TE Connectivity announces second quarter results for fiscal year 2020

·12 mins read

Year to date free cash flow up 34% year-over-year; Company has excess of $2 billion in available liquidity

SCHAFFHAUSEN, Switzerland , April 28, 2020 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 27, 2020 .

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

Second Quarter Highlights

  • Net sales were $3.2 billion , in line with the company's guidance, down 6% on a reported and down 5% on an organic basis over the second quarter of 2019.

  • Diluted earnings per share (EPS) from continuing operations were a loss of $1.35 . Adjusting for one-time impairment charge, adjusted EPS were $1.29 , exceeding the high end of the company's guidance.

  • Cash flow from continuing operating activities was $481 million and free cash flow was $311 million . Year to date free cash flow up 34% versus prior year. During the quarter the company returned $433 million returned to shareholders.

  • Strong liquidity position with more than $2 billion available liquidity.

"The market environment we guided to last quarter changed dramatically, and I'm pleased that we still delivered sales in line with our guidance and adjusted earnings per share above our expectations," said TE Connectivity Chief Executive Officer Terrence Curtin . "Despite the impact of COVID-19, we were able to maintain adjusted operating margins above 16% due to the diversity of our portfolio, our global manufacturing strategy and our early execution of cost reduction actions. We continue to successfully prioritize the safety of our employees while keeping our commitments to our customers, and I want to thank our employees for their strong execution in what has been an unprecedented time for our global community. We expect to see COVID-related demand impacts in the second half of the year particularly in the transportation and commercial aerospace markets, but our strong free cash flow and liquidity allows us to continue to invest in long-term global growth trends and position us for further content growth when demand returns." 

2020 Outlook

For the fiscal third quarter of 2020, the company expects net sales to be down approximately 25% sequentially, reflecting the impact of COVID-19 on the end demand environment, especially in the transportation and commercial aerospace markets. The company is withdrawing its full year guidance due to limited visibility of COVID-19 impact on future demand. 

Information about TE Connectivity's use of non-GAAP financial measures is provided below. For reconciliations of these non-GAAP financial measures to the most directly comparable 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 11:30 a.m. ET on April 28, 2020 .

About TE Connectivity
TE Connectivity Ltd. (NYSE: 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 (Decline) represents net sales growth (decline) (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 (Decline) 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 (Loss) and Adjusted Operating Margin represent operating income (loss) and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, and other income or charges, if any. We utilize these adjusted measures in combination with operating income (loss) 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 (Loss) 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) Benefit and Adjusted Effective Tax Rate represent income tax (expense) benefit 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, impairment of goodwill, other income or charges, and certain significant tax items, if any.

"           Adjusted Income (Loss) from Continuing Operations represents income (loss) from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, 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 (Loss) Per Share represents diluted earnings (loss) per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, 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, and the impact on our operations resulting from the coronavirus disease 2019 ("COVID-19"). Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, the extent, severity and duration of COVID-19 negatively affecting our business operations; business, economic, competitive and regulatory risks, such as conditions affecting demand for products in the automotive and other industries we serve; 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. In addition, the extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the geographic spread of the virus, the severity of the virus, the duration of the outbreak, the impact on our suppliers' and customers' supply chains, the actions that may be taken by various governmental authorities in response to the outbreak in jurisdictions in which we operate, and the possible impact on the global economy and local economies in which we operate.  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, 2019 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 Six Months Ended


March 27,


March 29,


March 27,


March 29,


2020


2019


2020


2019


(in millions, except per share data)

Net sales

$

3,195


$

3,412


$

6,363


$

6,759

Cost of sales 


2,166



2,294



4,304



4,527

Gross margin


1,029



1,118



2,059



2,232

Selling, general, and administrative expenses


352



373



719



762

Research, development, and engineering expenses


158



166



319



327

Acquisition and integration costs


12



7



19



12

Restructuring and other charges, net


22



42



46



117

Impairment of goodwill


900



-



900



-

Operating income (loss)


(415)



530



56



1,014

Interest income


5



4



11



9

Interest expense


(11)



(15)



(23)



(42)

Other income, net


11



1



16



-

Income (loss) from continuing operations before income taxes


(410)



520



60



981

Income tax expense


(42)



(91)



(489)



(169)

Income (loss) from continuing operations


(452)



429



(429)



812

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


(4)



10



(1)



(97)

Net income (loss)

$

(456)


$

439


$

(430)


$

715













Basic earnings (loss) per share:












Income (loss) from continuing operations

$

(1.35)


$

1.27


$

(1.28)


$

2.39

Income (loss) from discontinued operations


(0.01)



0.03



-



(0.29)

Net income (loss)


(1.37)



1.30



(1.29)



2.10













Diluted earnings (loss) per share:












Income (loss) from continuing operations

$

(1.35)


$

1.26


$

(1.28)


$

2.37

Income (loss) from discontinued operations


(0.01)



0.03



-



(0.28)

Net income (loss)


(1.37)



1.29



(1.29)



2.09













Weighted-average number of shares outstanding: 












Basic


334



338



334



340

Diluted


334



340



334



342

 

 

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)














March 27,


September 27,


2020


2019


(in millions, except share data)

Assets






Current assets:






Cash and cash equivalents

$

796


$

927

Accounts receivable, net of allowance for doubtful accounts of $32 and $25, respectively


2,461



2,320

Inventories


2,001



1,836

Prepaid expenses and other current assets


457



471

Total current assets


5,715



5,554

Property, plant, and equipment, net


3,558



3,574

Goodwill


5,235



5,740

Intangible assets, net


1,547



1,596

Deferred income taxes


2,382



2,776

Other assets


930



454

Total assets

$

19,367


$

19,694







Liabilities and equity






Current liabilities:






Short-term debt

$

603


$

570

Accounts payable


1,390



1,357

Accrued and other current liabilities


1,966



1,613

Total current liabilities


3,959



3,540

Long-term debt


3,752



3,395

Long-term pension and postretirement liabilities


1,359



1,367

Deferred income taxes


126



156

Income taxes


228



239

Other liabilities


772



427

Total liabilities


10,196



9,124

Commitments and contingencies






Equity:






TE Connectivity Ltd. shareholders' equity:






Common shares, CHF 0.57 par value, 350,951,381 shares authorized and issued


154



154

Accumulated earnings


11,122



12,256

Treasury shares, at cost, 19,877,795 and 15,862,337 shares, respectively


(1,639)



(1,337)

Accumulated other comprehensive loss


(571)



(503)

Total TE Connectivity Ltd. shareholders' equity


9,066



10,570

Noncontrolling interests


105



-

Total equity


9,171



10,570

Total liabilities and equity

$

19,367


$

19,694

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


























For the Quarters Ended


For the Six Months Ended


March 27,


March 29,


March 27,


March 29,


2020


2019


2020


2019


(in millions)

Cash flows from operating activities:












Net income (loss)

$

(456)


$

439


$

(430)


$

715

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


4



(10)



1



97

Income (loss) from continuing operations


(452)



429



(429)



812

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












Impairment of goodwill


900



-



900



-

Depreciation and amortization


180



173



354



341

Deferred income taxes


(49)



(17)



345



(28)

Non-cash lease cost


25



-



52



-

Provision for losses on accounts receivable and inventories


(2)



5



18



28

Share-based compensation expense


15



15



37



38

Other


1



14



11



32

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












Accounts receivable, net


(116)



(81)



(140)



(107)

Inventories


25



49



(151)



(70)

Prepaid expenses and other current assets


48



24



25



91

Accounts payable


(45)



(35)



49



(44)

Accrued and other current liabilities


5



(16)



(180)



(206)

Income taxes


(9)



6



1



21

Other


(45)



(11)



-



(25)

Net cash provided by continuing operating activities


481



555



892



883

Net cash provided by (used in) discontinued operating activities


-



1



-



(30)

Net cash provided by operating activities


481



556



892



853

Cash flows from investing activities:












Capital expenditures


(133)



(191)



(309)



(401)

Proceeds from sale of property, plant, and equipment


1



12



3



13

Acquisition of businesses, net of cash acquired


(244)



8



(359)



8

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


-



9



-



297

Other


(2)



(3)



(2)



-

Net cash used in continuing investing activities


(378)



(165)



(667)



(83)

Net cash used in discontinued investing activities


-



-



-



(2)

Net cash used in investing activities


(378)



(165)



(667)



(85)

Cash flows from financing activities:












Net increase (decrease) in commercial paper


(210)



27



(219)



90

Proceeds from issuance of debt


593



-



593



350

Repayment of debt


-



-



-



(441)

Proceeds from exercise of share options


13



10



27



17

Repurchase of common shares


(269)



(220)



(408)



(739)

Payment of common share dividends to shareholders


(153)



(149)



(307)



(299)

Transfers (to) from discontinued operations


-



1



-



(32)

Other


(5)



(1)



(31)



(30)

Net cash used in continuing financing activities


(31)



(332)



(345)



(1,084)

Net cash provided by (used in) discontinued financing activities


-



(1)



-



32

Net cash used in financing activities


(31)



(333)



(345)



(1,052)

Effect of currency translation on cash


(18)



2



(11)



1

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


54



60



(131)



(283)

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


742



505



927



848

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

$

796


$

565


$

796


$

565













Supplemental cash flow information:












Interest paid on debt, net

$

20


$

33


$

24


$

52

Income taxes paid, net of refunds


101



102



144



177

TE CONNECTIVITY LTD.

RECONCILIATION OF FREE CASH FLOW (UNAUDITED)


























For the Quarters Ended


For the Six Months Ended


March 27,


March 29,


March 27,


March 29,


2020


2019


2020


2019


(in millions)

Net cash provided by continuing operating activities

$

481


$

555


$

892


$

883

Excluding:












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


(38)



(32)



(32)



(82)

Capital expenditures, net


(132)



(179)



(306)



(388)

Free cash flow (1)

$

311


$

344


$

554


$

413













(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 Six Months Ended



March 27,



March 29,



March 27,



March 29,



2020



2019



2020



2019



($ in millions)



Net Sales





Net Sales





Net Sales





Net Sales




Transportation Solutions

$

1,857





$

1,971





$

3,725





$

3,957




Industrial Solutions


962






1,007






1,889






1,935




Communications Solutions


376






434






749






867




Total

$

3,195





$

3,412





$

6,363





$

6,759





















































Operating


Operating


Operating


Operating


Operating


Operating


Operating


Operating


Income (Loss)


Margin


Income


Margin


Income (Loss)


Margin


Income


Margin

Transportation Solutions

$

(606)


(32.6)

%


$

316


16.0

%


$

(290)


(7.8)

%


$

648


16.4

%

Industrial Solutions


142


14.8




137


13.6




257


13.6




237


12.2


Communications Solutions


49


13.0




77


17.7




89


11.9




129


14.9


Total

$

(415)


(13.0)

%


$

530


15.5

%


$

56


0.9

%


$

1,014


15.0

%


















































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

$

322


17.3

%


$

344


17.5

%


$

647


17.4

%


$

700


17.7

%

Industrial Solutions


145


15.1




159


15.8




277


14.7




297


15.3


Communications Solutions


52


13.8




78


18.0




97


13.0




149


17.2


Total

$

519


16.2

%


$

581


17.0

%


$

1,021


16.0

%


$

1,146


17.0

%

























(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 (DECLINE) (UNAUDITED)






































Change in Net Sales for the Quarter Ended March 27, 2020


versus Net Sales for the Quarter Ended March 29, 2019


Net Sales



Organic Net Sales







Growth (Decline)



Growth (Decline) (1)



Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):


















Automotive

$

(60)


(4.2)

%


$

(29)


(2.1)

%


$

(31)


$

-

Commercial transportation


(30)


(9.3)




(36)


(11.1)




(8)



14

Sensors


(24)


(10.8)




(33)


(14.9)




(3)



12

Total


(114)


(5.8)




(98)


(5.0)




(42)



26

Industrial Solutions (3):


















Aerospace, defense, oil, and gas


(13)


(3.9)




(10)


(2.9)




(3)



-

Industrial equipment


(46)


(14.1)




(40)


(12.5)




(6)



-

Medical


10


5.7




10


5.7




-



-

Energy


4


2.3




10


5.6




(6)



-

Total


(45)


(4.5)




(30)


(3.0)




(15)



-

Communications Solutions (3):


















Data and devices


(33)


(13.1)




(33)


(13.1)




-



-

Appliances


(25)


(13.7)




(22)


(11.9)




(3)



-

Total


(58)


(13.4)




(55)


(12.6)




(3)



-

Total

$

(217)


(6.4)

%


$

(183)


(5.4)

%


$

(60)


$

26
























































Change in Net Sales for the Six Months Ended March 27, 2020


versus Net Sales for the Six Months Ended March 29, 2019


Net Sales



Organic Net Sales







Growth (Decline)



Growth (Decline) (1)



Translation (2)


Acquisitions


($ in millions)

Transportation Solutions (3):


















Automotive

$

(124)


(4.3)

%


$

(72)


(2.5)

%


$

(52)


$

-

Commercial transportation


(69)


(11.1)




(81)


(13.2)




(15)



27

Sensors


(39)


(8.8)




(58)


(13.1)




(5)



24

Total


(232)


(5.9)




(211)


(5.3)




(72)



51

Industrial Solutions (3):


















Aerospace, defense, oil, and gas


11


1.8




17


2.8




(6)



-

Industrial equipment


(98)


(15.3)




(87)


(13.7)




(11)



-

Medical


21


6.1




22


6.3




(1)



-

Energy


20


6.0




29


8.7




(9)



-

Total


(46)


(2.4)




(19)


(1.0)




(27)



-

Communications Solutions (3):


















Data and devices


(71)


(14.0)




(71)


(14.0)




-



-

Appliances


(47)


(13.1)




(43)


(11.7)




(4)



-

Total


(118)


(13.6)




(114)


(13.1)




(4)



-

Total

$

(396)


(5.9)

%


$

(344)


(5.1)

%


$

(103)


$

51



















(1) Organic net sales growth (decline) 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 March 27, 2020


(UNAUDITED)















































Adjustments









Acquisition-


Restructuring












Related


and Other


Impairment


Tax


Adjusted



U.S. GAAP



Charges (1)


Charges, Net (1)


of Goodwill (1)


Items (2)


(Non-GAAP) (4)



($ in millions, except per share data)


Operating income (loss):




















Transportation Solutions

$

(606)



$

10


$

18


$

900


$

-


$

322


Industrial Solutions


142




2



1



-



-



145


Communications Solutions


49




-



3



-



-



52


Total

$

(415)



$

12


$

22


$

900


$

-


$

519






















Operating margin


(13.0)

%















16.2

%





















Other income, net

$

11



$

-


$

-


$

-


$

(8)


$

3






















Income tax expense

$

(42)



$

(2)


$

(4)


$

(4)


$

(31)


$

(83)






















Effective tax rate


(10.2)

%















16.1

%





















Income (loss) from continuing
operations

$

(452)



$

10


$

18


$

896


$

(39)


$

433






















Diluted earnings (loss) per share from
continuing operations (3)

$

(1.35)



$

0.03


$

0.05


$

2.67


$

(0.12)


$

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) Includes an income tax benefit related to pre-separation tax matters and the termination of the tax sharing agreement with Tyco International and Covidien, as well as the related impact to net other income.


(3) U.S. GAAP diluted shares excludes one million of nonvested share awards and options outstanding as the inclusion of these securities would have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares.


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


TE CONNECTIVITY LTD.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES


For the Quarter Ended March 29, 2019


(UNAUDITED)









































Adjustments









Acquisition-


Restructuring










Related


and Other


Tax


Adjusted



U.S. GAAP



Charges (1)


Charges, Net (1)


Items (2)


(Non-GAAP) (3)



($ in millions, except per share data)


Operating income:

















Transportation Solutions

$

316



$

4


$

24


$

-


$

344


Industrial Solutions


137




5



17



-



159


Communications Solutions


77




-



1



-



78


Total

$

530



$

9


$

42


$

-


$

581



















Operating margin


15.5

%












17.0

%


















Other income, net

$

1



$

-


$

-


$

-


$

1



















Income tax expense

$

(91)



$

(2)


$

(10)


$

15


$

(88)



















Effective tax rate


17.5

%












15.4

%


















Income from continuing operations

$

429



$

7


$

32


$

15


$

483



















Diluted earnings per share from
continuing operations

$

1.26



$

0.02


$

0.09


$

0.04


$

1.42



















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


(2) Includes income tax expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions.


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


TE CONNECTIVITY LTD.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES


For the Six Months Ended March 27, 2020


(UNAUDITED)















































Adjustments









Acquisition-


Restructuring












Related


and Other


Impairment


Tax


Adjusted



U.S. GAAP



Charges (1)


Charges, Net (1)


of Goodwill (1)


Items (2)


(Non-GAAP) (4)



($ in millions, except per share data)


Operating income (loss):




















Transportation Solutions

$

(290)



$

15


$

22


$

900


$

-


$

647


Industrial Solutions


257




4



16



-



-



277


Communications Solutions


89




-



8



-



-



97


Total

$

56



$

19


$

46


$

900


$

-


$

1,021






















Operating margin


0.9

%















16.0

%





















Other income, net

$

16



$

-


$

-


$

-


$

(8)


$

8






















Income tax expense

$

(489)



$

(3)


$

(4)


$

(4)


$

324


$

(176)






















Effective tax rate


815.0

%















17.3

%





















Income (loss) from continuing operations

$

(429)



$

16


$

42


$

896


$

316


$

841






















Diluted earnings (loss) per share from
continuing operations (3)

$

(1.28)



$

0.05


$

0.13


$

2.67


$

0.94


$

2.50






















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


(2) Includes income tax expense related to the tax impacts of certain measures of Swiss tax reform. Also includes an income tax benefit related to pre-separation tax matters and the termination of the tax sharing agreement with Tyco International and Covidien, as well as the related impact to net other income.


(3) U.S. GAAP diluted shares excludes two million of nonvested share awards and options outstanding as the inclusion of these securities would have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares.


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


TE CONNECTIVITY LTD.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES


For the Six Months Ended March 29, 2019


(UNAUDITED)










































Adjustments









Acquisition-


Restructuring










Related


and Other


Tax


Adjusted



U.S. GAAP



Charges (1)


Charges, Net (1)


Items (2)


(Non-GAAP) (3)



($ in millions, except per share data)


Operating income:

















Transportation Solutions

$

648



$

7


$

45


$

-


$

700


Industrial Solutions


237




8



52



-



297


Communications Solutions


129




-



20



-



149


Total

$

1,014



$

15


$

117


$

-


$

1,146



















Operating margin


15.0

%