Exhibit 99.1
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TE Connectivity announces third quarter results for fiscal year 2020
Sales ahead of expectations and demonstrated earnings resiliency in challenging market environment
SCHAFFHAUSEN, Switzerland – July 29, 2020 – TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal third quarter ended June 26, 2020.
Third Quarter Highlights
| • | Net sales were $2.5 billion, down 20% sequentially on a reported basis and ahead of the 25% decline the company expected. |
| • | Diluted earnings per share (EPS) from continuing operations were a loss of $0.18. Adjusted EPS were $0.59, exceeding the company’s expectation. |
| • | Cash flow from continuing operations was $380 million and free cash flow was $280 million. Year-to-date cash flow from continuing operations was $1.3 billion, with year-to-date free cash flow of $834 million. During the quarter the company returned $241 million to shareholders. |
| • | Strong liquidity position with approximately $2 billion available. |
“I’m pleased we delivered sales and adjusted earnings per share above our expectations, despite the ongoing COVID-related impacts this quarter,” said TE Connectivity Chief Executive Officer Terrence Curtin. “We continue to prioritize the health and safety of our employees, who have done an excellent job adapting and continuing to meet customer commitments during this dynamic time. We believe the quarter we just ended is the low point for our business, and we have seen improvements in orders and we expect sequential revenue and margin improvement into our fourth fiscal quarter. We are taking advantage of the current market environment and leveraging the diversity of our portfolio and the key technology trends to drive future content growth, while executing on our global manufacturing strategy and accelerating cost reduction. These actions position us well for the gradual recovery we expect to see in market demand.”
Fourth Quarter Outlook
For the fiscal fourth quarter of 2020, the company expects net sales to be up approximately 10 percent sequentially, driven primarily by an increase in its Transportation Solutions segment. The company is not providing full year guidance due to limited visibility of COVID-19 impact on future demand.
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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 July 29, 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
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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
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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
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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.
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Contacts: | Media Relations: Fernando Vivanco TE Connectivity 610-893-9756 Fernando.Vivanco@te.com | Investor Relations: Sujal Shah TE Connectivity 610-893-9790 Sujal.Shah@te.com |
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TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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| For the Quarters Ended | | For the Nine Months Ended | ||||||||
| June 26, | | June 28, | | June 26, | | June 28, | ||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
| (in millions, except per share data) | ||||||||||
Net sales | $ | 2,548 | | $ | 3,389 | | $ | 8,911 | | $ | 10,148 |
Cost of sales | | 1,841 | | | 2,279 | | | 6,145 | | | 6,806 |
Gross margin | | 707 | | | 1,110 | | | 2,766 | | | 3,342 |
Selling, general, and administrative expenses | | 321 | | | 356 | | | 1,040 | | | 1,118 |
Research, development, and engineering expenses | | 146 | | | 158 | | | 465 | | | 485 |
Acquisition and integration costs | | 8 | | | 9 | | | 27 | | | 21 |
Restructuring and other charges, net | | 98 | | | 67 | | | 144 | | | 184 |
Impairment of goodwill | | - | | | - | | | 900 | | | - |
Operating income | | 134 | | | 520 | | | 190 | | | 1,534 |
Interest income | | 2 | | | 4 | | | 13 | | | 13 |
Interest expense | | (13) | | | (13) | | | (36) | | | (55) |
Other income, net | | 4 | | | 2 | | | 20 | | | 2 |
Income from continuing operations before income taxes | | 127 | | | 513 | | | 187 | | | 1,494 |
Income tax (expense) benefit | | (185) | | | 245 | | | (674) | | | 76 |
Income (loss) from continuing operations | | (58) | | | 758 | | | (487) | | | 1,570 |
Income (loss) from discontinued operations, net of income taxes | | 17 | | | (1) | | | 16 | | | (98) |
Net income (loss) | $ | (41) | | $ | 757 | | $ | (471) | | $ | 1,472 |
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Basic earnings (loss) per share: | | | | | | | | | | | |
Income (loss) from continuing operations | $ | (0.18) | | $ | 2.25 | | $ | (1.46) | | $ | 4.63 |
Income (loss) from discontinued operations | | 0.05 | | | - | | | 0.05 | | | (0.29) |
Net income (loss) | | (0.12) | | | 2.25 | | | (1.41) | | | 4.34 |
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Diluted earnings (loss) per share: | | | | | | | | | | | |
Income (loss) from continuing operations | $ | (0.18) | | $ | 2.24 | | $ | (1.46) | | $ | 4.60 |
Income (loss) from discontinued operations | | 0.05 | | | - | | | 0.05 | | | (0.29) |
Net income (loss) | | (0.12) | | | 2.23 | | | (1.41) | | | 4.32 |
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Weighted-average number of shares outstanding: | | | | | | | | | | | |
Basic | | 330 | | | 337 | | | 333 | | | 339 |
Diluted | | 330 | | | 339 | | | 333 | | | 341 |
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TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | | | | |
| June 26, | | September 27, | ||
| 2020 | | 2019 | ||
| (in millions, except share data) | ||||
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | $ | 474 | | $ | 927 |
Accounts receivable, net of allowance for doubtful accounts of $34 and $25, respectively | | 2,146 | | | 2,320 |
Inventories | | 2,227 | | | 1,836 |
Prepaid expenses and other current assets | | 472 | | | 471 |
Total current assets | | 5,319 | | | 5,554 |
Property, plant, and equipment, net | | 3,598 | | | 3,574 |
Goodwill | | 5,143 | | | 5,740 |
Intangible assets, net | | 1,612 | | | 1,596 |
Deferred income taxes | | 2,286 | | | 2,776 |
Other assets | | 882 | | | 454 |
Total assets | $ | 18,840 | | $ | 19,694 |
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Liabilities and equity | | | | | |
Current liabilities: | | | | | |
Short-term debt | $ | 691 | | $ | 570 |
Accounts payable | | 1,271 | | | 1,357 |
Accrued and other current liabilities | | 1,765 | | | 1,613 |
Total current liabilities | | 3,727 | | | 3,540 |
Long-term debt | | 3,395 | | | 3,395 |
Long-term pension and postretirement liabilities | | 1,366 | | | 1,367 |
Deferred income taxes | | 161 | | | 156 |
Income taxes | | 244 | | | 239 |
Other liabilities | | 803 | | | 427 |
Total liabilities | | 9,696 | | | 9,124 |
Commitments and contingencies | | | | | |
Equity: | | | | | |
TE Connectivity Ltd. shareholders' equity: | | | | | |
Common shares, CHF 0.57 par value, 338,953,381 shares authorized and issued, and 350,951,381 shares authorized and issued, respectively | | 149 | | | 154 |
Accumulated earnings | | 10,125 | | | 12,256 |
Treasury shares, at cost, 8,961,449 and 15,862,337 shares, respectively | | (729) | | | (1,337) |
Accumulated other comprehensive loss | | (509) | | | (503) |
Total TE Connectivity Ltd. shareholders' equity | | 9,036 | | | 10,570 |
Noncontrolling interests | | 108 | | | - |
Total equity | | 9,144 | | | 10,570 |
Total liabilities and equity | $ | 18,840 | | $ | 19,694 |
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TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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| For the Quarters Ended | | For the Nine Months Ended | ||||||||
| June 26, | | June 28, | | June 26, | | June 28, | ||||
| 2020 | | 2019 | | 2020 | | 2019 | ||||
| (in millions) | ||||||||||
Cash flows from operating activities: | | | | | | | | | | | |
Net income (loss) | $ | (41) | | $ | 757 | | $ | (471) | | $ | 1,472 |
(Income) loss from discontinued operations, net of income taxes | | (17) | | | 1 | | | (16) | | | 98 |
Income (loss) from continuing operations | | (58) | | | 758 | | | (487) | | | 1,570 |
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: | | | | | | | | | | | |
Impairment of goodwill | | - | | | - | | | 900 | | | - |
Depreciation and amortization | | 176 | | | 174 | | | 530 | | | 515 |
Deferred income taxes | | 114 | | | (262) | | | 459 | | | (290) |
Non-cash lease cost | | 27 | | | - | | | 79 | | | - |
Provision for losses on accounts receivable and inventories | | 10 | | | 8 | | | 28 | | | 36 |
Share-based compensation expense | | 17 | | | 18 | | | 54 | | | 56 |
Other | | 29 | | | (6) | | | 40 | | | 26 |
Changes in assets and liabilities, net of the effects of acquisitions and divestitures: | | | | | | | | | | | |
Accounts receivable, net | | 322 | | | 2 | | | 182 | | | (105) |
Inventories | | (191) | | | 11 | | | (342) | | | (59) |
Prepaid expenses and other current assets | | 2 | | | 18 | | | 27 | | | 109 |
Accounts payable | | (130) | | | (42) | | | (81) | | | (86) |
Accrued and other current liabilities | | (24) | | | 59 | | | (204) | | | (147) |
Income taxes | | 19 | | | (84) | | | 20 | | | (63) |
Other | | 67 | | | 38 | | | 67 | | | 13 |
Net cash provided by continuing operating activities | | 380 | | | 692 | | | 1,272 | | | 1,575 |
Net cash used in discontinued operating activities | | - | | | (1) | | | - | | | (31) |
Net cash provided by operating activities | | 380 | | | 691 | | | 1,272 | | | 1,544 |
Cash flows from investing activities: | | | | | | | | | | | |
Capital expenditures | | (130) | | | (169) | | | (439) | | | (570) |
Proceeds from sale of property, plant, and equipment | | 3 | | | 3 | | | 6 | | | 16 |
Acquisition of businesses, net of cash acquired | | 31 | | | (291) | | | (328) | | | (283) |
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation | | - | | | - | | | - | | | 297 |
Other | | 15 | | | 3 | | | 13 | | | 3 |
Net cash used in continuing investing activities | | (81) | | | (454) | | | (748) | | | (537) |
Net cash used in discontinued investing activities | | - | | | - | | | - | | | (2) |
Net cash used in investing activities | | (81) | | | (454) | | | (748) | | | (539) |
Cash flows from financing activities: | | | | | | | | | | | |
Net decrease in commercial paper | | - | | | (360) | | | (219) | | | (270) |
Proceeds from issuance of debt | | - | | | 396 | | | 593 | | | 746 |
Repayment of debt | | (352) | | | - | | | (352) | | | (441) |
Proceeds from exercise of share options | | 2 | | | 38 | | | 29 | | | 55 |
Repurchase of common shares | | (115) | | | (174) | | | (523) | | | (913) |
Payment of common share dividends to shareholders | | (159) | | | (155) | | | (466) | | | (454) |
Transfers to discontinued operations | | - | | | (1) | | | - | | | (33) |
Other | | (1) | | | (2) | | | (32) | | | (32) |
Net cash used in continuing financing activities | | (625) | | | (258) | | | (970) | | | (1,342) |
Net cash provided by discontinued financing activities | | - | | | 1 | | | - | | | 33 |
Net cash used in financing activities | | (625) | | | (257) | | | (970) | | | (1,309) |
Effect of currency translation on cash | | 4 | | | 1 | | | (7) | | | 2 |
Net decrease in cash, cash equivalents, and restricted cash | | (322) | | | (19) | | | (453) | | | (302) |
Cash, cash equivalents, and restricted cash at beginning of period | | 796 | | | 565 | | | 927 | | | 848 |
Cash, cash equivalents, and restricted cash at end of period | $ | 474 | | $ | 546 | | $ | 474 | | $ | 546 |
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Supplemental cash flow information: | | | | | | | | | | | |
Interest paid on debt, net | $ | 7 | | $ | 4 | | $ | 31 | | $ | 56 |
Income taxes paid, net of refunds | | 51 | | | 100 | | | 195 | | | 277 |
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TE CONNECTIVITY LTD.
RECONCILIATION OF FREE CASH FLOW (UNAUDITED)
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| For the Quarters Ended | | For the Nine Months Ended | ||||||||
| June 26, | | June 28, | | June 26, | | June 28, | ||||
| 2020 | | 2019 | | 2020 | | 2019 | ||||
| (in millions) | ||||||||||
Net cash provided by continuing operating activities | $ | 380 | | $ | 692 | | $ | 1,272 | | $ | 1,575 |
Excluding: | | | | | | | | | | | |
Cash (collected) paid pursuant to collateral requirements related to cross-currency swap contracts | | 27 | | | (11) | | | (5) | | | (93) |
Capital expenditures, net | | (127) | | | (166) | | | (433) | | | (554) |
Free cash flow (1) | $ | 280 | | $ | 515 | | $ | 834 | | $ | 928 |
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(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures. | |||||||||||
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TE CONNECTIVITY LTD.
CONSOLIDATED SEGMENT DATA (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Quarters Ended | | | For the Nine Months Ended | | ||||||||||||||||||
| June 26, | | | June 28, | | | June 26, | | | June 28, | | ||||||||||||
| 2020 | | | 2019 | | | 2020 | | | 2019 | | ||||||||||||
| ($ in millions) | | |||||||||||||||||||||
| Net Sales |
| | | | Net Sales |
| | | | Net Sales |
| | | | Net Sales |
| | | ||||
Transportation Solutions | $ | 1,255 | | | | | $ | 1,968 | | | | | $ | 4,980 | | | | | $ | 5,925 | | | |
Industrial Solutions | | 865 | | | | | | 1,005 | | | | | | 2,754 | | | | | | 2,940 | | | |
Communications Solutions | | 428 | | | | | | 416 | | | | | | 1,177 | | | | | | 1,283 | | | |
Total | $ | 2,548 | | | | | $ | 3,389 | | | | | $ | 8,911 | | | | | $ | 10,148 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating | | Operating | | Operating | | Operating | | Operating | | Operating | | Operating | | Operating | ||||||||
| Income | | Margin | | Income | | Margin | | Income | | Margin | | Income | | Margin | ||||||||
Transportation Solutions | $ | (1) | | (0.1) | % | | $ | 308 | | 15.7 | % | | $ | (291) | | (5.8) | % | | $ | 956 | | 16.1 | % |
Industrial Solutions | | 70 | | 8.1 | | | | 156 | | 15.5 | | | | 327 | | 11.9 | | | | 393 | | 13.4 | |
Communications Solutions | | 65 | | 15.2 | | | | 56 | | 13.5 | | | | 154 | | 13.1 | | | | 185 | | 14.4 | |
Total | $ | 134 | | 5.3 | % | | $ | 520 | | 15.3 | % | | $ | 190 | | 2.1 | % | | $ | 1,534 | | 15.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | $ | 60 | | 4.8 | % | | $ | 367 | | 18.6 | % | | $ | 707 | | 14.2 | % | | $ | 1,067 | | 18.0 | % |
Industrial Solutions | | 112 | | 12.9 | | | | 167 | | 16.6 | | | | 389 | | 14.1 | | | | 464 | | 15.8 | |
Communications Solutions | | 68 | | 15.9 | | | | 62 | | 14.9 | | | | 165 | | 14.0 | | | | 211 | | 16.4 | |
Total | $ | 240 | | 9.4 | % | | $ | 596 | | 17.6 | % | | $ | 1,261 | | 14.2 | % | | $ | 1,742 | | 17.2 | % |
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(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures. | | ||||||||||||||||||||||
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TE CONNECTIVITY LTD.
RECONCILIATION OF NET SALES GROWTH (DECLINE) (UNAUDITED)
| | | | | | | | | | | | | | | | | |
| Change in Net Sales for the Quarter Ended June 26, 2020 | ||||||||||||||||
| versus Net Sales for the Quarter Ended June 28, 2019 | ||||||||||||||||
| Net Sales | | | Organic Net Sales | | | | | | ||||||||
| Growth (Decline) | | | Growth (Decline) (1) | | | Translation (2) | | Acquisitions | ||||||||
| ($ in millions) | ||||||||||||||||
Transportation Solutions (3): | | |
| | | | | |
| | | | | | | | |
Automotive | $ | (621) | | (43.8) | % | | $ | (609) | | (42.8) | % | | $ | (12) | | $ | - |
Commercial transportation | | (84) | | (26.5) | | | | (78) | | (24.1) | | | | (6) | | | - |
Sensors | | (8) | | (3.4) | | | | (51) | | (22.1) | | | | (1) | | | 44 |
Total | | (713) | | (36.2) | | | | (738) | | (37.3) | | | | (19) | | | 44 |
Industrial Solutions (3): | | | | | | | | | | | | | | | | | |
Aerospace, defense, oil, and gas | | (77) | | (22.5) | | | | (74) | | (21.9) | | | | (3) | | | - |
Industrial equipment | | (44) | | (14.2) | | | | (40) | | (12.7) | | | | (4) | | | - |
Medical | | (15) | | (8.5) | | | | (15) | | (8.5) | | | | - | | | - |
Energy | | (4) | | (2.2) | | | | 1 | | 0.5 | | | | (5) | | | - |
Total | | (140) | | (13.9) | | | | (128) | | (12.7) | | | | (12) | | | - |
Communications Solutions (3): | | | | | | | | | | | | | | | | | |
Data and devices | | 31 | | 12.7 | | | | 31 | | 12.7 | | | | - | | | - |
Appliances | | (19) | | (11.1) | | | | (15) | | (8.9) | | | | (4) | | | - |
Total | | 12 | | 2.9 | | | | 16 | | 3.8 | | | | (4) | | | - |
Total | $ | (841) | | (24.8) | % | | $ | (850) | | (25.0) | % | | $ | (35) | | $ | 44 |
| | | | | | | | | | | | | | | | | |
| Change in Net Sales for the Nine Months Ended June 26, 2020 | ||||||||||||||||
| versus Net Sales for the Nine Months Ended June 28, 2019 | ||||||||||||||||
| Net Sales | | | Organic Net Sales | | | | | | ||||||||
| Growth (Decline) | | | Growth (Decline) (1) | | | Translation (2) | | Acquisitions | ||||||||
| ($ in millions) | ||||||||||||||||
Transportation Solutions (3): | | |
| | | | | |
| | | | | | | | |
Automotive | $ | (745) | | (17.3) | % | | $ | (681) | | (15.8) | % | | $ | (64) | | $ | - |
Commercial transportation | | (153) | | (16.3) | | | | (159) | | (16.9) | | | | (21) | | | 27 |
Sensors | | (47) | | (7.0) | | | | (109) | | (16.2) | | | | (6) | | | 68 |
Total | | (945) | | (15.9) | | | | (949) | | (16.0) | | | | (91) | | | 95 |
Industrial Solutions (3): | | | | | | | | | | | | | | | | | |
Aerospace, defense, oil, and gas | | (66) | | (6.9) | | | | (57) | | (6.0) | | | | (9) | | | - |
Industrial equipment | | (142) | | (14.9) | | | | (127) | | (13.4) | | | | (15) | | | - |
Medical | | 6 | | 1.2 | | | | 7 | | 1.3 | | | | (1) | | | - |
Energy | | 16 | | 3.1 | | | | 30 | | 5.8 | | | | (14) | | | - |
Total | | (186) | | (6.3) | | | | (147) | | (5.0) | | | | (39) | | | - |
Communications Solutions (3): | | | | | | | | | | | | | | | | | |
Data and devices | | (40) | | (5.3) | | | | (40) | | (5.3) | | | | - | | | - |
Appliances | | (66) | | (12.5) | | | | (58) | | (10.8) | | | | (8) | | | - |
Total | | (106) | | (8.3) | | | | (98) | | (7.6) | | | | (8) | | | - |
Total | $ | (1,237) | | (12.2) | % | | $ | (1,194) | | (11.7) | % | | $ | (138) | | $ | 95 |
| | | | | | | | | | | | | | | | | |
(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. | |||||||||||||||||
11
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended June 26, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | | | Adjustments | | | | | |||||||
| | | | Acquisition- | | Restructuring | | | | | | |||||
| | | | Related | | and Other | | | | Adjusted | | |||||
| U.S. GAAP | | | Charges (1) | | Charges, Net (1) | | Tax Items (2) | | (Non-GAAP) (4) | | |||||
| ($ in millions, except per share data) | | ||||||||||||||
Operating income (loss): | | | | | | | | | | | | | | | | |
Transportation Solutions | $ | (1) | | | $ | 6 | | $ | 55 | | $ | - | | $ | 60 | |
Industrial Solutions | | 70 | | | | 2 | | | 40 | | | - | | | 112 | |
Communications Solutions | | 65 | | | | - | | | 3 | | | - | | | 68 | |
Total | $ | 134 | | | $ | 8 | | $ | 98 | | $ | - | | $ | 240 | |
| | | | | | | | | | | | | | | | |
Operating margin | | 5.3 | % | | | | | | | | | | | | 9.4 | % |
| | | | | | | | | | | | | | | | |
Other income, net | $ | 4 | | | $ | - | | $ | - | | $ | - | | $ | 4 | |
| | | | | | | | | | | | | | | | |
Income tax expense | $ | (185) | | | $ | (1) | | $ | (21) | | $ | 170 | | $ | (37) | |
| | | | | | | | | | | | | | | | |
Effective tax rate | | 145.7 | % | | | | | | | | | | | | 15.9 | % |
| | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | $ | (58) | | | $ | 7 | | $ | 77 | | $ | 170 | | $ | 196 | |
| | | | | | | | | | | | | | | | |
Diluted earnings (loss) per share from continuing operations (3) | $ | (0.18) | | | $ | 0.02 | | $ | 0.23 | | $ | 0.51 | | $ | 0.59 | |
| | | | | | | | | | | | | | | | |
(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 expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets. | | |||||||||||||||
(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. | | |||||||||||||||
12
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended June 28, 2019
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | | | Adjustments | | | | | |||||||
| | | | Acquisition- | | Restructuring | | | | | | |||||
| | | | Related | | and Other | | | | Adjusted | | |||||
| U.S. GAAP | | | Charges (1) | | Charges, Net (1) | | Tax Items (2) | | (Non-GAAP) (3) | | |||||
| ($ in millions, except per share data) | | ||||||||||||||
Operating income: | | | | | | | | | | | | | | | | |
Transportation Solutions | $ | 308 | | | $ | 6 | | $ | 53 | | $ | - | | $ | 367 | |
Industrial Solutions | | 156 | | | | 3 | | | 8 | | | - | | | 167 | |
Communications Solutions | | 56 | | | | - | | | 6 | | | - | | | 62 | |
Total | $ | 520 | | | $ | 9 | | $ | 67 | | $ | - | | $ | 596 | |
| | | | | | | | | | | | | | | | |
Operating margin | | 15.3 | % | | | | | | | | | | | | 17.6 | % |
| | | | | | | | | | | | | | | | |
Other income, net | $ | 2 | | | $ | - | | $ | - | | $ | - | | $ | 2 | |
| | | | | | | | | | | | | | | | |
Income tax (expense) benefit | $ | 245 | | | $ | (1) | | $ | (17) | | $ | (307) | | $ | (80) | |
| | | | | | | | | | | | | | | | |
Effective tax rate | | (47.8) | % | | | | | | | | | | | | 13.6 | % |
| | | | | | | | | | | | | | | | |
Income from continuing operations | $ | 758 | | | $ | 8 | | $ | 50 | | $ | (307) | | $ | 509 | |
| | | | | | | | | | | | | | | | |
Diluted earnings per share from continuing operations | $ | 2.24 | | | $ | 0.02 | | $ | 0.15 | | $ | (0.91) | | $ | 1.50 | |
| | | | | | | | | | | | | | | | |
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. | | |||||||||||||||
(2) Includes a $214 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform and a $93 million income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction. | | |||||||||||||||
(3) See description of non-GAAP financial measures. | | |||||||||||||||
13
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Nine Months Ended June 26, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | |
| | | | | Adjustments | | | | | ||||||||||
| | | | Acquisition- | | Restructuring | | | | | | | | ||||||
| | | | Related | | and Other | | Impairment | | | | Adjusted | | ||||||
| U.S. GAAP | | | Charges (1) | | Charges, Net (1) | | of Goodwill (1) | | Tax Items (2) | | (Non-GAAP) (4) | | ||||||
| ($ in millions, except per share data) | | |||||||||||||||||
Operating income (loss): | | | | | | | | | | | | | | | | | | | |
Transportation Solutions | $ | (291) | | | $ | 21 | | $ | 77 | | $ | 900 | | $ | - | | $ | 707 | |
Industrial Solutions | | 327 | | | | 6 | | | 56 | | | - | | | - | | | 389 | |
Communications Solutions | | 154 | | | | - | | | 11 | | | - | | | - | | | 165 | |
Total | $ | 190 | | | $ | 27 | | $ | 144 | | $ | 900 | | $ | - | | $ | 1,261 | |
| | | | | | | | | | | | | | | | | | | |
Operating margin | | 2.1 | % | | | | | | | | | | | | | | | 14.2 | % |
| | | | | | | | | | | | | | | | | | | |
Other income, net | $ | 20 | | | $ | - | | $ | - | | $ | - | | $ | (8) | | $ | 12 | |
| | | | | | | | | | | | | | | | | | | |
Income tax expense | $ | (674) | | | $ | (4) | | $ | (25) | | $ | (4) | | $ | 494 | | $ | (213) | |
| | | | | | | | | | | | | | | | | | | |
Effective tax rate | | 360.4 | % | | | | | | | | | | | | | | | 17.0 | % |
| | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | $ | (487) | | | $ | 23 | | $ | 119 | | $ | 896 | | $ | 486 | | $ | 1,037 | |
| | | | | | | | | | | | | | | | | | | |
Diluted earnings (loss) per share from continuing operations (3) | $ | (1.46) | | | $ | 0.07 | | $ | 0.36 | | $ | 2.68 | | $ | 1.46 | | $ | 3.10 | |
| | | | | | | | | | | | | | | | | | | |
(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 $355 million of income tax expense related to the tax impacts of certain measures of Swiss tax reform and $170 million of income tax expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets, partially offset by a $31 million income tax benefit related to pre-separation tax matters and the termination of the tax sharing agreement with Tyco International and Covidien. | | ||||||||||||||||||
(3) U.S. GAAP diluted shares excludes one million of nonvested share awards and options outstanding as the inclusion of these securities would have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares. | | ||||||||||||||||||
(4) See description of non-GAAP financial measures. | | ||||||||||||||||||
14
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Nine Months Ended June 28, 2019
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | | | | Adjustments | | | | | ||||||
| | | | Acquisition- | | Restructuring | | | | | | |||||
| | | | Related | | and Other | | | | Adjusted | | |||||
| U.S. GAAP | | | Charges (1) | | Charges, Net (1) | | Tax Items (2) | | (Non-GAAP) (3) | | |||||
| ($ in millions, except per share data) | | ||||||||||||||
Operating income: | | | | | | | | | | | | | | | | |
Transportation Solutions | $ | 956 | | | $ | 13 | | $ | 98 | | $ | - | | $ | 1,067 | |
Industrial Solutions | | 393 | | | | 11 | | | 60 | | | - | | | 464 | |
Communications Solutions | | 185 | | | | - | | | 26 | | | - | | | 211 | |
Total | $ | 1,534 | | | $ | 24 | | $ | 184 | | $ | - | | $ | 1,742 | |
| | | | | | | | | | | | | | | | |
Operating margin | | 15.1 | % | | | | | | | | | | | | 17.2 | % |
| | | | | | | | | | | | | | | | |
Other income, net | $ | 2 | | | $ | - | | $ | - | | $ | - | | $ | 2 | |
| | | | | | | | | | | | | | | | |
Income tax (expense) benefit | $ | 76 | | | $ | (4) | | $ | (46) | | $ | (292) | | $ | (266) | |
| | | | | | | | | | | | | | | | |
Effective tax rate | | (5.1) | % | | | | | | | | | | | | 15.6 | % |
| | | | | | | | | | | | | | | | |
Income from continuing operations | $ | 1,570 | | | $ | 20 | | $ | 138 | | $ | (292) | | $ | 1,436 | |
| | | | | | | | | | | | | | | | |
Diluted earnings per share from continuing operations | $ | 4.60 | | | $ | 0.06 | | $ | 0.40 | | $ | (0.86) | | $ | 4.21 | |
| | | | | | | | | | | | | | | | |
(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. | | |||||||||||||||
(2) Includes a $214 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform, a $93 million income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction, and $15 million of income tax expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions. | | |||||||||||||||
(3) See description of non-GAAP financial measures. | | |||||||||||||||
15
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended September 27, 2019
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | | | Adjustments | | | | | |||||||
| | | | | | Acquisition- | | | | | | | | | | |
| | | | | Related Charges | | Restructuring | | | | | | ||||
| | | | | and Other | | and Other | | | | Adjusted | | ||||
| U.S. GAAP | | | | Items (1)(2) | | Charges, Net (1) | | Tax Items | | (Non-GAAP) (3) | | ||||
| ($ 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 $17 million. | | |||||||||||||||
(3) See description of non-GAAP financial measures. | | |||||||||||||||
16
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Year Ended September 27, 2019
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | | | Adjustments | | | | | |||||||
| | | | Acquisition- | | | | | | | | |||||
| | | | Related Charges | | Restructuring | | | | | | |||||
| | | | and Other | | and Other | | | | Adjusted | | |||||
| U.S. GAAP | | | Items (1)(2) | | Charges, Net (1) | | Tax Items (3) | | (Non-GAAP) (4) | | |||||
| ($ 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. | | |||||||||||||||
17