solutions. The majority of the $3 billion in proceeds are expected to be used to fund share repurchases."
FISCAL THIRD QUARTER RESULTS
The financial results of the BNS business have been classified as discontinued operations. TE's ongoing business, results and guidance are included below and classified as continuing operations.
The company reported net sales of $3.12 billion, compared to prior year sales of $3.08 billion. Adjusted EPS were $0.90, compared to $0.85 in the prior year. GAAP EPS were $0.85, compared to $0.83 in the prior year. Free cash flow was $391 million for the quarter.
GAAP EPS included $19 million of acquisition related charges, restructuring and other charges, and tax items.
Excluding SubCom, total company orders were $2.9 billion and the book-to-bill ratio was 1.0.
OUTLOOK
For the fiscal fourth quarter 2015, the company expects net sales of $3.02 billion to $3.18 billion, reflecting 1 percent actual and 3 percent organic year over year growth at the mid-point, and adjusted EPS of $0.90 to $0.96, which represents 6 percent growth at the mid-point. GAAP EPS are expected to be $0.81 to $0.87, including restructuring and other charges of $0.06 and acquisition related charges of $0.03. This outlook includes foreign exchange headwinds, reducing expected sales by $244 million and adjusted EPS by $0.10 year over year.
For the full year, the company has reduced guidance, primarily due to slowdown in China, and expects net sales of $12.28 to $12.42 billion, reflecting 3 percent actual and 5 percent organic growth versus prior year at the mid-point; and adjusted EPS of $3.60 to $3.66 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.48 to $3.54, including acquisition related charges of $0.18, restructuring and other charges of $0.27, and income from tax related items of $0.33. The outlook includes foreign exchange headwinds, reducing expected sales by $925 million and adjusted EPS by $0.32 year over year.
Information about TE Connectivity's use of non-GAAP financial measures is provided below. For a reconciliation of these non-GAAP financial measures, see the attached tables.
CONFERENCE CALL AND WEBCAST
- The company will hold a conference call for investors today beginning at 8:30 a.m. EDT. Information about the conference call is available at TE Connectivity's website: http://investors.te.com.
- By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the United States is (800) 230-1085. The telephone dial-in number for participants outside the United States is (612) 288-0337.
- An audio replay of the conference call will be available beginning at 10:30 a.m. on July 22, 2015, and ending at 11:59 p.m. on July 29, 2015. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the replay dial-in number is (320) 365-3844. The replay access code for all callers is 360684.
NON-GAAP MEASURES
"Organic Sales Growth," "Adjusted Operating Income," "Adjusted Operating Margin," "Adjusted Other Income, Net," "Adjusted Income Tax Expense," "Adjusted Income from Continuing Operations," "Adjusted Earnings Per Share," "Adjusted Earnings Per Share in Constant Currency," and "Free Cash Flow" are non-GAAP measures and should not be considered replacements for results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP measures may not be comparable to similarly-titled measures reported by other companies. 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 measures in combination with the most directly comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease in reported amounts. The following provides additional information regarding these non-GAAP measures:
- Organic Sales Growth – is a useful measure of our underlying results and trends in the business. It is also a significant component in our incentive compensation plans. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Sales Growth is a useful measure of our performance because it excludes items that: i) are not completely under management's control, such as the impact of changes in foreign currency exchange rates; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.
- Adjusted Operating Income – represents operating income (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We utilize Adjusted Operating Income to assess segment level core operating performance and to provide insight to management in evaluating segment operating plan execution and underlying market conditions. It also is a significant component in our incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods.
- Adjusted Operating Margin – represents operating margin (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. This measure should be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and impact of adjustments to operating margin.
- Adjusted Other Income, Net – represents other income, net (the most comparable GAAP measure) before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. We present Adjusted Other Income, Net as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP.
- Adjusted Income Tax Expense – represents income tax expense (the most comparable GAAP measure) after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, impairment charges, other income or charges, and certain significant special tax items, if any. We present Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used in determining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).
- Adjusted Income from Continuing Operations – represents income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Income from Continuing Operations as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. Adjusted Income from Continuing Operations provides additional information regarding our underlying operating results, trends and the comparability of these results between periods.
- Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items, including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. We believe such a measure provides a picture of our results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult. It also is a significant component in our incentive compensation plans.
- Adjusted Earnings Per Share in Constant Currency – represents Adjusted Earnings Per Share excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe providing constant currency information provides valuable supplemental information regarding our earnings per share growth.
- Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.
Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Net capital expenditures consist of capital expenditures less proceeds from the sale of property, plant, and equipment. These items are subtracted because they represent long-term commitments. Voluntary pension contributions are excluded from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters, also are considered by management in evaluating Free Cash Flow.
Free Cash Flow subtracts certain cash items that are ultimately within management's and the Board of Directors' discretion to direct and may imply that there is less or more cash available for our programs than the most comparable GAAP measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.
FORWARD-LOOKING STATEMENTS
This release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results and our planned sale of the Broadband Network Solutions business. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive industry and the telecommunications networks and consumer devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; the possible effects on us of changes in tax laws, tax treaties and other legislation; the risk that the operations of Measurement Specialties will not be successfully integrated into ours; the risk that revenue opportunities, cost savings and other anticipated synergies from the Measurement Specialties acquisition may not be fully realized or may take longer to realize than expected; and the risk that the sale of the Broadband Network Solutions business may not be consummated, or if consummated, we do not realize the anticipated benefits from such transaction. More detailed information about these and other factors is set forth in TE Connectivity Ltd.'s Annual Report on Form 10-K for the fiscal year ended Sept. 26, 2014 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports filed by us with the U.S. Securities and Exchange Commission.
Sale of Broadband Network Solutions to CommScope
On January 28, 2015, TE announced the entry into a definitive agreement to sell its Broadband Network Solutions (BNS) business unit to CommScope (NASDAQ: COMM) for $3.0 billion. The BNS business, which consists of TE's Telecommunications, Enterprise Networks and Wireless businesses, had revenue of $1.9 billion in fiscal year 2014. CommScope is a global provider of telecommunications infrastructure solutions for wireless, business enterprise and residential broadband networks. The transaction is expected to close by December 31, 2015, and is subject to completion of transaction financing, regulatory approvals and customary closing conditions.
ABOUT TE CONNECTIVITY
TE Connectivity (NYSE: TEL) is a $14 billion global technology leader. Our connectivity and sensor solutions are essential in today's increasingly connected world. We collaborate with engineers to transform their concepts into creations – redefining what's possible using intelligent, efficient and high-performing TE products and solutions proven in harsh environments. Our 80,000 people, including 7,500 design engineers, partner with customers in 150 countries across a wide range of industries. We believe EVERY CONNECTION COUNTS – www.TE.com.
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TE CONNECTIVITY LTD. |
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
|||||||
|
For the Quarters Ended |
For the Nine Months Ended |
||||||
|
June 26, |
June 27, |
June 26, |
June 27, |
||||
|
2015 |
2014 |
2015 |
2014 |
||||
|
(in millions, except per share data) |
|||||||
|
Net sales |
$ 3,118 |
$ 3,075 |
$ 9,249 |
$ 8,901 |
|||
|
Cost of sales |
2,070 |
2,057 |
6,130 |
5,943 |
|||
|
Gross margin |
1,048 |
1,018 |
3,119 |
2,958 |
|||
|
Selling, general, and administrative expenses |
393 |
396 |
1,170 |
1,154 |
|||
|
Research, development, and engineering expenses |
159 |
147 |
479 |
433 |
|||
|
Acquisition and integration costs |
8 |
1 |
46 |
2 |
|||
|
Restructuring and other charges, net |
19 |
10 |
82 |
15 |
|||
|
Operating income |
469 |
464 |
1,342 |
1,354 |
|||
|
Interest income |
4 |
4 |
13 |
13 |
|||
|
Interest expense |
(33) |
(28) |
(104) |
(93) |
|||
|
Other income (expense), net |
11 |
9 |
(64) |
57 |
|||
|
Income from continuing operations before income taxes |
451 |
449 |
1,187 |
1,331 |
|||
|
Income tax expense |
(100) |
(102) |
(85) |
(331) |
|||
|
Income from continuing operations |
351 |
347 |
1,102 |
1,000 |
|||
|
Income (loss) from discontinued operations, net of income taxes |
(42) |
56 |
278 |
118 |
|||
|
Net income attributable to TE Connectivity Ltd. |
$ 309 |
$ 403 |
$ 1,380 |
$ 1,118 |
|||
|
Basic earnings per share attributable to TE Connectivity Ltd.: |
|||||||
|
Income from continuing operations |
$ 0.86 |
$ 0.85 |
$ 2.71 |
$ 2.44 |
|||
|
Income (loss) from discontinued operations |
(0.10) |
0.14 |
0.68 |
0.29 |
|||
|
Net income |
0.76 |
0.99 |
3.39 |
2.73 |
|||
|
Diluted earnings per share attributable to TE Connectivity Ltd.: |
|||||||
|
Income from continuing operations |
$ 0.85 |
$ 0.83 |
$ 2.67 |
$ 2.40 |
|||
|
Income (loss) from discontinued operations |
(0.10) |
0.13 |
0.67 |
0.28 |
|||
|
Net income |
0.75 |
0.97 |
3.34 |
2.68 |
|||
|
Dividends paid per common share |
$ 0.33 |
$ 0.29 |
$ 0.91 |
$ 0.79 |
|||
|
Weighted-average number of shares outstanding: |
|||||||
|
Basic |
406 |
409 |
407 |
410 |
|||
|
Diluted |
412 |
416 |
413 |
417 |
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TE CONNECTIVITY LTD. |
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CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||
|
June 26, |
September 26, |
||
|
2015 |
2014 |
||
|
(in millions, except share data) |
|||
|
Assets |
|||
|
Current assets: |
|||
|
Cash and cash equivalents |
$ 701 |
$ 2,457 |
|
|
Accounts receivable, net of allowance for doubtful accounts of $18 and $14, respectively |
2,185 |
2,057 |
|
|
Inventories |
1,717 |
1,509 |
|
|
Prepaid expenses and other current assets |
617 |
519 |
|
|
Deferred income taxes |
619 |
324 |
|
|
Assets held for sale |
1,897 |
2,013 |
|
|
Total current assets |
7,736 |
8,879 |
|
|
Property, plant, and equipment, net |
2,925 |
2,920 |
|
|
Goodwill |
4,841 |
3,726 |
|
|
Intangible assets, net |
1,597 |
1,087 |
|
|
Deferred income taxes |
2,054 |
2,047 |
|
|
Receivable from Tyco International plc and Covidien plc |
962 |
1,037 |
|
|
Other assets |
326 |
456 |
|
|
Total Assets |
$ 20,441 |
$ 20,152 |
|
|
Liabilities and Equity |
|||
|
Current liabilities: |
|||
|
Current maturities of long-term debt |
$ 631 |
$ 577 |
|
|
Accounts payable |
1,206 |
1,230 |
|
|
Accrued and other current liabilities |
1,660 |
1,594 |
|
|
Deferred revenue |
179 |
176 |
|
|
Liabilities held for sale |
365 |
416 |
|
|
Total current liabilities |
4,041 |
3,993 |
|
|
Long-term debt |
3,395 |
3,281 |
|
|
Long-term pension and postretirement liabilities |
1,192 |
1,280 |
|
|
Deferred income taxes |
299 |
229 |
|
|
Income taxes |
1,936 |
2,044 |
|
|
Other liabilities |
443 |
312 |
|
|
Total Liabilities |
11,306 |
11,139 |
|
|
Commitments and contingencies |
|||
|
Equity: |
|||
|
TE Connectivity Ltd. shareholders' equity: |
|||
|
Common shares, 414,064,381 shares authorized and issued, CHF 0.57 par value, and |
|||
|
419,070,781 shares authorized and issued, CHF 0.57 par value, respectively |
182 |
184 |
|
|
Contributed surplus |
4,338 |
5,231 |
|
|
Accumulated earnings |
5,633 |
4,253 |
|
|
Treasury shares, at cost, 10,181,684 and 11,383,631 shares, respectively |
(651) |
(644) |
|
|
Accumulated other comprehensive loss |
(373) |
(17) |
|
|
Total TE Connectivity Ltd. shareholders' equity |
9,129 |
9,007 |
|
|
Noncontrolling interests |
6 |
6 |
|
|
Total Equity |
9,135 |
9,013 |
|
|
Total Liabilities and Equity |
$ 20,441 |
$ 20,152 |
|
|
TE CONNECTIVITY LTD. |
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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|
For the Quarters Ended |
For the Nine Months Ended |
||||||
|
June 26, |
June 27, |
June 26, |
June 27, |
||||
|
2015 |
2014 |
2015 |
2014 |
||||
|
(in millions) |
|||||||
|
Cash Flows From Operating Activities: |
|||||||
|
Net income |
$ 309 |
$ 403 |
$ 1,380 |
$ 1,118 |
|||
|
(Income) loss from discontinued operations, net of income taxes |
42 |
(56) |
(278) |
(118) |
|||
|
Income from continuing operations |
351 |
347 |
1,102 |
1,000 |
|||
|
Adjustments to reconcile income from continuing operations to net cash |
|||||||
|
provided by operating activities: |
|||||||
|
Depreciation and amortization |
148 |
138 |
455 |
408 |
|||
|
Non-cash restructuring charges |
- |
8 |
15 |
14 |
|||
|
Deferred income taxes |
(52) |
8 |
(106) |
52 |
|||
|
Provision for losses on accounts receivable and inventories |
7 |
5 |
35 |
34 |
|||
|
Tax sharing (income) expense |
(12) |
(8) |
62 |
(59) |
|||
|
Share-based compensation expense |
21 |
18 |
65 |
58 |
|||
|
Other |
13 |
11 |
59 |
46 |
|||
|
Changes in assets and liabilities, net of the effects of acquisitions and divestitures: |
|||||||
|
Accounts receivable, net |
(106) |
(63) |
(125) |
(167) |
|||
|
Inventories |
(38) |
7 |
(218) |
(88) |
|||
|
Prepaid expenses and other current assets |
24 |
(10) |
35 |
(29) |
|||
|
Accounts payable |
(18) |
4 |
(29) |
54 |
|||
|
Accrued and other current liabilities |
35 |
(148) |
(206) |
(357) |
|||
|
Deferred revenue |
84 |
62 |
4 |
52 |
|||
|
Income taxes |
42 |
23 |
(90) |
95 |
|||
|
Other |
25 |
- |
21 |
29 |
|||
|
Net cash provided by continuing operating activities |
524 |
402 |
1,079 |
1,142 |
|||
|
Net cash provided by discontinued operating activities |
72 |
98 |
210 |
192 |
|||
|
Net cash provided by operating activities |
596 |
500 |
1,289 |
1,334 |
|||
|
Cash Flows From Investing Activities: |
|||||||
|
Capital expenditures |
(134) |
(164) |
(425) |
(445) |
|||
|
Proceeds from sale of property, plant, and equipment |
4 |
4 |
10 |
25 |
|||
|
Acquisition of businesses, net of cash acquired |
3 |
- |
(1,726) |
(18) |
|||
|
Other |
- |
(4) |
(2) |
(4) |
|||
|
Net cash used in continuing investing activities |
(127) |
(164) |
(2,143) |
(442) |
|||
|
Net cash used in discontinued investing activities |
(8) |
(9) |
(22) |
(29) |
|||
|
Net cash used in investing activities |
(135) |
(173) |
(2,165) |
(471) |
|||
|
Cash Flows From Financing Activities: |
|||||||
|
Net increase (decrease) in commercial paper |
(105) |
- |
(197) |
25 |
|||
|
Proceeds from issuance of long-term debt |
- |
- |
617 |
323 |
|||
|
Repayment of long-term debt |
- |
- |
(473) |
(360) |
|||
|
Proceeds from exercise of share options |
9 |
31 |
97 |
140 |
|||
|
Repurchase of common shares |
(226) |
(60) |
(511) |
(452) |
|||
|
Payment of common share dividends to shareholders |
(134) |
(119) |
(370) |
(324) |
|||
|
Transfer from discontinued operations |
64 |
89 |
188 |
163 |
|||
|
Other |
- |
(2) |
(2) |
(2) |
|||
|
Net cash used in continuing financing activities |
(392) |
(61) |
(651) |
(487) |
|||
|
Net cash used in discontinued financing activities |
(64) |
(89) |
(188) |
(163) |
|||
|
Net cash used in financing activities |
(456) |
(150) |
(839) |
(650) |
|||
|
Effect of currency translation on cash |
(1) |
7 |
(41) |
(3) |
|||
|
Net increase (decrease) in cash and cash equivalents |
4 |
184 |
(1,756) |
210 |
|||
|
Cash and cash equivalents at beginning of period |
697 |
1,429 |
2,457 |
1,403 |
|||
|
Cash and cash equivalents at end of period |
$ 701 |
$ 1,613 |
$ 701 |
$ 1,613 |
|||
|
Supplemental Cash Flow Information: |
|||||||
|
Interest paid |
$ 46 |
$ 46 |
$ 110 |
$ 108 |
|||
|
Income taxes paid, net of refunds |
111 |
71 |
281 |
185 |
|||
|
Reconciliation to Free Cash Flow: |
|||||||
|
Net cash provided by continuing operating activities |
$ 524 |
$ 402 |
$ 1,079 |
$ 1,142 |
|||
|
Capital expenditures, net |
(130) |
(160) |
(415) |
(420) |
|||
|
Payments (receipts) related to pre-separation U.S. tax matters, net |
(3) |
200 |
23 |
179 |
|||
|
Free cash flow (1) |
$ 391 |
$ 442 |
$ 687 |
$ 901 |
|||
|
(1) Free cash flow is a non-GAAP measure. See description of non-GAAP measures contained in this release. |
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TE CONNECTIVITY LTD. |
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CONSOLIDATED SEGMENT DATA (UNAUDITED) |
|||||||||||||||
|
For the Quarters Ended |
For the Nine Months Ended |
||||||||||||||
|
June 26, |
June 27, |
June 26, |
June 27, |
||||||||||||
|
2015 |
2014 |
2015 |
2014 |
||||||||||||
|
($ in millions) |
|||||||||||||||
|
Net Sales: |
|||||||||||||||
|
Transportation Solutions |
$ 1,621 |
$ 1,586 |
$ 4,843 |
$ 4,597 |
|||||||||||
|
Industrial Solutions |
806 |
849 |
2,387 |
2,401 |
|||||||||||
|
Communications Solutions |
691 |
640 |
2,019 |
1,903 |
|||||||||||
|
Total |
$ 3,118 |
$ 3,075 |
$ 9,249 |
$ 8,901 |
|||||||||||
|
Operating Income: |
|||||||||||||||
|
Transportation Solutions |
$ 303 |
18.7 |
% |
$ 325 |
20.5 |
% |
$ 921 |
19.0 |
% |
$ 948 |
20.6 |
% |
|||
|
Industrial Solutions |
98 |
12.2 |
121 |
14.3 |
268 |
11.2 |
318 |
13.2 |
|||||||
|
Communications Solutions |
68 |
9.8 |
18 |
2.8 |
153 |
7.6 |
88 |
4.6 |
|||||||
|
Total |
$ 469 |
15.0 |
% |
$ 464 |
15.1 |
% |
$ 1,342 |
14.5 |
% |
$ 1,354 |
15.2 |
% |
|||
|
Adjusted Operating Income (1): |
|||||||||||||||
|
Transportation Solutions |
$ 317 |
19.6 |
% |
$ 325 |
20.5 |
% |
$ 987 |
20.4 |
% |
$ 948 |
20.6 |
% |
|||
|
Industrial Solutions |
109 |
13.5 |
123 |
14.5 |
319 |
13.4 |
327 |
13.6 |
|||||||
|
Communications Solutions |
71 |
10.3 |
27 |
4.2 |
198 |
9.8 |
96 |
5.0 |
|||||||
|
Total |
$ 497 |
15.9 |
% |
$ 475 |
15.4 |
% |
$ 1,504 |
16.3 |
% |
$ 1,371 |
15.4 |
% |
|||
|
(1) Adjusted operating income is a non-GAAP measure. See description of non-GAAP measures contained in this release. |
|||||||||||||||
|
TE CONNECTIVITY LTD. |
||||||||||||||||
|
RECONCILIATION OF NET SALES GROWTH (UNAUDITED) |
||||||||||||||||
|
Percentage of |
||||||||||||||||
|
Segment's Total |
||||||||||||||||
|
Change in Net Sales for the Quarter Ended June 26, 2015 |
Net Sales for the |
|||||||||||||||
|
versus Net Sales for the Quarter Ended June 27, 2014 |
Quarter Ended |
|||||||||||||||
|
Organic (1) |
Translation (2) |
Acquisitions |
Total |
June 26, 2015 |
||||||||||||
|
($ in millions) |
||||||||||||||||
|
Transportation Solutions (3): |
||||||||||||||||
|
Automotive |
$ 73 |
5.7 |
% |
$ (149) |
$ - |
$ (76) |
(5.9) |
% |
75 |
% |
||||||
|
Commercial Transportation |
(13) |
(5.2) |
(20) |
- |
(33) |
(13.8) |
13 |
|||||||||
|
Sensors |
2 |
4.3 |
(5) |
147 |
144 |
288.0 |
12 |
|||||||||
|
Total |
62 |
3.9 |
(174) |
147 |
35 |
2.2 |
100 |
% |
||||||||
|
Industrial Solutions (3): |
||||||||||||||||
|
Industrial Equipment |
4 |
1.0 |
(28) |
20 |
(4) |
(1.1) |
43 |
|||||||||
|
Aerospace, Defense, Oil, and Gas |
(15) |
(5.0) |
(23) |
25 |
(13) |
(4.5) |
35 |
|||||||||
|
Energy |
- |
- |
(26) |
- |
(26) |
(12.5) |
22 |
|||||||||
|
Total |
(11) |
(1.3) |
(77) |
45 |
(43) |
(5.1) |
100 |
% |
||||||||
|
Communications Solutions (3): |
||||||||||||||||
|
Data and Devices |
(66) |
(16.1) |
(17) |
- |
(83) |
(20.2) |
48 |
|||||||||
|
Appliances |
(6) |
(3.3) |
(10) |
- |
(16) |
(9.0) |
23 |
|||||||||
|
Subsea Communications |
150 |
288.5 |
- |
- |
150 |
288.5 |
29 |
|||||||||
|
Total |
78 |
12.2 |
(27) |
- |
51 |
8.0 |
100 |
% |
||||||||
|
Total |
$ 129 |
4.2 |
% |
$ (278) |
$ 192 |
$ 43 |
1.4 |
% |
||||||||
|
Percentage of |
||||||||||||||||
|
Segment's Total |
||||||||||||||||
|
Change in Net Sales for the Nine Months Ended June 26, 2015 |
Net Sales for the |
|||||||||||||||
|
versus Net Sales for the Nine Months Ended June 27, 2014 |
Nine Months Ended |
|||||||||||||||
|
Organic (1) |
Translation (2) |
Acquisitions |
Total |
June 26, 2015 |
||||||||||||
|
($ in millions) |
||||||||||||||||
|
Transportation Solutions (3): |
||||||||||||||||
|
Automotive |
$ 216 |
5.8 |
% |
$ (336) |
$ - |
$ (120) |
(3.2) |
% |
75 |
% |
||||||
|
Commercial Transportation |
(1) |
(0.1) |
(46) |
- |
(47) |
(7.0) |
13 |
|||||||||
|
Sensors |
6 |
4.5 |
(14) |
421 |
413 |
280.9 |
12 |
|||||||||
|
Total |
221 |
4.8 |
(396) |
421 |
246 |
5.4 |
100 |
% |
||||||||
|
Industrial Solutions (3): |
||||||||||||||||
|
Industrial Equipment |
23 |
2.4 |
(67) |
23 |
(21) |
(2.1) |
41 |
|||||||||
|
Aerospace, Defense, Oil, and Gas |
19 |
2.4 |
(52) |
94 |
61 |
7.5 |
37 |
|||||||||
|
Energy |
8 |
1.4 |
(62) |
- |
(54) |
(9.2) |
22 |
|||||||||
|
Total |
50 |
2.1 |
(181) |
117 |
(14) |
(0.6) |
100 |
% |
||||||||
|
Communications Solutions (3): |
||||||||||||||||
|
Data and Devices |
(141) |
(11.6) |
(40) |
- |
(181) |
(14.9) |
51 |
|||||||||
|
Appliances |
14 |
2.8 |
(25) |
- |
(11) |
(2.2) |
24 |
|||||||||
|
Subsea Communications |
308 |
155.6 |
- |
- |
308 |
155.6 |
25 |
|||||||||
|
Total |
181 |
9.5 |
(65) |
- |
116 |
6.1 |
100 |
% |
||||||||
|
Total |
$ 452 |
5.1 |
% |
$ (642) |
$ 538 |
$ 348 |
3.9 |
% |
||||||||
|
(1) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes in foreign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this release. |
||||||||||||||||
|
(2) Represents the change in net sales resulting from changes in foreign currency exchange rates. |
||||||||||||||||
|
(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deems necessary. |
||||||||||||||||
|
TE CONNECTIVITY LTD. |
|||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||||
|
For the Quarter Ended June 26, 2015 |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Adjustments |
|||||||||
|
Acquisition |
Restructuring |
||||||||
|
Related |
and Other |
Tax |
Adjusted |
||||||
|
U.S. GAAP |
Charges (1) |
Charges, Net |
Items |
(Non-GAAP) (2) |
|||||
|
($ in millions, except per share data) |
|||||||||
|
Operating Income: |
|||||||||
|
Transportation Solutions |
$ 303 |
$ 5 |
$ 9 |
$ - |
$ 317 |
||||
|
Industrial Solutions |
98 |
5 |
6 |
- |
109 |
||||
|
Communications Solutions |
68 |
- |
3 |
- |
71 |
||||
|
Total |
$ 469 |
$ 10 |
$ 18 |
$ - |
$ 497 |
||||
|
Operating Margin |
15.0% |
15.9% |
|||||||
|
Other Income, Net |
$ 11 |
$ - |
$ - |
$ (5) |
$ 6 |
||||
|
Income Tax Expense |
$ (100) |
$ (5) |
$ 1 |
$ - |
$ (104) |
||||
|
Income from Continuing Operations |
|||||||||
|
Attributable to TE Connectivity Ltd. |
$ 351 |
$ 5 |
$ 19 |
$ (5) |
$ 370 |
||||
|
Diluted Earnings per Share from |
|||||||||
|
Continuing Operations Attributable |
|||||||||
|
to TE Connectivity Ltd. |
$ 0.85 |
$ 0.01 |
$ 0.05 |
$ (0.01) |
$ 0.90 |
||||
|
(1) Includes $8 million of acquisition and integration costs, $1 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $1 million of restructuring costs. |
|||||||||
|
(2) See description of non-GAAP measures contained in this release. |
|||||||||
|
TE CONNECTIVITY LTD. |
|||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||
|
For the Quarter Ended June 27, 2014 |
|||||||
|
(UNAUDITED) |
|||||||
|
Adjustments |
|||||||
|
Acquisition |
Restructuring |
||||||
|
Related |
and Other |
Adjusted |
|||||
|
U.S. GAAP |
Charges |
Charges, Net |
(Non-GAAP) (1) |
||||
|
($ in millions, except per share data) |
|||||||
|
Operating Income: |
|||||||
|
Transportation Solutions |
$ 325 |
$ - |
$ - |
$ 325 |
|||
|
Industrial Solutions |
121 |
1 |
1 |
123 |
|||
|
Communications Solutions |
18 |
- |
9 |
27 |
|||
|
Total |
$ 464 |
$ 1 |
$ 10 |
$ 475 |
|||
|
Operating Margin |
15.1% |
15.4% |
|||||
|
Other Income, Net |
$ 9 |
$ - |
$ - |
$ 9 |
|||
|
Income Tax Expense |
$ (102) |
$ - |
$ (3) |
$ (105) |
|||
|
Income from Continuing Operations |
|||||||
|
Attributable to TE Connectivity Ltd. |
$ 347 |
$ 1 |
$ 7 |
$ 355 |
|||
|
Diluted Earnings per Share from |
|||||||
|
Continuing Operations Attributable |
|||||||
|
to TE Connectivity Ltd. |
$ 0.83 |
$ - |
$ 0.02 |
$ 0.85 |
|||
|
(1) See description of non-GAAP measures contained in this release. |
|||||||
|
TE CONNECTIVITY LTD. |
|||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||||
|
For the Nine Months Ended June 26, 2015 |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Adjustments |
|||||||||
|
Acquisition |
Restructuring |
||||||||
|
Related |
and Other |
Tax |
Adjusted |
||||||
|
U.S. GAAP |
Charges (1) |
Charges, Net (2) |
Items (3) |
(Non-GAAP) (4) |
|||||
|
($ in millions, except per share data) |
|||||||||
|
Operating Income: |
|||||||||
|
Transportation Solutions |
$ 921 |
$ 56 |
$ 10 |
$ - |
$ 987 |
||||
|
Industrial Solutions |
268 |
27 |
24 |
- |
319 |
||||
|
Communications Solutions |
153 |
- |
45 |
- |
198 |
||||
|
Total |
$ 1,342 |
$ 83 |
$ 79 |
$ - |
$ 1,504 |
||||
|
Operating Margin |
14.5% |
16.3% |
|||||||
|
Other Income (Expense), Net |
$ (64) |
$ - |
$ - |
$ 89 |
$ 25 |
||||
|
Income Tax Expense |
$ (85) |
$ (23) |
$ 8 |
$ (224) |
$ (324) |
||||
|
Income from Continuing Operations |
|||||||||
|
Attributable to TE Connectivity Ltd. |
$ 1,102 |
$ 60 |
$ 87 |
$ (135) |
$ 1,114 |
||||
|
Diluted Earnings per Share from |
|||||||||
|
Continuing Operations Attributable |
|||||||||
|
to TE Connectivity Ltd. |
$ 2.67 |
$ 0.15 |
$ 0.21 |
$ (0.33) |
$ 2.70 |
||||
|
(1) Includes $46 million of acquisition and integration costs, $34 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $3 million of restructuring costs. |
|||||||||
|
(2) Includes an income tax charge for the estimated tax impacts of certain intercompany dividends related to the restructuring and anticipated sale of the Broadband Network Solutions business. |
|||||||||
|
(3) Includes $202 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $89 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax benefits related to the impacts of certain non-U.S. tax law changes and the associated reduction in the valuation allowance for tax loss carryforwards. |
|||||||||
|
(4) See description of non-GAAP measures contained in this release. |
|||||||||
|
TE CONNECTIVITY LTD. |
|||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||||
|
For the Nine Months Ended June 27, 2014 |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Adjustments |
|||||||||
|
Acquisition |
Restructuring |
||||||||
|
Related |
and Other |
Tax |
Adjusted |
||||||
|
U.S. GAAP |
Charges |
Charges, Net |
Items (1) |
(Non-GAAP) (2) |
|||||
|
($ in millions, except per share data) |
|||||||||
|
Operating Income: |
|||||||||
|
Transportation Solutions |
$ 948 |
$ - |
$ - |
$ - |
$ 948 |
||||
|
Industrial Solutions |
318 |
2 |
7 |
- |
327 |
||||
|
Communications Solutions |
88 |
- |
8 |
- |
96 |
||||
|
Total |
$ 1,354 |
$ 2 |
$ 15 |
$ - |
$ 1,371 |
||||
|
Operating Margin |
15.2% |
15.4% |
|||||||
|
Other Income, Net |
$ 57 |
$ - |
$ - |
$ (39) |
$ 18 |
||||
|
Income Tax Expense |
$ (331) |
$ - |
$ (7) |
$ 43 |
$ (295) |
||||
|
Income from Continuing Operations |
|||||||||
|
Attributable to TE Connectivity Ltd. |
$ 1,000 |
$ 2 |
$ 8 |
$ 4 |
$ 1,014 |
||||
|
Diluted Earnings per Share from |
|||||||||
|
Continuing Operations Attributable |
|||||||||
|
to TE Connectivity Ltd. |
$ 2.40 |
$ - |
$ 0.02 |
$ 0.01 |
$ 2.43 |
||||
|
(1) Includes income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters, including $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary. |
|||||||||
|
(2) See description of non-GAAP measures contained in this release. |
|||||||||
|
TE CONNECTIVITY LTD. |
|||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||||
|
For the Quarter Ended September 26, 2014 |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Adjustments |
|||||||||
|
Acquisition |
Restructuring |
||||||||
|
Related |
and Other |
Tax |
Adjusted |
||||||
|
U.S. GAAP |
Charges (1) |
Charges, Net |
Items (2) |
(Non-GAAP) (3) |
|||||
|
($ in millions, except per share data) |
|||||||||
|
Operating Income: |
|||||||||
|
Transportation Solutions |
$ 297 |
$ 4 |
$ 4 |
$ - |
$ 305 |
||||
|
Industrial Solutions |
113 |
29 |
- |
- |
142 |
||||
|
Communications Solutions |
41 |
- |
- |
- |
41 |
||||
|
Total |
$ 451 |
$ 33 |
$ 4 |
$ - |
$ 488 |
||||
|
Operating Margin |
14.7% |
15.9% |
|||||||
|
Other Income, Net |
$ 6 |
$ - |
$ - |
$ - |
$ 6 |
||||
|
Income Tax (Expense) Benefit |
$ 185 |
$ (7) |
$ 3 |
$ (282) |
$ (101) |
||||
|
Income from Continuing Operations |
|||||||||
|
Attributable to TE Connectivity Ltd. |
$ 614 |
$ 26 |
$ 7 |
$ (282) |
$ 365 |
||||
|
Diluted Earnings per Share from |
|||||||||
|
Continuing Operations Attributable |
|||||||||
|
to TE Connectivity Ltd. |
$ 1.48 |
$ 0.06 |
$ 0.02 |
$ (0.68) |
$ 0.88 |
||||
|
(1) Includes $29 million of acquisition and integration costs and $4 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales. |
|||||||||
|
(2) Income tax benefits recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards. |
|||||||||
|
(3) See description of non-GAAP measures contained in this release. |
|||||||||
|
TE CONNECTIVITY LTD. |
|||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES |
|||||||||
|
For the Year Ended September 26, 2014 |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Adjustments |
|||||||||
|
Acquisition |
Restructuring |
||||||||
|
Related |
and Other |
Tax |
Adjusted |
||||||
|
U.S. GAAP |
Charges (1) |
Charges, Net |
Items (2) |
(Non-GAAP) (3) |
|||||
|
($ in millions, except per share data) |
|||||||||
|
Operating Income: |
|||||||||
|
Transportation Solutions |
$ 1,245 |
$ 4 |
$ 4 |
$ - |
$ 1,253 |
||||
|
Industrial Solutions |
431 |
31 |
7 |
- |
469 |
||||
|
Communications Solutions |
129 |
- |
8 |
- |
137 |
||||
|
Total |
$ 1,805 |
$ 35 |
$ 19 |
$ - |
$ 1,859 |
||||
|
Operating Margin |
15.1% |
15.5% |
|||||||
|
Other Income, Net |
$ 63 |
$ - |
$ - |
$ (39) |
$ 24 |
||||
|
Income Tax Expense |
$ (146) |
$ (7) |
$ (4) |
$ (239) |
$ (396) |
||||
|
Income from Continuing Operations |
|||||||||
|
Attributable to TE Connectivity Ltd. |
$ 1,614 |
$ 28 |
$ 15 |
$ (278) |
$ 1,379 |
||||
|
Diluted Earnings per Share from |
|||||||||
|
Continuing Operations Attributable |
|||||||||
|
to TE Connectivity Ltd. |
$ 3.87 |
$ 0.07 |
$ 0.04 |
$ (0.67) |
$ 3.31 |
||||
|
(1) Includes $31 million of acquisition and integration costs and $4 million of non-cash amortization associated with fair value adjustments primarily related to acquired inventories and customer order backlog recorded in cost of sales. |
|||||||||
|
(2) Includes income tax benefits of $282 million recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards and income tax expense related to adjustments to prior year income tax returns. In addition, other income includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters, including $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary. |
|||||||||
|
(3) See description of non-GAAP measures contained in this release. |
|||||||||
|
TE CONNECTIVITY LTD. |
|||
|
RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES |
|||
|
TO FORWARD-LOOKING GAAP FINANCIAL MEASURES |
|||
|
As of July 22, 2015 |
|||
|
(UNAUDITED) |
|||
|
Outlook for the |
|||
|
Quarter Ending |
|||
|
September 25, |
Outlook for |
||
|
2015 |
Fiscal 2015 |
||
|
Diluted earnings per share from continuing operations attributable to TE |
|||
|
Connectivity Ltd. (GAAP) |
$0.81 - 0.87 |
$3.48 - 3.54 |
|
|
Restructuring and other charges, net |
0.06 |
0.27 |
|
|
Acquisition related charges |
0.03 |
0.18 |
|
|
Tax items |
- |
(0.33) |
|
|
Adjusted diluted earnings per share from continuing operations attributable to TE |
|||
|
Connectivity Ltd. (non-GAAP) (1) |
$0.90 - 0.96 |
$3.60 - 3.66 |
|
|
Net sales growth (GAAP) |
(2) - 3% |
3 - 4% |
|
|
Translation |
8 |
8 |
|
|
(Acquisitions) divestitures |
(6) |
(7) |
|
|
Organic net sales growth (non-GAAP) (1) |
0 - 5% |
4 - 5% |
|
|
(1) See description of non-GAAP measures contained in this release. |
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|
TE CONNECTIVITY LTD. |
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|
IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES |
|||||
|
(UNAUDITED) |
|||||
|
As of July 22, 2015 |
|||||
|
For the |
Outlook for the |
||||
|
Quarter Ended |
Quarter Ending |
||||
|
June 26, |
September 25, |
Outlook for |
|||
|
2015 |
2015 |
Fiscal 2015 |
|||
|
Adjusted diluted earnings per share from continuing operations |
|||||
|
attributable to TE Connectivity Ltd., excluding the impact of changes in |
|||||
|
foreign currency exchange rates (non-GAAP) (1) |
$1.00 |
$1.00 - 1.06 |
$3.92 - 3.98 |
||
|
Impact of changes in foreign currency exchange rates |
(0.10) |
(0.10) |
(0.32) |
||
|
Adjusted diluted earnings per share from continuing operations |
|||||
|
attributable to TE Connectivity Ltd. (non-GAAP) (1) |
$0.90 |
$0.90 - 0.96 |
$3.60 - 3.66 |
||
|
(1) See description of non-GAAP measures contained in this release. |
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SOURCE TE Connectivity Ltd.
Media Relations: Jane Crawford, TE Connectivity, 610-893-9689, Jane.crawford@te.com; Investor Relations: Sujal Shah, TE Connectivity, 610-893-9790, Sujal.shah@te.com