TE Connectivity Reports Strong Fourth Quarter and Full Year Results; Sales $14.3 Billion; Adjusted EPS $3.12

SCHAFFHAUSEN, Switzerland, Nov. 3, 2011 /PRNewswire/ -- TE Connectivity Ltd. (NYSE: TEL) today reported fiscal fourth quarter and full year results ended Sept. 30, 2011.  The company reported net sales of $3.9 billion during the fourth quarter, up 25 percent versus the prior year.  Annual sales were $14.3 billion, up 19 percent versus the prior year.  Strong annual and quarterly sales results were driven by the Transportation and Network Solutions segments.  Earnings Per Share from Continuing Operations (GAAP EPS) were $0.75 for the quarter and adjusted EPS were $0.89.  Full year GAAP EPS were $2.82 and adjusted EPS were $3.12.  Fiscal 2011 and fourth quarter results include an additional week.  Excluding the impact of this additional week, fourth quarter adjusted EPS were $0.81 and full year adjusted EPS were $3.03, up 13 percent and 19 percent versus the prior year, respectively.  Free cash flow was $560 million for the quarter and $1.4 billion for the year.

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“We are very pleased with the strong performance in 2011 as our team executed well in a volatile environment.  We continued to strengthen the company’s position in our Automotive and Telecom Networks businesses as well as in high-growth emerging markets,” said TE Connectivity Chief Executive Officer Tom Lynch.  “Our increased investment in engineering in recent years and the acquisition of ADC have served us well and expanded the range of products and solutions we provide for our customers.”

Total company orders were $3.6 billion in the fourth quarter, an increase of 22 percent compared to the prior year.  The book-to-bill ratio was 0.93 overall, and 0.94 excluding the Subsea Communications business.

FISCAL FOURTH QUARTER RESULTS

   ($ in millions)

Sept. 30, 2011

Sept. 24, 2010

YoY

Net Sales

$3,911

$3,137

25%

Operating Income

$465

$382

22%

Restructuring and Other Charges

$62

$56


Acquisition Related Charges

$23

$8


Adjusted Operating Income

$550

$446

23%

Operating Margin

11.9%

12.2%


Adjusted Operating Margin

14.1%

14.2%




IMPACT OF ADDITIONAL WEEK

($ in millions, except per share amounts)

Sept. 30, 2011

14 Weeks

14th Week

Sept. 30, 2011

13 Weeks

Net Sales

$3,911

($277)

$3,634

Adjusted Operating Income

$550

($53)

$497

Adjusted Operating Margin

14.1%


13.7%

Adjusted EPS

$0.89

($0.08)

$0.81



2012 OUTLOOK

For the full year, the company expects sales of $14.3 to $14.9 billion and Adjusted EPS of $3.10 to $3.40.  GAAP EPS are expected to be $3.00 to $3.30, including restructuring and other charges.  This compares to fiscal 2011 revenue of $14.0 billion and adjusted EPS of $3.03 excluding the additional week in the year.

“We expect full year organic sales growth of 2 to 6 percent,” Lynch said.  “This assumes continued growth in automotive production, increased investment in broadband networks and an improvement in the markets served by our Communications and Industrial Solutions (CIS) segment in the second half.”

For the first quarter, the company expects net sales of $3.4 to $3.5 billion and adjusted EPS of $0.68 to $0.72.  GAAP EPS are expected to be $0.66 to $0.70, including restructuring and other charges.  “First quarter sales and earnings are expected to decline sequentially due to normal seasonality and a continuation of soft demand and inventory corrections in our CIS markets,” Lynch said.

This outlook assumes current foreign exchange and commodity rates.  

ADDITIONAL ITEMS

  • The Board of Directors approved a recommendation to increase the quarterly dividend by 17%, from $0.18 to $0.21 per share, for the four fiscal quarters beginning with the third quarter of fiscal 2012.  This recommendation will be presented for shareholder approval at the company's Annual General Meeting of Shareholders in March 2012.
  • The Board of Directors also authorized an increase in the company's share repurchase program of $1.5 billion on September 27, 2011.
  • The company will hold an Investor Meeting on Tuesday, December 6, 2011 at The Waldorf Astoria in New York City.  

Information about TE Connectivity’s use of non-GAAP financial measures is described at the end of this press release.  For a reconciliation of these non-GAAP financial measures, see the attached tables.

ABOUT TE CONNECTIVITY

TE Connectivity is a global, $14 billion company that designs and manufactures approximately 500,000 products that connect and protect the flow of power and data inside the products that touch every aspect of our lives. Our nearly 100,000 employees partner with customers in virtually every industry — from consumer electronics, energy and healthcare, to automotive, aerospace and communication networks — enabling smarter, faster, better technologies to connect products to possibilities. More information on TE Connectivity can be found at http://www.te.com.

CONFERENCE CALL AND WEBCAST

  • The company will hold a conference call for investors today beginning at 8:30 a.m. EDT.
  • Internet users will be able to access the company’s earnings webcast, including slide materials, at the “Investors” section of TE Connectivity’s website: http://investors.te.com.
  • For both “listen-only” participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the United States is (800) 230-1059. The telephone dial-in number for participants outside the United States is (612) 234-9959.
  • An audio replay of the conference call will be available beginning at 10:30 a.m. EDT on November 3, 2011 and ending at 11:59 p.m. EST on November 10, 2011. The dial-in number for participants in the United States is (800) 475-6701.  For participants outside the United States, the replay dial-in number is (320) 365-3844. The replay access code for all callers is 218704.

NON-GAAP MEASURES

“Organic Sales Growth,” “Adjusted Operating Income,” “Adjusted Operating Margin,” “Adjusted Other Income, Net,” “Adjusted Income Tax Expense,” “Adjusted Income from Continuing Operations,” “Adjusted Earnings Per Share,” and “Free Cash Flow” (FCF) are non-GAAP measures and should not be considered replacements for GAAP results.  

“Organic Sales Growth” is a useful measure used by us to measure the underlying results and trends in the business.  The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth (the non-GAAP measure) consists of the impact from foreign currency exchange rates, acquisitions, divestitures, and an additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length.  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 and the impact of an additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length.  The limitation of this measure is that it excludes items that have an impact on our sales.  This limitation is best addressed by using organic sales growth in combination with the GAAP results.  See the accompanying tables to this release for the reconciliation presenting the components of Organic Sales Growth.

We have presented operating income before special items including charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges (“Adjusted Operating Income”).  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 better reflects our underlying operating results, trends, and the comparability of these results between periods.  The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges that may mask the underlying operating results and/or business trends.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported operating income.  This limitation is best addressed by using Adjusted Operating Income in combination with operating income (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

We have presented operating margin before special items including charges or income related to legal settlements and reserves, restructuring and other charges, and acquisition related charges (“Adjusted Operating Margin”).  We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results.  It also is a significant component in our incentive compensation plans.  Because we cannot predict the amount and timing of such items and the associated charges or gains that will be recorded in our financial statements, it is difficult to include the impact of those items in the forecast.

We have presented other income, net before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items (“Adjusted Other Income, Net”).   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.  The difference between Adjusted Other Income, Net and other income, net (the most comparable GAAP measure) consists of tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease other income, net.  This limitation is best addressed by using Adjusted Other Income, Net in combination with other income, net (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

We have presented income tax expense after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, and certain significant special tax items (“Adjusted Income Tax Expense”).  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).  The difference between Adjusted Income Tax Expense and income tax expense (the most comparable GAAP measure) is the tax effect of adjusting items and certain significant special tax items.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease income tax expense.  This limitation is best addressed by using Adjusted Income Tax Expense in combination with income tax expense (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

We have presented income from continuing operations attributable to TE Connectivity Ltd. before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects (“Adjusted Income from Continuing Operations”).  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.  The difference between Adjusted Income from Continuing Operations and income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results.  This limitation is best addressed by using Adjusted Income from Continuing Operations in combination with income from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

We have presented diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. before special items, including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, and, if applicable, related tax effects (“Adjusted Earnings Per Share”).  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.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results.  This limitation is best addressed by using Adjusted Earnings Per Share in combination with diluted earnings per share from continuing operations attributable to TE Connectivity Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

“Free Cash Flow” (FCF) is a useful measure of our cash generation which is free from any significant existing obligation.  It also is a significant component in our incentive compensation plans.  The difference between cash flows from operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows and inflows that we believe are useful to identify.  FCF permits management and investors to gain insight into the amount that management employs to measure cash that is free from any significant existing obligation.  The difference reflects the impact from:

  • net capital expenditures,
  • voluntary pension contributions, and
  • cash impact of special items.

Net capital expenditures are subtracted because they represent long-term commitments.  Voluntary pension contributions are subtracted from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity.  We forecast our cash flow results excluding any voluntary pension contributions because we have not yet made a determination about the amount and timing of any such future contributions.  In addition, our forecast excludes the cash impact of special items because we cannot predict the amount and timing of such items.

The limitation associated with using FCF is that it subtracts cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and that therefore may imply that there is less or more cash that is available for the company's programs than the most comparable GAAP measure.  This limitation is best addressed by using FCF in combination with the GAAP cash flow results.

FCF as presented herein may not be comparable to similarly-titled measures reported by other companies.  The measure should be used in conjunction with other GAAP financial measures.  Investors are urged to read our financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this release that show all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of our total cash and cash equivalents for the period.  See the accompanying tables to this release for a cash flow statement presented in accordance with GAAP and a reconciliation presenting the components of FCF.

Because we do not predict the amount and timing of special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, we do not provide reconciliations to GAAP of our forward-looking financial measures.

FORWARD-LOOKING STATEMENTS