TE Connectivity Announces Results for Third Quarter of Fiscal Year 2018
SCHAFFHAUSEN, Switzerland, July 25, 2018 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter, which ended June 29, 2018.
Third Quarter Highlights
-- Net sales were $3.8 billion, up 12 percent as reported and 6 percent
organically over the third quarter of 2017
-- Diluted earnings per share (EPS) from continuing operations were $1.29,
up 7 percent from the third quarter of 2017, and adjusted EPS were
$1.43, 15 percent growth over the same period in 2017
-- Cash flow from continuing operating activities was $800 million and free
cash flow was $504 million, with $382 million returned to shareholders
-- Orders, excluding the company's SubCom business, were $3.7 billion in
the quarter, up 9 percent organically from the third quarter of 2017
Third Quarter Results
For the third quarter, the company reported net sales of $3.8 billion, with diluted EPS from continuing operations of $1.29, and adjusted EPS of $1.43. Cash flow from continuing operating activities was $800 million and free cash flow was $504 million. Excluding SubCom, total orders were $3.7 billion, up 15 percent as reported and 9 percent organically over the third quarter of 2017. The book-to-bill ratio for the quarter, excluding SubCom, was 1.05.
"We exceeded our guidance for the quarter, delivering strong double-digit growth in both sales and adjusted earnings per share through our positive alignment with long-term global growth trends in our markets, the customer focus of our global teams and our industrial technology leadership position," said TE Connectivity Chief Executive Officer Terrence Curtin. "Our performance reflects the benefits of our strong business model, effective execution of our strategy and our focus on co-creating a safer, sustainable, productive and connected future with our customers."
2018 Outlook
For the fiscal fourth quarter of 2018, the company expects net sales of $3.59 billion to $3.69 billion, reflecting an increase of 5 percent on both an actual and organic basis year-over-year, at the mid-point. Diluted EPS from continuing operations are expected to be $1.23 to $1.25, including net restructuring and acquisition-related charges of $0.08. The company expects adjusted EPS of $1.31 to $1.33 which represents a 6 percent improvement at the mid-point versus the fourth quarter of 2017.
For the full year, the company expects net sales of $14.58 to $14.68 billion, reflecting 12 percent actual and 6 percent organic growth at the mid-point versus the prior year. Diluted EPS from continuing operations are expected to be $3.79 to $3.81, including net restructuring, acquisition-related, tax and other charges of $1.77. The company expects adjusted EPS of $5.56 to $5.58, reflecting 15 percent growth at the mid-point compared to fiscal year 2017.
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: http://investors.te.com.
-- By telephone: For both "listen-only" participants and those participants
who wish to take part in the question-and-answer portion of the call,
the dial-in number in the United States is (800) 230-1085, and for
international callers, the dial-in number is (612) 288-0337.
-- An audio replay of the conference call will be available beginning at
10:30 a.m. ET on July 25, 2018, and ending at 11:59 p.m. ET on August 1,
2018. The dial-in number for participants in the United States is (800)
475-6701. For participants outside the United States, the dial-in number
is (320) 365-3844. The replay access code for all callers is 450417.
About TE Connectivity
TE Connectivity Ltd. (NYSE: TEL) is a $13 billion global technology and manufacturing leader creating a safer, sustainable, productive, and connected future. For more than 75 years, our connectivity and sensor solutions, proven in the harshest environments, have enabled advancements in transportation, industrial applications, medical technology, energy, data communications, and the home. With 78,000 employees, including more than 7,000 engineers, working alongside customers in nearly 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 swaps, 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 the U.S. Tax Cuts and Jobs Act. 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. 29, 2017 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 Nine Months Ended
---------------------- -------------------------
June 29, June 30, June 29, June 30,
2018 2017 2018 2017
---- ---- ---- ----
(in millions, except per share data)
Net sales $3,764 $3,367 $10,989 $9,657
Cost of sales 2,547 2,227 7,352 6,340
----- ----- ----- -----
Gross margin 1,217 1,140 3,637 3,317
Selling, general, and administrative expenses 409 408 1,220 1,182
Research, development, and engineering expenses 181 168 539 485
Acquisition and integration costs 4 1 9 5
Restructuring and other charges, net 65 19 106 125
Operating income 558 544 1,763 1,520
Interest income 3 3 11 14
Interest expense (25) (32) (80) (95)
Other income (expense), net (1) (12) 2 (31)
--- --- --- ---
Income from continuing operations before income taxes 535 1 503 1,696 1 1,408
Income tax expense (81) (71) (789) (164)
--- --- ---- ----
Income from continuing operations 454 432 907 1,244
Income (loss) from discontinued operations, net of income taxes - 3 (3) 5
--- --- --- ---
Net income $454 $435 $904 $1,249
==== ==== ==== ======
Basic earnings per share:
Income from continuing operations $1.30 $1.22 $2.58 $3.50
Income (loss) from discontinued operations - 0.01 (0.01) 0.01
Net income 1.30 1.23 2.58 3.52
Diluted earnings per share:
Income from continuing operations $1.29 $1.21 $2.56 $3.47
Income (loss) from discontinued operations - 0.01 (0.01) 0.01
Net income 1.29 1.22 2.55 3.48
Dividends paid per common share $0.44 $0.40 $1.24 $1.14
Weighted-average number of shares outstanding:
Basic 349 355 351 355
Diluted 352 358 354 359
TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 29, September 29,
2018 2017
---- ----
(in millions, except share
data)
Assets
Current assets:
Cash and cash equivalents $770 $1,218
Accounts receivable, net of allowance for doubtful accounts of $21 2,591 2,290
Inventories 1,961 1,813
Prepaid expenses and other current assets 619 605
Total current assets 5,941 5,926
Property, plant, and equipment, net 3,633 3,400
Goodwill 5,616 5,651
Intangible assets, net 1,698 1,841
Deferred income taxes 1,672 2,141
Other assets 453 444
--- ---
Total Assets $19,013 $19,403
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $714 $710
Accounts payable 1,583 1,436
Accrued and other current liabilities 1,625 1,626
Deferred revenue 124 75
Total current liabilities 4,046 3,847
Long-term debt 3,294 3,634
Long-term pension and postretirement liabilities 1,119 1,160
Deferred income taxes 227 236
Income taxes 311 293
Other liabilities 524 482
--- ---
Total Liabilities 9,521 9,652
----- -----
Commitments and contingencies
Shareholders' equity:
Common shares, CHF 0.57 par value, 357,069,981 shares authorized and issued 157 157
Accumulated earnings 10,432 10,175
Treasury shares, at cost, 8,658,869 and 5,356,369 shares, respectively (798) (421)
Accumulated other comprehensive loss (299) (160)
---- ----
Total Shareholders' Equity 9,492 9,751
Total Liabilities and Shareholders' Equity $19,013 $19,403
======= =======
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Quarters Ended For the Nine Months Ended
---------------------- -------------------------
June 29, June 30, June 29, June 30,
2018 2017 2018 2017
---- ---- ---- ----
(in millions)
Cash Flows From Operating Activities:
Net income $454 $435 $904 $1,249
(Income) loss from discontinued operations, net of income taxes - (3) 3 (5)
--- --- --- ---
Income from continuing operations 454 432 907 1,244
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 173 157 514 469
Deferred income taxes (52) (28) 447 (146)
Provision for losses on accounts receivable and inventories 5 6 28 15
Share-based compensation expense 22 26 74 73
Other 5 11 (12) 23
Changes in assets and liabilities, net of the effects of acquisitions
and divestitures:
Accounts receivable, net 20 (45) (317) (260)
Inventories 60 (126) (184) (195)
Prepaid expenses and other current assets 55 (38) (52) (6)
Accounts payable (7) 69 180 217
Accrued and other current liabilities 70 43 (154) 56
Deferred revenue (23) (67) 49 (150)
Income taxes 22 21 24 54
Other (4) 63 23 55
--- --- --- ---
Net cash provided by continuing operating activities 800 524 1,527 1,449
Net cash used in discontinued operating activities - (1) - (1)
Net cash provided by operating activities 800 523 1,527 1,448
--- --- ----- -----
Cash Flows From Investing Activities:
Capital expenditures (239) (163) (686) (452)
Proceeds from sale of property, plant, and equipment 12 4 19 12
Acquisition of business, net of cash acquired - (77) - (77)
Other (6) (5) (8) (21)
--- --- --- ---
Net cash used in investing activities (233) (241) (675) (538)
---- ---- ---- ----
Cash Flows From Financing Activities:
Net increase (decrease) in commercial paper 46 - 271 (162)
Proceeds from the issuance of debt - - 119 89
Repayment of debt - - (708) -
Proceeds from exercise of share options 2 22 96 86
Repurchase of common shares (230) (178) (611) (376)
Payment of common share dividends to shareholders (154) (142) (435) (405)
Other (2) (2) (34) (24)
--- --- --- ---
Net cash used in continuing financing activities (338) (300) (1,302) (792)
Net cash provided by discontinued financing activities - 1 - 1
Net cash used in financing activities (338) (299) (1,302) (791)
---- ---- ------ ----
Effect of currency translation on cash (18) (1) 2 (11)
Net increase (decrease) in cash and cash equivalents 211 (18) (448) 108
Cash and cash equivalents at beginning of period 559 773 1,218 647
--- --- ----- ---
Cash and cash equivalents at end of period $770 $755 $770 $755
==== ==== ==== ====
Supplemental Cash Flow Information:
Interest paid $18 $40 $97 $106
Income taxes paid, net of refunds 109 79 317 256
TE CONNECTIVITY LTD.
RECONCILIATION OF FREE CASH FLOW (UNAUDITED)
For the Quarters Ended For the Nine Months Ended
---------------------- -------------------------
June 29, June 30, June 29, June 30,
2018 2017 2018 2017
---- ---- ---- ----
(in millions)
Net cash provided by continuing operating activities $800 $524 $1,527 $1,449
Excluding:
Receipts related to pre-separation U.S. tax matters, net - (15) (5) (23)
Cash paid (collected) pursuant to collateral requirements related
to cross-currency swap contracts (69) 58 10 19
Capital expenditures, net (227) (159) (667) (440)
Free cash flow (1) $504 $408 $865 $1,005
==== ==== ==== ======
(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
CONSOLIDATED SEGMENT DATA (UNAUDITED)
For the Quarters Ended For the Nine Months Ended
---------------------- -------------------------
June 29, June 30, June 29, June 30,
2018 2017 2018 2017
---- ---- ---- ----
($ in millions)
Net Sales Net Sales Net Sales Net Sales
--------- --------- --------- ---------
Transportation Solutions $2,112 $1,765 $6,278 $5,195
Industrial Solutions 988 905 2,842 2,553
Communications Solutions 664 697 1,869 1,909
Total $3,764 $3,367 $10,989 $9,657
====== ====== ======= ======
Operating Operating Operating Operating Operating Operating Operating Operating
Income Margin Income Margin Income Margin Income Margin
------ ------ ------ ------ ------ ------ ------ ------
Transportation Solutions $394 18.7% $333 18.9% $1,242 19.8% $986 19.0%
Industrial Solutions 93 9.4 100 11.0 321 11.3 258 10.1
Communications Solutions 71 10.7 111 15.9 200 10.7 276 14.5
Total $558 14.8% $544 16.2% $1,763 16.0% $1,520 15.7%
==== ==== ====== ======
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 $407 19.3% $337 19.1% $1,264 20.1% $1,048 20.2%
Industrial Solutions 142 14.4 117 12.9 404 14.2 320 12.5
Communications Solutions 79 11.9 113 16.2 218 11.7 287 15.0
Total $628 16.7% $567 16.8% $1,886 17.2% $1,655 17.1%
==== ==== ====== ======
(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NET SALES GROWTH (UNAUDITED)
Change in Net Sales for the Quarter Ended June 29, 2018
versus Net Sales for the Quarter Ended June 30, 2017
----------------------------------------------------
Net Organic Net
Sales Growth Sales Growth (1) Translation (2) Acquisitions
------------ ---------------- -------------- ------------
($ in millions)
Transportation Solutions (3):
Automotive $247 19.1% $130 10.0% $63 $54
Commercial transportation 73 27.9 57 21.9 16 -
Sensors 27 12.9 17 8.0 10 -
Total 347 19.7 204 11.6 89 54
--- --- --- ---
Industrial Solutions (3):
Industrial equipment 50 11.0 27 6.0 18 5
Aerospace, defense, oil, and gas 24 8.9 16 6.0 8 -
Energy 9 5.1 4 2.2 5 -
Total 83 9.2 47 5.3 31 5
--- --- --- ---
Communications Solutions (3):
Data and devices 32 13.1 27 10.8 5 -
Subsea communications (87) (32.1) (87) (32.1) - -
Appliances 22 12.2 16 8.8 6 -
Total (33) (4.7) (44) (6.3) 11 -
--- --- --- ---
Total $397 11.8% $207 6.2% $131 $59
==== ==== ==== ===
Change in Net Sales for the Nine Months Ended June 29, 2018
versus Net Sales for the Nine Months Ended June 30, 2017
--------------------------------------------------------
Net Organic Net
Sales Growth Sales Growth (1) Translation (2) Acquisitions
------------ ---------------- -------------- ------------
($ in millions)
Transportation Solutions (3):
Automotive $751 19.4% $352 9.0% $238 $161
Commercial transportation 245 33.9 192 26.4 53 -
Sensors 87 14.6 51 8.7 36 -
Total 1,083 20.8 595 11.5 327 161
----- --- --- ---
Industrial Solutions (3):
Industrial equipment 216 17.2 130 10.4 64 22
Aerospace, defense, oil, and gas 56 7.1 25 3.1 31 -
Energy 17 3.4 (8) (1.6) 25 -
Total 289 11.3 147 5.8 120 22
--- --- --- ---
Communications Solutions (3):
Data and devices 65 9.2 49 6.8 16 -
Subsea communications (196) (27.8) (196) (27.8) - -
Appliances 91 18.4 73 14.5 18 -
Total (40) (2.1) (74) (3.9) 34 -
--- --- --- ---
Total $1,332 13.8% $668 7.0% $481 $183
====== ==== ==== ====
(1) Organic net sales growth is a non-GAAP financial measure. See description of non-GAAP financial measures.
(2) Represents the change in net sales resulting from changes in foreign currency exchange rates.
(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deems necessary.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended June 29, 2018
(UNAUDITED)
Adjustments
-----------
Acquisition Restructuring
Related and Other Adjusted
U.S. GAAP Charges (1) Charges, Net (1) (Non-GAAP) (2)
--------- ---------- --------------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $394 $2 $11 $407
Industrial Solutions 93 3 46 142
Communications Solutions 71 - 8 79
Total $558 $5 $65 $628
==== === === ====
Operating Margin 14.8% 16.7%
==== ====
Other Expense, Net $(1) $ - $ - $(1)
=== ================= ======================= ===
Income Tax Expense $(81) $(2) $(19) $(102)
==== === ==== =====
Effective Tax Rate 15.1% 16.9%
==== ====
Income from Continuing Operations $454 $3 $46 $503
==== === === ====
Diluted Earnings per Share from
Continuing Operations $1.29 $0.01 $0.13 $1.43
===== ===== ===== =====
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.
(2) See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended June 30, 2017
(UNAUDITED)
Adjustments
-----------
Acquisition Restructuring
Related and Other Tax Adjusted
U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3)
--------- ---------- --------------- -------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $333 $1 $3 $ - $337
Industrial Solutions 100 3 14 - 117
Communications Solutions 111 - 2 - 113
Total $544 $4 $19 $ - $567
==== === === ========== ====
Operating Margin 16.2% 16.8%
==== ====
Other Expense, Net $(12) $ - $ - $7 $(5)
==== ================= ======================= === ===
Income Tax Expense $(71) $(1) $(3) $(14) $(89)
==== === === ==== ====
Effective Tax Rate 14.1% 16.7%
==== ====
Income from Continuing Operations $432 $3 $16 $(7) $444
==== === === === ====
Diluted Earnings per Share from
Continuing Operations $1.21 $0.01 $0.04 $(0.02) $1.24
===== ===== ===== ====== =====
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.
(2) Income tax benefits associated with pre-separation tax matters and the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.
(3) See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Nine Months Ended June 29, 2018
(UNAUDITED)
Adjustments
-----------
Acquisition Restructuring
Related and Other Tax Adjusted
U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3)
--------- ---------- --------------- -------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $1,242 $9 $13 $ - $1,264
Industrial Solutions 321 8 75 - 404
Communications Solutions 200 - 18 - 218
Total $1,763 $17 $106 $ - $1,886
====== === ==== ========== ======
Operating Margin 16.0% 17.2%
==== ====
Other Income, Net $2 $ - $ - $(1) $1
=== ================= ======================= === ===
Income Tax Expense $(789) $(4) $(27) $506 $(314)
===== === ==== ==== =====
Effective Tax Rate 46.5% 17.3%
==== ====
Income from Continuing Operations $907 $13 $79 $505 $1,504
==== === === ==== ======
Diluted Earnings per Share from
Continuing Operations $2.56 $0.04 $0.22 $1.43 $4.25
===== ===== ===== ===== =====
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.
(2) Includes $567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act and a $61 million income tax benefit related to certain legal entity restructurings.
(3) See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Nine Months Ended June 30, 2017
(UNAUDITED)
Adjustments
-----------
Acquisition Restructuring
Related and Other Tax Adjusted
U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3)
--------- ---------- --------------- -------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $986 $2 $60 $ - $1,048
Industrial Solutions 258 8 54 - 320
Communications Solutions 276 - 11 - 287
Total $1,520 $10 $125 $ - $1,655
====== === ==== ========== ======
Operating Margin 15.7% 17.1%
==== ====
Other Expense, Net $(31) $ - $ - $7 $(24)
==== ================= ======================= === ====
Income Tax Expense $(164) $(2) $(33) $(66) $(265)
===== === ==== ==== =====
Effective Tax Rate 11.6% 17.1%
==== ====
Income from Continuing Operations $1,244 $8 $92 $(59) $1,285
====== === === ==== ======
Diluted Earnings per Share from
Continuing Operations $3.47 $0.02 $0.26 $(0.16) $3.58
===== ===== ===== ====== =====
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.
(2) Includes income tax benefits associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards. Also includes income tax benefits associated with pre-separation tax matters and
the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.
(3) See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended September 29, 2017
(UNAUDITED)
Adjustments
-----------
Restructuring
Acquisition and Other
Related Charges Adjusted
U.S. GAAP Charges (1) (Credits), Net (1) (Non-GAAP) (2)
--------- ---------- ----------------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $321 $1 $7 $329
Industrial Solutions 111 - 19 130
Communications Solutions 109 - (3) 106
Total $541 $1 $23 $565
==== === === ====
Operating Margin 15.7% 16.3%
==== ====
Other Income, Net $8 $ - $ - $8
=== ================= ======================== ===
Income Tax Expense $(91) $(1) $(7) $(99)
==== === === ====
Effective Tax Rate 17.5% 18.2%
==== ====
Income from Continuing Operations $429 $ - $16 $445
==== ================= === ====
Diluted Earnings per Share from
Continuing Operations $1.21 $ - $0.04 $1.25
===== ================= ===== =====
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.
(2) See description of non-GAAP financial measures.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Year Ended September 29, 2017
(UNAUDITED)
Adjustments
-----------
Acquisition Restructuring
Related and Other Tax Adjusted
U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3)
--------- ---------- --------------- -------- -------------
($ in millions, except per share data)
Operating Income:
Transportation Solutions $1,307 $3 $67 $ - $1,377
Industrial Solutions 369 8 73 - 450
Communications Solutions 385 - 8 - 393
Total $2,061 $11 $148 $ - $2,220
====== === ==== ========== ======
Operating Margin 15.7% 16.9%
==== ====
Other Expense, Net $(23) $ - $ - $7 $(16)
==== ================= ======================= === ====
Income Tax Expense $(255) $(3) $(40) $(66) $(364)
===== === ==== ==== =====
Effective Tax Rate 13.2% 17.4%
==== ====
Income from Continuing Operations $1,673 $8 $108 $(59) $1,730
====== === ==== ==== ======
Diluted Earnings per Share from
Continuing Operations $4.67 $0.02 $0.30 $(0.16) $4.83
===== ===== ===== ====== =====
(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 benefits associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards. Also includes income tax benefits associated with pre-separation tax matters and
the related impact to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.
(3) 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 July 25, 2018
(UNAUDITED)
Outlook for
Quarter Ending
September 28, Outlook for
2018 Fiscal 2018
---- -----------
Diluted earnings per share from continuing operations (GAAP) $1.23 - $1.25 $3.79 - $3.81
Restructuring and other charges, net 0.07 0.29
Acquisition related charges 0.01 0.05
Tax items - 1.43
Adjusted diluted earnings per share from continuing operations (non-GAAP) (1) $1.31 - $1.33 $5.56 - $5.58
============= =============
Net sales growth (GAAP) 4 - 6% 11 - 12%
Translation 2 (3)
(Acquisitions) divestitures, net (2) (2)
Organic net sales growth (non-GAAP) (1) 4 - 6% 6 - 7%
===== =====
(1) See description of non-GAAP financial measures.
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SOURCE TE Connectivity Ltd.
