8-K
TE Connectivity plc (TEL)
8-K
2020-07-29
For: 2020-07-29
View Original
Added on
April 02, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2020
TE CONNECTIVITY LTD.
(Exact name of registrant as specified in its charter)
| | | |
|---|---|---|
| Switzerland | | 98-0518048 |
| (Jurisdiction of Incorporation) | | (IRS Employer Identification Number) |
001-33260
(Commission File Number)
Mühlenstrasse 26 , CH-8200 **** Schaffhausen
Switzerland
(Address of Principal Executive Offices, including Zip Code)
+41 **** (0)52 **** 633 66 61
(Registrant’s telephone number, including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | |
|---|---|---|---|---|
| Title of each class | | Trading symbol | | Name of each exchange on which registered |
| Common Shares, Par Value CHF 0.57 | | TEL | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On July 29, 2020, TE Connectivity Ltd. (the “Company”) issued a press release reporting the Company’s third quarter results for fiscal 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference in this Item 2.02.
Item 7.01. Regulation FD Disclosure
The Company will hold a conference call and webcast on July 29, 2020 (see information in the press release attached hereto as Exhibit 99.1 under “Conference Call and Webcast”). A copy of the slide materials to be discussed at the conference call and webcast is being furnished pursuant to Regulation FD as Exhibit 99.2 and is incorporated herein by reference, and the slide materials also can be accessed at the “Investors” section of the Company’s website (www.te.com).
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| ExhibitNo. | **** | Description |
|---|---|---|
| 99.1 | Press release issued July 29, 2020 | |
| 99.2 | Presentation - TE Connectivity Q3 2020 Earnings Call (July 29, 2020) | |
| | | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 29, 2020 | TE CONNECTIVITY LTD.<br><br><br><br> |
|---|---|
| By: /s/ Heath A. Mitts | |
| Name: Heath A. Mitts<br> | |
| Title: Executive Vice President and Chief Financial Officer |
Exhibit 99.1
| | |
|---|
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. 1
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 2
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 3
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 4
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.
#
| <br><br><br><br><br><br><br><br> | <br><br><br><br><br><br><br><br> | |
|---|---|---|
| Contacts: | Media Relations :<br><br>Fernando Vivanco<br><br>TE Connectivity<br><br>610-893-9756<br><br>Fernando.Vivanco@te.com | Investor Relations :<br><br>Sujal Shah<br><br>TE Connectivity<br><br>610-893-9790<br><br>Sujal.Shah@te.com |
5
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | 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 |
| | | | | | | | | | | | |
| 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 |
| | | | | | | | | | | | |
| 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 |
| | | | | | | | | | | | |
| Weighted-average number of shares outstanding: | | | | | | | | | | | |
| Basic | | 330 | | | 337 | | | 333 | | | 339 |
| Diluted | | 330 | | | 339 | | | 333 | | | 341 |
6
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 |
| | | | | | |
| 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 |
7
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | 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 |
| | | | | | | | | | | | |
| Supplemental cash flow information: | | | | | | | | | | | |
| Interest paid on debt, net | $ | 7 | | $ | 4 | | $ | 31 | | $ | 56 |
| Income taxes paid, net of refunds | | 51 | | | 100 | | | 195 | | | 277 |
8
TE CONNECTIVITY LTD.
RECONCILIATION OF FREE CASH FLOW (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 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 |
| | | | | | | | | | | | |
| ^(1)^Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures. |
9
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 | | | | | $ | 1,968 | | | | | $ | 4,980 | | | | | $ | 5,925 | | | | |
| Industrial Solutions | | | | | | | 1,005 | | | | | | 2,754 | | | | | | 2,940 | | | |
| Communications Solutions | | | | | | | 416 | | | | | | 1,177 | | | | | | 1,283 | | | |
| Total | | | | | $ | 3,389 | | | | | $ | 8,911 | | | | | $ | 10,148 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Operating | | Operating | | Operating | | Operating | | Operating | | Operating | | Operating | | Operating | |||||||
| | Income | | Margin | | Income | | Margin | | Income | | Margin | | Income | | Margin | |||||||
| Transportation Solutions | | (0.1) | % | | $ | 308 | | 15.7 | % | | $ | (291) | | (5.8) | % | | $ | 956 | | 16.1 | % | |
| Industrial Solutions | | | 8.1 | | | | 156 | | 15.5 | | | | 327 | | 11.9 | | | | 393 | | 13.4 | |
| Communications Solutions | | | 15.2 | | | | 56 | | 13.5 | | | | 154 | | 13.1 | | | | 185 | | 14.4 | |
| Total | | 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 | | 4.8 | % | | $ | 367 | | 18.6 | % | | $ | 707 | | 14.2 | % | | $ | 1,067 | | 18.0 | % | |
| Industrial Solutions | | | 12.9 | | | | 167 | | 16.6 | | | | 389 | | 14.1 | | | | 464 | | 15.8 | |
| Communications Solutions | | | 15.9 | | | | 62 | | 14.9 | | | | 165 | | 14.0 | | | | 211 | | 16.4 | |
| Total | | 9.4 | % | | $ | 596 | | 17.6 | % | | $ | 1,261 | | 14.2 | % | | $ | 1,742 | | 17.2 | % | |
| | | | | | | | | | | | | | | | | | | | | | | |
| ^(1)^Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures. | |
All values are in US Dollars.
10
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 | | (43.8) | % | | $ | (609) | | (42.8) | % | | $ | (12) | | $ | - | |
| Commercial transportation | | | (26.5) | | | | (78) | | (24.1) | | | | (6) | | | - |
| Sensors | | | (3.4) | | | | (51) | | (22.1) | | | | (1) | | | 44 |
| Total | | | (36.2) | | | | (738) | | (37.3) | | | | (19) | | | 44 |
| Industrial Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Aerospace, defense, oil, and gas | | | (22.5) | | | | (74) | | (21.9) | | | | (3) | | | - |
| Industrial equipment | | | (14.2) | | | | (40) | | (12.7) | | | | (4) | | | - |
| Medical | | | (8.5) | | | | (15) | | (8.5) | | | | - | | | - |
| Energy | | | (2.2) | | | | 1 | | 0.5 | | | | (5) | | | - |
| Total | | | (13.9) | | | | (128) | | (12.7) | | | | (12) | | | - |
| Communications Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Data and devices | | | 12.7 | | | | 31 | | 12.7 | | | | - | | | - |
| Appliances | | | (11.1) | | | | (15) | | (8.9) | | | | (4) | | | - |
| Total | | | 2.9 | | | | 16 | | 3.8 | | | | (4) | | | - |
| Total | | (24.8) | % | | $ | (850) | | (25.0) | % | | $ | (35) | | $ | 44 |
All values are in US Dollars.
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 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 | | (17.3) | % | | $ | (681) | | (15.8) | % | | $ | (64) | | $ | - | |
| Commercial transportation | | | (16.3) | | | | (159) | | (16.9) | | | | (21) | | | 27 |
| Sensors | | | (7.0) | | | | (109) | | (16.2) | | | | (6) | | | 68 |
| Total | | | (15.9) | | | | (949) | | (16.0) | | | | (91) | | | 95 |
| Industrial Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Aerospace, defense, oil, and gas | | | (6.9) | | | | (57) | | (6.0) | | | | (9) | | | - |
| Industrial equipment | | | (14.9) | | | | (127) | | (13.4) | | | | (15) | | | - |
| Medical | | | 1.2 | | | | 7 | | 1.3 | | | | (1) | | | - |
| Energy | | | 3.1 | | | | 30 | | 5.8 | | | | (14) | | | - |
| Total | | | (6.3) | | | | (147) | | (5.0) | | | | (39) | | | - |
| Communications Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Data and devices | | | (5.3) | | | | (40) | | (5.3) | | | | - | | | - |
| Appliances | | | (12.5) | | | | (58) | | (10.8) | | | | (8) | | | - |
| Total | | | (8.3) | | | | (98) | | (7.6) | | | | (8) | | | - |
| Total | | (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. |
All values are in US Dollars.
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 | | | $ | 6 | | $ | 55 | | $ | - | | $ | 60 | | |
| Industrial Solutions | | | | | 2 | | | 40 | | | - | | | 112 | |
| Communications Solutions | | | | | - | | | 3 | | | - | | | 68 | |
| Total | | | $ | 8 | | $ | 98 | | $ | - | | $ | 240 | | |
| | | | | | | | | | | | | | | | |
| Operating margin | | % | | | | | | | | | | | | 9.4 | % |
| | | | | | | | | | | | | | | | |
| Other income, net | | | $ | - | | $ | - | | $ | - | | $ | 4 | | |
| | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (1) | | $ | (21) | | $ | 170 | | $ | (37) | | |
| | | | | | | | | | | | | | | | |
| Effective tax rate | | % | | | | | | | | | | | | 15.9 | % |
| | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | | $ | 7 | | $ | 77 | | $ | 170 | | $ | 196 | | |
| | | | | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations^(3)^ | | | $ | 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. | |
All values are in US Dollars.
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 | | ||||
| | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | Tax Items ^(2)^ | **** | (Non-GAAP) ^(3)^ | | ||||
| | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 6 | | $ | 53 | | $ | - | | $ | 367 | |
| Industrial Solutions | | | | 3 | | | 8 | | | - | | | 167 | |
| Communications Solutions | | | | - | | | 6 | | | - | | | 62 | |
| Total | | | $ | 9 | | $ | 67 | | $ | - | | $ | 596 | |
| | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | 17.6 | % |
| | | | | | | | | | | | | | | |
| Other income, net | | | $ | - | | $ | - | | $ | - | | $ | 2 | |
| | | | | | | | | | | | | | | |
| Income tax (expense) benefit | | | $ | (1) | | $ | (17) | | $ | (307) | | $ | (80) | |
| | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | 13.6 | % |
| | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 8 | | $ | 50 | | $ | (307) | | $ | 509 | |
| | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 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. | |
All values are in US Dollars.
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 | | |||||
| | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | of Goodwill ^(1)^ | **** | Tax Items^(2)^ | **** | (Non-GAAP) ^(4)^ | | |||||
| | | ||||||||||||||||
| Operating income (loss): | | | | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 21 | | $ | 77 | | $ | 900 | | $ | - | | $ | 707 | |
| Industrial Solutions | | | | 6 | | | 56 | | | - | | | - | | | 389 | |
| Communications Solutions | | | | - | | | 11 | | | - | | | - | | | 165 | |
| Total | | | $ | 27 | | $ | 144 | | $ | 900 | | $ | - | | $ | 1,261 | |
| | | | | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | | | | 14.2 | % |
| | | | | | | | | | | | | | | | | | |
| Other income, net | | | $ | - | | $ | - | | $ | - | | $ | (8) | | $ | 12 | |
| | | | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (4) | | $ | (25) | | $ | (4) | | $ | 494 | | $ | (213) | |
| | | | | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | | | | 17.0 | % |
| | | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | | $ | 23 | | $ | 119 | | $ | 896 | | $ | 486 | | $ | 1,037 | |
| | | | | | | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations (3) | | | $ | 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. | |
All values are in US Dollars.
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 | | ||||
| | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | Tax Items ^(2)^ | **** | (Non-GAAP) ^(3)^ | | ||||
| | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 13 | | $ | 98 | | $ | - | | $ | 1,067 | |
| Industrial Solutions | | | | 11 | | | 60 | | | - | | | 464 | |
| Communications Solutions | | | | - | | | 26 | | | - | | | 211 | |
| Total | | | $ | 24 | | $ | 184 | | $ | - | | $ | 1,742 | |
| | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | 17.2 | % |
| | | | | | | | | | | | | | | |
| Other income, net | | | $ | - | | $ | - | | $ | - | | $ | 2 | |
| | | | | | | | | | | | | | | |
| Income tax (expense) benefit | | | $ | (4) | | $ | (46) | | $ | (292) | | $ | (266) | |
| | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | 15.6 | % |
| | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 20 | | $ | 138 | | $ | (292) | | $ | 1,436 | |
| | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 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. | |
All values are in US Dollars.
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 | | |||
| | | | | Items ^(1)(2)^ | **** | Charges, Net^(1)^ | **** | Tax Items | **** | (Non-GAAP) ^(3)^ | | |||
| | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 18 | | $ | 46 | | $ | - | | $ | 334 | |
| Industrial Solutions | | | | 4 | | | 3 | | | - | | | 157 | |
| Communications Solutions | | | | 1 | | | 22 | | | - | | | 47 | |
| Total | | | $ | 23 | | $ | 71 | | $ | - | | $ | 538 | |
| | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | 16.3 | % |
| | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (5) | | $ | (15) | | $ | 1 | | $ | (80) | |
| | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | 15.1 | % |
| | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 18 | | $ | 56 | | $ | 1 | | $ | 451 | |
| | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 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. | |
All values are in US Dollars.
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 | | ||||
| | | | Items ^(1)(2)^ | **** | Charges, Net^(1)^ | **** | Tax Items ^(3)^ | **** | (Non-GAAP) ^(4)^ | | ||||
| | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 31 | | $ | 144 | | $ | - | | $ | 1,401 | |
| Industrial Solutions | | | | 15 | | | 63 | | | - | | | 621 | |
| Communications Solutions | | | | 1 | | | 48 | | | - | | | 258 | |
| Total | | | $ | 47 | | $ | 255 | | $ | - | | $ | 2,280 | |
| | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | 17.0 | % |
| | | | | | | | | | | | | | | |
| Other income, net | | | $ | - | | $ | - | | $ | - | | $ | 2 | |
| | | | | | | | | | | | | | | |
| Income tax (expense) benefit | | | $ | (9) | | $ | (61) | | $ | (291) | | $ | (346) | |
| | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | 15.5 | % |
| | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 38 | | $ | 194 | | $ | (291) | | $ | 1,887 | |
| | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 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. | |
All values are in US Dollars.
17
Exhibit 99.2
| EVERY CONNECTION COUNTS<br>TE Connectivity<br>Third Quarter<br>2020 Earnings<br>July 29, 2020 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Forward-Looking Statements<br>This presentation contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of<br>1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in<br>circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results,<br>performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking<br>and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking<br>statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do<br>so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law.<br>The forward-looking statements in this presentation include statements addressing our future financial condition and operating results, and<br>the impact on our operations resulting from the coronavirus disease 2019 (“COVID-19”). Examples of factors that could cause actual results<br>to differ materially from those described in the forward-looking statements include, among others, the extent, severity and duration of COVID-<br>19 negatively affecting our business operations; business, economic, competitive and regulatory risks, such as conditions affecting demand<br>for products in the automotive and other industries we serve; competition and pricing pressure; fluctuations in foreign currency exchange<br>rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments<br>in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; and the<br>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<br>to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and<br>cannot be predicted. Such developments may include the geographic spread of the virus, the severity of the virus, the duration of the<br>outbreak, the impact on our suppliers’ and customers’ supply chains, the actions that may be taken by various governmental authorities in<br>response to the outbreak in jurisdictions in which we operate, and the possible impact on the global economy and local economies in which<br>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<br>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<br>with the U.S. Securities and Exchange Commission.<br>Non-GAAP Financial Measures<br>Where we have used non-GAAP financial measures, reconciliations to the most comparable GAAP measure are provided, along with a<br>disclosure on the usefulness of the non-GAAP financial measure, in this presentation.<br>Forward-Looking Statements<br>and Non-GAAP Financial Measures<br>2 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Q3 Summary<br>Sales of $2.5B, better than expectations; Adjusted EPS of $0.59<br>• Sales down 20% sequentially on a reported basis versus expectations of down 25%<br>• Transportation down 32% sequentially, better than anticipated across the segment<br>• Industrial down 10% sequentially, as expected<br>• Communications up 14% sequentially, as expected<br>• Adjusted Operating Margins of 9.4% and Adjusted EPS of $0.59<br>• Q3 FCF of $280M with ~$240M returned to shareholders; YTD Free Cash Flow of ~$830M<br>• Our balance sheet remains strong with ~$2B of liquidity available<br>• Resiliency in manufacturing and operations is enabling us to meet our customer commitments<br>Expecting sequential sales and EPS growth in Q4<br>• Expect Q4 sales to be up ~10% sequentially from Q3<br>• Growth driven by the Transportation segment with increases in auto production<br>• Continue to expect FCF to exceed $1B in FY20<br>• Continue to execute on cost reduction and footprint consolidation plans<br>• Strong opportunities for growth and margin expansion as demand returns<br>Adjusted EPS, Adjusted Operating Margin and Free Cash Flow are non-GAAP financial measures; see Appendix for descriptions and reconciliations. 3 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Strong backlog and improving order trends support sequential growth in Q4<br>$ in Millions<br>Reported FY20<br>Q2<br>FY20<br>Q3<br>Growth<br>Q2 to Q3<br>Sequential Order Trends<br>Transportation 1,849 1,178 (36)%<br>Industrial 1,051 824 (22)%<br>Communications 467 384 (18)%<br>Total TE 3,367 2,386<br>July book to bill of 1.05 Book to Bill 1.05 0.94<br>Segment Orders Summary<br>4<br>• Growth in China in the Transportation<br>and Industrial segments<br>• Weakness in orders in North America<br>and Europe across all segments<br>• Seeing improving monthly order trends<br>since April<br>• Strong backlog position entering in Q4 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>$2.5 B<br>Q3 2020 Q4 2020<br>• Auto production expected to increase ~40% from ~12M vehicles produced in Q3 to ~17M in Q4<br>• Sequential growth in other businesses; offset by residual impact of supply chain corrections<br>• Expect sequential growth in Transportation; modest growth in Industrial expected to be offset by<br>modest declines in Communications<br>• ~35% fall through on sequential revenue growth to adjusted operating income<br>$ in Millions<br>Q3 to Q4 Sequential Sales Growth<br>5<br>Sequential Sales up<br>~10% driven by increases<br>in auto production<br>Adjusted Operating Income is a non-GAAP financial measures: see Appendix for descriptions and reconciliations |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Transportation Solutions<br>$1,968<br>$1,255<br>Q3 2019 Q3 2020<br>• Automotive sales down Y/Y in Q3 at a similar rate as<br>global auto production declines; 6% outperformance<br>versus the market YTD, due to content growth<br>• Commercial Transportation organic declines in North<br>America and Europe, partially offset by growth in China<br>• Sensors decline driven by weakness across all markets<br>Y/Y Growth Rates Reported Organic<br>Automotive $797 (44)% (43)%<br>Commercial<br>Transportation 233 (27)% (24)%<br>Sensors 225 (3)% (22)%<br>Transportation<br>Solutions $1,255 (36)% (37)%<br>Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations.<br>Q3 Sales Q3 Business Performance<br>Q3 Adjusted Operating Margin<br>$ in Millions<br>Reported<br>Down 36%<br>Organic<br>Down 37%<br>Adjusted Operating<br>Margins declining on<br>lower volumes<br>Adjusted EBITDA Margin 24.2% 13.8%<br>6<br>18.6%<br>4.8%<br>Q3 2019 Q3 2020 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Industrial Solutions<br>$1,005<br>$865<br>Q3 2019 Q3 2020<br>Y/Y Growth Rates Reported Organic<br>Aerospace, Defense<br>and Marine $265 (23)% (22)%<br>Industrial Equipment 265 (14)% (13)%<br>Medical 161 (9)% (9)%<br>Energy 174 (2)% 1%<br>Industrial Solutions $865 (14)% (13)%<br>Adjusted Operating<br>Margins decline on<br>lower volumes<br>16.6% 12.9%<br>Q3 2019 Q3 2020<br>Adjusted EBITDA Margin 21.2% 18.5%<br>• AD&M decline driven by weakness in Commercial<br>Aerospace market<br>• Industrial Equipment declines in North America and Europe<br>partially offset by growth in China<br>• Medical decline driven by delayed elective procedures<br>caused by COVID-19<br>• Energy growth in Europe and China, partially offset by<br>weakness in North America<br>• On track with long term segment margin expansion plans<br>$ in Millions<br>Q3 Sales Q3 Business Performance<br>Q3 Adjusted Operating Margin<br>Reported<br>Down 14%<br>Organic<br>Down 13%<br>7 Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations. |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>$416 $428<br>Q3 2019 Q3 2020<br>Reported<br>Up 3%<br>Organic<br>Up 4%<br>Y/Y Growth Rates Reported Organic<br>Data & Devices $276 13% 13%<br>Appliances 152 (11)% (9)%<br>Communications<br>Solutions $428 3% 4%<br>• Data & Devices growth driven by strength in cloud<br>related demand<br>• Appliances decline driven by end market weakness<br>in all regions<br>• Strong Adjusted Operating Margin performance in<br>line with business model target<br>14.9% 15.9%<br>Q3 2019 Q3 2020<br>Adjusted Operating<br>Margin expansion<br>of 100 basis points<br>due to strong<br>operational<br>performance<br>Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations<br>Communications Solutions<br>Q3 Sales<br>Q3 Adjusted Operating Margin<br>Q3 Business Performance<br>$ in Millions<br>Adjusted EBITDA Margin 19.2% 19.4%<br>8 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Q3 Financial Summary<br>($ in Millions, except per share amounts) Q3 FY19 Q3 FY20<br>Net Sales $ 3,389 $ 2,548<br>Operating Income (Loss) $ 520 $ 134<br>Operating Margin 15.3% 5.3%<br>Acquisition Related Charges 9 8<br>Restructuring & Other Charges, net 67 98<br>Adjusted Operating Income $ 596 $ 240<br>Adjusted Operating Margin 17.6% 9.4%<br>Earnings (Loss) Per Share* $ 2.24 $ (0.18)<br>Acquisition Related Charges 0.02 0.02<br>Restructuring & Other Charges, net 0.15 0.23<br>Tax Items (0.91) 0.51<br>Adjusted EPS $ 1.50 $ 0.59<br>*Represents Diluted Earnings (Loss) Per Share from Continuing Operations.<br>** Income tax expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets.<br>Adjusted Operating Income, Adjusted Operating Margin and Adjusted EPS are non-GAAP financial measures; see Appendix for descriptions and reconciliations. 9<br>** |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Q3 Financial Performance<br>$928 $834<br>YTD 2019 YTD 2020<br>$3,389 $3,195<br>$2,548<br>Q3 2019 Q2 2020 Q3 2020<br>$1.50 $1.29<br>$0.59<br>Q3 2019 Q2 2020 Q3 2020<br>Adjusted<br>EBITDA<br>Margin<br>22.7% 21.9% 16.3%<br>17.6% 16.2%<br>9.4%<br>Q3 2019 Q2 2020 Q3 2020<br>Adjusted Operating Margin, Adjusted EPS, Adjusted EBITDA Margin and Free Cash Flow are non-GAAP financial measures: see Appendix for descriptions and reconciliations.<br>Sales Adjusted Operating Margin<br>Free Cash Flow Adjusted EPS<br>Continue to expect FCF in excess of $1B in FY20<br>10 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Expectations Going Forward<br>• Expect Q4 sales to grow ~10% from Q3 low point with sequential improvement driven<br>by Auto<br>• ~35% fall through on sequential revenue growth to adjusted operating income<br>• Q4 Adjusted effective tax rate of ~19.5%<br>Market<br>Assumptions<br>4Q20 Expectations<br>Actions We<br>Are Taking<br>Adjusted Operating Income and Adjusted Effective Tax Rate are non-GAAP financial measure; see Appendix for description<br>Strong portfolio position and early cost actions enabling<br>TE to navigate a challenging demand environment<br>11<br>• Continue to execute on cost reduction and factory footprint consolidation plans<br>• Demonstrating resilience in global manufacturing enabling us to meet our customer<br>commitments<br>• Maintaining balanced capital strategy, with thoughtful evaluation of share buyback plans<br>• Global auto production expected to increase to ~17M vehicles in Q4<br>• Our portfolio is well positioned to benefit from secular trends, including content growth<br>• Expect revenue growth and margin & EPS expansion as market demand gradually<br>recovers |
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| EVERY CONNECTION COUNTS<br>Additional<br>Information |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>$64 $69 $243<br>$223 $344<br>$311 $443<br>$515 $280<br>$670<br>$688<br>2018 2019 2020<br>Q1 Q2 Q3 Q4<br>Free Cash Flow & Liquidity<br>FY20 FCF expected to be >$1B<br>Strong liquidity position<br>• Remain committed to quarterly dividend<br>• Will continue to evaluate share repurchases<br>• Expecting capital expenditures of ~$575M<br>$697<br>$500<br>$616<br>$350<br>$616<br>2021 2022 2023 2024 2025<br>As of6/26/2020<br>$474<br>Cash<br>$ in Millions<br>• ~$2.0B liquidity available<br>• ~$500M in cash<br>• $1.5B undrawn revolver<br>• Debt/EBITDA currently at 1.6x***<br>*Free Cash Flow is a non-GAAP financial measure; see Appendix for description and reconciliation<br>**Excludes debt maturing after fiscal year 2025<br>***Represents the Ratio of Consolidated Total Debt to Consolidated EBITDA as defined in our five-year unsecured senior credit agreement. Please refer to the Appendix for additional information<br>Free Cash Flow* Priorities<br>Cash & Debt Maturity Profile** Liquidity<br>13 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Y/Y Q3 2020<br>Adjusted EPS is a non-GAAP financial measure; See Appendix for description and reconciliation.<br>Sales<br>(in millions)<br>Adjusted EPS<br>Q3 2019 Results $3,389 $1.50<br>Operational Performance (806) (0.93)<br>FX Impact (35) 0.03<br>Tax Rate Impact -(0.01)<br>Q3 2020 Results $2,548 $0.59<br>14 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>($ in Millions) Q3 2019 Q3 2020<br>Beginning Cash Balance $565 $796<br>Free Cash Flow 515 280<br>Dividends (155) (159)<br>Share repurchases (174) (115)<br>Net increase (decrease) in debt 36 (352)<br>Acquisition of businesses, net of cash<br>acquired (291) 31<br>Other 50 (7)<br>Ending Cash Balance $546 $474<br>Total Debt $4,036 $4,086<br>A/R $2,463 $2,146<br>Days Sales Outstanding* 65 76<br>Inventory $1,961 $2,227<br>Days on Hand* 74 105<br>Accounts Payable $1,438 $1,271<br>Days Outstanding* 57 62<br>Free Cash Flow and Working Capital Liquidity, Cash & Debt<br>($ in Millions) Q3 2019 Q3 2020<br>Cash from Continuing Operations $692 $380<br>Capital expenditures, net<br>Cash (collected) paid pursuant to<br>collateral requirements related to cross-<br>currency swap contracts<br>(166)<br>(11)<br>(127)<br>27<br>Free Cash Flow $515 $280<br>Free Cash Flow is a non-GAAP financial measure, see Appendix for description and reconciliation<br>* Adjusted to exclude the impact of acquisitions<br>Q3 Balance Sheet & Cash Flow Summary<br>15 |
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| EVERY CONNECTION COUNTS<br>Appendix |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper. 17<br>Non-GAAP Financial Measures<br>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<br>accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures provide supplemental information and should not be<br>considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its<br>decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance<br>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<br>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<br>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<br>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<br>non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.<br>The following provides additional information regarding our non-GAAP financial measures:<br>• Organic Net Sales Growth (Decline) – represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency<br>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<br>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<br>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<br>plans.<br>• Adjusted Operating Income (Loss) and Adjusted Operating Margin – represent operating income (loss) and operating margin, respectively, (the most comparable GAAP<br>financial measures) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, and other income or charges, if any.<br>We utilize these adjusted measures in combination with operating income (loss) and operating margin to assess segment level operating performance and to provide insight<br>to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income (Loss) is a significant component in our incentive<br>compensation plans.<br>• Adjusted Other Income (Expense), Net – represents net other income (expense) (the most comparable GAAP financial measure) before special items including tax sharing<br>income related to adjustments to prior period tax returns and other items, if any.<br>• Adjusted Income Tax (Expense) Benefit and Adjusted Effective Tax Rate – represent income tax (expense) benefit and effective tax rate, respectively, (the most<br>comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition-related charges, impairment of<br>goodwill, other income or charges, and certain significant tax items, if any.<br>• Adjusted Income (Loss) from Continuing Operations – represents income (loss) from continuing operations (the most comparable GAAP financial measure) before special<br>items including restructuring and other charges, acquisition-related charges, impairment of goodwill, tax sharing income related to adjustments to prior period tax returns<br>and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.<br>• Adjusted Earnings (Loss) Per Share – represents diluted earnings (loss) per share from continuing operations (the most comparable GAAP financial measure) before<br>special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, tax sharing income related to adjustments to prior period tax<br>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<br>component in our incentive compensation plans. |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper. 18<br>• Adjusted EBITDA and Adjusted EBITDA Margin - represent net income (loss) and net income (loss) as a percentage of net sales, respectively, (the most comparable GAAP<br>financial measures) before interest expense, interest income, income taxes, depreciation, and amortization, as adjusted for net other income, income from discontinued<br>operations, and special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, and other income or charges, if any.<br>• 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<br>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<br>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<br>generated from our operations. Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash<br>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<br>by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters and cash paid (collected)<br>pursuant to collateral requirements related to cross-currency swap contracts, are also excluded by management in evaluating Free Cash Flow. Net capital expenditures<br>consist of capital expenditures less proceeds from the sale of property, plant, and equipment. These items are subtracted because they represent long-term commitments.<br>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<br>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<br>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<br>payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not<br>considered in the calculation of Free Cash Flow.<br>• Adjusted Return on Invested Capital (ROIC) – represents adjusted net operating profit after tax divided by average invested capital. We use Adjusted Return on Invested<br>Capital as an indicator of our capital efficiency. Adjusted Return on Invested Capital is not a measure defined by GAAP. It is calculated by us, in part, using non-GAAP<br>financial measures. We are providing our calculation of Adjusted Return on Invested Capital as this measure may not be defined and calculated by other companies in the<br>same manner.<br>• Ratio of Consolidated Total Debt to Consolidated EBITDA is a covenant used in our Amended and Restated Five-Year Senior Credit Agreement dated as of November 14,<br>2018 and filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 14, 2018. Consolidated Total Debt and Consolidated EBITDA are<br>adjusted financial measures as defined in the Credit Agreement.<br>Non-GAAP Financial Measures (cont.) |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Segment Summary<br>19<br><br><br>Transportation Solutions $ 1,255 $ 1,968 $ 4,980 $ 5,925<br>Industrial Solutions 865 1,005 2,754 2,940<br>Communications Solutions 428 416 1,177 1,283<br>Total $ 2,548 $ 3,389 $ 8,911 $ 10,148<br>Transportation Solutions $ (1) (0.1) % $ 308 15.7 % $ (291) (5.8) % $ 956 16.1 %<br>Industrial Solutions 70 8.1 156 15.5 327 11.9 393 13.4<br>Communications Solutions 65 15.2 56 13.5 154 13.1 185 14.4<br>Total $ 134 5.3 % $ 520 15.3 % $ 190 2.1 % $ 1,534 15.1 %<br>Transportation Solutions $ 60 4.8 % $ 367 18.6 % $ 707 14.2 % $ 1,067 18.0 %<br>Industrial Solutions 112 12.9 167 16.6 389 14.1 464 15.8<br>Communications Solutions 68 15.9 62 14.9 165 14.0 211 16.4<br>Total $ 240 9.4 % $ 596 17.6 % $ 1,261 14.2 % $ 1,742 17.2 %<br>2020<br>For the Nine Months Ended<br>2019<br>For the Quarters Ended<br>June 26, June 28, June 26, June 28,<br>Net Sales<br>Operating<br>Income<br>Net Sales Net Sales Net Sales<br>Income (1)<br>Adjusted<br>Operating<br>Income (1)<br>Income<br>Operating Operating<br>Income<br>Operating<br>Income<br>(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP financial measures.<br>2020 2019<br>($ in millions)<br>Operating<br>Margin (1)<br>Adjusted<br>Operating<br>Margin (1)<br>Adjusted<br>Operating<br>Income (1)<br>Adjusted<br>Operating<br>Adjusted<br>Operating<br>Income (1)<br>Operating<br>Margin<br>Operating<br>Margin<br>Operating<br>Margin<br>Operating<br>Margin<br>Adjusted<br>Operating<br>Margin (1)<br>Adjusted<br>Operating<br>Margin (1)<br>Adjusted |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Net Sales Growth<br>20<br><br>Transportation Solutions (3):<br>Automotive $ (621) (43.8) % $ (609) (42.8) % $ (12) $ -<br>Commercial transportation (84) (26.5) (78) (24.1) (6) -<br>Sensors (8) (3.4) (51) (22.1) (1) 44<br>Total (713) (36.2) (738) (37.3) (19) 44<br>Industrial Solutions (3):<br>Aerospace, defense, oil, and gas (77) (22.5) (74) (21.9) (3) -<br>Industrial equipment (44) (14.2) (40) (12.7) (4) -<br>Medical (15) (8.5) (15) (8.5) - -<br>Energy (4) (2.2) 1 0.5 (5) -<br>Total (140) (13.9) (128) (12.7) (12) -<br>Communications Solutions (3):<br>Data and devices 31 12.7 31 12.7 - -<br>Appliances (19) (11.1) (15) (8.9) (4) -<br>Total 12 2.9 16 3.8 (4) -<br>Total $ (841) (24.8) % $ (850) (25.0) % $ (35) $ 44<br>Transportation Solutions (3):<br>Automotive $ (745) (17.3) % $ (681) (15.8) % $ (64) $ -<br>Commercial transportation (153) (16.3) (159) (16.9) (21) 27<br>Sensors (47) (7.0) (109) (16.2) (6) 68<br>Total (945) (15.9) (949) (16.0) (91) 95<br>Industrial Solutions (3):<br>Aerospace, defense, oil, and gas (66) (6.9) (57) (6.0) (9) -<br>Industrial equipment (142) (14.9) (127) (13.4) (15) -<br>Medical 6 1.2 7 1.3 (1) -<br>Energy 16 3.1 30 5.8 (14) -<br>Total (186) (6.3) (147) (5.0) (39) -<br>Communications Solutions (3):<br>Data and devices (40) (5.3) (40) (5.3) - -<br>Appliances (66) (12.5) (58) (10.8) (8) -<br>Total (106) (8.3) (98) (7.6) (8) -<br>Total $ (1,237) (12.2) % $ (1,194) (11.7) % $ (138) $ 95<br>(1) Organic net sales growth (decline) is a non-GAAP financial measure. See description of non-GAAP financial measures.<br>(2) Represents the change in net sales resulting from changes in foreign currency exchange rates.<br>(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as<br>management deems necessary.<br>($ in millions)<br>Net Sales<br>Growth (Decline)<br>Organic Net Sales<br>Growth (Decline) (1)<br>Change in Net Sales for the Quarter Ended June 26, 2020<br>versus Net Sales for the Quarter Ended June 28, 2019<br>Net Sales Organic Net Sales<br>Growth (Decline) Growth (Decline) (1) Translation (2) Acquisitions<br>Change in Net Sales for the Nine Months Ended June 26, 2020<br>versus Net Sales for the Nine Months Ended June 28, 2019<br>($ in millions)<br>Translation (2) Acquisitions |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended June 26, 2020<br>21<br><br>Operating income (loss):<br>Transportation Solutions $ (1) $ 6 $ 55 $ - $ 60<br>Industrial Solutions 70 2 40 - 112<br>Communications Solutions 65 - 3 - 68<br>Total $ 134 $ 8 $ 98 $ - $ 240<br>Operating margin 5.3 % 9.4 %<br>Other income, net $ 4 $ - $ - $ - $ 4<br>Income tax expense $ (185) $ (1) $ (21) $ 170 $ (37)<br>Effective tax rate 145.7 % 15.9 %<br>Income (loss) from continuing<br>operations $ (58) $ 7 $ 77 $ 170 $ 196<br>Diluted earnings (loss) per share from<br>continuing operations (3) $ (0.18) $ 0.02 $ 0.23 $ 0.51 $ 0.59<br><br>(4) See description of non-GAAP financial measures.<br>(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<br>laws in effect for each such jurisdiction.<br>U.S. GAAP Charges (1) (Non-GAAP) (4) Charges, Net (1)<br>($ in millions, except per share data)<br>Tax Items (2)<br>(3) U.S. GAAP diluted shares excludes one million of nonvested share awards and options outstanding as the inclusion of these securities would<br>have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares.<br>(2) Income tax expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets.<br>Adjustments<br>and Other Adjusted Related<br>Acquisition- Restructuring |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br><br>Operating income:<br>Transportation Solutions $ 308 $ 6 $ 53 $ - $ 367<br>Industrial Solutions 156 3 8 - 167<br>Communications Solutions 56 - 6 - 62<br>Total $ 520 $ 9 $ 67 $ - $ 596<br>Operating margin 15.3 % 17.6 %<br>Other income, net $ 2 $ - $ - $ - $ 2<br>Income tax (expense) benefit $ 245 $ (1) $ (17) $ (307) $ (80)<br>Effective tax rate (47.8) % 13.6 %<br>Income from continuing operations $ 758 $ 8 $ 50 $ (307) $ 509<br>Diluted earnings per share from<br>continuing operations $ 2.24 $ 0.02 $ 0.15 $ (0.91) $ 1.50<br>(3) See description of non-GAAP financial measures.<br>(2) Includes a $214 million income tax benefit related to the tax impacts of certain measures of Swiss tax reform and a $93 million income tax<br>benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction.<br>(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax<br>laws in effect for each such jurisdiction.<br>U.S. GAAP<br>Adjustments<br>Acquisition-<br>Related<br>Charges (1)<br>Adjusted<br>(Non-GAAP) (3)<br>($ in millions, except per share data)<br>Charges, Net (1)<br>and Other<br>Restructuring<br>Items (2)<br>Tax<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended June 28, 2019<br>22 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Nine Months Ended June 26, 2020<br>23<br><br>Operating income (loss):<br>Transportation Solutions $ (291) $ 21 $ 77 $ 900 $ - $ 707<br>Industrial Solutions 327 6 56 - - 389<br>Communications Solutions 154 - 11 - - 165<br>Total $ 190 $ 27 $ 144 $ 900 $ - $ 1,261<br>Operating margin 2.1 % 14.2 %<br>Other income, net $ 20 $ - $ - $ - $ (8) $ 12<br>Income tax expense $ (674) $ (4) $ (25) $ (4) $ 494 $ (213)<br>Effective tax rate 360.4 % 17.0 %<br>Income (loss) from continuing<br>operations $ (487) $ 23 $ 119 $ 896 $ 486 $ 1,037<br>Diluted earnings (loss) per share from<br>continuing operations (3) $ (1.46) $ 0.07 $ 0.36 $ 2.68 $ 1.46 $ 3.10<br>($ in millions, except per share data)<br>(4) See description of non-GAAP financial measures.<br>U.S. GAAP<br>Adjustments<br>Charges (1)<br>Restructuring<br>and Other<br>Charges, Net (1)<br>Related<br>Tax Items (2) (Non-GAAP) (4)<br>Adjusted<br>(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<br>such jurisdiction.<br>(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<br>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<br>matters and the termination of the tax sharing agreement with Tyco International and Covidien.<br>Acquisition-<br>Impairment<br>of Goodwill (1)<br>(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<br>antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares. |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Nine Months Ended June 28, 2019<br>24<br><br>Operating income:<br>Transportation Solutions $ 956 $ 13 $ 98 $ - $ 1,067<br>Industrial Solutions 393 11 60 - 464<br>Communications Solutions 185 - 26 - 211<br>Total $ 1,534 $ 24 $ 184 $ - $ 1,742<br>Operating margin 15.1 % 17.2 %<br>Other income, net $ 2 $ - $ - $ - $ 2<br>Income tax (expense) benefit $ 76 $ (4) $ (46) $ (292) $ (266)<br>Effective tax rate (5.1) % 15.6 %<br>Income from continuing operations $ 1,570 $ 20 $ 138 $ (292) $ 1,436<br>Diluted earnings per share from<br>continuing operations $ 4.60 $ 0.06 $ 0.40 $ (0.86) $ 4.21<br>(3) See description of non-GAAP financial measures.<br>(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<br>in effect for each such jurisdiction.<br>(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<br>related to the effective settlement of a tax audit in a non-U.S. jurisdiction, and $15 million of income tax expense associated with the tax impacts<br>of certain legal entity restructurings and intercompany transactions.<br>Adjustments<br>U.S. GAAP<br>Acquisition- Restructuring<br>Tax Items (2)<br>Adjusted Related<br>($ in millions, except per share data)<br>(Non-GAAP) (3) Charges (1)<br>and Other<br>Charges, Net (1) |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended March 27, 2020<br>25<br><br>Operating income (loss):<br>Transportation Solutions $ (606) $ 10 $ 18 $ 900 $ - $ 322<br>Industrial Solutions 142 2 1 - - 145<br>Communications Solutions 49 - 3 - - 52<br>Total $ (415) $ 12 $ 22 $ 900 $ - $ 519<br>Operating margin (13.0) % 16.2 %<br>Other income, net $ 11 $ - $ - $ - $ (8) $ 3<br>Income tax expense $ (42) $ (2) $ (4) $ (4) $ (31) $ (83)<br>Effective tax rate (10.2) % 16.1 %<br>Income (loss) from continuing<br>operations $ (452) $ 10 $ 18 $ 896 $ (39) $ 433<br>Diluted earnings (loss) per share from<br>continuing operations (3) $ (1.35) $ 0.03 $ 0.05 $ 2.67 $ (0.12) $ 1.29<br>Restructuring<br>Impairment<br>($ in millions, except per share data)<br>U.S. GAAP<br>Acquisition-<br>Related<br>Charges (1) Charges, Net (1) of Goodwill (1)<br>Adjustments<br>(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<br>well as the related impact to net other income.<br>(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<br>antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares.<br>(4) See description of non-GAAP financial measures.<br>Adjusted<br>(Non-GAAP) (4)<br>(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<br>such jurisdiction.<br>Tax Items (2)<br>and Other |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended September 27, 2019<br>26<br>Acquisition-<br>Related Charges<br>and Other<br>Items (1)(2)<br>Operating income:<br>Transportation Solutions $ 270 $ 18 $ 46 $ - $ 334<br>Industrial Solutions 150 4 3 - 157<br>Communications Solutions 24 1 22 - 47<br>Total $ 444 $ 23 $ 71 $ - $ 538<br>Operating margin 13.5 % 16.3 %<br>Income tax expense $ (61) $ (5) $ (15) $ 1 $ (80)<br>Effective tax rate 14.0 % 15.1 %<br>Income from continuing operations $ 376 $ 18 $ 56 $ 1 $ 451<br>Diluted earnings per share from<br>continuing operations $ 1.11 $ 0.05 $ 0.17 $ - $ 1.33<br>and Other<br>Restructuring<br>Tax Items<br>(3) See description of non-GAAP financial measures.<br>(2) Includes acquisition-related charges of $6 million and a write-off of spare parts of $17 million.<br>(1) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax<br>laws in effect for each such jurisdiction.<br>U.S. GAAP<br>Adjustments<br>Adjusted<br>(Non-GAAP) (3)<br>($ in millions, except per share data)<br>Charges, Net (1) |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Acquisition-<br>Related Charges Restructuring<br>and Other and Other Tax Adjusted<br>U.S. GAAP Items (1)(2) Charges, Net (1) Items (3) (Non-GAAP) (4)<br>Operating income:<br>Transportation Solutions 1,226 $ 31 $ 144 $ - $ 1,401 $<br>Industrial Solutions 543 15 63 - 621<br>Communications Solutions 209 1 48 - 258<br>Total 1,978 $ 47 $ 255 $ - $ 2,280 $<br>Operating margin 14.7% 17.0%<br>Other income, net 2 $ - $ - $ - $ 2 $<br>Income tax (expense) benefit 15 $ (9) $ (61) $ (291) $ (346) $<br>Effective tax rate (0.8)% 15.5%<br>Income from continuing operations 1,946 $ 38 $ 194 $ (291) $ 1,887 $<br>Diluted earnings per share from<br>continuing operations 5.72 $ 0.11 $ 0.57 $ (0.86) $ 5.55 $<br>Adjustments<br>(4) See description of non-GAAP financial measures.<br>($ in millions, except per share data)<br>(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<br>laws in effect for each such jurisdiction.<br>(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<br>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<br>tax impacts of certain legal entity restructurings and intercompany transactions.<br>(2) Includes acquisition-related charges of $30 million and a write-off of spare parts of $17 million.<br>Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Year Ended September 27, 2019<br>27 |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Free Cash Flow<br>28<br>Net cash provided by operating activities:<br>Net cash provided by continuing operating activities $ 380 $ 692 $ 1,272 $ 1,575<br>Net cash used in discontinued operating activities - (1) - (31)<br>380 691 1,272 1,544<br>Net cash used in investing activities (81) (454) (748) (539)<br>Net cash used in financing activities (625) (257) (970) (1,309)<br>Effect of currency translation on cash 4 1 (7) 2<br>Net decrease in cash, cash equivalents, and restricted cash $ (322) $ (19) $ (453) $ (302)<br>Net cash provided by continuing operating activities $ 380 $ 692 $ 1,272 $ 1,575<br>Excluding:<br>Cash (collected) paid pursuant to collateral requirements related<br>to cross-currency swap contracts 27 (11) (5) (93)<br>Capital expenditures, net (127) (166) (433) (554)<br>Free cash flow (1) $ 280 $ 515 $ 834 $ 928<br>(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.<br>For the Quarters Ended<br>June 26,<br>2020<br>June 28,<br>2019<br>(in millions)<br>June 26,<br>For the Nine Months Ended<br>2020 2019<br>June 28, |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin<br>29<br>Net income (loss) $ (41) $ 757<br>(Income) loss from discontinued operations (17) 1<br>Income tax expense (benefit) 185 (245)<br>Other income, net (4) (2)<br>Interest expense 13 13<br>Interest income (2) (4)<br>Operating income 134 520<br>Acquisition-related charges 8 9<br>Restructuring and other charges, net 98 67<br>Adjusted operating income (1) 240 596<br>Depreciation and amortization 176 174<br>Adjusted EBITDA (1) $ 416 $ 770<br>Net sales $ 2,548 $ 3,389<br>Net income as a percentage of net sales (1.6) % 22.3 %<br>Adjusted EBITDA margin (1) 16.3 % 22.7 %<br>Operating income (loss) $ (1) $ 70 $ 65 $ 134 $ 308 $ 156 $ 56 $ 520<br>Acquisition-related charges 6 2 - 8 6 3 - 9<br>Restructuring and other charges, net 55 40 3 98 53 8 6 67<br>Adjusted operating income (1) 60 112 68 240 367 167 62 596<br>Depreciation and amortization 113 48 15 176 110 46 18 174<br>Adjusted EBITDA (1) $ 173 $ 160 $ 83 $ 416 $ 477 $ 213 $ 80 $ 770<br>Net sales $ 1,255 $ 865 $ 428 $ 2,548 $ 1,968 $ 1,005 $ 416 $ 3,389<br>Operating margin (0.1) % 8.1 % 15.2 % 5.3 % 15.7 % 15.5 % 13.5 % 15.3 %<br>Adjusted operating margin (1) 4.8 % 12.9 % 15.9 % 9.4 % 18.6 % 16.6 % 14.9 % 17.6 %<br>Adjusted EBITDA margin (1) 13.8 % 18.5 % 19.4 % 16.3 % 24.2 % 21.2 % 19.2 % 22.7 %<br>Solutions Solutions<br>Communications<br>($ in millions)<br>For the Quarters Ended<br>June 26, 2020 June 28, 2019<br>For the Quarters Ended<br>June 26,<br>2020 2019<br>June 28,<br>(1) See description of non-GAAP financial measures.<br>Communications<br>Solutions Total<br>($ in millions)<br>Total<br>Transportation<br>Solutions<br>Industrial<br>Solutions Solutions<br>Transportation Industrial |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin<br>30<br>Net income (loss) $ (456) $ 439<br>(Income) loss from discontinued operations 4 (10)<br>Income tax expense 42 91<br>Other income, net (11) (1)<br>Interest expense 11 15<br>Interest income (5) (4)<br>Operating income (loss) (415) 530<br>Acquisition-related charges 12 9<br>Restructuring and other charges, net 22 42<br>Impairment of goodwill 900 -<br>Adjusted operating income (1) 519 581<br>Depreciation and amortization (2) 180 171<br>Adjusted EBITDA (1) $ 699 $ 752<br>Net sales $ 3,195 $ 3,412<br>Net income as a percentage of net sales (14.3) % 12.9 %<br>Adjusted EBITDA margin (1) 21.9 % 22.0 %<br>Operating income (loss) $ (606) $ 142 $ 49 $ (415) $ 316 $ 137 $ 77 $ 530<br>Acquisition-related charges 10 2 - 12 4 5 - 9<br>Restructuring and other charges, net 18 1 3 22 24 17 1 42<br>Impairment of goodwill 900 - - 900 - - - -<br>Adjusted operating income (1) 322 145 52 519 344 159 78 581<br>Depreciation and amortization (2) 117 46 17 180 109 42 20 171<br>Adjusted EBITDA (1) $ 439 $ 191 $ 69 $ 699 $ 453 $ 201 $ 98 $ 752<br>Net sales $ 1,857 $ 962 $ 376 $ 3,195 $ 1,971 $ 1,007 $ 434 $ 3,412<br>Operating margin (32.6) % 14.8 % 13.0 %(13.0) % 16.0 % 13.6 % 17.7 % 15.5 %<br>Adjusted operating margin (1) 17.3 % 15.1 % 13.8 % 16.2 % 17.5 % 15.8 % 18.0 % 17.0 %<br>Adjusted EBITDA margin (1) 23.6 % 19.9 % 18.4 % 21.9 % 23.0 % 20.0 % 22.6 % 22.0 %<br>(2) Excludes non-cash amortization associated with fair value adjustments related to acquired customer order backlog of $2 million for the quarter March 29, 2019, as these charges are included in the acquisition-related charges line.<br>(1) See description of non-GAAP financial measures.<br>Communications<br>Solutions Total<br>($ in millions)<br>Total<br>Transportation<br>Solutions<br>Industrial<br>Solutions Solutions<br>Transportation Industrial<br>Solutions Solutions<br>Communications<br>($ in millions)<br>For the Quarters Ended<br>March 27, 2020 March 29, 2019<br>For the Quarters Ended<br>March 27,<br>2020 2019<br>March 29, |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Adjusted Return on Invested Capital (ROIC)<br>31<br>Operating income (loss) $ 134 $ (415) $ 471 $ 444 $ 520 $ 530 $ 484 $ 570<br>Acquisition-related charges and other items 8 12 7 23 9 9 6 5<br>Restructuring and other charges, net 98 22 24 71 67 42 75 22<br>Impairment of goodwill - 900 - - - - - -<br>Adjusted operating income (1) $ 240 $ 519 $ 502 $ 538 $ 596 $ 581 $ 565 $ 597<br>Amortization expense $ 46 $ 46 $ 45 $ 45 $ 45 $ 45 $ 45 $ 45<br>Adjustment (2) - - - - - (2) (1) -<br>Adjusted amortization expense $ 46 $ 46 $ 45 $ 45 $ 45 $ 43 $ 44 $ 45<br>Adjusted operating income plus adjusted amortization expense $ 286 $ 565 $ 547 $ 583 $ 641 $ 624 $ 609 $ 642<br>Income (loss) from continuing operations before income taxes $ 127 $ (410) $ 470 $ 437 $ 513 $ 520 $ 461 $ 546<br>Acquisition-related charges and other items 8 12 7 23 9 9 6 5<br>Restructuring and other charges, net 98 22 24 71 67 42 75 22<br>Impairment of goodwill - 900 - - - - - -<br>Tax items - (8) - - - - - -<br>Adjusted income from continuing operations before income taxes $ 233 $ 516 $ 501 $ 531 $ 589 $ 571 $ 542 $ 573<br>Income taxes paid, net of refunds $ 51 $ 101 $ 43 $ 61 $ 100 $ 102 $ 75 $ 76<br>Adjusted cash tax rate 21.9 % 19.6 % 8.6 % 11.5 % 17.0 % 17.9 % 13.8 % 13.3 %<br>Adjusted net operating profit after taxes $ 223 $ 454 $ 500 $ 516 $ 532 $ 513 $ 525 $ 557<br>Trailing four quarter adjusted net operating profit after taxes $ 1,693 $ 2,127<br>Total debt $ 4,086 $ 4,355 $ 3,973 $ 3,965 $ 4,036 $ 3,982 $ 3,967 $ 4,000<br>Total TE Connectivity Ltd. shareholders' equity 9,036 9,066 10,557 10,570 10,622 9,994 10,236 10,831<br>Invested capital $ 13,122 $ 13,421 $ 14,530 $ 14,535 $ 14,658 $ 13,976 $ 14,203 $ 14,831<br>Trailing four quarter average invested capital $ 13,902 14,417<br>Adjusted ROIC (1) 12.2 % 14.8 %<br>(2) Adjustment for non-cash amortization associated with fair value adjustments related to acquired customer order backlog as these charges are included in the acquisition-related charges and other items line.<br>March 27,<br>2020<br>December 27,<br>2019<br>September 27,<br>2019<br>June 28,<br>2019<br>March 29,<br>2019<br>December 28,<br>2018<br>September 28,<br>2018<br>June 26,<br>2020<br>As of or for the Quarters Ended<br>($ in millions)<br>(1) See description of non-GAAP financial measures. |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Free Cash Flow<br>32<br>June 26, March 27, December 27, September 27, June 28, March 29, December 28, September 28, June 29, March 30, December 29,<br>2020 2020 2019 2019 2019 2019 2018 2018 2018 2018 2017<br>Net cash provided by operating activities:<br>Net cash provided by continuing operating activities 380 $ 481 $ 411 $ 879 $ 692 $ 555 $ 328 $ 922 $ 734 $ 362 $ 283 $<br>Net cash provided by (used in) discontinued operating activities - - - (1) (1) 1 (31) 2 66 15 67<br>380 481 411 878 691 556 297 924 800 377 350<br>Net cash provided by (used in) investing activities (81) (378) (289) (153) (454) (165) 80 (419) (233) (201) (241)<br>Net cash used in financing activities (625) (31) (314) (334) (257) (333) (719) (420) (338) (330) (634)<br>Effect of currency translation on cash 4 (18) 7 (10) 1 2 (1) (7) (18) 9 11<br>Net increase (decrease) in cash, cash equivalents, and restricted cash (322) $ 54 $ (185) $ 381 $ (19) $ 60 $ (343) $ 78 $ 211 $ (145) $ (514) $<br>Net cash provided by continuing operating activities 380 $ 481 $ 411 $ 879 $ 692 $ 555 $ 328 $ 922 $ 734 $ 362 $ 283 $<br>Excluding:<br>Receipts related to pre-separation U.S. tax matters, net - - - - - - - - - (5) -<br>Cash (collected) paid pursuant to collateral requirements related<br>to cross-currency swap contracts 27 (38) 6 (39) (11) (32) (50) 6 (69) 61 18<br>Capital expenditures, net (127) (132) (174) (152) (166) (179) (209) (258) (222) (195) (237)<br>Free cash flow (1) 280 $ 311 $ 243 $ 688 $ 515 $ 344 $ 69 $ 670 $ 443 $ 223 $ 64 $<br>(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.<br>For the Quarters Ended<br>(in millions) |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Ratio of Consolidated Total Debt to Consolidated EBITDA<br>(as defined in the Credit Facility)*<br>33<br>Consolidated Total Debt (as defined in the Credit Facility) (1):<br>Short-term debt $ 690<br>Long-term debt 3,410<br>Consolidated Total Debt (as defined in the Credit Facility) (1) $ 4,100<br>Consolidated EBITDA (as defined in the Credit Facility) (2):<br>Net loss $ (99)<br>Tax Sharing Agreement-related income (8)<br>Consolidated net loss (107)<br>Interest expense 49<br>Income tax expense 735<br>Depreciation and amortization 705<br>Share-based compensation expense 73<br>Income from discontinued operations, net of income taxes (12)<br>Non-recurring charges:<br>Acquisition-related charges 50<br>Restructuring and other charges, net 215<br>Impairment of goodwill 900<br>Pension and postretirement benefits expense in excess of minimum required contributions 3<br>Consolidated EBITDA (as defined in the Credit Facility) (2) $ 2,611<br>Ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) 1.6 x<br>As of and for the<br>Twelve Months<br>Ended<br>($ in millions)<br>(2) Represents Consolidated EBITDA as defined in our Credit Facility and is calculated using the most recently concluded period of four<br>consecutive fiscal quarters.<br>June 26,<br>2020<br>(1) Represents Consolidated Total Debt as defined in our Credit Facility. Balances represent the face amount of debt and exclude net unamortized<br>discounts, premiums, and debt issuance costs and the effects of fair value hedge-designated interest rate swap contracts.<br>*Our five-year unsecured senior revolving credit facility ("Credit Facility") contains a financial ratio covenant providing that if, as of the last day<br>of each fiscal quarter, the ratio of Consolidated Total Debt at such time to Consolidated EBITDA for the then most recently concluded period of<br>four consecutive fiscal quarters of TE Connectivity Ltd. exceeds 3.75 to 1.00, subject to certain limited exceptions in the event of qualifying<br>acquisitions (as described in the Credit Facility), an Event of Default (as defined in the Credit Facility) is triggered. |
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| © 2020 TE Connectivity. Confidential & Proprietary. Do not reproduce or distribute externally including non-authorized representatives and distributors. Create a sustainable future by limiting print copies, and recycling paper.<br>Reconciliation of Forward-Looking Non-GAAP Financial Measures<br>to Forward-Looking GAAP Financial Measures<br>34<br>Effective tax rate 18.1 - 19.1 %<br>Effective tax rate adjustments (2) 0.9<br>Adjusted effective tax rate (3) 19.0 - 20.0 %<br>Quarter Ending<br>(2) Includes adjustments for special tax items and the tax effect of acquisition-related charges and net restructuring and other charges,<br>calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction.<br>(1) Outlook is as of July 29, 2020.<br>(3) See description of non-GAAP financial measures.<br>September 25,<br>2020 (1)<br>Outlook for |
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