8-K
TE Connectivity plc (TEL)
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): January 27, 2021
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 January 27, 2021, TE Connectivity Ltd. (the “Company”) issued a press release reporting the Company’s first quarter results for fiscal 2021. 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 January 27, 2021 (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 January 27, 2021 | |
| 99.2 | Presentation - TE Connectivity Q1 2021 Earnings Call (January 27, 2021) | |
| | | |
| 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: January 27, 2021 | 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.com |
TE Connectivity announces first quarter results for fiscal year 2021
Double-digit growth in sales and EPS year over year, exceeding company expectations
SCHAFFHAUSEN, Switzerland – Jan. 27, 2021 – TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal first quarter ended Dec. 25, 2020.
First Quarter Highlights
| ● | Net sales were $3.5 billion, up 11% on a reported basis, and 6% on an organic basis year over year. |
|---|---|
| ● | Orders of approximately $4 billion, up 25% year over year. |
| --- | --- |
| ● | GAAP earnings per share (EPS) from continuing operations were $1.13, and adjusted EPS were $1.47, up 21% year over year. |
| --- | --- |
| ● | Cash flow from continuing operating activities was $640 million and free cash flow was $529 million, with $286 million returned to shareholders. |
| --- | --- |
“Our strong first quarter performance reflects our global team’s ability to adapt to ongoing dynamic market conditions to deliver double-digit sales and EPS growth that exceeded our expectations,” said TE Connectivity CEO Terrence Curtin. “These results demonstrate the strength and resilience of our portfolio, our employees’ commitment to our customers and the benefit of our leadership position in long-term global growth trends. In particular, our Transportation segment continued to outperform the market due to content growth driven by electric vehicles, along with data connectivity and autonomy trends. Our Communications segment also exhibited strength due to demand in high-speed cloud applications and growth in the appliances market. As we are seeing continued signs of improvement in the majority of our end markets, we expect to deliver continued sales and earnings growth in the second quarter.”
Second Quarter FY21 Outlook
For the second quarter of fiscal 2021, the company expects net sales of approximately $3.5 billion, reflecting an approximate 10% increase on a reported basis and an increase of mid-single digits on an organic basis year over year. GAAP EPS from continuing operations are expected to be approximately $1.38 with adjusted EPS of approximately $1.47, up 14% year over year.
Information about TE Connectivity's use of non-GAAP financial measures is provided below. For reconciliations of these non-GAAP financial measures, see the attached tables.
Conference Call and Webcast
The company will hold a conference call today beginning at 8:30 a.m. ET. The dial-in information is provided here:
| ● | At TE Connectivity's website: investors.te.com |
|---|---|
| ● | By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (866) 211-4092, and for international callers, the dial-in number is (647) 689-6620. |
| --- | --- |
| ● | A replay of the conference call will be available on TE Connectivity’s investor website at investors.te.com at 11:30 a.m. ET on Jan. 27, 2021. |
| --- | --- |
About TE Connectivity
TE Connectivity Ltd. (NYSE: TEL) is a 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 approximately 80,000 employees, including more than 7,500 engineers, working alongside customers in approximately 140 countries, TE ensures that EVERY CONNECTION COUNTS. Learn more at www.te.com and on LinkedIn, Facebook, WeChat and Twitter.
Non-GAAP Financial Measures
We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures provide supplemental information and should not be considered replacements for results in accordance with GAAP. Management uses non-GAAP financial measures internally for planning and forecasting purposes and in its decision-making processes related to the operations of our company. We believe these measures provide meaningful information to us and investors because they enhance the understanding of our operating performance, ability to generate cash, and the trends of our business. Additionally, we believe that investors benefit from having access to the same financial measures that management uses in evaluating our operations. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using these non-GAAP financial measures in combination with the most directly comparable GAAP financial measures in order to better understand the amounts, character, and impact of any increase or
decrease in reported amounts. These non-GAAP financial measures may not be comparable to similarly-titled measures reported by other companies.
The following provides additional information regarding our non-GAAP financial measures:
●Organic Net Sales Growth (Decline) – represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic Net Sales Growth (Decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. This measure is a significant component in our incentive compensation plans.
●Adjusted Operating Income (Loss) and Adjusted Operating Margin – represent operating income (loss) and operating margin, respectively, (the most comparable GAAP financial measures) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, and other income or charges, if any. We utilize these adjusted measures in combination with operating income (loss) and operating margin to assess segment level operating performance and to provide insight to management in evaluating segment operating plan execution and market conditions. Adjusted Operating Income (Loss) is a significant component in our incentive compensation plans.
●Adjusted Other Income (Expense), Net – represents net other income (expense) (the most comparable GAAP financial measure) before special items including tax sharing income related to adjustments to prior period tax returns and other items, if any.
●Adjusted Income Tax (Expense) Benefit and Adjusted Effective Tax Rate – represent income tax (expense) benefit and effective tax rate, respectively, (the most comparable GAAP financial measures) after adjusting for the tax effect of special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, other income or charges, and certain significant tax items, if any.
●Adjusted Income (Loss) from Continuing Operations – represents income (loss) from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects.
●Adjusted Earnings (Loss) Per Share – represents diluted earnings (loss) per share from continuing operations (the most comparable GAAP financial measure) before special items including restructuring and other charges, acquisition-related charges, impairment of goodwill, tax sharing income related to adjustments to prior period tax returns and other tax items, other income or charges, and certain significant tax items, if any, and, if applicable, the related tax effects. This measure is a significant component in our incentive compensation plans.
●Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are useful to identify. We believe Free
Cash Flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated from our operations. Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of special items, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP financial measure because this activity is driven by economic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters and cash paid (collected) pursuant to collateral requirements related to cross-currency swap contracts, are also excluded by management in evaluating Free Cash Flow. Net capital expenditures consist of capital expenditures less proceeds from the sale of property, plant, and equipment. These items are subtracted because they represent long-term commitments. In the calculation of Free Cash Flow, we subtract certain cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and may imply that there is less or more cash available for our programs than the most comparable GAAP financial measure indicates. It should not be inferred that the entire Free Cash Flow amount is available for future discretionary expenditures, as our definition of Free Cash Flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we may have other discretionary expenditures, such as discretionary dividends, share repurchases, and business acquisitions, that are not considered in the calculation of Free Cash Flow.
Forward-Looking Statements
This release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance, financial condition or achievements to differ materially from anticipated results, performance, financial condition or achievements. All statements contained herein that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention or obligation to do so) our forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. The forward-looking statements in this release include statements addressing our future financial condition and operating results, and the impact on our operations resulting from the coronavirus disease 2019 (“COVID-19”). Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, the extent, severity and duration of COVID-19 negatively affecting our business operations; business, economic, competitive and regulatory risks, such as conditions affecting demand for products in the automotive and other industries we serve; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; and the possible effects on us of changes in tax laws, tax treaties and other legislation, including the effects of Swiss tax reform. In addition, the extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the geographic spread of the virus, the severity of the virus, the duration of the outbreak, the impact on our suppliers’ and customers’ supply chains, the actions that may be taken by various governmental authorities in response to the outbreak in jurisdictions in which we operate, and the possible impact on the global economy and local economies in which we operate. More detailed information about these and other factors is set forth in TE Connectivity Ltd.'s Annual Report on Form 10-K for the fiscal year ended Sept. 25, 2020 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.
#
| Contacts: | Media Relations : | Investor Relations : |
|---|---|---|
| | Fernando Vivanco | Sujal Shah |
| | TE Connectivity | TE Connectivity |
| | 610-893-9756 | 610-893-9790 |
| | Fernando.Vivanco@te.com | Sujal.Shah@te.com |
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| | | | | | |
|---|---|---|---|---|---|
| | For the Quarters Ended | ||||
| | December 25, | | December 27, | ||
| | 2020 | 2019 | |||
| | (in millions, except per share data) | ||||
| Net sales | $ | 3,522 | | $ | 3,168 |
| Cost of sales | | 2,376 | | | 2,138 |
| Gross margin | | 1,146 | | | 1,030 |
| Selling, general, and administrative expenses | | 361 | | | 367 |
| Research, development, and engineering expenses | | 162 | | | 161 |
| Acquisition and integration costs | | 8 | | | 7 |
| Restructuring and other charges, net | | 167 | | | 24 |
| Operating income | | 448 | | | 471 |
| Interest income | | 3 | | | 6 |
| Interest expense | | (15) | | | (12) |
| Other income (expense), net | | (1) | | | 5 |
| Income from continuing operations before income taxes | | 435 | | | 470 |
| Income tax expense | | (60) | | | (447) |
| Income from continuing operations | | 375 | | | 23 |
| Income from discontinued operations, net of income taxes | | 6 | | | 3 |
| Net income | $ | 381 | | $ | 26 |
| | | | | | |
| Basic earnings per share: | | | | | |
| Income from continuing operations | $ | 1.13 | | $ | 0.07 |
| Income from discontinued operations | | 0.02 | | | 0.01 |
| Net income | | 1.15 | | | 0.08 |
| | | | | | |
| Diluted earnings per share: | | | | | |
| Income from continuing operations | $ | 1.13 | | $ | 0.07 |
| Income from discontinued operations | | 0.02 | | | 0.01 |
| Net income | | 1.14 | | | 0.08 |
| | | | | | |
| Weighted-average number of shares outstanding: | | | | | |
| Basic | | 331 | | | 335 |
| Diluted | | 333 | | | 337 |
TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | | | | | |
|---|---|---|---|---|---|
| | December 25, | | September 25, | ||
| | 2020 | | 2020 | ||
| | (in millions, except share data) | ||||
| Assets | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 1,098 | | $ | 945 |
| Accounts receivable, net of allowance for doubtful accounts of $33 and $29, respectively | | 2,640 | | | 2,377 |
| Inventories | | 2,066 | | | 1,950 |
| Prepaid expenses and other current assets | | 677 | | | 512 |
| Total current assets | | 6,481 | | | 5,784 |
| Property, plant, and equipment, net | | 3,768 | | | 3,650 |
| Goodwill | | 5,387 | | | 5,224 |
| Intangible assets, net | | 1,613 | | | 1,593 |
| Deferred income taxes | | 2,198 | | | 2,178 |
| Other assets | | 819 | | | 813 |
| Total assets | $ | 20,266 | | $ | 19,242 |
| Liabilities, redeemable noncontrolling interests, and shareholders' equity | | | | | |
| Current liabilities: | | | | | |
| Short-term debt | $ | 685 | | $ | 694 |
| Accounts payable | | 1,629 | | | 1,276 |
| Accrued and other current liabilities | | 1,769 | | | 1,720 |
| Total current liabilities | | 4,083 | | | 3,690 |
| Long-term debt | | 3,516 | | | 3,452 |
| Long-term pension and postretirement liabilities | | 1,329 | | | 1,336 |
| Deferred income taxes | | 144 | | | 143 |
| Income taxes | | 266 | | | 252 |
| Other liabilities | | 949 | | | 874 |
| Total liabilities | | 10,287 | | | 9,747 |
| Commitments and contingencies | | | | | |
| Redeemable noncontrolling interests | | 118 | | | 112 |
| Shareholders' equity: | | | | | |
| Common shares, CHF 0.57 par value, 338,953,381 shares authorized and issued, respectively | | 149 | | | 149 |
| Accumulated earnings | | 10,672 | | | 10,348 |
| Treasury shares, at cost, 7,836,597 and 8,295,878 shares, respectively | | (655) | | | (669) |
| Accumulated other comprehensive loss | | (305) | | | (445) |
| Total shareholders' equity | | 9,861 | | | 9,383 |
| Total liabilities, redeemable noncontrolling interests, and shareholders' equity | $ | 20,266 | | $ | 19,242 |
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | |
|---|---|---|---|---|---|
| | For the Quarters Ended | ||||
| | December 25, | | December 27, | ||
| | 2020 | | 2019 | ||
| | (in millions) | ||||
| Cash flows from operating activities: | | | | | |
| Net income | $ | 381 | | $ | 26 |
| Income from discontinued operations, net of income taxes | | (6) | | | (3) |
| Income from continuing operations | | 375 | | | 23 |
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | 187 | | | 174 |
| Deferred income taxes | | (42) | | | 394 |
| Non-cash lease cost | | 30 | | | 27 |
| Provision for losses on accounts receivable and inventories | | 6 | | | 20 |
| Share-based compensation expense | | 19 | | | 22 |
| Other | | 21 | | | 10 |
| Changes in assets and liabilities, net of the effects of acquisitions and divestitures: | | | | | |
| Accounts receivable, net | | (299) | | | (24) |
| Inventories | | (145) | | | (176) |
| Prepaid expenses and other current assets | | (87) | | | (23) |
| Accounts payable | | 349 | | | 94 |
| Accrued and other current liabilities | | 88 | | | (185) |
| Income taxes | | 17 | | | 10 |
| Other | | 121 | | | 45 |
| Net cash provided by operating activities | | 640 | | | 411 |
| Cash flows from investing activities: | | | | | |
| Capital expenditures | | (142) | | | (176) |
| Proceeds from sale of property, plant, and equipment | | 1 | | | 2 |
| Acquisition of businesses, net of cash acquired | | (107) | | | (115) |
| Other | | 2 | | | — |
| Net cash used in investing activities | | (246) | | | (289) |
| Cash flows from financing activities: | | | | | |
| Net decrease in commercial paper | | — | | | (9) |
| Repayment of debt | | (30) | | | — |
| Proceeds from exercise of share options | | 75 | | | 14 |
| Repurchase of common shares | | (119) | | | (139) |
| Payment of common share dividends to shareholders | | (159) | | | (154) |
| Other | | (19) | | | (26) |
| Net cash used in financing activities | | (252) | | | (314) |
| Effect of currency translation on cash | | 11 | | | 7 |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | | 153 | | | (185) |
| Cash, cash equivalents, and restricted cash at beginning of period | | 945 | | | 927 |
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,098 | | $ | 742 |
| | | | | | |
| Supplemental cash flow information: | | | | | |
| Interest paid on debt, net | $ | 4 | | $ | 4 |
| Income taxes paid, net of refunds | | 85 | | | 43 |
TE CONNECTIVITY LTD.
RECONCILIATION OF FREE CASH FLOW (UNAUDITED)
| | | | | | |
|---|---|---|---|---|---|
| | For the Quarters Ended | ||||
| | December 25, | | December 27, | ||
| | 2020 | | 2019 | ||
| | (in millions) | ||||
| Net cash provided by continuing operating activities | $ | 640 | | $ | 411 |
| Excluding: | | | | | |
| Cash paid pursuant to collateral requirements related to cross-currency swap contracts | | 30 | | | 6 |
| Capital expenditures, net | | (141) | | | (174) |
| Free cash flow ^(1)^ | $ | 529 | | $ | 243 |
| | | | | | |
| ^(1)^Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures. |
TE CONNECTIVITY LTD.
CONSOLIDATED SEGMENT DATA (UNAUDITED)
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | For the Quarters Ended | | ||||||||
| | December 25, | | | December 27, | | |||||
| | 2020 | | | 2019 | | |||||
| | ( in millions) | |||||||||
| | Net Sales | **** | | | | Net Sales | **** | | | |
| Transportation Solutions | | | | | $ | 1,868 | | | | |
| Industrial Solutions | | | | | | | 927 | | | |
| Communications Solutions | | | | | | | 373 | | | |
| Total | | | | | $ | 3,168 | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | Operating | | Operating | | Operating | | Operating | |||
| | Income | | Margin | | Income | | Margin | |||
| Transportation Solutions | | 13.8 | % | | $ | 316 | | 16.9 | % | |
| Industrial Solutions | | | 8.7 | | | | 115 | | 12.4 | |
| Communications Solutions | | | 15.1 | | | | 40 | | 10.7 | |
| Total | | 12.7 | % | | $ | 471 | | 14.9 | % | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | Adjusted | | Adjusted | | Adjusted | | Adjusted | |||
| | Operating | | Operating | | Operating | | Operating | |||
| | Income (1) | | Margin ^(1)^ | | Income ^(1)^ | | Margin ^(1)^ | |||
| Transportation Solutions | | 19.4 | % | | $ | 325 | | 17.4 | % | |
| Industrial Solutions | | | 13.5 | | | | 132 | | 14.2 | |
| Communications Solutions | | | 17.6 | | | | 45 | | 12.1 | |
| Total | | 17.7 | % | | $ | 502 | | 15.8 | % | |
| | | | | | | | | | | |
| ^(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.
TE CONNECTIVITY LTD.
RECONCILIATION OF NET SALES GROWTH (DECLINE) (UNAUDITED)
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Change in Net Sales for the Quarter Ended December 25, 2020 | |||||||||||||||
| | versus Net Sales for the Quarter Ended December 27, 2019 | |||||||||||||||
| | Net Sales | | | Organic Net Sales | | | | | | |||||||
| | Growth (Decline) | | **** | Growth (Decline) ^(1)^ | | **** | Translation ^(2)^ | **** | Acquisitions | |||||||
| | ( in millions) | |||||||||||||||
| Transportation Solutions ^(3)^: | | **** | | | | | | **** | | | | | | | | |
| Automotive | | 15.9 | % | | $ | 161 | | 11.3 | % | | $ | 63 | | $ | — | |
| Commercial transportation | | | 28.3 | | | | 65 | | 24.9 | | | | 8 | | | — |
| Sensors | | | 28.8 | | | | 7 | | 3.2 | | | | 5 | | | 47 |
| Total | | | 19.1 | | | | 233 | | 12.3 | | | | 76 | | | 47 |
| Industrial Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Aerospace, defense, oil, and gas | | | (19.1) | | | | (68) | | (22.0) | | | | 6 | | | 3 |
| Industrial equipment | | | 12.2 | | | | 21 | | 7.7 | | | | 11 | | | — |
| Medical | | | (12.8) | | | | (24) | | (13.4) | | | | 1 | | | — |
| Energy | | | (2.3) | | | | (7) | | (3.7) | | | | 3 | | | — |
| Total | | | (5.8) | | | | (78) | | (8.4) | | | | 21 | | | 3 |
| Communications Solutions ^(3)^: | | | | | | | | | | | | | | | | |
| Data and devices | | | 6.8 | | | | 10 | | 4.7 | | | | 5 | | | — |
| Appliances | | | 24.0 | | | | 33 | | 21.1 | | | | 4 | | | — |
| Total | | | 13.9 | | | | 43 | | 11.5 | | | | 9 | | | — |
| Total | | 11.2 | % | | $ | 198 | | 6.2 | % | | $ | 106 | | $ | 50 | |
| | | | | | | | | | | | | | | | | |
| ^(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.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended December 25, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Adjustments | | | | | |||||||
| | | | | Acquisition- | | Restructuring | | | | | | ||||
| | | | | Related | | and Other | | | | Adjusted | | ||||
| | U.S. GAAP | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | Tax Items^(2)^ | **** | (Non-GAAP) ^(3)^ | | ||||
| | ( in millions, except per share data) | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 5 | | $ | 118 | | $ | — | | $ | 431 | | |
| Industrial Solutions | | | | | 4 | | | 38 | | | — | | | 118 | |
| Communications Solutions | | | | | — | | | 11 | | | — | | | 75 | |
| Total | | | $ | 9 | | $ | 167 | | $ | — | | $ | 624 | | |
| | | | | | | | | | | | | | | | |
| Operating margin | | % | | | | | | | | | | | | 17.7 | % |
| | | | | | | | | | | | | | | | |
| Other expense, net | | | $ | — | | $ | — | | $ | — | | $ | (1) | | |
| | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (2) | | $ | (32) | | $ | (29) | | $ | (123) | | |
| | | | | | | | | | | | | | | | |
| Effective tax rate | | % | | | | | | | | | | | | 20.1 | % |
| | | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 7 | | $ | 135 | | $ | (29) | | $ | 488 | | |
| | | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 0.02 | | $ | 0.41 | | $ | (0.09) | | $ | 1.47 | | |
| | | | | | | | | | | | | | | | |
| ^(1)^ The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. | | ||||||||||||||
| ^(2)^ Income tax benefits related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets. | | ||||||||||||||
| ^(3)^ See description of non-GAAP financial measures. | |
All values are in US Dollars.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended December 27, 2019
(UNAUDITED)
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Adjustments | | | | | |||||||
| | | | | Acquisition- | | Restructuring | | | | | | ||||
| | | | | Related | | and Other | | | | Adjusted | | ||||
| | U.S. GAAP | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | Tax Items ^(2)^ | **** | (Non-GAAP) ^(3)^ | | ||||
| | ( in millions, except per share data) | | |||||||||||||
| Operating income: | | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 5 | | $ | 4 | | $ | — | | $ | 325 | | |
| Industrial Solutions | | | | | 2 | | | 15 | | | — | | | 132 | |
| Communications Solutions | | | | | — | | | 5 | | | — | | | 45 | |
| Total | | | $ | 7 | | $ | 24 | | $ | — | | $ | 502 | | |
| | | | | | | | | | | | | | | | |
| Operating margin | | % | | | | | | | | | | | | 15.8 | % |
| | | | | | | | | | | | | | | | |
| Other income, net | | | $ | — | | $ | — | | $ | — | | $ | 5 | | |
| | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (1) | | $ | — | | $ | 355 | | $ | (93) | | |
| | | | | | | | | | | | | | | | |
| Effective tax rate | | % | | | | | | | | | | | | 18.6 | % |
| | | | | | | | | | | | | | | | |
| Income from continuing operations | | | $ | 6 | | $ | 24 | | $ | 355 | | $ | 408 | | |
| | | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations | | | $ | 0.02 | | $ | 0.07 | | $ | 1.05 | | $ | 1.21 | | |
| | | | | | | | | | | | | | | | |
| ^(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)^ Income tax expense related to the tax impacts of certain measures of Swiss tax reform. | | ||||||||||||||
| ^(3)^ See description of non-GAAP financial measures. | |
All values are in US Dollars.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Quarter Ended March 27, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Adjustments | | | | | ||||||||||
| | | | | Acquisition- | | Restructuring | | | | | | | | |||||
| | | | | Related | | and Other | | Impairment | | | | Adjusted | | |||||
| | U.S. GAAP | | | Charges ^(1)^ | **** | Charges, Net^(1)^ | **** | of Goodwill ^(1)^ | **** | Tax Items ^(2)^ | **** | (Non-GAAP) ^(4)^ | | |||||
| | ( in millions, except per share data) | | ||||||||||||||||
| Operating income (loss): | | | | | | | | | | | | | | | | | | |
| Transportation Solutions | | | $ | 10 | | $ | 18 | | $ | 900 | | $ | — | | $ | 322 | | |
| Industrial Solutions | | | | | 2 | | | 1 | | | — | | | — | | | 145 | |
| Communications Solutions | | | | | — | | | 3 | | | — | | | — | | | 52 | |
| Total | | | $ | 12 | | $ | 22 | | $ | 900 | | $ | — | | $ | 519 | | |
| | | | | | | | | | | | | | | | | | | |
| Operating margin | | % | | | | | | | | | | | | | | | 16.2 | % |
| | | | | | | | | | | | | | | | | | | |
| Other income, net | | | $ | — | | $ | — | | $ | — | | $ | (8) | | $ | 3 | | |
| | | | | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (2) | | $ | (4) | | $ | (4) | | $ | (31) | | $ | (83) | | |
| | | | | | | | | | | | | | | | | | | |
| Effective tax rate | | % | | | | | | | | | | | | | | | 16.1 | % |
| | | | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | | $ | 10 | | $ | 18 | | $ | 896 | | $ | (39) | | $ | 433 | | |
| | | | | | | | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations ^(3)^ | | | $ | 0.03 | | $ | 0.05 | | $ | 2.67 | | $ | (0.12) | | $ | 1.29 | | |
| | | | | | | | | | | | | | | | | | | |
| ^(1)^ The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. | | |||||||||||||||||
| ^(2)^ Includes an income tax benefit related to pre-separation tax matters and the termination of the tax sharing agreement with Tyco International and Covidien, as well as the related impact to net other income. | | |||||||||||||||||
| ^(3)^ U.S. GAAP diluted shares excludes one million of nonvested share awards and options outstanding as the inclusion of these securities would have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares. | | |||||||||||||||||
| ^(4)^ See description of non-GAAP financial measures. | |
All values are in US Dollars.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
For the Year Ended September 25, 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 | | | $ | 32 | | $ | 113 | | $ | 900 | | $ | — | | $ | 952 | |
| Industrial Solutions | | | | 8 | | | 102 | | | — | | | — | | | 522 | |
| Communications Solutions | | | | — | | | 42 | | | — | | | — | | | 260 | |
| Total | | | $ | 40 | | $ | 257 | | $ | 900 | | $ | — | | $ | 1,734 | |
| | | | | | | | | | | | | | | | | | |
| Operating margin | % | | | | | | | | | | | | | | | 14.2 | % |
| | | | | | | | | | | | | | | | | | |
| Other income, net | | | $ | — | | $ | — | | $ | — | | $ | (8) | | $ | 12 | |
| | | | | | | | | | | | | | | | | | |
| Income tax expense | | | $ | (8) | | $ | (46) | | $ | (4) | | $ | 550 | | $ | (291) | |
| | | | | | | | | | | | | | | | | | |
| Effective tax rate | % | | | | | | | | | | | | | | | 17.0 | % |
| | | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | | $ | 32 | | $ | 211 | | $ | 896 | | $ | 542 | | $ | 1,422 | |
| | | | | | | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations (3) | | | $ | 0.10 | | $ | 0.63 | | $ | 2.68 | | $ | 1.62 | | $ | 4.26 | |
| | | | | | | | | | | | | | | | | | |
| (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 226 million of income tax expense related to increases to the valuation allowance for certain 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 two million of nonvested share awards and options outstanding as the inclusion of these securities would have been antidilutive because of our loss during the period. Such amounts are included in adjusted (non-GAAP) diluted shares. | | ||||||||||||||||
| (4) See description of non-GAAP financial measures. | |
All values are in US Dollars.
TE CONNECTIVITY LTD.
RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES
TO FORWARD-LOOKING GAAP FINANCIAL MEASURES
As of January 27, 2021
(UNAUDITED)
| | | | |
|---|---|---|---|
| | Outlook for | | |
| | Quarter Ending | | |
| | March 26, | | |
| | 2021 | | |
| Diluted earnings per share from continuing operations | $ | 1.38 | |
| Restructuring and other charges, net | | 0.07 | |
| Acquisition-related charges | | 0.02 | |
| Adjusted diluted earnings per share from continuing operations ^(1)^ | $ | 1.47 | |
| | | | |
| ^(1)^ See description of non-GAAP financial measures. |
Exhibit 99.2
| EVERY CONNECTION COUNTS<br>TE Connectivity<br>First Quarter<br>2021 Earnings<br>January 27, 2021 |
|---|
| 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. 25, 2020 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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| Earnings Highlights<br>Q1 Results exceeded guidance with double digit growth in Sales and EPS<br>• Sales of $3.5B, up 11% on a reported basis and 6% organically Y/Y<br>• Transportation up 12% organically Y/Y, with growth in all businesses<br>• Industrial down 8% organically Y/Y, driven by weakness in Comm Air<br>• Communications up 12% organically Y/Y, with growth in Appliances and Data & Devices<br>• Orders of ~$4B, up 25% Y/Y. Book to bill of 1.15<br>• Adjusted Operating Margins of 17.7%, up ~190bps Y/Y<br>• Adjusted EPS of $1.47, up 21% Y/Y driven by strong operational performance<br>• Record Q1 Free Cash Flow of ~$530M with ~$285M returned to shareholders<br>• Continuing to demonstrate the strength of our portfolio and content benefit from secular trends<br>Q2 Guidance reflects double digit Sales and Adjusted EPS growth Y/Y<br>• Expect sales of ~$3.5B, up ~10% reported and mid-single digits organically Y/Y<br>• Y/Y increases in Transportation and Communications, partially offset by declines in Industrial<br>• Adjusted EPS of ~$1.47, up 14% Y/Y with Adjusted Operating Margin expansion<br>Organic Net Sales Growth (Decline), Adjusted EPS, Adjusted Operating Margin and Free Cash Flow are non-GAAP financial measures; see Appendix for descriptions and reconciliations 3 |
| --- |
| Reported FY20 FY20 FY21 Q1 Growth<br>Q1 Q4 Q1 Y/Y Q/Q<br>Transportation 1,867 2,124 2,537 36% 19%<br>Industrial 965 799 956 (1%) 20%<br>Communications 409 425 556 36% 31%<br>Total TE 3,241 3,348 4,049 25% 21%<br>Book to Bill 1.02 1.03 1.15<br>Segment Orders Summary<br>($ in millions)<br>4<br>• Transportation Y/Y growth driven by<br>all businesses and regions<br>• Industrial Y/Y decline driven by<br>Comm Air weakness partially offset<br>by increases in Industrial Equipment<br>and Energy<br>• Communications Y/Y growth driven<br>by Appliances and Data & Devices<br>increases in all regions<br>• Sequential orders growth across all<br>businesses in each Segment<br>Orders Reflecting Benefit of Market Improvements |
| --- |
| Transportation Solutions<br>$1,868 $2,224<br>Q1 2020 Q1 2021<br>• Automotive organic sales growth of 11%, versus low-<br>single digit global production growth, driven by<br>continued strong content outperformance and supply<br>chain benefits<br>• Commercial Transportation organic growth driven by<br>electronification trends and content outperformance<br>• Sensors reported growth of 29% includes the First<br>Sensor acquisition; organic growth driven by Auto<br>applications<br>Y/Y Growth Rates Reported Organic<br>Automotive $1,629 16% 11%<br>Commercial<br>Transportation 331 28% 25%<br>Sensors 264 29% 3%<br>Transportation<br>Solutions $2,224 19% 12%<br>Q1 Sales Q1 Business Performance<br>Q1 Adjusted Operating Margin<br>$ in Millions<br>Reported<br>Up 19%<br>Organic<br>Up 12%<br>Adjusted Operating<br>Margin expansion<br>driven by strong<br>operational<br>performance<br>Adjusted EBITDA Margin 23.4% 24.9%<br>5<br>17.4% 19.4%<br>Q1 2020 Q1 2021<br>Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations |
| --- |
| Industrial Solutions<br>$927 $873<br>Q1 2020 Q1 2021<br>Y/Y Growth Rates Reported Organic<br>Aerospace, Defense<br>and Marine $250 (19)% (22)%<br>Industrial Equipment 295 12% 8%<br>Medical 156 (13)% (13)%<br>Energy 172 (2)% (4)%<br>Industrial Solutions $873 (6)% (8)%<br>Adjusted Operating<br>Margin performance<br>remains resilient<br>despite lower sales<br>14.2% 13.5%<br>Q1 2020 Q1 2021<br>Adjusted EBITDA Margin 19.1% 18.9%<br>• AD&M decline driven by continued weakness in<br>Commercial Aerospace market<br>• Industrial Equipment growth in all regions with strength in<br>factory automation applications<br>• Medical impacted by ongoing delays in elective<br>procedures caused by Covid-19<br>• Energy driven by Covid-19 impacts on the utility market,<br>partially offset by gains in renewable energy applications<br>$ in Millions<br>Q1 Sales Q1 Business Performance<br>Q1 Adjusted Operating Margin<br>Reported<br>Down 6%<br>Organic<br>Down 8%<br>6 Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations |
| --- |
| $373 $425<br>Q1 2020 Q1 2021<br>Reported<br>Up 14%<br>Organic<br>Up 12%<br>Y/Y Growth Rates Reported Organic<br>Data & Devices $234 7% 5%<br>Appliances $191 24% 21%<br>Communications<br>Solutions $425 14% 12%<br>• Data & Devices growth driven by market strength<br>and share gains in high-speed cloud related<br>applications<br>• Appliances growth across all regions, benefitting<br>from home investments and improving housing<br>market 12.1%<br>17.6%<br>Q1 2020 Q1 2021<br>Adjusted Operating<br>Margin performance<br>driven by strong<br>operational<br>performance<br>Organic Net Sales Growth (Decline), Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP financial measures: see Appendix for descriptions and reconciliations<br>Communications Solutions<br>Q1 Sales<br>Q1 Adjusted Operating Margin<br>Q1 Business Performance<br>$ in Millions<br>Adjusted EBITDA Margin 16.4% 21.6%<br>7 |
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| Q1 Financial Summary<br>($ in Millions, except per share amounts) Q1 FY20 Q1 FY21<br>Net Sales $ 3,168 $ 3,522<br>Operating Income $ 471 $ 448<br>Operating Margin 14.9% 12.7%<br>Acquisition-Related Charges 7 9<br>Restructuring & Other Charges, Net 24 167<br>Adjusted Operating Income $ 502 $ 624<br>Adjusted Operating Margin 15.8% 17.7%<br>Earnings Per Share* $ 0.07 $ 1.13<br>Acquisition-Related Charges 0.02 0.02<br>Restructuring & Other Charges, Net 0.07 0.41<br>Tax Items 1.05 (0.09)<br>Adjusted EPS $ 1.21 $ 1.47<br>* Represents Diluted Earnings (Loss) Per Share from Continuing Operations.<br>Adjusted Operating Income, Adjusted Operating Margin and Adjusted EPS are non-GAAP financial measures; see Appendix for descriptions and reconciliations. 8 |
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| Q1 Financial Performance<br>$3,168 $3,261 $3,522<br>Q1 2020 Q4 2020 Q1 2021<br>$1.21 $1.16 $1.47<br>Q1 2020 Q4 2020 Q1 2021<br>Adjusted<br>EBITDA<br>Margin<br>21.3% 20.1% 23.0%<br>15.8% 14.5% 17.7%<br>Q1 2020 Q4 2020 Q1 2021<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>Demonstrating Business Model Execution<br>9<br>$243<br>$648 $529<br>Q1 2020 Q4 2020 Q1 2021 |
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| EVERY CONNECTION COUNTS<br>Additional<br>Information |
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| Y/Y Q1 2021<br>Adjusted EPS is a non-GAAP financial measure; See Appendix for description and reconciliation.<br>Sales<br>(in millions)<br>Adjusted EPS<br>Q1 2020 Results $3,168 $1.21<br>Operational Performance 248 0.23<br>FX Impact 106 0.06<br>Tax Rate Impact -(0.03)<br>Q1 2021 Results $3,522 $1.47<br>11 |
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| Y/Y Q2 2021<br>Adjusted EPS is a non-GAAP financial measure; See Appendix for description and reconciliation.<br>Sales<br>(in millions)<br>Adjusted EPS<br>Q2 2020 Results $3,195 $1.29<br>Operational Performance 138 0.12<br>FX Impact 167 0.09<br>Tax Rate Impact -(0.03)<br>Q2 2021 Guidance $3,500 $1.47<br>12 |
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| ($ in Millions) Q1 2020 Q1 2021<br>Beginning Cash Balance $927 $945<br>Free Cash Flow 243 529<br>Dividends (154) (159)<br>Share repurchases (139) (119)<br>Net decrease in debt (9) (30)<br>Acquisition of businesses, net of cash<br>acquired (115) (107)<br>Other (11) 39<br>Ending Cash Balance $742 $1,098<br>Total Debt $3,973 $4,201<br>A/R $2,338 $2,640<br>Days Sales Outstanding* 66 67<br>Inventory $2,003 $2,066<br>Days on Hand* 81 75<br>Accounts Payable $1,433 $1,629<br>Days Outstanding* 60 62<br>Free Cash Flow and Working Capital Liquidity, Cash & Debt<br>($ in Millions) Q1 2020 Q1 2021<br>Cash from Continuing Operating<br>Activities $411 $640<br>Capital expenditures, net<br>Cash paid pursuant to collateral<br>requirements related to cross-currency<br>swap contracts<br>(174)<br>6<br>(141)<br>30<br>Free Cash Flow $243 $529<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>Q1 Balance Sheet & Cash Flow Summary<br>13 |
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| EVERY CONNECTION COUNTS<br>Appendix |
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| 15<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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| 16<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>• Free Cash Flow Conversion – represents the ratio of Free Cash Flow to Adjusted Income (Loss) from Continuing Operations. We use Free Cash Flow Conversion as an<br>indicator of our ability to convert earnings to cash.<br>Non-GAAP Financial Measures (cont.) |
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| Segment Summary<br>17<br><br><br>Transportation Solutions $ 2,224 $ 1,868<br>Industrial Solutions 873 927<br>Communications Solutions 425 373<br>Total $ 3,522 $ 3,168<br>Transportation Solutions $ 308 13.8 % $ 316 16.9 %<br>Industrial Solutions 76 8.7 115 12.4<br>Communications Solutions 64 15.1 40 10.7<br>Total $ 448 12.7 % $ 471 14.9 %<br>Transportation Solutions $ 431 19.4 % $ 325 17.4 %<br>Industrial Solutions 118 13.5 132 14.2<br>Communications Solutions 75 17.6 45 12.1<br>Total $ 624 17.7 % $ 502 15.8 %<br>For the Quarters Ended<br>December 27, December 25,<br>Net Sales Net Sales<br>Income (1)<br>Adjusted<br>O perating<br>Income (1)<br>Income<br>O perating O perating<br>Income<br>(1) Adjusted operating income and adjusted operating margin are non-GAAP financial measures. See description of non-GAAP<br>financial measures.<br>2020 2019<br>($ in millions)<br>Adjusted<br>O perating<br>O perating<br>Margin<br>O perating<br>Margin<br>Adjusted<br>O perating<br>Margin (1)<br>Adjusted<br>O perating<br>Margin (1) |
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| Reconciliation of Net Sales Growth<br>18<br><br>Transportation Solutions (3):<br>Automotive $ 224 15.9 % $ 161 11.3 % $ 63 $ —<br>Commercial transportation 73 28.3 65 24.9 8 —<br>Sensors 59 28.8 7 3.2 5 47<br>Total 356 19.1 233 12.3 76 47<br>Industrial Solutions (3):<br>Aerospace, defense, oil, and gas (59) (19.1) (68) (22.0) 6 3<br>Industrial equipment 32 12.2 21 7.7 11 —<br>Medical (23) (12.8) (24) (13.4) 1 —<br>Energy (4) (2.3) (7) (3.7) 3 —<br>Total (54) (5.8) (78) (8.4) 21 3<br>Communications Solutions (3):<br>Data and devices 15 6.8 10 4.7 5 —<br>Appliances 37 24.0 33 21.1 4 —<br>Total 52 13.9 43 11.5 9 —<br>Total $ 354 11.2 % $ 198 6.2 % $ 106 $ 50<br>Net Sales<br>Growth (Decline)<br>Organic Net Sales<br>Growth (Decline) (1)<br>Change in Net Sales for the Quarter Ended December 25, 2020<br>versus Net Sales for the Quarter Ended December 27, 2019<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 management deems<br>necessary.<br>($ in millions)<br>Translation (2) Acquisitions |
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| Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended December 25, 2020<br>19<br><br>Operating income:<br>Transportation Solutions $ 308 $ 5 $ 118 $ — $ 431<br>Industrial Solutions 76 4 38 — 118<br>Communications Solutions 64 — 11 — 75<br>Total $ 448 $ 9 $ 167 $ — $ 624<br>Operating margin 12.7 % 17.7 %<br>Other expense, net $ (1) $ — $ — $ — $ (1)<br>Income tax expense $ (60) $ (2) $ (32) $ (29) $ (123)<br>Effective tax rate 13.8 % 20.1 %<br>Income from continuing operations $ 375 $ 7 $ 135 $ (29) $ 488<br>Diluted earnings per share from<br>continuing operations $ 1.13 $ 0.02 $ 0.41 $ (0.09) $ 1.47<br><br>Acquisition- Restructuring<br>Adjustments<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>(2) Income tax benefits related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.<br>(3) See description of non-GAAP financial measures.<br>Related and Other Adjusted<br>U.S. GAAP Charges (1) Charges, Net (1) Tax Items (2) (Non-GAAP) (3) |
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| Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended December 27, 2019<br>20<br><br>Operating income:<br>Transportation Solutions $ 316 $ 5 $ 4 $ - $ 325<br>Industrial Solutions 115 2 15 - 132<br>Communications Solutions 40 - 5 - 45<br>Total $ 471 $ 7 $ 24 $ - $ 502<br>Operating margin 14.9 % 15.8 %<br>Other income, net $ 5 $ - $ - $ - $ 5<br>Income tax expense $ (447) $ (1) $ - $ 355 $ (93)<br>Effective tax rate 95.1 % 18.6 %<br>Income from continuing operations $ 23 $ 6 $ 24 $ 355 $ 408<br>Diluted earnings per share from<br>continuing operations $ 0.07 $ 0.02 $ 0.07 $ 1.05 $ 1.21<br>U.S. GAAP<br>Acquisition-<br>Related<br>Charges (1)<br>Adjustments<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<br>laws in effect for each such jurisdiction.<br>(2) Income tax expense related to the tax impacts of certain measures of Swiss tax reform.<br>Adjusted<br>(Non-GAAP) (3)<br>($ in millions, except per share data)<br>Restructuring<br>and Other<br>Charges, Net (1) Tax Items (2) |
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| Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended September 25, 2020<br>21<br><br>Operating income:<br>Transportation Solutions $ 198 $ 11 $ 36 $ — $ 245<br>Industrial Solutions 85 2 46 — 133<br>Communications Solutions 64 — 31 — 95<br>Total $ 347 $ 13 $ 113 $ — $ 473<br>Operating margin 10.6 % 14.5 %<br>Income tax expense $ (109) $ (4) $ (21) $ 56 $ (78)<br>Effective tax rate 32.3 % 16.8 %<br>Income from continuing operations $ 228 $ 9 $ 92 $ 56 $ 385<br>Diluted earnings per share from<br>continuing operations $ 0.69 $ 0.03 $ 0.28 $ 0.17 $ 1.16<br><br>Acquisition- Restructuring<br>Adjustments<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>(2) Income tax expense related to increases to the valuation allowance for certain deferred tax assets.<br>(3) See description of non-GAAP financial measures.<br>Related and Other Adjusted<br>U.S. GAAP Charges (1) Charges, Net (1) Tax Items (2) (Non-GAAP) (3) |
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| Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Quarter Ended March 27, 2020<br>22<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>(4) See description of non-GAAP financial measures.<br>U.S. GAAP<br>Acquisition-<br>Related<br>Charges (1)<br>Adjustments<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.<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 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>Adjusted<br>(Non-GAAP) (4)<br>($ in millions, except per share data)<br>Restructuring<br>and Other<br>Charges, Net (1) Tax Items (2) |
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| Reconciliation of Non-GAAP Financial Measures to GAAP<br>Financial Measures for the Year Ended September 25, 2020<br>23<br><br>Operating income (loss):<br>Transportation Solutions $ (93) $ 32 $ 113 $ 900 $ - $ 952<br>Industrial Solutions 412 8 102 - - 522<br>Communications Solutions 218 - 42 - - 260<br>Total $ 537 $ 40 $ 257 $ 900 $ - $ 1,734<br>Operating margin 4.4 % 14.2 %<br>Other income, net $ 20 $ - $ - $ - $ (8) $ 12<br>Income tax expense $ (783) $ (8) $ (46) $ (4) $ 550 $ (291)<br>Effective tax rate 149.4 % 17.0 %<br>Income (loss) from continuing<br>operations $ (259) $ 32 $ 211 $ 896 $ 542 $ 1,422<br>Diluted earnings (loss) per share from<br>continuing operations (3) $ (0.78) $ 0.10 $ 0.63 $ 2.68 $ 1.62 $ 4.26<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 $226 million of income tax expense related to<br>increases to the valuation allowance for certain deferred tax assets, partially offset by a $31 million income tax benefit related to pre-separation tax matters and the<br>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 two 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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| Reconciliation of Free Cash Flow<br>24<br>Net cash provided by operating activities:<br>Net cash provided by continuing operating activities $ 640 $ 719 $ 411<br>Net cash provided by discontinued operating activities — 1 —<br>640 720 411<br>Net cash used in investing activities (246) (117) (289)<br>Net cash used in financing activities (252) (135) (314)<br>Effect of currency translation on cash 11 3 7<br>Net increase (decrease) in cash, cash equivalents, and restricted cash $ 153 $ 471 $ (185)<br>Net cash provided by continuing operating activities $ 640 $ 719 $ 411<br>Excluding:<br>Cash paid pursuant to collateral requirements related<br>to cross-currency swap contracts 30 39 6<br>Capital expenditures, net (141) (110) (174)<br>Free cash flow (1) $ 529 $ 648 $ 243<br>For the Quarters Ended<br>December 25, December 27,<br>(in millions)<br>(1) Free cash flow is a non-GAAP financial measure. See description of non-GAAP financial measures.<br>2020 2019<br>September 25,<br>2020 |
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| Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin<br>25<br>Net income $ 381 $ 230 $ 26<br>Income from discontinued operations (6) (2) (3)<br>Income tax expense 60 109 447<br>Other (income) expense, net 1 - (5)<br>Interest expense 15 12 12<br>Interest income (3) (2) (6)<br>Operating income 448 347 471<br>Acquisition-related charges 9 13 7<br>Restructuring and other charges, net 167 113 24<br>Adjusted operating income (1) 624 473 502<br>Depreciation and amortization 187 181 174<br>Adjusted EBITDA (1) $ 811 $ 654 $ 676<br>Net sales $ 3,522 $ 3,261 $ 3,168<br>Net income as a percentage of net sales 10.8 % 7.1 % 0.8 %<br>Adjusted EBITDA margin (1) 23.0 % 20.1 % 21.3 %<br>Operating income $ 308 $ 76 $ 64 $ 448 $ 316 $ 115 $ 40 $ 471<br>Acquisition-related charges 5 4 — 9 5 2 — 7<br>Restructuring and other charges, net 118 38 11 167 4 15 5 24<br>Adjusted operating income (1) 431 118 75 624 325 132 45 502<br>Depreciation and amortization 123 47 17 187 113 45 16 174<br>Adjusted EBITDA (1) $ 554 $ 165 $ 92 $ 811 $ 438 $ 177 $ 61 $ 676<br>Net sales $ 2,224 $ 873 $ 425 $ 3,522 $ 1,868 $ 927 $ 373 $ 3,168<br>Operating margin 13.8 % 8.7 % 15.1 % 12.7 % 16.9 % 12.4 % 10.7 % 14.9 %<br>Adjusted operating margin (1) 19.4 % 13.5 % 17.6 % 17.7 % 17.4 % 14.2 % 12.1 % 15.8 %<br>Adjusted EBITDA margin (1) 24.9 % 18.9 % 21.6 % 23.0 % 23.4 % 19.1 % 16.4 % 21.3 %<br>Solutions Solutions<br>Communications<br>For the Quarters Ended<br>December 25, 2020 December 27, 2019<br>December 25,<br>2020 2020<br>September 25, December 27,<br>2019<br>($ in millions)<br>For the Quarters Ended<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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| Reconciliation of Forward-Looking Non-GAAP Financial Measures<br>to Forward-Looking GAAP Financial Measures<br>26<br>Diluted earnings per share from continuing operations $ 1.38<br>Restructuring and other charges, net 0.07<br>Acquisition-related charges 0.02<br>Adjusted diluted earnings per share from continuing operations (2) $ 1.47<br>Effective tax rate 17.5 %<br>Effective tax rate adjustments (3) 1.5<br>Adjusted effective tax rate (2) 19.0 %<br>(3) Includes adjustments for special tax items and the tax effect of acquisition-related charges and net<br>restructuring and other charges, calculated based on the jurisdictions in which the expense (income) is incurred<br>and the tax laws in effect for each such jurisdiction.<br>Outlook for<br>Quarter Ending<br>March 26,<br>2021 (1)<br>Outlook for<br>Fiscal 2021 (1)<br>(1) Outlook is as of January 27, 2021.<br>(2) See description of non-GAAP financial measures. |
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