TE Connectivity Reports Fiscal Fourth Quarter and Full Year Results

SCHAFFHAUSEN, Switzerland, Oct. 28, 2015 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal fourth quarter and year ended September 25, 2015.

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Fourth Quarter Highlights                                                                                        

• Net sales were $2.98 billion, down 3 percent versus the prior year and flat organically, and up 6 percent in constant currency
• Adjusted Earnings Per Share (EPS) from continuing operations were $0.90, up 2 percent versus the prior year and up 15 percent in constant currency
• Diluted Earnings Per Share from continuing operations (GAAP EPS) were $0.34 versus $1.48 in the prior year primarily due to tax items
• Returned $759 million to shareholders through dividends and share repurchases

Full Year Highlights

• Net sales increased to $12.2 billion, up 4 percent organically versus the prior year; up 10 percent in constant currency
• Adjusted Earnings Per Share (EPS) from continuing operations were $3.60, up 9 percent versus the prior year and up 19 percent in constant currency
• Diluted Earnings Per Share from continuing operations (GAAP EPS) were $3.01 versus $3.87 in the prior year primarily due to tax items
• Returned $1.7 billion to shareholders including $1.2 billion in share repurchases
• Strengthened portfolio with four acquisitions and Broadband Network Solutions (BNS) divestiture; established TE as a leader in the attractive sensors market; increased harsh environment businesses to 80 percent of sales.

Tom Lynch, TE Connectivity Chairman and CEO stated, "For the full year, we delivered strong performance in a challenging macro environment. Sales were up 4 percent organically, and 10 percent on a constant currency basis due to the continued strength in our Automotive, Appliances, Commercial Air, SubCom and Sensors businesses. This more than offset approximately $1 billion in unfavorable foreign exchange translation, the precipitous decline in the Oil and Gas market, and a slowdown in China during the last two quarters of the fiscal year. We expanded adjusted operating margins by 80 bps and grew adjusted EPS 19 percent on a constant currency basis for the year due to strong execution, the strength of our harsh environment portfolio and productivity improvements driven by our TE Operating Advantage (TEOA) business system.

"In fiscal year 2015, we made good progress on our strategy," said Lynch. "We completed four acquisitions, strengthening our leadership position in harsh environment solutions and establishing a leading Sensors business. We also sold our BNS business for $3 billion and are returning the vast majority of proceeds to shareholders. We ended the year with 80 percent of our portfolio focused on harsh environment applications, and 90 percent of our sales driven by connectivity and sensor solutions.

"In fiscal year 2016, we expect sales between $12.0 and $12.8 billion, up 1 percent on an actual basis and 3 percent organically at the midpoint of the range," said Lynch. "This guidance reflects continued growth in the majority of our harsh environment businesses for the year, offset by softness in China and several Industrial markets in the first half of the fiscal year. We expect inventories to get back in balance and China markets to return to growth in our second half. Despite this challenging environment, we expect to deliver fiscal 2016 adjusted EPS of $3.80 to $4.20, up 11 percent at the midpoint of the range."

FISCAL FOURTH QUARTER RESULTS
The company reported net sales of $2.98 billion compared to prior year sales of $3.07 billion. Adjusted EPS were $0.90, compared to $0.88 in the prior year. GAAP EPS were $0.34, compared to $1.48 in the prior year. GAAP EPS included $228 million of tax items, acquisition related charges, and restructuring and other charges. Free cash flow was $389 million for the quarter.

Excluding SubCom, total company orders were $2.6 billion and the book-to-bill ratio was 0.95.

OUTLOOK 
For the fiscal first quarter 2016, the company expects net sales of $2.7 billion to $2.9 billion, reflecting a decline of 8 percent on an actual basis and down 4 percent on an organic basis year over year at the mid-point. The company expects adjusted EPS of $0.72 to $0.80 which represents a 15 percent decline at the mid-point. GAAP EPS are expected to be $0.62 to $0.70, including restructuring and other charges of $0.08 and acquisition related charges of $0.02. This outlook includes foreign exchange headwinds, reducing expected sales by $167 million and adjusted EPS by $0.05 year over year.

For the full year, the company expects net sales of $12.0 to $12.8 billion, reflecting 1 percent actual and 3 percent organic growth versus prior year at the mid-point; and adjusted EPS of $3.80 to $4.20 reflecting double-digit growth versus the prior year. GAAP EPS are expected to be $3.61 to $4.01, including restructuring and other charges of $0.16, and acquisition related charges of $0.03. The outlook includes foreign exchange headwinds, reducing expected sales by $262 million and adjusted EPS by $0.10 year over year as well as the impact of a 53^rd week. 

Information about TE Connectivity's use of non-GAAP financial measures is provided below. For a reconciliation 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. EDT. The dial-in information is provided here:

• At TE Connectivity's website: http://investors.te.com.
• By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the dial-in number in the United States is (800) 230-1074, and for international callers, the dial-in number is (612) 234-9959.
• An audio replay of the conference call will be available beginning at 10:30 a.m. EDT on October 28, 2015, and ending at 11:59 p.m. EST on November 4, 2015. The dial-in number for participants in the United States is (800) 475-6701. For participants outside the United States, the dial-in number is (320) 365-3844. The replay access code for all callers is 367168.

NON-GAAP MEASURES 
"Organic Sales Growth," "Sales in Constant Currency," "Adjusted Operating Income," "Adjusted Operating Income in Constant Currency," "Adjusted Operating Margin," "Adjusted Other Income, Net," "Adjusted Income Tax Expense," "Adjusted Income from Continuing Operations," "Adjusted Earnings Per Share," "Adjusted Earnings Per Share in Constant Currency," and "Free Cash Flow" are non-GAAP measures and should not be considered replacements for results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP measures may not be comparable to similarly-titled measures reported by other companies. 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 measures in combination with the most directly comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease in reported amounts. The following provides additional information regarding these non-GAAP measures:

• Organic Sales Growth – is a useful measure of our underlying results and trends in the business. It is also a significant component in our incentive compensation plans. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Sales Growth is a useful measure of our performance because it excludes items that: i) are not completely under management's control, such as the impact of changes in foreign currency exchange rates; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.
• Sales in Constant Currency – represents net sales (the most comparable GAAP measure) excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe constant currency information provides valuable supplemental information regarding our net sales.
• Adjusted Operating Income – represents operating income (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We utilize Adjusted Operating Income to assess segment level core operating performance and to provide insight to management in evaluating segment operating plan execution and underlying market conditions. It also is a significant component in our incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods.
• Adjusted Operating Income in Constant Currency – represents Adjusted Operating Income excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe constant currency information provides valuable supplemental information regarding our operating income.
• Adjusted Operating Margin – represents operating margin (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income or charges, if any. We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. This measure should be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and impact of adjustments to operating margin.
• Adjusted Other Income, Net – represents other income, net (the most comparable GAAP measure) before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, if any. We present Adjusted Other Income, Net as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP.
• Adjusted Income Tax Expense – represents income tax expense (the most comparable GAAP measure) after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, impairment charges, other income or charges, and certain significant special tax items, if any. We present Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used in determining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).
• Adjusted Income from Continuing Operations – represents income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Income from Continuing Operations as we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. Adjusted Income from Continuing Operations provides additional information regarding our underlying operating results, trends and the comparability of these results between periods.
• Adjusted Earnings Per Share – represents diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) before special items, including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, if applicable, the related tax effects. We present Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider results excluding these items in addition to results in accordance with GAAP. We believe such a measure provides a picture of our results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult. It also is a significant component in our incentive compensation plans.
• Adjusted Earnings Per Share in Constant Currency – represents Adjusted Earnings Per Share excluding the impact of fluctuations in foreign currency exchange rates between periods. We believe constant currency information provides valuable supplemental information regarding our earnings per share.
• 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 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. 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. Voluntary pension contributions are excluded from the GAAP 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, also are considered by management in evaluating Free Cash Flow. 
  
  Free Cash Flow subtracts 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 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 our expected use of proceeds received from the sale of the Broadband Network Solutions business. Examples of factors that could cause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatory risks, such as conditions affecting demand for products, particularly in the automotive industry and consumer devices industries; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; natural disasters and political, economic and military instability in countries in which we operate; developments in the credit markets; future goodwill impairment; compliance with current and future environmental and other laws and regulations; the possible effects on us of changes in tax laws, tax treaties and other legislation; the risk that the operations of Measurement Specialties will not be successfully integrated into ours; the risk that revenue opportunities, cost savings and other anticipated synergies from the Measurement Specialties acquisition may not be fully realized or may take longer to realize than expected; and the risk that we do not realize the anticipated benefits from the sale of the Broadband Network Solutions business. 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. 26, 2014 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.

ABOUT TE CONNECTIVITY    
TE Connectivity (NYSE: TEL) is a $12 billion global technology leader. Our connectivity and sensor solutions are essential in today's increasingly connected world. We collaborate with engineers to transform their concepts into creations – redefining what's possible using intelligent, efficient and high-performing TE products and solutions proven in harsh environments. Our 72,000 people, including 7,200 engineers, partner with customers in approximately 150 countries across a wide range of industries. We believe EVERY CONNECTION COUNTS – www.TE.com.   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE TE Connectivity Ltd.