EX-99.1 2 a19-13010_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

TE Connectivity announces results for third quarter of fiscal year 2019

 

Earnings per share exceeded the high end of the company’s guidance

 

SCHAFFHAUSEN, Switzerland — July 24, 2019 — TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter, which ended June 28, 2019.

 

Third Quarter Highlights

 

·                  Net sales of $3.4 billion, at the low end of the company’s guidance

·                  Diluted earnings per share (EPS) from continuing operations were $2.24, and adjusted EPS were $1.50, both exceeding the high-end of the company’s guidance

·                  Cash flow from continuing operating activities was $692 million and free cash flow was $515 million, with $307 million returned to shareholders

 

Third Quarter Results

 

For the third quarter, the company reported net sales of $3.4 billion, with diluted EPS from continuing operations of $2.24, and adjusted EPS were $1.50. Cash flow from continuing operating activities was $692 million and free cash flow was $515 million. Year-to-date cash flow from continuing operations was $1.6 billion, up 14% from 2018, and free cash flow year-to-date was $928 million, a 27% improvement over the prior year. Total orders were $3.3 billion, down 12% year-over-year. The company continued its long-term growth strategy, completing the acquisition of the Kissling Group and Alpha Technics, and announcing its intention to acquire First Sensor AG.

 

“Our third quarter results demonstrate the ability of our teams to outperform in a weakening market environment and successfully execute to drive strong earnings per share performance. Our Industrial segment continued to show growth, led by strength in our aerospace, defense and medical businesses, and our Transportation segment outperformed global auto production declines due to content gains,” said Terrence Curtin, chief executive officer of TE Connectivity. “As a result of inventory destocking by our distribution partners and further auto production declines, particularly in China, we are lowering our guidance and accelerating cost control levers to maintain earnings resilience. We will continue to invest in long-term growth opportunities in alignment with our strategy.”

 

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2019 Outlook

 

For the fiscal fourth quarter of 2019, the company expects net sales of $3.2 billion to $3.3 billion. Diluted EPS from continuing operations are expected to be $0.81 to $0.87, including net restructuring, acquisition-related and other charges of $0.46. The company expects adjusted EPS of $1.27 to $1.33.

 

For the full year, the company expects net sales of $13.35 billion to $13.45 billion. Diluted EPS from continuing operations are expected to be $5.42 to $5.48, including net restructuring, acquisition-related and other charges of $0.91 and a tax-related benefit of $0.86. The company expects adjusted EPS of $5.47 to $5.53.

 

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: 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 (866) 211-4092, and for international callers, the dial-in number is (647) 689-6620.

·                  An audio replay of the conference call will be available on TE Connectivity’s investor website at investors.te.com at 10:30 a.m. ET on July 24, 2019.

 

ABOUT TE CONNECTIVITY

TE Connectivity Ltd. is a $14 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 80,000 employees, including more than 8,000 engineers, working alongside customers in approximately 140 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

 

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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

 

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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 swap contracts, 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 Swiss tax reform.  More detailed information about these and other factors is set forth in TE Connectivity Ltd.’s Annual Report on

 

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Form 10-K for the fiscal year ended Sept. 28, 2018 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.

 

# # #

 

Contacts:

 

Media Relations:

 

Investor Relations:

 

 

Rachel Quimby

 

Sujal Shah

 

 

TE Connectivity

 

TE Connectivity

 

 

610-893-9593

 

610-893-9790

 

 

Rachel.quimby@te.com

 

sujal.shah@te.com

 

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TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Nine Months Ended

 

 

 

June 28,

 

June 29,

 

June 28,

 

June 29,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(in millions, except per share data)

 

Net sales

 

$

3,389

 

$

3,581

 

$

10,148

 

$

10,479

 

Cost of sales

 

2,279

 

2,394

 

6,806

 

6,916

 

Gross margin

 

1,110

 

1,187

 

3,342

 

3,563

 

Selling, general, and administrative expenses

 

356

 

394

 

1,118

 

1,180

 

Research, development, and engineering expenses

 

158

 

171

 

485

 

509

 

Acquisition and integration costs

 

9

 

4

 

21

 

9

 

Restructuring and other charges, net

 

67

 

64

 

184

 

104

 

Operating income

 

520

 

554

 

1,534

 

1,761

 

Interest income

 

4

 

3

 

13

 

11

 

Interest expense

 

(13

)

(26

)

(55

)

(80

)

Other income (expense), net

 

2

 

(1

)

2

 

2

 

Income from continuing operations before income taxes

 

513

 

530

 

1,494

 

1,694

 

Income tax (expense) benefit

 

245

 

(77

)

76

 

(784

)

Income from continuing operations

 

758

 

453

 

1,570

 

910

 

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

 

(1

)

1

 

(98

)

(6

)

Net income

 

$

757

 

$

454

 

$

1,472

 

$

904

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

2.25

 

$

1.30

 

$

4.63

 

$

2.59

 

Income (loss) from discontinued operations

 

 

 

(0.29

)

(0.02

)

Net income

 

2.25

 

1.30

 

4.34

 

2.58

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

2.24

 

$

1.29

 

$

4.60

 

$

2.57

 

Income (loss) from discontinued operations

 

 

 

(0.29

)

(0.02

)

Net income

 

2.23

 

1.29

 

4.32

 

2.55

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

337

 

349

 

339

 

351

 

Diluted

 

339

 

352

 

341

 

354

 

 

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TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

June 28,

 

September 28,

 

 

 

2019

 

2018

 

 

 

(in millions, except share data)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

546

 

$

848

 

Accounts receivable, net of allowance for doubtful accounts of $25 and $22, respectively

 

2,463

 

2,361

 

Inventories

 

1,961

 

1,857

 

Prepaid expenses and other current assets

 

452

 

661

 

Assets held for sale

 

 

472

 

Total current assets

 

5,422

 

6,199

 

Property, plant, and equipment, net

 

3,636

 

3,497

 

Goodwill

 

5,800

 

5,684

 

Intangible assets, net

 

1,664

 

1,704

 

Deferred income taxes

 

2,845

 

2,144

 

Other assets

 

381

 

1,158

 

Total assets

 

$

19,748

 

$

20,386

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term debt

 

$

602

 

$

963

 

Accounts payable

 

1,438

 

1,548

 

Accrued and other current liabilities

 

1,654

 

1,711

 

Liabilities held for sale

 

 

188

 

Total current liabilities

 

3,694

 

4,410

 

Long-term debt

 

3,434

 

3,037

 

Long-term pension and postretirement liabilities

 

1,094

 

1,102

 

Deferred income taxes

 

203

 

207

 

Income taxes

 

240

 

312

 

Other liabilities

 

461

 

487

 

Total liabilities

 

9,126

 

9,555

 

Commitments and contingencies

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common shares, CHF 0.57 par value, 350,951,381 shares authorized and issued, and 357,069,981 shares authorized and issued, respectively

 

154

 

157

 

Accumulated earnings

 

11,893

 

12,114

 

Treasury shares, at cost, 14,541,059 and 12,279,603 shares, respectively

 

(1,224

)

(1,134

)

Accumulated other comprehensive loss

 

(201

)

(306

)

Total shareholders’ equity

 

10,622

 

10,831

 

Total liabilities and shareholders’ equity

 

$

19,748

 

$

20,386

 

 

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TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Nine Months Ended

 

 

 

June 28,

 

June 29,

 

June 28,

 

June 29,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(in millions)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

757

 

$

454

 

$

1,472

 

$

904

 

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

 

1

 

(1

)

98

 

6

 

Income from continuing operations

 

758

 

453

 

1,570

 

910

 

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

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

174

 

167

 

515

 

496

 

Deferred income taxes

 

(262

)

(55

)

(290

)

442

 

Provision for losses on accounts receivable and inventories

 

8

 

4

 

36

 

29

 

Share-based compensation expense

 

18

 

20

 

56

 

71

 

Other

 

(6

)

5

 

26

 

(12

)

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

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

2

 

(3

)

(105

)

(379

)

Inventories

 

11

 

10

 

(59

)

(217

)

Prepaid expenses and other current assets

 

18

 

55

 

109

 

(50

)

Accounts payable

 

(42

)

(7

)

(86

)

177

 

Accrued and other current liabilities

 

59

 

67

 

(147

)

(143

)

Income taxes

 

(84

)

22

 

(63

)

24

 

Other

 

38

 

(4

)

13

 

31

 

Net cash provided by continuing operating activities

 

692

 

734

 

1,575

 

1,379

 

Net cash provided by (used in) discontinued operating activities

 

(1

)

66

 

(31

)

148

 

Net cash provided by operating activities

 

691

 

800

 

1,544

 

1,527

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(169

)

(234

)

(570

)

(673

)

Proceeds from sale of property, plant, and equipment

 

3

 

12

 

16

 

19

 

Acquisition of businesses, net of cash acquired

 

(291

)

 

(283

)

 

Proceeds from divestiture of discontinued operation, net of cash retained by sold operation

 

 

 

297

 

 

Other

 

3

 

(6

)

3

 

(8

)

Net cash used in continuing investing activities

 

(454

)

(228

)

(537

)

(662

)

Net cash used in discontinued investing activities

 

 

(5

)

(2

)

(13

)

Net cash used in investing activities

 

(454

)

(233

)

(539

)

(675

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Net increase (decrease) in commercial paper

 

(360

)

46

 

(270

)

271

 

Proceeds from issuance of debt

 

396

 

 

746

 

119

 

Repayment of debt

 

 

 

(441

)

(708

)

Proceeds from exercise of share options

 

38

 

2

 

55

 

96

 

Repurchase of common shares

 

(174

)

(230

)

(913

)

(611

)

Payment of common share dividends to shareholders

 

(155

)

(154

)

(454

)

(435

)

Transfers (to) from discontinued operations

 

(1

)

61

 

(33

)

135

 

Other

 

(2

)

(2

)

(32

)

(34

)

Net cash used in continuing financing activities

 

(258

)

(277

)

(1,342

)

(1,167

)

Net cash provided by (used in) discontinued financing activities

 

1

 

(61

)

33

 

(135

)

Net cash used in financing activities

 

(257

)

(338

)

(1,309

)

(1,302

)

Effect of currency translation on cash

 

1

 

(18

)

2

 

2

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

(19

)

211

 

(302

)

(448

)

Cash, cash equivalents, and restricted cash at beginning of period

 

565

 

559

 

848

 

1,218

 

Cash, cash equivalents, and restricted cash at end of period

 

$

546

 

$

770

 

$

546

 

$

770

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

4

 

$

18

 

$

56

 

$

97

 

Income taxes paid, net of refunds

 

100

 

109

 

277

 

317

 

 

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TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Nine Months Ended

 

 

 

June 28,

 

June 29,

 

June 28,

 

June 29,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(in millions)

 

Net cash provided by continuing operating activities

 

$

692

 

$

734

 

$

1,575

 

$

1,379

 

Excluding:

 

 

 

 

 

 

 

 

 

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

 

 

 

 

(5

)

Cash (collected) paid pursuant to collateral requirements related to cross-currency swap contracts

 

(11

)

(69

)

(93

)

10

 

Capital expenditures, net

 

(166

)

(222

)

(554

)

(654

)

Free cash flow (1)

 

$

515

 

$

443

 

$

928

 

$

730

 

 


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

 

9


 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)

 

 

 

For the Quarters Ended

 

For the Nine Months Ended

 

 

 

June 28,

 

June 29,

 

June 28,

 

June 29,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

($ in millions)

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

Net Sales

 

 

 

Transportation Solutions

 

$

1,968

 

 

 

$

2,112

 

 

 

$

5,925

 

 

 

$

6,278

 

 

 

Industrial Solutions

 

1,005

 

 

 

988

 

 

 

2,940

 

 

 

2,842

 

 

 

Communications Solutions

 

416

 

 

 

481

 

 

 

1,283

 

 

 

1,359

 

 

 

Total

 

$

3,389

 

 

 

$

3,581

 

 

 

$

10,148

 

 

 

$

10,479

 

 

 

 

 

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

Operating

 

 

 

Income

 

Margin

 

Income

 

Margin

 

Income

 

Margin

 

Income

 

Margin

 

Transportation Solutions

 

$

308

 

15.7

%

$

393

 

18.6

%

$

956

 

16.1

%

$

1,237

 

19.7

%

Industrial Solutions

 

156

 

15.5

 

92

 

9.3

 

393

 

13.4

 

319

 

11.2

 

Communications Solutions

 

56

 

13.5

 

69

 

14.3

 

185

 

14.4

 

205

 

15.1

 

Total

 

$

520

 

15.3

%

$

554

 

15.5

%

$

1,534

 

15.1

%

$

1,761

 

16.8

%

 

 

 

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

 

$

367

 

18.6

%

$

406

 

19.2

%

$

1,067

 

18.0

%

$

1,259

 

20.1

%

Industrial Solutions

 

167

 

16.6

 

142

 

14.4

 

464

 

15.8

 

403

 

14.2

 

Communications Solutions

 

62

 

14.9

 

75

 

15.6

 

211

 

16.4

 

220

 

16.2

 

Total

 

$

596

 

17.6

%

$

623

 

17.4

%

$

1,742

 

17.2

%

$

1,882

 

18.0

%

 


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

 

10


 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)

 

 

 

Change in Net Sales for the Quarter Ended June 28, 2019

 

 

 

versus Net Sales for the Quarter Ended June 29, 2018

 

 

 

Net

 

Organic Net

 

 

 

 

 

 

 

Sales Growth

 

Sales Growth (1)

 

Translation (2)

 

Acquisitions

 

 

 

($ in millions)

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

(123

)

(8.0

)%

$

(59

)

(3.9

)%

$

(64

)

$

 

Commercial transportation

 

(18

)

(5.4

)

(16

)

(5.1

)

(12

)

10

 

Sensors

 

(3

)

(1.3

)

2

 

0.7

 

(8

)

3

 

Total

 

(144

)

(6.8

)

(73

)

(3.5

)

(84

)

13

 

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial equipment

 

(21

)

(4.2

)

(27

)

(5.5

)

(14

)

20

 

Aerospace, defense, oil, and gas

 

47

 

15.9

 

51

 

16.9

 

(4

)

 

Energy

 

(9

)

(4.8

)

(1

)

(0.4

)

(8

)

 

Total

 

17

 

1.7

 

23

 

2.3

 

(26

)

20

 

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and devices

 

(33

)

(11.9

)

(26

)

(9.4

)

(7

)

 

Appliances

 

(32

)

(15.8

)

(26

)

(12.8

)

(6

)

 

Total

 

(65

)

(13.5

)

(52

)

(10.8

)

(13

)

 

Total

 

$

(192

)

(5.4

)%

$

(102

)

(2.8

)%

$

(123

)

$

33

 

 

 

 

Change in Net Sales for the Nine Months Ended June 28, 2019

 

 

 

versus Net Sales for the Nine Months Ended June 29, 2018

 

 

 

Net

 

Organic Net

 

 

 

 

 

 

 

Sales Growth

 

Sales Growth (1)

 

Translation (2)

 

Acquisitions

 

 

 

($ in millions)

 

Transportation Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Automotive

 

$

(317

)

(6.8

)%

$

(139

)

(3.1

)%

$

(178

)

$

 

Commercial transportation

 

(30

)

(3.1

)

(5

)

(0.7

)

(35

)

10

 

Sensors

 

(6

)

(0.9

)

13

 

1.8

 

(22

)

3

 

Total

 

(353

)

(5.6

)

(131

)

(2.1

)

(235

)

13

 

Industrial Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial equipment

 

(3

)

(0.2

)

(25

)

(1.8

)

(41

)

63

 

Aerospace, defense, oil, and gas

 

111

 

13.1

 

123

 

14.4

 

(12

)

 

Energy

 

(10

)

(1.9

)

17

 

3.0

 

(27

)

 

Total

 

98

 

3.4

 

115

 

4.0

 

(80

)

63

 

Communications Solutions (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Data and devices

 

(21

)

(2.7

)

(4

)

(0.5

)

(17

)

 

Appliances

 

(55

)

(9.4

)

(36

)

(6.3

)

(19

)

 

Total

 

(76

)

(5.6

)

(40

)

(3.0

)

(36

)

 

Total

 

$

(331

)

(3.2

)%

$

(56

)

(0.5

)%

$

(351

)

$

76

 

 


(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.

 

11


 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended June 28, 2019

(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

 

$

308

 

$

6

 

$

53

 

$

 

$

367

 

Industrial Solutions

 

156

 

3

 

8

 

 

167

 

Communications Solutions

 

56

 

 

6

 

 

62

 

Total

 

$

520

 

$

9

 

$

67

 

$

 

$

596

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

15.3

%

 

 

 

 

 

 

17.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

$

2

 

$

 

$

 

$

 

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

$

245

 

$

(1

)

$

(17

)

$

(307

)

$

(80

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(47.8

)%

 

 

 

 

 

 

13.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

758

 

$

8

 

$

50

 

$

(307

)

$

509

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

2.24

 

$

0.02

 

$

0.15

 

$

(0.91

)

$

1.50

 

 


(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 a $214 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform and a $93 million income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction.

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

 

12


 

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

 

$

393

 

$

2

 

$

11

 

$

406

 

Industrial Solutions

 

92

 

3

 

47

 

142

 

Communications Solutions

 

69

 

 

6

 

75

 

Total

 

$

554

 

$

5

 

$

64

 

$

623

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

15.5

%

 

 

 

 

17.4

%

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

$

(1

)

$

 

$

 

$

(1

)

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

(77

)

$

(2

)

$

(20

)

$

(99

)

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

14.5

%

 

 

 

 

16.5

%

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

453

 

$

3

 

$

44

 

$

500

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

1.29

 

$

0.01

 

$

0.13

 

$

1.42

 

 


(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.

 

13


 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Nine Months Ended June 28, 2019

(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

 

$

956

 

$

13

 

$

98

 

$

 

$

1,067

 

Industrial Solutions

 

393

 

11

 

60

 

 

464

 

Communications Solutions

 

185

 

 

26

 

 

211

 

Total

 

$

1,534

 

$

24

 

$

184

 

$

 

$

1,742

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

15.1

%

 

 

 

 

 

 

17.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

$

2

 

$

 

$

 

$

 

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

$

76

 

$

(4

)

$

(46

)

$

(292

)

$

(266

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(5.1

)%

 

 

 

 

 

 

15.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1,570

 

$

20

 

$

138

 

$

(292

)

$

1,436

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

4.60

 

$

0.06

 

$

0.40

 

$

(0.86

)

$

4.21

 

 


(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 a $214 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform, a $93 million income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction, and $15 million of income tax expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions.

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

 

14


 

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

 

$

1,237

 

$

9

 

$

13

 

$

 

$

1,259

 

Industrial Solutions

 

319

 

8

 

76

 

 

403

 

Communications Solutions

 

205

 

 

15

 

 

220

 

Total

 

$

1,761

 

$

17

 

$

104

 

$

 

$

1,882

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

16.8

%

 

 

 

 

 

 

18.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

$

2

 

$

 

$

 

$

(1

)

$

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

(784

)

$

(4

)

$

(27

)

$

506

 

$

(309

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

46.3

%

 

 

 

 

 

 

17.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

910

 

$

13

 

$

77

 

$

505

 

$

1,505

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

2.57

 

$

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.

 

15


 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 28, 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

 

$

341

 

$

3

 

$

20

 

$

 

$

364

 

Industrial Solutions

 

146

 

2

 

4

 

 

152

 

Communications Solutions

 

83

 

 

(2

)

 

81

 

Total

 

$

570

 

$

5

 

$

22

 

$

 

$

597

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

16.2

%

 

 

 

 

 

 

17.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

$

(1

)

$

 

$

 

$

 

$

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

$

1,128

 

$

(1

)

$

(4

)

$

(1,222

)

$

(99

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(206.6

)%

 

 

 

 

 

 

17.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1,674

 

$

4

 

$

18

 

$

(1,222

)

$

474

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

4.78

 

$

0.01

 

$

0.05

 

$

(3.49

)

$

1.35

 

 


(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 a $1,222 million net income tax benefit associated with the tax impacts of certain intercompany transactions including an increase to the valuation allowance.

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

 

16


 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 28, 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

 

$

1,578

 

$

12

 

$

33

 

$

 

$

1,623

 

Industrial Solutions

 

465

 

10

 

80

 

 

555

 

Communications Solutions

 

288

 

 

13

 

 

301

 

Total

 

$

2,331

 

$

22

 

$

126

 

$

 

$

2,479

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

16.7

%

 

 

 

 

 

 

17.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

$

1

 

$

 

$

 

$

(1

)

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

$

344

 

$

(5

)

$

(31

)

$

(716

)

$

(408

)

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(15.4

)%

 

 

 

 

 

 

17.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

2,584

 

$

17

 

$

95

 

$

(717

)

$

1,979

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

$

7.32

 

$

0.05

 

$

0.27

 

$

(2.03

)

$

5.61

 

 


(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 a $1,283 million net income tax benefit associated with the tax impacts of certain intercompany transactions and legal entity restructurings including an increase to the valuation allowance. Also includes $567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act.

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

 

17


 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of July 24, 2019

(UNAUDITED)

 

 

 

Outlook for

 

 

 

 

 

Quarter Ending

 

 

 

 

 

September 27,

 

Outlook for

 

 

 

2019

 

Fiscal 2019

 

Diluted earnings per share from continuing operations (GAAP)

 

$0.81 - $0.87

 

$5.42 - $5.48

 

Restructuring and other charges, net

 

0.43

 

0.83

 

Acquisition related charges

 

0.03

 

0.08

 

Tax items

 

 

(0.86

)

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

 

$1.27 - $1.33

 

$5.47 - $5.53

 

 

 

 

 

 

 

Net sales growth (GAAP)

 

(8)% - (6)%

 

(5)% - (4)%

 

Translation

 

1

 

3

 

(Acquisitions) divestitures, net

 

(1

)

(1

)

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

 

(8)% - (6)%

 

(3)% - (2)%

 

 


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

 

18