UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 2014
TE CONNECTIVITY LTD.
(Exact Name of Registrant as Specified in its Charter)
Switzerland |
|
98-0518048 |
(Jurisdiction of Incorporation) |
|
(IRS Employer Identification Number) |
001-33260
(Commission File Number)
Rheinstrasse 20
CH-8200 Schaffhausen
Switzerland
(Address of Principal Executive Offices, including Zip Code)
+41 (0)52 633 66 61
(Registrants Telephone Number, including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On July 23, 2014, TE Connectivity Ltd. (the Company) issued a press release reporting the Companys third quarter results for fiscal 2014. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference in this Item 2.02.
Item 7.01. Regulation FD Disclosure
The Company will hold a conference call and webcast on July 23, 2014 (see information in the press release attached hereto as Exhibit 99.1 under Conference Call and Webcast). A copy of the slide materials to be discussed at the conference call and webcast is being furnished pursuant to Regulation FD as Exhibit 99.2 and is incorporated herein by reference, and the slide materials also can be accessed at the Investors section of the Companys website (www.te.com).
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit No. |
|
Description |
|
|
|
99.1 |
|
Press release issued July 23, 2014 |
|
|
|
99.2 |
|
Presentation TE Connectivity Q3 2014 Earnings Call (July 23, 2014) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
TE CONNECTIVITY LTD. |
|
(Registrant) |
|
|
|
By: |
/s/ Robert W. Hau |
|
|
Robert W. Hau |
|
|
Executive Vice President and Chief Financial Officer |
Date: July 23, 2014
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Exhibit 99.1
TE Connectivity Reports Third Quarter Results
Sales Up 4 Percent; GAAP EPS Up 23 Percent; Adjusted EPS Up 14 Percent
SCHAFFHAUSEN, Switzerland July 23, 2014 TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 27, 2014.
Third Quarter Highlights
· Net sales increased to $3.58 billion, up 4 percent versus the prior year
· Adjusted Earnings Per Share were $1.00, up 14 percent versus the prior year and at the high end of our guidance range
· Diluted Earnings Per Share from Continuing Operations (GAAP EPS) were $0.97, up 23 percent versus the prior year
· Free Cash Flow was $530 million; returned $169 million to shareholders through share repurchases and dividends
· Announced the planned acquisition of Measurement Specialties, Inc. to establish TE as a leader in the high-growth sensor market
We had a strong quarter with continued sales momentum and adjusted EPS at the high end of our guidance range, said Tom Lynch, TE Connectivity Chairman and CEO. Our performance was led by continued strength in our Transportation and Industrial segments and our Appliances business businesses that are focused on higher margin harsh environment applications.
Since the last quarter, we announced strategic acquisitions that expand our position in high-growth industries. We are excited about the announced acquisition of Measurement Specialties, Inc., which will add nearly $40 billion to our addressable market. Having closed on the acquisition of the SEACON Group, we have significantly expanded our business in the very attractive oil and gas market. These acquisitions position TE as a leading provider of highly engineered connectivity and sensor solutions technologies that are essential in an increasingly connected world.
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We expect continued strength in our Transportation and Industrial segments for the remainder of the fiscal year. For the first nine months of the year, we generated $1.1 billion in free cash flow and returned over 70 percent to shareholders. For the full year, we are reiterating our guidance and expect adjusted EPS growth of approximately 17 percent, sales growth of 5 percent, and adjusted operating margins above our target of 15 percent.
FISCAL THIRD QUARTER RESULTS
The company reported net sales of $3.58 billion, compared to prior year sales of $3.45 billion. Adjusted EPS were $1.00, compared to $0.88 in the prior year. GAAP EPS were $0.97, compared to $0.79 in the prior year. Free cash flow was $530 million for the quarter.
GAAP EPS includes $0.03 of restructuring and other charges.
Excluding Subsea Communications, total company orders were $3.48 billion, up 2 percent, and the book-to-bill ratio was 0.99.
OUTLOOK
For the fourth quarter, the company expects net sales of $3.56 to $3.66 billion and adjusted EPS of $0.98 to $1.02. GAAP EPS are expected to be $0.93 to $0.97, including restructuring charges of $0.03, acquisition related charges of $0.06, and income related to other items of $0.04.
For the full year, the company expects net sales of $13.9 to $14 billion and adjusted EPS of $3.76 to $3.80. GAAP EPS are expected to be $3.62 to $3.66, including restructuring charges of $0.10, acquisition related charges of $0.07, expense from tax-related items of $0.01, and income related to other items of $0.04.
The outlook assumes foreign exchange and commodity rates that are consistent with current levels.
Information about TE Connectivitys use of non-GAAP financial measures is described at the end of this press release. 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.
· Internet users will be able to access the companys earnings webcast, including slide materials, at the Investors section of TE Connectivitys website: http://investors.te.com
· By telephone: For both listen-only participants and those participants who wish to take part in the
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question-and-answer portion of the call, the telephone dial-in number in the United States is (800) 230-1074. The telephone dial-in number for participants outside the United States is (612) 234-9960.
· An audio replay of the conference call will be available beginning at 10:30 a.m. EDT on July 23, 2014, and ending at 11:59 p.m. EDT on July 30, 2014. 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 329466.
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, 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 us 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 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 managements 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. The limitation of this measure is that it excludes items that have an impact on our sales. This limitation is best addressed by using organic sales growth in combination with the GAAP results.
We present operating income before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any (Adjusted Operating Income). 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. The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any, 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 our 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.
We present operating margin before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any (Adjusted Operating Margin). We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. It also is a significant component in our incentive compensation plans. 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.
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We present other income, net before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any (Adjusted Other Income, Net). 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. The difference between Adjusted Other Income, Net and other income, net (the most comparable GAAP measure) consists of tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease other income, net. This limitation is best addressed by using Adjusted Other Income, Net in combination with other income, net (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.
We present income tax expense 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 (Adjusted Income Tax Expense). 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). The difference between Adjusted Income Tax Expense and income tax expense (the most comparable GAAP measure) is the tax effect of adjusting items and certain significant special tax items, if any. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease income tax expense. This limitation is best addressed by using Adjusted Income Tax Expense in combination with income tax expense (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.
We present income from continuing operations attributable to TE Connectivity Ltd. before special items including charges or income related to legal settlements and reserves, 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, related tax effects (Adjusted Income from Continuing Operations). 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. The difference between Adjusted Income from Continuing Operations and income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, 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, related tax effects. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using Adjusted Income from Continuing Operations in combination with income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.
We present diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. before special items, including charges or income related to legal settlements and reserves, 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
4
charges, if any, and, if applicable, related tax effects (Adjusted Earnings Per Share). 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. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using Adjusted Earnings Per Share in combination with diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.
Free Cash Flow (FCF) is a useful measure of our ability to generate cash. It also is a significant component in our incentive compensation plans. The difference between net cash provided by continuing operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) 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.
FCF 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. We believe investors should also consider these items in evaluating our free cash flow. We forecast our cash flow results excluding any voluntary pension contributions because we have not yet made a determination about the amount and timing of any such future contributions. In addition, our forecast excludes the cash impact of special items because we cannot predict the amount and timing of such items.
FCF as presented herein may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes items that have an impact on our GAAP cash flow. Also, it subtracts certain cash items that are ultimately within managements 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. This limitation is best addressed by using FCF in combination with the GAAP cash flow results. 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 managements 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
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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, our ability to realize projected financial impacts of and to integrate the acquisition of the SEACON Group (SEACON) and our planned acquisition of Measurement Specialties, Inc. (MEAS). 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 acquisition of MEAS may not be consummated; the risk that a regulatory approval that may be required for the MEAS acquisition is not obtained or is obtained subject to conditions that are not anticipated; the risk that revenue opportunities, cost savings and other anticipated synergies from the MEAS acquisition or the SEACON acquisition may not be fully realized or may take longer to realize than expected; and the risk that MEAS operations or SEACONs operations will not be successfully integrated into ours. 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. 27, 2013 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.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is for informational purposes only and does not constitute an offer to purchase or a solicitation of any proxy, vote or approval. In connection with the proposed merger, Measurement Specialties, Inc. (MEAS) intends to file a proxy statement and related documents with the SEC. The definitive proxy statement will be mailed to MEAS shareholders. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the proxy statement and other relevant documents (in each case when available) filed by MEAS and TE Connectivity Ltd. with the SEC at the website maintained by the SEC at www.sec.gov. Copies of the documents filed by MEAS with the SEC will be available free of charge at the website maintained by MEAS at www.meas-spec.com. Copies of the documents filed by TE Connectivity Ltd. with the SEC will be available free of charge at the website maintained by TE at www.te.com.
MEAS and its directors, executive officers and certain other employees may be deemed to be participants in the solicitation of proxies from MEAS shareholders with respect to the proposed merger. Information about MEAS directors and executive officers and their ownership of MEAS common stock is set forth in the proxy statement for MEAS 2013 Annual Meeting of Shareholders, which was filed with the SEC on July 29, 2013. Additional information regarding persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed merger will be contained in the proxy statement to be filed by MEAS with the SEC. TE Connectivity Ltd. and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from MEAS shareholders with respect to the merger. Information about TEs directors and executive officers is set forth in the proxy statement for TEs 2014 Annual Meeting of Shareholders, which was filed with the SEC on
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January 15, 2014, TEs Annual Report on Form 10-K for the fiscal year ended September 27, 2013, which was filed with the SEC on November 15, 2013, and TEs Quarterly Reports on Form 10-Q for the fiscal quarters ended March 28, 2014 and December 27, 2013, which were filed with the SEC on April 24, 2014 and January 23, 2014 respectively.
ABOUT TE CONNECTIVITY
TE Connectivity (NYSE: TEL) is a $13 billion world leader in connectivity. The company designs and manufactures products at the heart of electronic connections for the worlds leading industries including automotive, energy and industrial, broadband communications, consumer devices, healthcare, and aerospace and defense. TE Connectivitys long-standing commitment to innovation and engineering excellence helps its customers solve the need for more energy efficiency, always-on communications and ever-increasing productivity. With nearly 90,000 employees in over 50 countries, TE Connectivity makes connections the world relies on to work flawlessly every day. To connect with the company, visit www.TE.com.
# # #
Contacts: |
Media Relations:
Jane Crawford
TE Connectivity
610-893-9689 - Office
Jane.crawford@te.com |
Investor Relations:
Sujal Shah
TE Connectivity
610-893-9790 - Office
Sujal.shah@te.com
Will Ruthrauff
TE Connectivity
610-893-9565 - Office
Will.ruthrauff@te.com |
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TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
For the Quarters Ended |
|
For the Nine Months Ended |
|
|
|
June 27, |
|
June 28, |
|
June 27, |
|
June 28, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
(in millions, except per share data) |
|
Net sales |
|
$ |
3,580 |
|
$ |
3,449 |
|
$ |
10,337 |
|
$ |
9,848 |
|
Cost of sales |
|
2,376 |
|
2,317 |
|
6,843 |
|
6,675 |
|
Gross margin |
|
1,204 |
|
1,132 |
|
3,494 |
|
3,173 |
|
Selling, general, and administrative expenses |
|
483 |
|
456 |
|
1,421 |
|
1,322 |
|
Research, development, and engineering expenses |
|
171 |
|
167 |
|
505 |
|
509 |
|
Acquisition and integration costs |
|
1 |
|
3 |
|
2 |
|
11 |
|
Restructuring and other charges, net |
|
14 |
|
67 |
|
42 |
|
240 |
|
Operating income |
|
535 |
|
439 |
|
1,524 |
|
1,091 |
|
Interest income |
|
4 |
|
4 |
|
13 |
|
13 |
|
Interest expense |
|
(30 |
) |
(36 |
) |
(94 |
) |
(108 |
) |
Other income (expense), net |
|
9 |
|
18 |
|
57 |
|
(199 |
) |
Income from continuing operations before income taxes |
|
518 |
|
425 |
|
1,500 |
|
797 |
|
Income tax (expense) benefit |
|
(113 |
) |
(93 |
) |
(376 |
) |
92 |
|
Income from continuing operations |
|
405 |
|
332 |
|
1,124 |
|
889 |
|
Income (loss) from discontinued operations, net of income taxes |
|
(2 |
) |
3 |
|
(6 |
) |
|
|
Net income attributable to TE Connectivity Ltd. |
|
$ |
403 |
|
$ |
335 |
|
$ |
1,118 |
|
$ |
889 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to TE Connectivity Ltd.: |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.99 |
|
$ |
0.80 |
|
$ |
2.74 |
|
$ |
2.12 |
|
Income (loss) from discontinued operations |
|
|
|
0.01 |
|
(0.01 |
) |
|
|
Net income |
|
0.99 |
|
0.81 |
|
2.73 |
|
2.12 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to TE Connectivity Ltd.: |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.97 |
|
$ |
0.79 |
|
$ |
2.70 |
|
$ |
2.10 |
|
Income (loss) from discontinued operations |
|
|
|
0.01 |
|
(0.01 |
) |
|
|
Net income |
|
0.97 |
|
0.80 |
|
2.68 |
|
2.10 |
|
|
|
|
|
|
|
|
|
|
|
Dividends and cash distributions paid per common share |
|
$ |
0.29 |
|
$ |
0.25 |
|
$ |
0.79 |
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
409 |
|
415 |
|
410 |
|
419 |
|
Diluted |
|
416 |
|
421 |
|
417 |
|
423 |
|
TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
June 27, |
|
September 27, |
|
|
|
2014 |
|
2013 |
|
|
|
(in millions, except share data) |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,613 |
|
$ |
1,403 |
|
Accounts receivable, net of allowance for doubtful accounts of $39 and $48, respectively |
|
2,503 |
|
2,323 |
|
Inventories |
|
1,810 |
|
1,762 |
|
Prepaid expenses and other current assets |
|
605 |
|
487 |
|
Deferred income taxes |
|
342 |
|
334 |
|
Total current assets |
|
6,873 |
|
6,309 |
|
Property, plant, and equipment, net |
|
3,154 |
|
3,166 |
|
Goodwill |
|
4,354 |
|
4,326 |
|
Intangible assets, net |
|
1,173 |
|
1,244 |
|
Deferred income taxes |
|
1,997 |
|
2,146 |
|
Receivable from Tyco International Ltd. and Covidien plc |
|
1,024 |
|
1,002 |
|
Other assets |
|
296 |
|
268 |
|
Total Assets |
|
$ |
18,871 |
|
$ |
18,461 |
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
625 |
|
$ |
711 |
|
Accounts payable |
|
1,433 |
|
1,383 |
|
Accrued and other current liabilities |
|
1,683 |
|
1,762 |
|
Deferred revenue |
|
119 |
|
68 |
|
Total current liabilities |
|
3,860 |
|
3,924 |
|
Long-term debt |
|
2,375 |
|
2,303 |
|
Long-term pension and postretirement liabilities |
|
1,125 |
|
1,155 |
|
Deferred income taxes |
|
321 |
|
321 |
|
Income taxes |
|
2,012 |
|
1,979 |
|
Other liabilities |
|
330 |
|
393 |
|
Total Liabilities |
|
10,023 |
|
10,075 |
|
Commitments and contingencies |
|
|
|
|
|
Equity: |
|
|
|
|
|
TE Connectivity Ltd. shareholders equity: |
|
|
|
|
|
Common shares, 419,070,781 shares authorized and issued, CHF 0.57 par value, and 428,527,307 shares authorized and issued, CHF 0.57 par value, respectively |
|
184 |
|
189 |
|
Contributed surplus |
|
5,224 |
|
6,136 |
|
Accumulated earnings |
|
3,590 |
|
2,472 |
|
Treasury shares, at cost, 9,397,171 and 17,020,636 shares, respectively |
|
(513 |
) |
(720 |
) |
Accumulated other comprehensive income |
|
357 |
|
303 |
|
Total TE Connectivity Ltd. shareholders equity |
|
8,842 |
|
8,380 |
|
Noncontrolling interests |
|
6 |
|
6 |
|
Total Equity |
|
8,848 |
|
8,386 |
|
Total Liabilities and Equity |
|
$ |
18,871 |
|
$ |
18,461 |
|
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
For the Quarters Ended |
|
For the Nine Months Ended |
|
|
|
June 27, |
|
June 28, |
|
June 27, |
|
June 28, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
(in millions) |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
Net income attributable to TE Connectivity Ltd. |
|
$ |
403 |
|
$ |
335 |
|
$ |
1,118 |
|
$ |
889 |
|
(Income) loss from discontinued operations, net of income taxes |
|
2 |
|
(3 |
) |
6 |
|
|
|
Income from continuing operations |
|
405 |
|
332 |
|
1,124 |
|
889 |
|
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
154 |
|
147 |
|
457 |
|
457 |
|
Non-cash restructuring charges |
|
9 |
|
42 |
|
17 |
|
66 |
|
Deferred income taxes |
|
10 |
|
(1 |
) |
77 |
|
92 |
|
Provision for losses on accounts receivable and inventories |
|
13 |
|
10 |
|
49 |
|
49 |
|
Tax sharing (income) expense |
|
(8 |
) |
(18 |
) |
(59 |
) |
198 |
|
Share-based compensation expense |
|
21 |
|
19 |
|
64 |
|
59 |
|
Other |
|
11 |
|
20 |
|
46 |
|
30 |
|
Changes in assets and liabilities, net of the effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
(83 |
) |
(79 |
) |
(190 |
) |
(30 |
) |
Inventories |
|
30 |
|
(17 |
) |
(103 |
) |
(91 |
) |
Inventoried costs on long-term contracts |
|
|
|
25 |
|
20 |
|
31 |
|
Accounts payable |
|
(1 |
) |
25 |
|
39 |
|
132 |
|
Accrued and other current liabilities |
|
(140 |
) |
24 |
|
(358 |
) |
(28 |
) |
Income taxes |
|
23 |
|
39 |
|
95 |
|
(412 |
) |
Other |
|
57 |
|
46 |
|
63 |
|
11 |
|
Net cash provided by continuing operating activities |
|
501 |
|
614 |
|
1,341 |
|
1,453 |
|
Net cash provided by (used in) discontinued operating activities |
|
(1 |
) |
2 |
|
(7 |
) |
|
|
Net cash provided by operating activities |
|
500 |
|
616 |
|
1,334 |
|
1,453 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
(175 |
) |
(159 |
) |
(476 |
) |
(412 |
) |
Proceeds from sale of property, plant, and equipment |
|
4 |
|
15 |
|
25 |
|
19 |
|
Other |
|
(2 |
) |
19 |
|
(20 |
) |
36 |
|
Net cash used in investing activities |
|
(173 |
) |
(125 |
) |
(471 |
) |
(357 |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
Net increase in commercial paper |
|
|
|
|
|
25 |
|
50 |
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
323 |
|
|
|
Repayment of long-term debt |
|
|
|
(1 |
) |
(360 |
) |
(715 |
) |
Proceeds from exercise of share options |
|
31 |
|
67 |
|
140 |
|
153 |
|
Repurchase of common shares |
|
(60 |
) |
(253 |
) |
(452 |
) |
(618 |
) |
Payment of common share dividends and cash distributions to shareholders |
|
(119 |
) |
(104 |
) |
(324 |
) |
(281 |
) |
Other |
|
(3 |
) |
2 |
|
(9 |
) |
|
|
Net cash used in continuing financing activities |
|
(151 |
) |
(289 |
) |
(657 |
) |
(1,411 |
) |
Net cash provided by (used in) discontinued financing activities |
|
1 |
|
(2 |
) |
7 |
|
|
|
Net cash used in financing activities |
|
(150 |
) |
(291 |
) |
(650 |
) |
(1,411 |
) |
Effect of currency translation on cash |
|
7 |
|
(11 |
) |
(3 |
) |
(12 |
) |
Net increase (decrease) in cash and cash equivalents |
|
184 |
|
189 |
|
210 |
|
(327 |
) |
Cash and cash equivalents at beginning of period |
|
1,429 |
|
1,073 |
|
1,403 |
|
1,589 |
|
Cash and cash equivalents at end of period |
|
$ |
1,613 |
|
$ |
1,262 |
|
$ |
1,613 |
|
$ |
1,262 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
48 |
|
$ |
44 |
|
$ |
111 |
|
$ |
132 |
|
Income taxes paid, net of refunds |
|
81 |
|
56 |
|
205 |
|
229 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Free Cash Flow: |
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operating activities |
|
$ |
501 |
|
$ |
614 |
|
$ |
1,341 |
|
$ |
1,453 |
|
Capital expenditures, net |
|
(171 |
) |
(144 |
) |
(451 |
) |
(393 |
) |
Payments (receipts) related to pre-separation U.S. tax matters, net |
|
200 |
|
(39 |
) |
179 |
|
28 |
|
Free cash flow (1) |
|
$ |
530 |
|
$ |
431 |
|
$ |
1,069 |
|
$ |
1,088 |
|
(1) Free cash flow is a non-GAAP measure. See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
CONSOLIDATED SEGMENT DATA (UNAUDITED)
|
|
For the Quarters Ended |
|
|
|
For the Nine Months Ended |
|
|
|
|
|
June 27, |
|
|
|
June 28, |
|
|
|
June 27, |
|
|
|
June 28, |
|
|
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Solutions |
|
$ |
1,585 |
|
|
|
$ |
1,438 |
|
|
|
$ |
4,596 |
|
|
|
$ |
4,087 |
|
|
|
Industrial Solutions |
|
849 |
|
|
|
803 |
|
|
|
2,401 |
|
|
|
2,281 |
|
|
|
Network Solutions |
|
738 |
|
|
|
803 |
|
|
|
2,139 |
|
|
|
2,262 |
|
|
|
Consumer Solutions |
|
408 |
|
|
|
405 |
|
|
|
1,201 |
|
|
|
1,218 |
|
|
|
Total |
|
$ |
3,580 |
|
|
|
$ |
3,449 |
|
|
|
$ |
10,337 |
|
|
|
$ |
9,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Solutions |
|
$ |
335 |
|
21.1 |
% |
$ |
282 |
|
19.6 |
% |
$ |
978 |
|
21.3 |
% |
$ |
715 |
|
17.5 |
% |
Industrial Solutions |
|
125 |
|
14.7 |
% |
84 |
|
10.5 |
% |
330 |
|
13.7 |
% |
235 |
|
10.3 |
% |
Network Solutions |
|
39 |
|
5.3 |
% |
48 |
|
6.0 |
% |
108 |
|
5.0 |
% |
103 |
|
4.6 |
% |
Consumer Solutions |
|
36 |
|
8.8 |
% |
25 |
|
6.2 |
% |
108 |
|
9.0 |
% |
38 |
|
3.1 |
% |
Total |
|
$ |
535 |
|
14.9 |
% |
$ |
439 |
|
12.7 |
% |
$ |
1,524 |
|
14.7 |
% |
$ |
1,091 |
|
11.1 |
% |
TE CONNECTIVITY LTD.
RECONCILIATION OF NET SALES GROWTH (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
Change in Net Sales for the Quarter Ended June 27, 2014 |
|
Segments Total |
|
|
|
versus Net Sales for the Quarter Ended June 28, 2013 |
|
Net Sales for the |
|
|
|
Organic (1) |
|
Translation (2) |
|
Acquisitions (Divestiture) |
|
Total |
|
Quarter Ended June 27, 2014 |
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Transportation Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive |
|
$ |
119 |
|
8.3 |
% |
$ |
28 |
|
$ |
|
|
$ |
147 |
|
10.2 |
% |
100 |
% |
Total |
|
119 |
|
8.3 |
|
28 |
|
|
|
147 |
|
10.2 |
|
100 |
% |
Industrial Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Equipment |
|
10 |
|
3.0 |
|
4 |
|
|
|
14 |
|
4.2 |
|
41 |
|
Aerospace, Defense, Oil, and Gas |
|
22 |
|
8.3 |
|
4 |
|
5 |
|
31 |
|
11.9 |
|
34 |
|
Energy |
|
3 |
|
1.3 |
|
2 |
|
(4 |
) |
1 |
|
0.5 |
|
25 |
|
Total |
|
35 |
|
4.3 |
|
10 |
|
1 |
|
46 |
|
5.7 |
|
100 |
% |
Network Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom Networks |
|
(4 |
) |
(1.2 |
) |
3 |
|
|
|
(1 |
) |
(0.3 |
) |
47 |
|
Data Communications |
|
(10 |
) |
(5.0 |
) |
2 |
|
|
|
(8 |
) |
(4.2 |
) |
25 |
|
Enterprise Networks |
|
(1 |
) |
(0.6 |
) |
(3 |
) |
|
|
(4 |
) |
(2.5 |
) |
21 |
|
Subsea Communications |
|
(52 |
) |
(50.1 |
) |
|
|
|
|
(52 |
) |
(50.1 |
) |
7 |
|
Total |
|
(67 |
) |
(8.3 |
) |
2 |
|
|
|
(65 |
) |
(8.1 |
) |
100 |
% |
Consumer Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Devices |
|
(12 |
) |
(5.1 |
) |
(1 |
) |
|
|
(13 |
) |
(5.3 |
) |
56 |
|
Appliances |
|
14 |
|
8.6 |
|
2 |
|
|
|
16 |
|
9.9 |
|
44 |
|
Total |
|
2 |
|
0.4 |
|
1 |
|
|
|
3 |
|
0.7 |
|
100 |
% |
Total |
|
$ |
89 |
|
2.6 |
% |
$ |
41 |
|
$ |
1 |
|
$ |
131 |
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
Change in Net Sales for the Nine Months Ended June 27, 2014 |
|
Segments Total |
|
|
|
versus Net Sales for the Nine Months Ended June 28, 2013 |
|
Net Sales for the |
|
|
|
Organic (1) |
|
Translation (2) |
|
Acquisitions (Divestitures) |
|
Total |
|
Nine Months Ended June 27, 2014 |
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Transportation Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive |
|
$ |
481 |
|
11.7 |
% |
$ |
28 |
|
$ |
|
|
$ |
509 |
|
12.5 |
% |
100 |
% |
Total |
|
481 |
|
11.7 |
|
28 |
|
|
|
509 |
|
12.5 |
|
100 |
% |
Industrial Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Equipment |
|
61 |
|
6.5 |
|
5 |
|
|
|
66 |
|
7.1 |
|
42 |
|
Aerospace, Defense, Oil, and Gas |
|
41 |
|
5.4 |
|
9 |
|
6 |
|
56 |
|
7.4 |
|
34 |
|
Energy |
|
10 |
|
1.7 |
|
|
|
(12 |
) |
(2 |
) |
(0.3 |
) |
24 |
|
Total |
|
112 |
|
4.9 |
|
14 |
|
(6 |
) |
120 |
|
5.3 |
|
100 |
% |
Network Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom Networks |
|
46 |
|
4.9 |
|
4 |
|
|
|
50 |
|
5.4 |
|
46 |
|
Data Communications |
|
(39 |
) |
(6.7 |
) |
(1 |
) |
(39 |
) |
(79 |
) |
(13.5 |
) |
24 |
|
Enterprise Networks |
|
15 |
|
3.2 |
|
(13 |
) |
|
|
2 |
|
0.4 |
|
21 |
|
Subsea Communications |
|
(96 |
) |
(32.8 |
) |
|
|
|
|
(96 |
) |
(32.8 |
) |
9 |
|
Total |
|
(74 |
) |
(3.4 |
) |
(10 |
) |
(39 |
) |
(123 |
) |
(5.4 |
) |
100 |
% |
Consumer Solutions (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Devices |
|
(40 |
) |
(5.2 |
) |
(10 |
) |
|
|
(50 |
) |
(6.6 |
) |
59 |
|
Appliances |
|
33 |
|
7.2 |
|
|
|
|
|
33 |
|
7.2 |
|
41 |
|
Total |
|
(7 |
) |
(0.6 |
) |
(10 |
) |
|
|
(17 |
) |
(1.4 |
) |
100 |
% |
Total |
|
$ |
512 |
|
5.2 |
% |
$ |
22 |
|
$ |
(45 |
) |
$ |
489 |
|
5.0 |
% |
|
|
(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 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 |
|
$ |
335 |
|
$ |
|
|
$ |
|
|
$ |
335 |
|
Industrial Solutions |
|
125 |
|
1 |
|
1 |
|
127 |
|
Network Solutions |
|
39 |
|
|
|
1 |
|
40 |
|
Consumer Solutions |
|
36 |
|
|
|
12 |
|
48 |
|
Total |
|
$ |
535 |
|
$ |
1 |
|
$ |
14 |
|
$ |
550 |
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
14.9 |
% |
|
|
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
Other Income, Net |
|
$ |
9 |
|
$ |
|
|
$ |
|
|
$ |
9 |
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
$ |
(113 |
) |
$ |
|
|
$ |
(3 |
) |
$ |
(116 |
) |
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
405 |
|
$ |
1 |
|
$ |
11 |
|
$ |
417 |
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
0.97 |
|
$ |
|
|
$ |
0.03 |
|
$ |
1.00 |
|
(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 Quarter Ended June 28, 2013
(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 |
|
$ |
282 |
|
$ |
1 |
|
$ |
1 |
|
$ |
|
|
$ |
284 |
|
Industrial Solutions |
|
84 |
|
2 |
|
22 |
|
|
|
108 |
|
Network Solutions |
|
48 |
|
|
|
26 |
|
|
|
74 |
|
Consumer Solutions |
|
25 |
|
|
|
18 |
|
|
|
43 |
|
Total |
|
$ |
439 |
|
$ |
3 |
|
$ |
67 |
|
$ |
|
|
$ |
509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
12.7 |
% |
|
|
|
|
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Income, Net |
|
$ |
18 |
|
$ |
|
|
$ |
|
|
$ |
(8 |
) |
$ |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
$ |
(93 |
) |
$ |
(1 |
) |
$ |
(21 |
) |
$ |
|
|
$ |
(115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
332 |
|
$ |
2 |
|
$ |
46 |
|
$ |
(8 |
) |
$ |
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
0.79 |
|
$ |
|
|
$ |
0.11 |
|
$ |
(0.02 |
) |
$ |
0.88 |
|
(1) Relates to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.
(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 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 |
|
$ |
978 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
978 |
|
Industrial Solutions |
|
330 |
|
2 |
|
7 |
|
|
|
339 |
|
Network Solutions |
|
108 |
|
|
|
22 |
|
|
|
130 |
|
Consumer Solutions |
|
108 |
|
|
|
13 |
|
|
|
121 |
|
Total |
|
$ |
1,524 |
|
$ |
2 |
|
$ |
42 |
|
$ |
|
|
$ |
1,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
14.7 |
% |
|
|
|
|
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Income, Net |
|
$ |
57 |
|
$ |
|
|
$ |
|
|
$ |
(39 |
) |
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
$ |
(376 |
) |
$ |
|
|
$ |
(14 |
) |
$ |
43 |
|
$ |
(347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
1,124 |
|
$ |
2 |
|
$ |
28 |
|
$ |
4 |
|
$ |
1,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
2.70 |
|
$ |
|
|
$ |
0.07 |
|
$ |
0.01 |
|
$ |
2.78 |
|
(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 $18 million related to our share of a settlement agreement entered into by Tyco International with a former subsidiary.
(2) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Nine Months Ended June 28, 2013
(UNAUDITED)
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
Acquisition |
|
Restructuring |
|
|
|
|
|
|
|
|
|
Related |
|
and Other |
|
Tax |
|
Adjusted |
|
|
|
U.S. GAAP |
|
Charges |
|
Charges, Net |
|
Items (1) |
|
(Non-GAAP) (2) |
|
|
|
($ in millions, except per share data) |
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
Transportation Solutions |
|
$ |
715 |
|
$ |
5 |
|
$ |
29 |
|
$ |
|
|
$ |
749 |
|
Industrial Solutions |
|
235 |
|
6 |
|
55 |
|
|
|
296 |
|
Network Solutions |
|
103 |
|
|
|
76 |
|
|
|
179 |
|
Consumer Solutions |
|
38 |
|
|
|
80 |
|
|
|
118 |
|
Total |
|
$ |
1,091 |
|
$ |
11 |
|
$ |
240 |
|
$ |
|
|
$ |
1,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
11.1 |
% |
|
|
|
|
|
|
13.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense), Net |
|
$ |
(199 |
) |
$ |
|
|
$ |
|
|
$ |
222 |
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax (Expense) Benefit |
|
$ |
92 |
|
$ |
(3 |
) |
$ |
(72 |
) |
$ |
(314 |
) |
$ |
(297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
889 |
|
$ |
8 |
|
$ |
168 |
|
$ |
(92 |
) |
$ |
973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
2.10 |
|
$ |
0.02 |
|
$ |
0.40 |
|
$ |
(0.22 |
) |
$ |
2.30 |
|
(1) Includes income tax benefits associated with the settlement of an audit of prior year income tax returns as well as the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax expense related to adjustments to prior year income tax returns and income tax benefits recognized in connection with the lapse of statutes of limitations for examinations of prior year income tax returns. In addition, the other income adjustment includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.
(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 27, 2013
(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 |
|
$ |
257 |
|
$ |
2 |
|
$ |
9 |
|
$ |
|
|
$ |
268 |
|
Industrial Solutions |
|
127 |
|
1 |
|
7 |
|
|
|
135 |
|
Network Solutions |
|
33 |
|
|
|
49 |
|
|
|
82 |
|
Consumer Solutions |
|
48 |
|
|
|
6 |
|
|
|
54 |
|
Total |
|
$ |
465 |
|
$ |
3 |
|
$ |
71 |
|
$ |
|
|
$ |
539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
13.5 |
% |
|
|
|
|
|
|
15.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Income, Net |
|
$ |
16 |
|
$ |
|
|
$ |
|
|
$ |
(9 |
) |
$ |
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
$ |
(63 |
) |
$ |
(2 |
) |
$ |
(18 |
) |
$ |
(40 |
) |
$ |
(123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
387 |
|
$ |
1 |
|
$ |
53 |
|
$ |
(49 |
) |
$ |
392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
0.92 |
|
$ |
|
|
$ |
0.13 |
|
$ |
(0.12 |
) |
$ |
0.93 |
|
(1) Includes income tax benefits recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards partially offset by income tax expense related to adjustments to prior year income tax returns. In addition, the other income adjustment includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.
(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 Year Ended September 27, 2013
(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 |
|
$ |
972 |
|
$ |
7 |
|
$ |
38 |
|
$ |
|
|
$ |
1,017 |
|
Industrial Solutions |
|
362 |
|
7 |
|
62 |
|
|
|
431 |
|
Network Solutions |
|
136 |
|
|
|
125 |
|
|
|
261 |
|
Consumer Solutions |
|
86 |
|
|
|
86 |
|
|
|
172 |
|
Total |
|
$ |
1,556 |
|
$ |
14 |
|
$ |
311 |
|
$ |
|
|
$ |
1,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin |
|
11.7 |
% |
|
|
|
|
|
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense), Net |
|
$ |
(183 |
) |
$ |
|
|
$ |
|
|
$ |
213 |
|
$ |
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax (Expense) Benefit |
|
$ |
29 |
|
$ |
(5 |
) |
$ |
(90 |
) |
$ |
(354 |
) |
$ |
(420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
1,276 |
|
$ |
9 |
|
$ |
221 |
|
$ |
(141 |
) |
$ |
1,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. |
|
$ |
3.02 |
|
$ |
0.02 |
|
$ |
0.52 |
|
$ |
(0.33 |
) |
$ |
3.23 |
|
(1) Includes $331 million of income tax benefits associated with the settlement of an audit of prior year income tax returns as well as the related impact of $231 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax expense related to adjustments to prior year income tax returns, income tax benefits recognized in connection with a reduction in the valuation allowance associated with certain tax loss carryforwards, and income tax benefits recognized in connection with the lapse of statutes of limitations for examinations of prior year income tax returns. In addition, the other income adjustment includes amounts related to reimbursements by Tyco International and Covidien in connection with pre-separation tax matters.
(2) 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 23, 2014
(UNAUDITED)
|
|
Outlook for |
|
|
|
|
|
Quarter Ending |
|
|
|
|
|
September 26, |
|
Outlook for |
|
|
|
2014 |
|
Fiscal 2014 |
|
Diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (GAAP) |
|
$0.93 - 0.97 |
|
$3.62 - 3.66 |
|
Restructuring and other charges, net |
|
0.03 |
|
0.10 |
|
Acquisition related charges |
|
0.06 |
|
0.07 |
|
Tax items |
|
|
|
0.01 |
|
Other items |
|
(0.04) |
|
(0.04) |
|
Adjusted diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (non-GAAP) (1) |
|
$0.98 - 1.02 |
|
$3.76 - 3.80 |
|
(1) See description of non-GAAP measures contained in this release.
Exhibit
99.2
|
Q3 2014
Earnings Call July 23, 2014
|
|
Forward-Looking
Statements and Non-GAAP Measures page 2 / July 2014 Forward-Looking
Statements -- This presentation contains certain forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of
1995. These statements are based on managements 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 presentation include statements
addressing our future financial condition and operating results, our ability to
realize projected financial impacts of and to integrate the acquisition of
the SEACON Group (SEACON), and our planned acquisition of Measurement
Specialties, Inc. ( MEAS). 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 acquisition of MEAS may not be
consummated; the risk that a regulatory approval that may be required for the
MEAS acquisition is not obtained or is obtained subject to conditions that
are not anticipated; the risk that revenue opportunities, cost savings and
other anticipated synergies from the MEAS acquisition or the SEACON
acquisition may not be fully realized or may take longer to realize than
expected; and the risk that MEAS operations or SEACONs operations will not
be successfully integrated into ours. 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. 27, 2013 as well as in our
Quarterly Reports on Form 10-Q for the fiscal quarters ended December 27,
2013 and March 28, 2014, Current Reports on Form 8-K, and other reports filed
by us with the U.S. Securities and Exchange Commission. Non-GAAP Measures --
Where we have used non-GAAP financial measures, reconciliations to the most
comparable GAAP measure are provided, along with a disclosure on the
usefulness of the non-GAAP measure, in this presentation.
|
|
Summary
Adjusted EPS, Adjusted Operating Margin, and Free Cash Flow are non-GAAP
measures; see Appendix for description and reconciliation. Sales of $3.58
billion; up 4% versus prior year Adjusted EPS of $1.00, up 14% versus prior
year Adjusted Operating Margin of 15.4%, up 60 basis points versus prior year
Free Cash Flow of $530 million; returned $169 million to shareholders
Book-to-Bill of 0.99 with orders up 2%, excluding Subsea Communications Full
year outlook $13.95 billion of revenue at the mid-point, up 5% versus the
prior year Adjusted EPS of $3.78 at the mid-point, up 17% versus the prior
year SEACON acquisition closed subsequent to quarter end; Measurement Specialties
acquisition is on track to close in the current calendar year page 3 / July
2014 Record quarterly adjusted EPS in the third quarter
|
|
Revenue up 8%
organically; global vehicle production up ~2%; Sales and orders growth in all
regions with China sales up >20% Continued strength in industrial
transportation driven by global truck market, particularly in the U.S. and
China Adjusted operating margin increase due to volume growth, product mix
and productivity Transportation Solutions Q3 Summary Organic Sales Growth,
Adjusted Operating Income, and Adjusted Operating Margin are non-GAAP
measures; see Appendix for description and reconciliation. page 4 ($ in
Millions) / July 2014 Growth Rates Actual Organic Sales $1,585 10% 8% Orders
$1,562 9% 7% Book to Bill 0.99 Adj. Operating Income $335 18% Adj. Operating
Margin 21.1% Sales by Business Growth Rates Actual Organic Automotive $1,585
10% 8% Transportation Solutions $1,585 10% 8% Sales by Region Actual Organic
Region Q3 FY14 Growth Growth Americas $365 8% 9% EMEA 675 11% 6% Asia-Pacific
545 11% 10% Total $1,585 10% 8%
|
|
Industrial
Solutions Q3 Summary Organic Sales Growth, Adjusted Operating Income, and
Adjusted Operating Margin are non-GAAP measures; see Appendix for description
and reconciliation. page 5 ($ in Millions) Industrial Equipment growth driven
by strength in Asia-Pacific, particularly China Continued strength in
Commercial Aerospace and Oil & Gas Double digit growth in Energy in
Americas and Asia, offset by EMEA weakness Adjusted operating margins up
160bps on volume and factory productivity / July 2014 169 Sales by Business
Growth Rates Actual Organic Industrial Equipment $349 4% 3% Aerospace,
Defense, Oil, and Gas 291 12% 8% Energy 209 -% 1% Industrial Solutions $849
6% 4% Growth Rates Actual Organic Sales $849 6% 4% Orders $853 3% 2% Book to
Bill 1.00 Adj. Operating Income $127 18% Adj. Operating Margin 15.0% Sales by
Region Actual Organic Region Q3 FY14
Growth Growth Americas $348 6% 5% EMEA 332 -% (4)% Asia-Pacific 169 20% 21% Total $849 6% 4%
|
|
Network
Solutions Q3 Summary ($ in Millions) Organic Sales Growth, Adjusted Operating
Income, and Adjusted Operating Margin are non-GAAP measures; see Appendix for
description and reconciliation. page 6 Subsea Communications significantly
impacted segment revenue and operating margins Telecom Networks growth in
EMEA offset by declines in Asia Enterprise Networks down slightly due to weak
demand in EMEA Data Communications down due to continued market softness
Subsea Communications bookings of ~$550 million following AAE-1 contract
going into force / July 2014 $685 Sales by Business Growth Rates Actual
Organic Telecom Networks $347 -% (1)% Data Communications 182 (4)% (5)%
Enterprise Networks 157 (2)% (1)% Subsea Communications 52 (50)% (50)% Network
Solutions $738 (8)% (8)% Growth Rates Actual Organic Sales $738 (8)% (8)%
Orders $1,228 65% 65% Orders ex SubCom $676 (7)% (7)% Book to Bill 1.67 B:B
ex SubCom 0.99 Adj. Operating Income $40 (46)% Adj. Operating Margin 5.4%
Sales by Region (excluding Subsea Communications) Actual Organic Region Q3
FY14 Growth Growth Americas $298 (4)% (2)% EMEA 210 6% 1% Asia-Pacific 177
(7)% (5)% Total $685 (2)% (2)%
|
|
Consumer
Solutions Q3 Summary Organic Sales Growth, Adjusted Operating Income, and
Adjusted Operating Margin are non-GAAP measures; see Appendix for description
and reconciliation. page 7 ($ in Millions) Strength in Appliances driven by
continued strong demand and share gains in Americas and Asia Consumer Devices
down primarily due to mobile phone and PC declines Adjusted operating margin
up 120bps due to strong Appliances sales / July 2014 Sales by Business Growth
Rates Actual Organic Consumer Devices $230 (5)% (5)% Appliances 178 10% 9%
Consumer Solutions $408 1% -% Growth Rates Actual Organic Sales $408 1% -%
Orders $389 (9)% (9)% Book to Bill 0.95 Adj. Operating Income $48 12% Adj.
Operating Margin 11.8% Sales by Region Actual Organic Region Q3 FY14 Growth
Growth Americas $79 11% 11% EMEA 58 (2)% (6)% Asia-Pacific 271 (1)% (1)%
Total $408 1% -%
|
|
Q3 Financial
Summary ($ in Millions, except per share amounts) Adjusted Operating Income,
Adjusted Operating Margin and Adjusted EPS are non-GAAP measures; see
Appendix for description. Q3 FY14 Q3 FY13 Net Sales 3,580 $ 3,449 $ Operating
Income 535 $ 439 $ Acquisition Related Charges 1 3 Restructuring & Other
Charges, net 14 67 Adjusted Operating Income 550 $ 509 $ Operating Margin
14.9% 12.7% Adjusted Operating Margin 15.4% 14.8% GAAP Earnings Per Share
0.97 $ 0.79 $ Acquisition Related Charges - - Restructuring and Other
Charges, net 0.03 0.11 Tax Items - (0.02) Adjusted EPS 1.00 $ 0.88 $ page 8 /
July 2014
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31.6% 32.2%
32.8% 33.7% 33.6% 34.2% 33.6% 30.0% 31.0% 32.0% 33.0% 34.0% 35.0% Q1 FY13 Q2
FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q3 Operating Results & Other
Items Q3 FY14 Q3 FY13 RD&E 171 $ 167 $ SG&A 483 456 Total 654 $ 623 $ % of Sales RD&E 4.8% 4.8% SG&A 13.5% 13.2% ($ in Millions) Adjusted
Other Income, Adjusted Income Tax Expense and Adjusted Effective Tax Rate are
non-GAAP measures; see Appendix for description and reconciliation. ($ in
Millions) Q3 FY14 Q3 FY13 Interest Expense, Net (26) $ (32) $ Adjusted Other
Income, Net 9 $ 10 $ Income Tax Expense (113) $ (93) $ Effective Tax Rate
21.8% 21.9% Adj. Income Tax Expense (116) $ (115) $ Adj. Effective Tax Rate
21.8% 23.6% Gross Margin Percentage Operating Expenses Other Items page 9 /
July 2014 Gross margin up 80bps versus prior year SG&A increase to
support revenue growth Adjusted tax rate slightly below expectation
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Q3 Balance Sheet
and Cash Flow Summary ($ in Millions) Q3 FY14 Q3 FY13 Cash from Continuing
Operations 501 $ 614 $ Capital expenditures, net (171) (144) Pre-separation
tax payments (receipts), net 200 (39) Free Cash Flow 530 $ 431 $ A/R - $ 2,503 $ 2,257 $ Days Sales Outstanding 63 59 Inventory (Excl. CIP) - $ 1,792
$ 1,737 $ Days on Hand 68 68 Accounts Payable - $ 1,433 $ 1,357 $ Days
Outstanding 54 53 Free Cash Flow is a non-GAAP measure; see Appendix for
description. Liquidity Summary ($ in Millions) Q3 FY14 Q3 FY13 Beginning Cash
Balance 1,429 $ 1,073 $ Free Cash Flow 530 431 Dividends (119) (104) Share
repurchases (60) (253) Proceeds from exercise of share options 31 67
Pre-separation tax (payments) receipts, net (200) 39 Repayment of long-term
debt - (1) Other 2 10 Ending Cash Balance 1,613 $ 1,262 $ Total Debt 3,000 $ 3,018 $ Liquidity, Cash & Debt Free Cash Flow and Working Capital page 10
/ July 2014
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Q4 Outlook^ ^
Assumes foreign exchange rates and commodity prices that are consistent with
current levels and does not include the impact of the planned Measurement
Specialties acquisition. * Organic Sales Growth and Adjusted EPS are non-GAAP
measures; see Appendix for description and reconciliation. Transportation
Solutions Revenue up ~7-9% vs. prior year Global auto production expected to
be up ~5% vs. prior year Asia up ~5-6% North America up ~9% EMEA up ~3-4%
Industrial Solutions Revenue up ~10% vs. prior year Aerospace, Defense, Oil
and Gas up ~25%, including SEACON Industrial Equipment up low single digits Energy
up mid single digits Network Solutions Revenue flat excluding Subsea
Communications Telecom Networks flat Enterprise Networks up low single digits
Data Communications down mid single digits Subsea Communications revenues up
sequentially to ~$85 million Consumer Solutions Revenue down low single
digits Appliances up low single digits offset by weak Consumer Devices demand
page 11 / July 2014 Another strong quarter ($ in Millions, except per share
amounts) Sales $3,560 to $3,660 Y/Y Growth Actual 4% 7% Organic* 2% 5%
Adjusted EPS* $0.98 to $1.02 Y/Y Growth 5% 10%
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Network
Solutions Revenue down slightly vs. prior year excluding Subsea
Communications Telecom Networks up mid single digits Enterprise Networks flat
Data Communications down ~11% Subsea Communications revenue ~$285 million
Consumer Solutions Revenue down slightly vs. prior year Appliances up mid
single digits Consumer Devices down mid single digits FY14 Outlook^ ^ Assumes
foreign exchange rates and commodity prices that are consistent with current
levels, and does not include the impact of the planned Measurement
Specialties acquisition. * Organic Sales Growth and Adjusted EPS are non-GAAP
measures; see Appendix for description and reconciliation. Adjusted EPS
growth of 17% at mid-point Transportation Solutions Revenue up ~11% vs. prior
year Global auto production expected to be up ~5% Asia up ~7% North America
up ~6% EMEA up ~3-4% Industrial Solutions Revenue up mid single digits vs.
prior year Industrial Equipment up mid single digits Aerospace, Defense, Oil
and Gas ~12% Energy flat page 12 / July 2014 ($ in Millions, except per share
amounts) Sales $13,900 to $14,000 Y/Y Growth Actual 5% 5% Organic* 4% 5%
Adjusted EPS* $3.76 to $3.80 Y/Y Growth 16% 18%
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Appendix
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Non-GAAP Measures
Organic Sales Growth, Adjusted Operating Income, Adjusted Operating
Margin, Adjusted Other Income, Net, Adjusted Income Tax Expense,
Adjusted Effective Tax Rate, Adjusted Income from Continuing Operations,
Adjusted Earnings Per Share, 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 us 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 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 managements 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. The limitation
of this measure is that it excludes items that have an impact on our sales.
This limitation is best addressed by using organic sales growth in
combination with the GAAP results. We present operating income before special
items including charges or income related to legal settlements and reserves,
restructuring and other charges, acquisition related charges, impairment
charges, and other income or charges, if any (Adjusted Operating Income).
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. The difference between Adjusted Operating Income and
operating income (the most comparable GAAP measure) consists of the impact of
charges or income related to legal settlements and reserves, restructuring
and other charges, acquisition related charges, impairment charges, and other
income or charges, if any, 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 our 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. We
present operating margin before special items including charges or income
related to legal settlements and reserves, restructuring and other charges,
acquisition related charges, impairment charges, and other income or charges,
if any (Adjusted Operating Margin). We present Adjusted Operating Margin
before special items to give investors a perspective on the underlying
business results. It also is a significant component in our incentive
compensation plans. 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. We present
other income, net before special items including tax sharing income related
to certain proposed adjustments to prior period tax returns and other tax items,
if any (Adjusted Other Income, Net). 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. The
difference between Adjusted Other Income, Net and other income, net (the most
comparable GAAP measure) consists of tax sharing income related to certain
proposed adjustments to prior period tax returns and other tax items, if any.
The limitation of this measure is that it excludes the financial impact of
items that would otherwise either increase or decrease other income, net.
This limitation is best addressed by using Adjusted Other Income, Net in
combination with other income, net (the most comparable GAAP measure) in
order to better understand the amounts, character and impact of any increase
or decrease in reported amounts. We present income tax expense 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 (Adjusted Income Tax Expense). 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). The difference between
Adjusted Income Tax Expense and income tax expense (the most comparable GAAP
measure) is the tax effect of adjusting items and certain significant special
tax items, if any. The limitation of this measure is that it excludes the
financial impact of items that would otherwise either increase or decrease
income tax expense. This limitation is best addressed by using Adjusted
Income Tax Expense in combination with income tax expense (the most
comparable GAAP measure) in order to better understand the amounts, character
and impact of any increase or decrease in reported amounts. We present
effective income tax rate 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 (Adjusted Effective Tax Rate). We
present Adjusted Effective Tax Rate to provide investors further information
regarding the tax rate effects of adjustments used in determining the
non-GAAP financial measure Adjusted Income from Continuing Operations (as
defined below). The difference between Adjusted Effective Tax Rate and
effective income tax rate (the most comparable GAAP measure) is the tax rate
effect of the adjusting items and certain significant special tax items, if
any. The limitation of this measure is that it excludes the financial impact
of items that would otherwise either increase or decrease the effective
income tax rate. This limitation is best addressed by using Adjusted
Effective Tax Rate in combination with effective income tax rate (the most
comparable GAAP measure) in order to better understand the amounts, character
and impact of any increase or decrease in reported amounts. * U.S. Generally
Accepted Accounting Principles page 14 / July 2014
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Non-GAAP
Measures (cont.) We present income from continuing operations attributable to
TE Connectivity Ltd. before special items including charges or income related
to legal settlements and reserves, 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, related tax effects (Adjusted Income from
Continuing Operations). 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. The difference between Adjusted Income from
Continuing Operations and income from continuing operations attributable to
TE Connectivity Ltd. (the most comparable GAAP measure) consists of the
impact of charges or income related to legal settlements and reserves,
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, related tax effects. The
limitation of this measure is that it excludes the financial impact of items
that would otherwise either increase or decrease our reported results. This
limitation is best addressed by using Adjusted Income from Continuing
Operations in combination with income from continuing operations attributable
to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better
understand the amounts, character and impact of any increase or decrease in
reported amounts. We present diluted earnings per share from continuing
operations attributable to TE Connectivity Ltd. before special items,
including charges or income related to legal settlements and reserves,
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, related tax
effects (Adjusted Earnings Per Share). 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. The limitation of this measure is that it
excludes the financial impact of items that would otherwise either increase
or decrease our reported results. This limitation is best addressed by using
Adjusted Earnings Per Share in combination with diluted earnings per share
from continuing operations attributable to TE Connectivity Ltd. (the most
comparable GAAP measure) in order to better understand the amounts, character
and impact of any increase or decrease on reported results. Free Cash Flow
(FCF) is a useful measure of our ability to generate cash. It also is a
significant component in our incentive compensation plans. The difference
between net cash provided by continuing operating activities (the most
comparable GAAP measure) and FCF (the non-GAAP measure) 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. FCF 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. We believe investors should also consider these items in
evaluating our free cash flow. We forecast our cash flow results excluding any
voluntary pension contributions because we have not yet made a determination
about the amount and timing of any such future contributions. In addition,
our forecast excludes the cash impact of special items because we cannot
predict the amount and timing of such items. FCF as presented herein may not
be comparable to similarly-titled measures reported by other companies. The
primary limitation of this measure is that it excludes items that have an
impact on our GAAP cash flow. Also, it subtracts certain cash items that are
ultimately within managements 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. This limitation is
best addressed by using FCF in combination with the GAAP cash flow results.
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. page 15 / July 2014
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Q3 Revenue
Summary Actual Organic Segment Q3 FY14 Q3 FY13 Growth Growth(1)
Transportation Solutions $1,585 $1,438 10% 8% Industrial Solutions 849 803 6%
4% Network Solutions 738 803 (8)% (8)% Consumer Solutions 408 405 1% -% Total
$3,580 $3,449 4% 3% (1)See description and reconciliation of non-GAAP
measures contained in this appendix. ($ in Millions) page 16 / July 2014
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Reconciliation
of Net Sales Growth Q3 14 vs. Q3 13 page 17 / July 2014 Translation (2)
Acquisitions (Divestiture) Transportation Solutions (3) : Automotive 119 $ 8.3 % 28 $ - $ 147 $ 10.2 % 100 % Total 119 8.3 28 - 147 10.2 100 %
Industrial Solutions (3) : Industrial Equipment 10 3.0 4 - 14 4.2 41
Aerospace, Defense, Oil, and Gas 22 8.3 4 5 31 11.9 34 Energy 3 1.3 2 (4) 1
0.5 25 Total 35 4.3 10 1 46 5.7 100 % Network Solutions (3) : Telecom
Networks (4) (1.2) 3 - (1) (0.3) 47 Data Communications (10) (5.0) 2 - (8)
(4.2) 25 Enterprise Networks (1) (0.6) (3) - (4) (2.5) 21 Subsea
Communications (52) (50.1) - - (52) (50.1) 7 Total (67) (8.3) 2 - (65) (8.1)
100 % Consumer Solutions (3) : Consumer Devices (12) (5.1) (1) - (13) (5.3)
56 Appliances 14 8.6 2 - 16 9.9 44 Total 2 0.4 1 - 3 0.7 100 % Total 89 $ 2.6
% 41 $ 1 $ 131 $ 3.8 % Percentage of Change in Net Sales for the Quarter Ended
June 27, 2014 Segment's Total versus Net Sales for the Quarter Ended June 28,
2013 Organic (1) Total ($ in millions) Net Sales for the Quarter Ended June
27, 2014 (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 appendix. (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.
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Reconciliation
of Net Sales Growth by Segment and Geography Q3 14 vs. Q3 13 page 18 / July
2014 Translation (2) Acquisitions (Divestiture) Transportation Solutions :
EMEA 36 $ 6.0 % 30 $ - $ 66 $ 10.9 % AsiaPacific 51 10.4 4 - 55 11.2
Americas 32 9.3 (6) - 26 7.6 Total 119 8.3 28 - 147 10.2 Industrial Solutions
: EMEA (12) (3.7) 15 (4) (1) (0.3) AsiaPacific 30 21.3 (2) - 28 19.9
Americas 17 5.2 (3) 5 19 5.8 Total 35 4.3 10 1 46 5.7 Network Solutions :
EMEA 3 1.2 9 - 12 6.0 AsiaPacific (11) (5.3) (4) - (15) (7.9) Americas (59)
(14.3) (3) - (62) (15.0) Total (67) (8.3) 2 - (65) (8.1) Consumer Solutions :
EMEA (4) (6.1) 3 - (1) (1.7) AsiaPacific (2) (0.9) (2) - (4) (1.5) Americas
8 11.0 - - 8 11.0 Total 2 0.4 1 - 3 0.7 Total: EMEA 23 1.9 57 (4) 76 6.3
AsiaPacific 68 6.3 (4) - 64 5.8 Americas (2) (0.2) (12) 5 (9) (0.8) Total 89
$ 2.6 % 41 $ 1 $ 131 $ 3.8 % ($ in millions) (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 appendix. (2) Represents
the change in net sales resulting from changes in foreign currency exchange
rates. Change in Net Sales for the Quarter Ended June 27, 2014 versus Net
Sales for the Quarter Ended June 28, 2013 Organic (1) Total
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page 19
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for
the Quarter Ended June 27, 2014 / July 2014 Acquisition Restructuring Related
and Other Adjusted U.S. GAAP Charges Charges, Net (Non-GAAP) (1) Operating
Income: Transportation Solutions 335 $ - $ - $ 335 $ Industrial Solutions 125
1 1 127 Network Solutions 39 - 1 40 Consumer Solutions 36 - 12 48 Total 535 $ 1 $ 14 $ 550 $ Operating Margin 14.9% 15.4% Other Income, Net 9 $ - $ - $ 9 $ Income Tax Expense (113) $ - $ (3) $ (116) $ Effective Tax Rate 21.8% 21.8%
Income from Continuing Operations Attributable to TE Connectivity Ltd. 405 $ 1 $ 11 $ 417 $ Diluted Earnings per Share from Continuing Operations
Attributable to TE Connectivity Ltd. 0.97 $ - $ 0.03 $ 1.00 $ (1) See
description of non-GAAP measures contained in this appendix. ($ in millions,
except per share data) Adjustments
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page 20
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for
the Quarter Ended June 28, 2013 / July 2014 Acquisition Restructuring Related
and Other Tax Adjusted U.S. GAAP Charges Charges, Net Items (1) (Non-GAAP)
(2) Operating Income: Transportation Solutions 282 $ 1 $ 1 $ - $ 284 $ Industrial Solutions 84 2 22 - 108 Network Solutions 48 - 26 - 74 Consumer
Solutions 25 - 18 - 43 Total 439 $ 3 $ 67 $ - $ 509 $ Operating Margin 12.7%
14.8% Other Income, Net 18 $ - $ - $ (8) $ 10 $ Income Tax Expense (93) $ (1)
$ (21) $ - $ (115) $ Effective Tax Rate 21.9% 23.6% Income from Continuing
Operations Attributable to TE Connectivity Ltd. 332 $ 2 $ 46 $ (8) $ 372 $ Diluted Earnings per Share from Continuing Operations Attributable to TE
Connectivity Ltd. 0.79 $ - $ 0.11 $ (0.02) $ 0.88 $ (1) Relates to
reimbursements by Tyco International and Covidien in connection with
pre-separation tax matters. (2) See description of non-GAAP measures
contained in this appendix. Adjustments ($ in millions, except per share
data)
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page 21
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for
the Quarter Ended September 27, 2013 / July 2014 Acquisition Restructuring
Related and Other Tax Adjusted U.S. GAAP Charges Charges, Net Items (1)
(Non-GAAP) (2) Operating Income: Transportation Solutions 257 $ 2 $ 9 $ - $ 268 $ Industrial Solutions 127 1 7 - 135 Network Solutions 33 - 49 - 82
Consumer Solutions 48 - 6 - 54 Total 465 $ 3 $ 71 $ - $ 539 $ Operating
Margin 13.5% 15.7% Other Income, Net 16 $ - $ - $ (9) $ 7 $ Income Tax
Expense (63) $ (2) $ (18) $ (40) $ (123) $ Effective Tax Rate 14.0% 23.8%
Income from Continuing Operations Attributable to TE Connectivity Ltd. 387 $ 1 $ 53 $ (49) $ 392 $ Diluted Earnings per Share from Continuing Operations
Attributable to TE Connectivity Ltd. 0.92 $ - $ 0.13 $ (0.12) $ 0.93 $ (1)
Includes income tax benefits recognized in connection with a reduction in the
valuation allowance associated with certain tax loss carryforwards partially
offset by income tax expense related to adjustments to prior year income tax
returns. In addition, the other income adjustment includes amounts related to
reimbursements by Tyco International and Covidien in connection with pre-
separation tax matters. (2) See description of non-GAAP measures contained in
this appendix. Adjustments ($ in millions, except per share data)
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Reconciliation
of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended
September 27, 2013 page 22 / July 2014 Acquisition Restructuring Related and
Other Tax Adjusted U.S. GAAP Charges Charges, Net Items (1) (Non-GAAP) (2)
Operating Income: Transportation Solutions 972 $ 7 $ 38 $ - $ 1,017 $ Industrial Solutions 362 7 62 - 431 Network Solutions 136 - 125 - 261
Consumer Solutions 86 - 86 - 172 Total 1,556 $ 14 $ 311 $ - $ 1,881 $ Operating Margin 11.7% 14.2% Other Income (Expense), Net (183) $ - $ - $ 213
$ 30 $ Income Tax (Expense) Benefit 29 $ (5) $ (90) $ (354) $ (420) $ Effective Tax Rate NM (3) 23.5% Income from Continuing Operations
Attributable to TE Connectivity Ltd. 1,276 $ 9 $ 221 $ (141) $ 1,365 $ Diluted Earnings per Share from Continuing Operations Attributable to TE
Connectivity Ltd. 3.02 $ 0.02 $ 0.52 $ (0.33) $ 3.23 $ (3) Not meaningful.
Adjustments (2) See description of non-GAAP measures contained in this
appendix. ($ in millions, except per share data) (1) Includes $331 million of
income tax benefits associated with the settlement of an audit of prior year
income tax returns as well as the related impact of $231 million to other
expense pursuant to the tax sharing agreement with Tyco International and
Covidien. Also includes income tax expense related to adjustments to prior
year income tax returns, income tax benefits recognized in connection with a
reduction in the valuation allowance associated with certain tax loss
carryforwards, and income tax benefits recognized in connection with the
lapse of statutes of limitations for examinations of prior year income tax
returns. In addition, the other income adjustment includes amounts related to
reimbursements by Tyco International and Covidien in connection with
pre-separation tax matters.
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Reconciliation
of Forward-Looking Non-GAAP Financial Measures to Forward-Looking GAAP
Financial Measures page 23 / July 2014 Outlook for Quarter Ending September
26, Outlook for 2014 Fiscal 2014 Diluted earnings per share from continuing
operations attributable to TE Connectivity Ltd. (GAAP) $0.93 - 0.97 $3.62 -
3.66 Restructuring and other charges, net 0.03 0.10 Acquisition related
charges 0.06 0.07 Tax items - 0.01 Other items (0.04) (0.04) Adjusted diluted
earnings per share from continuing operations attributable to TE Connectivity
Ltd. (non-GAAP) (1) $0.98 - 1.02 $3.76 - 3.80 Net sales growth (GAAP) 4 - 7 %
5 - 5 % Translation (2) (1) Acquisitions (divestitures) - - Organic net sales
growth (non-GAAP) (1) 2 - 5% 4 - 5 % (1) See description of non-GAAP measures
contained in this appendix.
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