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TE Connectivity announces fourth quarter and full year results for fiscal year 2019

Revenue and earnings exceed mid-point of company's guidance; strong free cash flow performance

SCHAFFHAUSEN, Switzerland, Oct. 30, 2019 /PRNewswire/ -- TE Connectivity Ltd. (TEL) today reported results for the fiscal fourth quarter and year ended September 27, 2019.

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

Fourth Quarter Highlights

  • Net sales were $3.3 billion, down 6% as reported and 5% organically over the fourth quarter of 2018.
  • Diluted earnings per share (EPS) from continuing operating operations were $1.11, and adjusted EPS were $1.33, both exceeding the mid-point of the company's guidance.
  • Cash flow from continuing operating activities was $879 million and free cash flow was $688 million, with $332 million returned to shareholders.

Full Year Highlights

  • Net sales were $13.4 billion, down 4% as reported and 2% organically from fiscal year 2018.
  • Diluted EPS from continuing operations were $5.72, and adjusted EPS were $5.55, down 1% versus the prior year.
  • Cash flow from continuing operations was $2.5 billion and free cash flow was $1.6 billion, up 15% year over year.
  • Deployed approximately $300 million on acquisitions and announced intent to acquire First Sensor

Fourth Quarter Results
For the fourth quarter, the company reported net sales of $3.3 billion, with diluted EPS from continuing operations of $1.11. Adjusted EPS were $1.33, exceeding the mid-point of the company's guidance. Cash flow from continuing operating activities was $879 million, and free cash flow was $688 million. Total orders were $3.2 billion, down 3% sequentially.

Full Year Results
For the full year, the company reported net sales of $13.4 billion and diluted EPS from continuing operations of $5.72. Adjusted EPS were $5.55, cash flow from continuing operating activities was $2.5 billion and free cash flow was $1.6 billion, up 15% from fiscal year 2018. The company continued to strengthen its portfolio in growing markets, completing the acquisition of the Kissling Group and Alpha Technics, and announcing the acquisitions of Silicon Microstructures Inc. (SMI) and First Sensor AG.

"Our results through the fourth quarter of fiscal 2019 reflect the ability of our teams to execute in what continues to be a challenging market environment. I'm pleased that we quickly responded to market weakness and demonstrated earnings resiliency despite a decline in revenue. Our Industrial segment continued to show top-line organic growth and margin expansion, led by strength in our aerospace, defense and medical businesses, while our Transportation segment outperformed auto production declines through product content gains and our strong global position," said TE Connectivity CEO Terrence Curtin. "I want to thank our employees for their solid execution of our strategy and their commitment to our customers and our purpose, which once again helped TE achieve external recognition, including being named by Fortune as a World's Most Admired Company for the second consecutive year."

2020 Outlook
For the fiscal first quarter of 2020, the company expects net sales of $3.0 billion to $3.2 billion, reflecting a decrease of 7% on an actual basis and 6% on an organic basis year over year at the mid-point. Diluted EPS from continuing operations are expected to be $0.93 to $0.99, including net restructuring, acquisition-related and other charges of $0.17. The company expects adjusted EPS of $1.10 to $1.16.

For the full year, the company expects net sales of $12.7 to $13.3 billion, reflecting 3% actual and 2% organic decline at the mid-point versus the prior year. Diluted EPS from continuing operations are expected to be $4.21 to $4.61, including net restructuring, acquisition-related and other charges of $0.64. The company expects adjusted EPS of $4.85 to $5.25.

"We continue to see a challenging and uncertain global market environment in fiscal 2020 and remain confident in the ability of our teams to adjust to changing dynamics and deliver strong performance for our owners and customers," said Curtin. "We will continue to execute cost reduction plans to preserve operating resiliency and generate strong cash flow, while maintaining our strategy of expanding content with our highly engineered solutions. At the same time, we will continue to invest in long-term global growth trends where our innovative technologies create a safer, sustainable, productive and connected future."

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.              
  • A 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 Oct. 30, 2019.

About TE Connectivity
TE Connectivity Ltd. (TEL) is a $13 billion global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. With nearly 80,000 employees, including more than 8,000 engineers, working alongside customers in approximately 150 countries, TE ensures that EVERY CONNECTION COUNTS. Learn more at www.te.com and on LinkedIn, Facebook, WeChat and Twitter.

Non-GAAP Financial Measures
We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.

The following provides additional information regarding our non-GAAP financial measures:

  • Organic Net Sales Growth – represents net sales growth (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth is a useful measure of our performance because it excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
  • Adjusted Operating Income and Adjusted Operating Margin – represent operating income and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition related charges, and other income or charges, if any. We utilize these adjusted measures in combination with operating income and operating margin to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income is a significant component in our incentive compensation plans.
  • Adjusted Other Income (Expense), Net – represents net other income (expense) (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
  • Adjusted Income Tax Expense and Adjusted Effective Tax Rate – represent income tax expense and effective tax rate, respectively (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition related charges, other income or charges, and certain significant tax items, if any.
  • Adjusted Income from Continuing Operations – represents income from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
  • Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition related charges, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
  • Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations.
                                                   
    Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP financial measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters and cash paid (collected) pursuant to collateral requirements related to cross-currency 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 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.

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 27,


September 28,


September 27,


September 28,


2019


2018


2019


2018


(in millions, except per share data)

Net sales

$            3,300


$            3,509


$          13,448


$          13,988

Cost of sales 

2,248


2,327


9,054


9,243

Gross margin

1,052


1,182


4,394


4,745

Selling, general, and administrative expenses

372


414


1,490


1,594

Research, development, and engineering expenses

159


171


644


680

Acquisition and integration costs

6


5


27


14

Restructuring and other charges, net

71


22


255


126

Operating income  

444


570


1,978


2,331

Interest income

6


4


19


15

Interest expense

(13)


(27)


(68)


(107)

Other income (expense), net

-


(1)


2


1

Income from continuing operations before income taxes

437


546


1,931


2,240

Income tax (expense) benefit

(61)


1,128


15


344

Income from continuing operations

376


1,674


1,946


2,584

Loss from discontinued operations, net of income taxes

(4)


(13)


(102)


(19)

Net income

$               372


$            1,661


$            1,844


$            2,565

















Basic earnings per share:








Income from continuing operations

$              1.12


$              4.82


$              5.76


$              7.38

Loss from discontinued operations

(0.01)


(0.04)


(0.30)


(0.05)

Net income  

1.11


4.79


5.46


7.33









Diluted earnings per share:








Income from continuing operations

$              1.11


$              4.78


$              5.72


$              7.32

Loss from discontinued operations

(0.01)


(0.04)


(0.30)


(0.05)

Net income  

1.10


4.75


5.42


7.27









Weighted-average number of shares outstanding: 








Basic

336


347


338


350

Diluted

338


350


340


353

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)










September 27,


September 28,


2019


2018


(in millions, except share data)

Assets




Current assets:




Cash and cash equivalents

$               927


$               848

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

2,320


2,361

Inventories

1,836


1,857

Prepaid expenses and other current assets

471


661

Assets held for sale

-


472

Total current assets

5,554


6,199

Property, plant, and equipment, net

3,574


3,497

Goodwill

5,740


5,684

Intangible assets, net

1,596


1,704

Deferred income taxes

2,776


2,144

Other assets

454


1,158

Total assets

$          19,694


$          20,386





Liabilities and shareholders' equity




Current liabilities:




Short-term debt

$               570


$               963

Accounts payable

1,357


1,548

Accrued and other current liabilities

1,613


1,711

Liabilities held for sale

-


188

Total current liabilities

3,540


4,410

Long-term debt

3,395


3,037

Long-term pension and postretirement liabilities

1,367


1,102

Deferred income taxes

156


207

Income taxes

239


312

Other liabilities

427


487

Total liabilities

9,124


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 

12,256


12,114

Treasury shares, at cost, 15,862,337 and 12,279,603 shares, respectively

(1,337)


(1,134)

Accumulated other comprehensive loss

(503)


(306)

Total shareholders' equity

10,570


10,831

Total liabilities and shareholders' equity

$          19,694


$          20,386

 

 

TE CONNECTIVITY LTD.

 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 27,


September 28,


September 27,


September 28,


2019


2018


2019


2018


(in millions)

Cash flows from operating activities:








Net income

$               372


$            1,661


$            1,844


$            2,565

Loss from discontinued operations, net of income taxes

4


13


102


19

Income from continuing operations

376


1,674


1,946


2,584

Adjustments to reconcile income from continuing operations to net cash 








provided by operating activities:








Depreciation and amortization

175


171


690


667

Deferred income taxes

72


(1,233)


(218)


(791)

Provision for losses on accounts receivable and inventories

7


1


43


30

Share-based compensation expense

19


24


75


95

Other 

25


17


51


5

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








and divestitures:








Accounts receivable, net

136


110


31


(269)

Inventories

123


(30)


64


(247)

Prepaid expenses and other current assets

35


(13)


144


(63)

Accounts payable

(92)


24


(178)


201

Accrued and other current liabilities

132


148


(15)


5

Income taxes

(72)


30


(135)


54

Other

(57)


(1)


(44)


30

Net cash provided by continuing operating activities

879


922


2,454


2,301

Net cash provided by (used in) discontinued operating activities

(1)


2


(32)


150

Net cash provided by operating activities

878


924


2,422


2,451

Cash flows from investing activities:








Capital expenditures

(179)


(262)


(749)


(935)

Proceeds from sale of property, plant, and equipment

27


4


43


23

Acquisition of businesses, net of cash acquired

-


(153)


(283)


(153)

Proceeds from divestiture of discontinued operation, net of cash 








retained by sold operation

-


-


297


-

Other

(1)


-


2


(8)

Net cash used in continuing investing activities

(153)


(411)


(690)


(1,073)

Net cash used in discontinued investing activities

-


(8)


(2)


(21)

Net cash used in investing activities

(153)


(419)


(692)


(1,094)

Cash flows from financing activities:








Net increase (decrease) in commercial paper

219


(1)


(51)


270

Proceeds from issuance of debt

-


-


746


119

Repayment of debt

(250)


-


(691)


(708)

Proceeds from exercise of share options

30


4


85


100

Repurchase of common shares

(178)


(268)


(1,091)


(879)

Payment of common share dividends to shareholders

(154)


(153)


(608)


(588)

Transfers (to) from discontinued operations 

(1)


(6)


(34)


129

Other

(1)


(2)


(33)


(36)

Net cash used in continuing financing activities

(335)


(426)


(1,677)


(1,593)

Net cash provided by (used in) discontinued financing activities

1


6


34


(129)

Net cash used in financing activities

(334)


(420)


(1,643)


(1,722)

Effect of currency translation on cash

(10)


(7)


(8)


(5)

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

381


78


79


(370)

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

546


770


848


1,218

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

$               927


$               848


$               927


$               848









Supplemental cash flow information:








Interest paid on debt, net

$                 19


$                 30


$                 75


$               127

Income taxes paid, net of refunds

61


76


338


393

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


















For the Quarters Ended


For the Years Ended


September 27,


September 28,


September 27,


September 28,


2019


2018


2019


2018


(in millions)

Net cash provided by continuing operating activities

$               879


$               922


$            2,454


$            2,301

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

(39)


6


(132)


16

Capital expenditures, net

(152)


(258)


(706)


(912)

Free cash flow (1)

$               688


$               670


$            1,616


$            1,400









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

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED SEGMENT DATA (UNAUDITED)


























For the Quarters Ended 


For the Years Ended 


September 27,


September 28,


September 27,


September 28,


2019


2018


2019


2018


($ in millions)


Net Sales



Net Sales



Net Sales



Net Sales


Transportation Solutions

$          1,896



$          2,012



$          7,821



$          8,290


Industrial Solutions

1,014



1,014



3,954



3,856


Communications Solutions

390



483



1,673



1,842


Total

$          3,300



$          3,509



$        13,448



$        13,988



























Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income

Margin


Income

Margin


Income

Margin


Income

Margin

Transportation Solutions

$             270

14.2%


$             341

16.9%


$          1,226

15.7%


$          1,578

19.0%

Industrial Solutions

150

14.8


146

14.4


543

13.7


465

12.1

Communications Solutions

24

6.2


83

17.2


209

12.5


288

15.6

Total

$             444

13.5%


$             570

16.2%


$          1,978

14.7%


$          2,331

16.7%


























Adjusted

Adjusted


Adjusted

Adjusted


Adjusted

Adjusted


Adjusted

Adjusted


Operating

Operating


Operating

Operating


Operating

Operating


Operating

Operating


Income (1)

Margin (1)


Income (1)

Margin (1)


Income (1)

Margin (1)


Income (1)

Margin (1)

Transportation Solutions

$             334

17.6%


$             364

18.1%


$          1,401

17.9%


$          1,623

19.6%

Industrial Solutions

157

15.5


152

15.0


621

15.7


555

14.4

Communications Solutions

47

12.1


81

16.8


258

15.4


301

16.3

Total

$             538

16.3%


$             597

17.0%


$          2,280

17.0%


$          2,479

17.7%













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

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NET SALES GROWTH (UNAUDITED)






















Change in Net Sales for the Quarter Ended September 27, 2019


 versus Net Sales for the Quarter Ended September 28, 2018


Net


Organic Net






Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):










Automotive

$                (89)

(6.1)%


$                (59)

(4.1)%


$                (30)


$                    -

Commercial transportation

(29)

(9.3)


(41)

(13.6)


(7)


19

Sensors

2

0.8


1

0.4


(4)


5

Total

(116)

(5.8)


(99)

(4.9)


(41)


24

Industrial Solutions (3):










Industrial equipment

(35)

(6.8)


(40)

(7.9)


(5)


10

Aerospace, defense, oil, and gas

38

12.3


42

13.2


(4)


-

Energy

(3)

(1.6)


4

2.0


(7)


-

Total

-

-


6

0.6


(16)


10

Communications Solutions (3):










Data and devices

(54)

(18.4)


(53)

(18.0)


(1)


-

Appliances

(39)

(20.6)


(34)

(18.3)


(5)


-

Total

(93)

(19.3)


(87)

(18.0)


(6)


-

Total 

$              (209)

(6.0)%


$              (180)

(5.1)%


$                (63)


$                 34






















Change in Net Sales for the Year Ended September 27, 2019


 versus Net Sales for the Year Ended September 28, 2018


Net


Organic Net






Sales Growth


Sales Growth (1)


Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):










Automotive

$              (406)

(6.7)%


$              (198)

(3.3)%


$              (208)


$                    -

Commercial transportation

(59)

(4.6)


(48)

(3.9)


(40)


29

Sensors

(4)

(0.4)


14

1.4


(26)


8

Total

(469)

(5.7)


(232)

(2.8)


(274)


37

Industrial Solutions (3):










Industrial equipment

(38)

(1.9)


(66)

(3.4)


(45)


73

Aerospace, defense, oil, and gas

149

12.9


165

14.1


(16)


-

Energy

(13)

(1.8)


21

2.7


(34)


-

Total

98

2.5


120

3.1


(95)


73

Communications Solutions (3):










Data and devices

(75)

(7.0)


(58)

(5.4)


(17)


-

Appliances

(94)

(12.1)


(71)

(9.3)


(23)


-

Total

(169)

(9.2)


(129)

(7.0)


(40)


-

Total 

$              (540)

(3.9)%


$              (241)

(1.7)%


$              (409)


$               110











(1) Organic net sales growth is a non-GAAP financial measure. See description of non-GAAP financial measures.

(2) Represents the change in net sales resulting from changes in foreign currency exchange rates.

(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 27, 2019

(UNAUDITED)
























Adjustments






Acquisition-










Related Charges


Restructuring








and Other


and Other


Tax


Adjusted


U.S. GAAP


Items (1)(2)


Charges, Net (1)


Items


(Non-GAAP) (3)


($ in millions, except per share data)

Operating income:










Transportation Solutions

$               270


$                 18


$                 46


$                    -


$               334

Industrial Solutions

150


4


3


-


157

Communications Solutions

24


1


22


-


47

Total 

$               444


$                 23


$                 71


$                    -


$               538











Operating margin

13.5%








16.3%











Income tax expense

$                (61)


$                  (5)


$                (15)


$                   1


$                (80)











Effective tax rate

14.0%








15.1%











Income from continuing operations 

$               376


$                 18


$                 56


$                   1


$               451











Diluted earnings per share from 










continuing operations

$              1.11


$              0.05


$              0.17


$                    -


$              1.33











(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 acquisition-related charges of $6 million and a write-off of spare parts of $17 million.

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

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended September 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.

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 27, 2019

(UNAUDITED)
























Adjustments






Acquisition-










Related Charges


Restructuring








and Other


and Other


Tax


Adjusted


U.S. GAAP


Items (1)(2)


Charges, Net (1)


Items (3)


(Non-GAAP) (4)


($ in millions, except per share data)

Operating income:










Transportation Solutions

$            1,226


$                 31


$               144


$                    -


$            1,401

Industrial Solutions

543


15


63


-


621

Communications Solutions

209


1


48


-


258

Total 

$            1,978


$                 47


$               255


$                    -


$            2,280











Operating margin

14.7%








17.0%











Other income, net

$                   2


$                    -


$                    -


$                    -


$                   2











Income tax (expense)benefit

$                 15


$                  (9)


$                (61)


$              (291)


$              (346)











Effective tax rate

(0.8)%








15.5%











Income from continuing operations 

$            1,946


$                 38


$               194


$              (291)


$            1,887











Diluted earnings per share from 










continuing operations

$              5.72


$              0.11


$              0.57


$             (0.86)


$              5.55











(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 acquisition-related charges of $30 million and a write-off of spare parts of $17 million.

(3) Includes a $216 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform, a $90 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.

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

 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Year Ended September 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.


 

 

TE CONNECTIVITY LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

For the Quarter Ended December 28, 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

$               332


$                   3


$                 21


$               356

Industrial Solutions

100


3


35


138

Communications Solutions

52


-


19


71

Total 

$               484


$                   6


$                 75


$               565









Operating margin

14.5%






16.9%









Other expense, net

$                  (1)


$                    -


$                    -


$                  (1)









Income tax expense

$                (78)


$                  (1)


$                (19)


$                (98)









Effective tax rate

16.9%






18.1%









Income from continuing operations

$               383


$                   5


$                 56


$               444









Diluted earnings per share from 








continuing operations

$              1.11


$              0.01


$              0.16


$              1.29









(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.

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


 

TE CONNECTIVITY LTD.

RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES

TO FORWARD-LOOKING GAAP FINANCIAL MEASURES

As of October 30, 2019

(UNAUDITED)






Outlook for




Quarter Ending




December 27,


 Outlook for 


2019


Fiscal 2020

Diluted earnings per share from continuing operations (GAAP)

 $0.93 - $0.99 


 $4.21 - $4.61 

Restructuring and other charges, net

0.13


0.56

Acquisition-related charges

0.04


0.08

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

 $1.10 - $1.16 


 $4.85 - $5.25 









Net sales growth (GAAP)

 (10)% - (4)% 


(5)% - (1)%

Translation

2


2

(Acquisitions) divestitures, net

(1)


(1)

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

(9)% - (3)%


(4)% - 0%









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

 

Cision

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