SECURITIES AND EXCHANGE...
Transcript of SECURITIES AND EXCHANGE...
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORTPursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2016
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)
Rheinstrasse 20CH-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: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On November 2, 2016 , TE Connectivity Ltd. (the “Company”) issued a press release reporting the Company’s fourth quarter and full year results for fiscal 2016. A copy ofthe 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 November 2, 2016 (see information in the press release attached hereto as Exhibit 99.1 under “Conference Call andWebcast”). 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 hereinby 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 Exhibit No.
Description 99.1
Press release issued November 2, 2016 99.2
Presentation - TE Connectivity Q4 2016 Earnings Call ( November 2, 2016 ) 2
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. TE CONNECTIVITY LTD.(Registrant)
By: /s/ Heath A. Mitts
Heath A. Mitts
Executive Vice President and Chief Financial Officer Date: November 2, 2016
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Exhibit 99.1
TE Connectivity Announces Fourth Quarter and Full Year Results for Fiscal Year 2016
Company Posts Strong Fourth Quarter GAAP EPS and Record Quarterly Adjusted EPS
SCHAFFHAUSEN, Switzerland — November 2, 2016 — TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal fourth quarter and year endedSeptember 30, 2016. Fourth Quarter Highlights
· Net sales were $3.3 billion· Diluted earnings per share (EPS) from continuing operations were $1.22· Adjusted EPS were $1.27, above the high end of the guidance range· Cash flow from continuing operating activities was strong at $782 million and free cash flow was a record for the company at $594 million
Full Year Highlights
· Net sales were $12.2 billion· Diluted EPS from continuing operations (GAAP EPS) were $5.26· Adjusted EPS were $4.08, up 13 percent versus the prior year· Cash flow from continuing operating activities was $2 billion; free cash flow was $1.6 billion· $3.1 billion returned to shareholders through dividends and share repurchases· Strengthened harsh environment portfolio with acquisitions in interventional medical (Creganna), industrial connectors (Intercontec), and automotive
sensors (Jaquet)· Strong performance and momentum in the SubCom business, with $1 billion of backlog
Fourth Quarter Results For the fourth quarter, the company reported net sales of $3.3 billion, with diluted EPS from continuing operations (GAAP EPS) of $1.22. Adjusted EPS were $1.27,cash flow from continuing operating activities was strong at $782 million, and free cash flow was a record for the company at $594 million. Excluding SubCom, totalorders were $3.2 billion and the book-to-bill ratio was 1.03. All metrics include the impact of an additional week in the fourth quarter. “The fourth quarter was a strong finish to a solid year for TE, despite a challenging macro environment,” said TE Connectivity Chairman and CEO Tom Lynch. “Ourperformance was led by strength in several businesses
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including Automotive, Commercial Transportation, SubCom, Aerospace and Defense, and Energy. We continued to build our harsh environment portfolio with theacquisition of Intercontec, which expanded our product range in the industrial equipment market. Our SubCom business continued its momentum by being awarded acontract in October for the Pacific Light Cable Network, a trans-pacific cable installation for Google and Facebook.” Full Year Results For the full year, the company reported net sales of $12.2 billion and diluted EPS from continuing operations (GAAP EPS) of $5.26. Adjusted EPS were $4.08, cashflow from continuing operating activities was $2 billion and free cash flow was $1.6 billion for the year. All metrics include the impact of an additional week in thefourth quarter. “Our strategy to focus on harsh environment applications and our strong execution delivered solid results for the full fiscal year,” said Lynch. “At a segment level,results were driven by excellent performance in our Transportation Solutions segment and a solid second half of the year in our Industrial Solutions andCommunications Solutions segments. We also continued our disciplined capital allocation strategy, returning $3.1 billion to shareholders.” 2017 Outlook For the fiscal first quarter 2017, the company expects net sales of $2.95 billion to $3.05 billion, reflecting an increase of 6 percent on an actual basis and 3 percent onan organic basis year over year at the mid-point. GAAP EPS are expected to be $0.84 to $0.88, including net restructuring, acquisition-related and other charges of$0.14. TE expects adjusted EPS of $0.98 to $1.02 which represents a 19 percent improvement at the mid-point versus the first quarter of 2016. For the full year, the company expects net sales of $12.3 to $12.9 billion, reflecting 5 percent actual and 3 percent organic growth at the mid-point versus the prioryear, excluding the additional week in fiscal year 2016. GAAP EPS are expected to be $3.84 to $4.14, including net restructuring, acquisition-related and othercharges of $0.35. TE expects adjusted EPS of $4.19 to $4.49, reflecting 10 percent growth at the mid-point compared to 2016, when excluding the additional week.
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“These are exciting times for TE, and we have never been better positioned to capitalize on the strong underlying trends of a safer, greener, smarter and moreconnected world,” said Lynch. “We expect a good start to fiscal 2017 due to strong order momentum in the fourth quarter of 2016. Our guidance for 2017 implies 5percent growth in sales, and another year of double-digit improvement in adjusted EPS.” Information about TE Connectivity’s use of non-GAAP financial measures is provided below. For a reconciliation of these non-GAAP financial measures, see theattached tables. Chief Executive Officer Transition On October 3, 2016, the company announced that its Board of Directors appointed Terrence Curtin to succeed Tom Lynch as the company’s chief executive officer,effective March 9, 2017. Upon completion of the transition, Lynch will continue as executive chairman of the board. 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: 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) 230-1059, and for international callers, the dial-in number is (612) 332-0107.· An audio replay of the conference call will be available beginning at 10:30 a.m. ET on November 2, 2016, and ending at 11:59 p.m. ET on November 9,
2016. 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 403245.
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 productsand solutions proven in harsh environments. Our 75,000 people, including over 7,000 engineers, partner with customers in close to 150 countries across a wide rangeof industries. We believe EVERY CONNECTION COUNTS — www.TE.com.
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Non-GAAP Measures “Organic Net Sales Growth,” “Organic Net Sales Growth Excluding the Impact of the Additional Week,” “Net Sales Excluding the Impact of the Additional Week,”“Net Sales Growth Excluding the Impact of the Additional Week,” “Adjusted Operating Income,” “Adjusted Operating Income Excluding the Impact of theAdditional Week,” “Adjusted Operating Margin Excluding the Impact of the Additional Week,” “Adjusted Operating Margin,” “Adjusted Other Income, Net,”“Adjusted Income Tax Expense,” “Adjusted Income from Continuing Operations,” “Adjusted Earnings Per Share,” “Adjusted Earnings Per Share Excluding theImpact of the Additional Week,” and “Free Cash Flow” are non-GAAP measures and should not be considered replacements for results in accordance withaccounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP measures may not be comparable to similarly-titled measures reported by othercompanies. The primary limitation of these measures is that they exclude the financial impact of items that would otherwise either increase or decrease our reportedresults. This limitation is best addressed by using these non-GAAP measures in combination with the most directly comparable GAAP measures in order to betterunderstand the amounts, character and impact of any increase or decrease in reported amounts. The following provides additional information regarding these non-GAAP measures:
· Organic Net Sales Growth — is a useful measure of our underlying results and trends in the business. It is also a significant component in our incentivecompensation plans. The difference between reported net sales growth (the most comparable GAAP measure) and Organic Net Sales Growth consists of theimpact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Net Sales Growth is a useful measure of our performancebecause 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) donot reflect the underlying growth of the company, such as acquisition and divestiture activity.
· Organic Net Sales Growth Excluding the Impact of the Additional Week, Net Sales Excluding the Impact of the Additional Week, and Net Sales Growth
Excluding the Impact of the Additional Week — represent Organic Net Sales Growth, net sales (the most comparable GAAP measure), and net sales growth(the most comparable GAAP measure), respectively, excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal yearswhich are 53 weeks in length. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year. Webelieve these measures are useful to investors because they provide insight into our underlying operating results, trends, and the comparability of theseresults between periods.
· 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 OperatingIncome to assess segment level core operating performance and to provide insight to management in evaluating segment operating plan execution andunderlying market conditions. It also is a significant component in our incentive compensation plans. Adjusted Operating Income is useful to investorsbecause it provides insight into our underlying operating results, trends, and the comparability of these results between periods.
· Adjusted Operating Income Excluding the Impact of the Additional Week and Adjusted Operating Margin Excluding the Impact of the Additional Week —
represents Adjusted Operating Income and Adjusted Operating Margin, respectively, excluding the impact of the additional week in the fourth quarter of thefiscal year for fiscal years which are 53 weeks in length. We believe these measures are useful to investors because they provide insight into our underlyingoperating results, trends, and the comparability of these results between periods.
· Adjusted Operating Margin — represents operating margin (the most comparable GAAP measure) before
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special items including charges or income related to restructuring and other charges, acquisition related charges, impairment charges, and other income orcharges, if any. We present Adjusted Operating Margin before special items to give investors a perspective on the underlying business results. This measureshould be considered in conjunction with operating margin calculated using our GAAP results in order to understand the amounts, character and impact ofadjustments to operating margin.
· Adjusted Other Income, Net — represents other income, net (the most comparable GAAP measure) before special items including tax sharing incomerelated 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 isappropriate 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 significantspecial tax items, if any. We present Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used indetermining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).
· Adjusted Income from Continuing Operations — represents income from continuing operations (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 certainproposed 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 resultsexcluding these items in addition to results in accordance with GAAP. Adjusted Income from Continuing Operations provides additional informationregarding 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 (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 tocertain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, if any, and, ifapplicable, the related tax effects. We present Adjusted Earnings Per Share because we believe that it is appropriate for investors to consider resultsexcluding these items in addition to results in accordance with GAAP. We believe such a measure provides insight into our underlying operating results,trends, and the comparability of these results between periods, since it excludes the impact of special items, which may recur, but tend to be irregular as totiming. It also is a significant component in our incentive compensation plans.
· Adjusted Earnings Per Share Excluding the Impact of the Additional Week — represents Adjusted Earnings Per Share excluding the impact of the
additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. We believe Adjusted Earnings Per Share Excluding theImpact of the Additional Week is useful to investors because it provides insight into our underlying operating results, trends, and the comparability of theseresults between periods.
· 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 monitorand evaluate cash flows generated from our operations.
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Free Cash Flow is defined as net cash provided by continuing operating activities excluding voluntary pension contributions and the cash impact of specialitems, if any, minus net capital expenditures. Voluntary pension contributions are excluded from the GAAP measure because this activity is driven byeconomic financing decisions rather than operating activity. Certain special items, including net payments related to pre-separation tax matters, are alsoexcluded 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 directand 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 thatthe 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, sharerepurchases, 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 arebased 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 hereinthat are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions are generallyintended to identify forward-looking statements. We have no intention and are under no obligation to update or alter (and expressly disclaim any such intention orobligation 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. Theforward-looking statements in this presentation include statements addressing our future financial condition and operating results. Examples of factors that couldcause actual results to differ materially from those described in the forward-looking statements include, among others, business, economic, competitive and regulatoryrisks, such as conditions affecting demand for products, particularly in the automotive and data and devices industries; competition and pricing pressure; fluctuationsin 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 possibleeffects on us of changes in tax laws, tax treaties and other legislation. More detailed information about these and other factors is set forth in TE Connectivity Ltd.’sAnnual Report on Form 10-K for the fiscal year ended Sept. 25, 2015 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and otherreports filed by us with the U.S. Securities and Exchange Commission.
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Contacts: Media Relations :
B.J. TalleyTE [email protected]
Investor Relations :Sujal ShahTE [email protected]
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TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Quarters Ended
For the Years Ended
September 30,
September 25,
September 30,
September 25,
2016
2015
2016
2015
(in millions, except per share data)
Net sales
$ 3,332
$ 2,984
$ 12,238
$ 12,233
Cost of sales
2,228
2,016
8,205
8,146
Gross margin
1,104
968
4,033
4,087
Selling, general, and administrative expenses
389
334
1,463
1,504
Research, development, and engineering expenses
165
148
644
627
Acquisition and integration costs
3
9
22
55
Restructuring and other charges, net
30
70
2
152
Operating income
517
407
1,902
1,749
Interest income
7
4
19
17
Interest expense
(34) (32) (127) (136)Other income (expense), net
(1) 9
(632) (55)Income from continuing operations before income taxes
489
388
1,162
1,575
Income tax (expense) benefit
(52) (252) 779
(337)Income from continuing operations
437
136
1,941
1,238
Income from discontinued operations, net of income taxes
—
904
68
1,182
Net income
$ 437
$ 1,040
$ 2,009
$ 2,420
Basic earnings per share:
Income from continuing operations
$ 1.23
$ 0.34
$ 5.30
$ 3.06
Income from discontinued operations
—
2.26
0.19
2.92
Net income
1.23
2.60
5.49
5.98
Diluted earnings per share:
Income from continuing operations
$ 1.22
$ 0.34
$ 5.26
$ 3.01
Income from discontinued operations
—
2.23
0.18
2.88
Net income
1.22
2.57
5.44
5.89
Dividends paid per common share
$ 0.37
$ 0.33
$ 1.40
$ 1.24
Weighted-average number of shares outstanding:
Basic
355
400
366
405
Diluted
359
405
369
411
TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30,
September 25,
2016
2015
(in millions, except share data)
Assets
Current assets:
Cash and cash equivalents
$ 647
$ 3,329
Accounts receivable, net of allowance for doubtful accounts of $17 and $18, respectively
2,046
2,120
Inventories
1,596
1,615
Prepaid expenses and other current assets
486
476
Deferred income taxes
—
345
Total current assets
4,775
7,885
Property, plant, and equipment, net
3,052
2,920
Goodwill
5,532
4,824
Intangible assets, net
1,879
1,555
Deferred income taxes
2,071
2,144
Receivable from Tyco International plc and Covidien plc
12
964
Other assets
287
297
Total Assets
$ 17,608
$ 20,589
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt
$ 331
$ 498
Accounts payable
1,090
1,143
Accrued and other current liabilities
1,437
1,749
Deferred revenue
208
185
Total current liabilities
3,066
3,575
Long-term debt
3,739
3,386
Long-term pension and postretirement liabilities
1,502
1,327
Deferred income taxes
207
329
Income taxes
247
1,954
Other liabilities
362
433
Total Liabilities
9,123
11,004
Commitments and contingencies
Shareholders’ Equity:
Common shares, CHF 0.57 par value, 382,835,381 shares authorized and issued, and 414,064,381 sharesauthorized and issued, respectively
168
182
Contributed surplus
1,801
4,359
Accumulated earnings
8,682
6,673
Treasury shares, at cost, 27,554,005 and 20,071,089 shares, respectively
(1,624) (1,256)Accumulated other comprehensive loss
(542) (373)Total Shareholders’ Equity
8,485
9,585
Total Liabilities and Shareholders’ Equity
$ 17,608
$ 20,589
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Quarters Ended
For the Years Ended
September 30,
September 25,
September 30,
September 25,
2016
2015
2016
2015
(in millions)
Cash Flows From Operating Activities:
Net income
$ 437
$ 1,040
$ 2,009
$ 2,420
Income from discontinued operations, net of income taxes
—
(904) (68) (1,182)Income from continuing operations
437
136
1,941
1,238
Adjustments to reconcile income from continuing operations tonet cash provided by operating activities:
Depreciation and amortization
147
161
585
616
Non-cash restructuring charges
28
6
41
21
Deferred income taxes
16
146
178
40
Provision for losses on accounts receivable and inventories
(10) 1
17
36
Tax sharing (income) expense
—
(10) 632
52
Share-based compensation expense
25
24
91
89
Gain on divestiture
(1) —
(144) —
Other
(10) 46
61
105
Changes in assets and liabilities, net of the effects ofacquisitions and divestitures:
Accounts receivable, net
101
(85) 116
(210)Inventories
18
(2) 16
(220)Prepaid expenses and other current assets
(20) 1
282
36
Accounts payable
(71) 7
(100) (22)Accrued and other current liabilities
64
51
(4) (155)Deferred revenue
48
8
26
12
Income taxes
(29) 38
(1,764) (52)Other
39
12
45
33
Net cash provided by continuing operating activities
782
540
2,019
1,619
Net cash provided by (used in) discontinued operatingactivities
(98) 84
(97) 294
Net cash provided by operating activities
684
624
1,922
1,913
Cash Flows From Investing Activities:
Capital expenditures
(208) (175) (628) (600)Proceeds from sale of property, plant, and equipment
5
7
8
17
Acquistion of businesses, net of cash acquired
(342) 1
(1,336) (1,725)Proceeds from divestiture of business, net of cash retained by soldbusiness
7
—
333
—
Proceeds from sale of discontinued operations, net of cashretained by sold operations
—
2,957
(19) 2,957
Other
14
14
61
12
Net cash provided by (used in) continuing investingactivities
(524) 2,804
(1,581) 661
Net cash used in discontinued investing activities
—
(3) —
(25)Net cash provided by (used in) investing activities
(524) 2,801
(1,581) 636
Cash Flows From Financing Activities:
Net increase (decrease) in commercial paper
30
(131) 330
(328)Proceeds from issuance of debt
2
—
352
617
Repayment of debt
(1) —
(501) (473)Proceeds from exercise of share options
13
6
90
103
Repurchase of common shares
(130) (512) (2,787) (1,023)Payment of common share dividends to shareholders
(132) (132) (509) (502)Transfer (to) from discontinued operations
(98) 81
(97) 269
Other
—
2
(5) —
Net cash used in continuing financing activities
(316) (686) (3,127) (1,337)Net cash provided by (used in) discontinued financingactivities
98
(81) 97
(269)Net cash used in financing activities
(218) (767) (3,030) (1,606)Effect of currency translation on cash
11
(30) 7
(71)Net increase (decrease) in cash and cash equivalents
(47) 2,628
(2,682) 872
Cash and cash equivalents at beginning of period
694
701
3,329
2,457
Cash and cash equivalents at end of period
$ 647
$ 3,329
$ 647
$ 3,329
Supplemental Cash Flow Information:
Interest paid
$ 15
$ 18
$ 117
$ 128
Income taxes paid, net of refunds
64
69
806
350
TE CONNECTIVITY LTD.
RECONCILIATION OF FREE CASH FLOW (UNAUDITED)
For the Quarters Ended
For the Years Ended
September 30,
September 25,
September 30,
September 25,
2016
2015
2016
2015
(in millions)
Net cash provided by continuing operating activities
$ 782
$ 540
$ 2,019
$ 1,619
Excluding:
Payments related to pre-separation U.S. tax matters, net
5
17
150
40
Payments related to income taxes on the sale of the
Broadband Network Solutions business
10
—
36
—
Capital expenditures, net
(203) (168) (620) (583)Free cash flow (1)
$ 594
$ 389
$ 1,585
$ 1,076
(1) Free cash flow is a non-GAAP measure. See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
CONSOLIDATED SEGMENT DATA (UNAUDITED)
For the Quarters Ended
For the Years Ended
September 30,
September 25,
September 30,
September 25,
2016
2015
2016
2015
($ in millions)
Net Sales
Net Sales
Net Sales
Net Sales
Transportation Solutions
$ 1,736
$ 1,508
$ 6,503
$ 6,351
Industrial Solutions
919
792
3,215
3,179
Communications Solutions
677
684
2,520
2,703
Total
$ 3,332
$ 2,984
$ 12,238
$ 12,233
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Income
Margin
Income
Margin
Income
Margin
Income
Margin
Transportation Solutions
$ 344
19.8% $ 272
18.0% $ 1,191
18.3% $ 1,193
18.8%Industrial Solutions
119
12.9
84
10.6
343
10.7
352
11.1
Communications Solutions
54
8.0
51
7.5
368
14.6
204
7.5
Total
$ 517
15.5% $ 407
13.6% $ 1,902
15.5% $ 1,749
14.3%
Adjusted
Adjusted
Adjusted
Adjusted
Adjusted
Adjusted
Adjusted
Adjusted
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Income (1)
Margin (1)
Income (1)
Margin (1)
Income (1)
Margin (1)
Income (1)
Margin (1)
Transportation Solutions
$ 341
19.6% $ 306
20.3% $ 1,246
19.2% $ 1,293
20.4%Industrial Solutions
123
13.4
110
13.9
397
12.3
429
13.5
Communications Solutions
87
12.9
72
10.5
293
11.6
270
10.0
Total
$ 551
16.5% $ 488
16.4% $ 1,936
15.8% $ 1,992
16.3%
(1) Adjusted operating income and adjusted operating margin are non-GAAP measures. See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NET SALES GROWTH (UNAUDITED)
Percentage of
Change in Net Sales for the Quarter Ended September 30, 2016
Segment’s Total
versus Net Sales for the Quarter Ended September 25, 2015
Net Sales for the
Acquisitions
Quarter Ended
Total
Translation (1)
(Divestiture)
Organic (2)
September 30, 2016
($ in millions)
Transportation Solutions (3):
Automotive
$ 183
16.2% $ 11
$ —
$ 172
15.3% 76%Commercial Transportation
25
13.2
3
—
22
12.1
12
Sensors
20
10.5
(2) 14
8
4.2
12
Total
228
15.1
12
14
202
13.4
100%Industrial Solutions (3):
Industrial Equipment
84
24.5
2
79
3
0.7
46%Aerospace, Defense, Oil, and Gas
23
8.3
—
1
22
8.0
33
Energy
20
11.6
(3) —
23
13.4
21
Total
127
16.0
(1) 80
48
6.0
100%Communications Solutions (3):
Data and Devices
(61) (18.9) —
(47) (14) (5.8) 39%Subsea Communications
37
18.3
—
—
37
18.3
35
Appliances
17
10.7
—
—
17
10.4
26
Total
(7) (1.0) —
(47) 40
5.9
100%Total
$ 348
11.7% $ 11
$ 47
$ 290
9.8%
Percentage of
Change in Net Sales for the Year Ended September 30, 2016
Segment’s Total
versus Net Sales for the Year Ended September 25, 2015
Net Sales for the
Acquisitions
Year Ended
Total
Translation (1)
(Divestiture)
Organic (2)
September 30, 2016
($ in millions)
Transportation Solutions (3):
Automotive
$ 132
2.8% $ (134) $ —
$ 266
5.6% 75%Commercial Transportation
5
0.6
(16) —
21
2.6
13
Sensors
15
2.0
(24) 16
23
3.1
12
Total
152
2.4
(174) 16
310
4.9
100%Industrial Solutions (3):
Industrial Equipment
96
7.3
(14) 179
(69) (5.2) 44%Aerospace, Defense, Oil, and Gas
(51) (4.4) (15) 9
(45) (3.8) 34
Energy
(9) (1.3) (34) —
25
3.6
22
Total
36
1.1
(63) 188
(89) (2.8) 100%Communications Solutions (3):
Data and Devices
(337) (24.8) (6) (123) (208) (17.8) 40%Subsea Communications
176
24.8
—
—
176
24.8
35
Appliances
(22) (3.5) (11) —
(11) (1.8) 25
Total
(183) (6.8) (17) (123) (43) (1.6) 100%Total
$ 5
—% $ (254) $ 81
$ 178
1.5%
(1) Represents the change in net sales resulting from changes in foreign currency exchange rates.(2) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes inforeign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this release.(3) Industry end market information is presented consistently with our internal management reporting and may be periodically revised as management deemsnecessary.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESFor the Quarter Ended September 30, 2016
(UNAUDITED)
Adjustments
Restructuring
Acquisition
and Other
Related
Charges
Adjusted
U.S. GAAP
Charges (1)(2)
(Credits), Net (2)
(Non-GAAP) (3)
($ in millions, except per share data)
Operating Income:
Transportation Solutions
$ 344
$ 3
$ (6) $ 341
Industrial Solutions
119
1
3
123
Communications Solutions
54
—
33
87
Total
$ 517
$ 4
$ 30
$ 551
Operating Margin
15.5%
16.5% Other Expense, Net
$ (1) $ —
$ —
$ (1) Income Tax Expense
$ (52) $ (1) $ (15) $ (68) Income from Continuing Operations
$ 437
$ 3
$ 15
$ 455
Diluted Earnings per Share from Continuing Operations
$ 1.22
$ 0.01
$ 0.04
$ 1.27
(1) Includes $3 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquiredcustomer order backlog recorded in cost of sales.(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for eachsuch jurisdiction.(3) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESFor the Quarter Ended September 25, 2015
(UNAUDITED)
Adjustments
Acquisition
Restructuring
Related
and Other
Tax
Adjusted
U.S. GAAP
Charges (1)(2)
Charges, Net (2)
Items (3)
(Non-GAAP) (4)
($ in millions, except per share data)
Operating Income:
Transportation Solutions
$ 272
$ 5
$ 29
$ —
$ 306
Industrial Solutions
84
6
20
—
110
Communications Solutions
51
—
21
—
72
Total
$ 407
$ 11
$ 70
$ —
$ 488
Operating Margin
13.6%
16.4% Other Income, Net
$ 9
$ —
$ —
$ (5) $ 4
Income Tax Expense
$ (252) $ 1
$ (17) $ 168
$ (100) Income from Continuing Operations
$ 136
$ 12
$ 53
$ 163
$ 364
Diluted Earnings per Share from ContinuingOperations
$ 0.34
$ 0.03
$ 0.13
$ 0.40
$ 0.90
(1) Includes $9 million of acquisition and integration costs and $2 million of non-cash amortization associated with fair value adjustments related to acquiredinventories and customer order backlog recorded in cost of sales.(2) 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 eachsuch jurisdiction.(3) Includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with ourintegration of Measurement Specialties, Inc. Also includes $63 million of income tax benefits associated with the settlement of audits of prior year income taxreturns.(4) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESFor the Year Ended September 30, 2016
(UNAUDITED)
Adjustments
Restructuring
Acquisition
and Other
U.S. GAAP
Related Charges (1)(2)
Charges (Credits), Net (2)
Tax Items (3)
Adjusted (Non-GAAP) (4)
($ in millions, except per share data)
Operating Income:
Transportation Solutions
$ 1,191
$ 9
$ 46
$ —
$ 1,246
Industrial Solutions
343
23
31
—
397
Communications Solutions
368
—
(75) —
293
Total
$ 1,902
$ 32
$ 2
$ —
$ 1,936
Operating Margin
15.5%
15.8% Other Income (Expense), Net
$ (632) $ —
$ —
$ 650
$ 18
Income Tax (Expense) Benefit
$ 779
$ (7) $ (2) $ (1,111) $ (341) Income from Continuing Operations
$ 1,941
$ 25
$ —
$ (461) $ 1,505
Diluted Earnings per Share from ContinuingOperations
$ 5.26
$ 0.07
$ —
$ (1.25) $ 4.08
(1) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquiredinventories and customer order backlog recorded in cost of sales.(2) 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 eachsuch jurisdiction.(3)Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of thedisputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement withTyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets;and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million to other expensepursuant to the tax sharing agreement with Tyco International and Covidien.(4) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESFor the Year Ended September 25, 2015
(UNAUDITED)
Adjustments
Acquisition
Restructuring
Related
and Other
Tax
Adjusted
U.S. GAAP
Charges (1)(2)
Charges, Net (2)
Items (3)
(Non-GAAP) (4)
($ in millions, except per share data)
Operating Income:
Transportation Solutions
$ 1,193
$ 61
$ 39
$ —
$ 1,293
Industrial Solutions
352
33
44
—
429
Communications Solutions
204
—
66
—
270
Total
$ 1,749
$ 94
$ 149
$ —
$ 1,992
Operating Margin
14.3%
16.3% Other Income (Expense), Net
$ (55) $ —
$ —
$ 84
$ 29
Income Tax Expense
$ (337) $ (22) $ (29) $ (36) $ (424) Income from Continuing Operations
$ 1,238
$ 72
$ 120
$ 48
$ 1,478
Diluted Earnings per Share from ContinuingOperations
$ 3.01
$ 0.18
$ 0.29
$ 0.12
$ 3.60
(1) Includes $55 million of acquisition and integration costs, $36 million of non-cash amortization associated with fair value adjustments related to acquiredinventories and customer order backlog recorded in cost of sales, and $3 million of restructuring costs.(2) 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 eachsuch jurisdiction.(3) Includes $264 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $84 millionto other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes $216 million of income tax charges associated with thetax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc. and $29 million of incometax charges for the tax impacts of certain intercompany dividends related to the restructuring and sale of the Broadband Network Solutions business.(4) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESFor the Quarter Ended December 25, 2015
(UNAUDITED)
Adjustments
Acquisition
Restructuring
Related
and Other
Tax
Adjusted
U.S. GAAP
Charges (1)(2)
Charges, Net (2)
Items (3)
(Non-GAAP) (4)
($ in millions, except per share data)
Operating Income:
Transportation Solutions
$ 261
$ 3
$ 16
$ —
$ 280
Industrial Solutions
66
3
9
—
78
Communications Solutions
71
—
15
—
86
Total
$ 398
$ 6
$ 40
$ —
$ 444
Operating Margin
14.0%
15.7% Other Income, Net
$ 8
$ —
$ —
$ —
$ 8
Income Tax Expense
$ (58) $ (2) $ (12) $ (28) $ (100) Income from Continuing Operations
$ 324
$ 4
$ 28
$ (28) $ 328
Diluted Earnings per Share from ContinuingOperations
$ 0.83
$ 0.01
$ 0.07
$ (0.07) $ 0.84
(1) Includes $5 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquiredinventories and customer order backlog recorded in cost of sales.(2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for eachsuch jurisdiction.(3) Income tax benefits related to deferred tax assets recognized in connection with the anticipated sale of the Circuit Protection Devices business.(4) See description of non-GAAP measures contained in this release.
TE CONNECTIVITY LTD.
IMPACT OF ADDITIONAL WEEK (UNAUDITED)For the Quarter Ended September 30, 2016
For the Quarter Ended September 30, 2016
For the
Change in Net Sales for the Quarter EndedSeptember 30, 2016 versus Net Sales for the
Quarter Ended September 25, 2015
Change in Organic Net Sales for the Quarter EndedSeptember 30, 2016 versus Organic Net Sales for the
Quarter Ended September 25, 2015(2)
Adjustment
Quarter Ended
Adjustment
Adjustment
14 Weeks
Impact of
13 Weeks
September 25,
14 Weeks
Impact of
13 Weeks
14 Weeks
Impact of
13 Weeks
U.S. GAAP
14th Week
(Non-GAAP) (1)(2)
2015
U.S. GAAP
14th Week
(Non-GAAP) (1)(2)
(Non-GAAP) (2)
14th Week
(Non-GAAP) (1)(2)
($ in millions)
Net Sales:
TransportationSolutions
Automotive
$ 1,311
$ (102)$ 1,209
$ 1,128
16.2% (9.0)% 7.2% 15.3% (9.0)% 6.3%CommercialTransportation
215
(15) 200
190
13.2
(7.9) 5.3
12.1
(7.9) 4.2
Sensors
210
(13) 197
190
10.5
(6.8) 3.7
4.2
(6.5) (2.3)Total
1,736
(130) 1,606
1,508
15.1
(8.6) 6.5
13.4
(8.5) 4.9
Industrial Solutions
IndustrialEquipment
427
(32) 395
343
24.5
(9.3) 15.2
0.7
(7.8) (7.1)Aerospace,Defense, Oil,and Gas
299
(20) 279
276
8.3
(7.2) 1.1
8.0
(7.1) 0.9
Energy
193
(13) 180
173
11.6
(7.6) 4.0
13.4
(7.6) 5.8
Total
919
(65) 854
792
16.0
(8.2) 7.8
6.0
(7.5) (1.5)CommunicationsSolutions
Data and Devices
262
(21) 241
323
(18.9) (6.5) (25.4) (5.8) (7.5) (13.3)SubseaCommunications
239
(11) 228
202
18.3
(5.4) 12.9
18.3
(5.2) 13.1
Appliances
176
(11) 165
159
10.7
(6.9) 3.8
10.4
(7.4) 3.0
Total
677
(43) 634
684
(1.0) (6.3) (7.3) 5.9
(6.8) (0.9)Total
$ 3,332
$ (238)$ 3,094
$ 2,984
11.7% (8.0)% 3.7% 9.8% (7.9)% 1.9%
Adjustments
Acquisition
Restructuring
Adjustment
Related
and Other
14 Weeks
Impact of
13 Weeks
U.S. GAAP
Charges (3)
Charges, Net
(Non-GAAP) (2)
14th Week
(Non-GAAP) (1)(2)
($ in millions, except per share data)
Operating Income
$ 517
$ 4
$ 30
$ 551
$ (55) $ 496
Operating Margin
15.5%
16.5%
16.0% Diluted Earnings per Sharefrom ContinuingOperations
$ 1.22
$ 0.01
$ 0.04
$ 1.27
$ (0.13) $ 1.14
(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly salesfigure for the last month of the fiscal year.(2) See description of non-GAAP measures contained in this release.(3) Includes $3 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquiredcustomer order backlog recorded in cost of sales.
TE CONNECTIVITY LTD.
IMPACT OF ADDITIONAL WEEK (UNAUDITED)For the Year Ended September 30, 2016
Fiscal 2016
Change in Net Sales for Fiscal 2016 versus Net Sales for Fiscal 2015
Change in Organic Net Sales for Fiscal 2016 versus Organic Net Sales for Fiscal 2015 (2)
Adjustment
Adjustment
Adjustment
53 Weeks
Impact of
52 Weeks
53 Weeks
Impact of
52 Weeks
53 Weeks
Impact of
52 Weeks
U.S. GAAP
53rd Week
(Non-GAAP) (1)(2)
Fiscal 2015
U.S. GAAP
53rd Week
(Non-GAAP) (1)(2)
(Non-GAAP) (2)
53rd Week
(Non-GAAP) (1)(2)
($ in millions)
Net Sales:
Transportation Solutions
Automotive
$ 4,912
$ (102) $ 4,810
$ 4,780
2.8% (2.2)% 0.6% 5.6% (2.2)% 3.4%Commercial Transportation
825
(15) 810
820
0.6
(1.8) (1.2) 2.6
(1.8) 0.8
Sensors
766
(13) 753
751
2.0
(1.7) 0.3
3.1
(1.7) 1.4
Total
6,503
(130) 6,373
6,351
2.4
(2.1) 0.3
4.9
(2.1) 2.8
Industrial Solutions
Industrial Equipment
1,419
(32) 1,387
1,323
7.3
(2.5) 4.8
(5.2) (2.1) (7.3)Aerospace, Defense, Oil, and
Gas
1,100
(20) 1,080
1,151
(4.4) (1.8) (6.2) (3.8) (1.7) (5.5)Energy
696
(13) 683
705
(1.3) (1.8) (3.1) 3.6
(1.9) 1.7
Total
3,215
(65) 3,150
3,179
1.1
(2.0) (0.9) (2.8) (1.9) (4.7)Communications Solutions
Data and Devices
1,020
(21) 999
1,357
(24.8) (1.6) (26.4) (17.8) (1.7) (19.5)Subsea Communications
885
(11) 874
709
24.8
(1.5) 23.3
24.8
(1.3) 23.5
Appliances
615
(11) 604
637
(3.5) (1.7) (5.2) (1.8) (1.9) (3.7)Total
2,520
(43) 2,477
2,703
(6.8) (1.6) (8.4) (1.6) (1.7) (3.3)Total
$ 12,238
$ (238) $ 12,000
$ 12,233
—% (1.9)% (1.9)% 1.5% (2.0)% (0.5)%
Adjustments
Acquisition
Restructuring
Adjustment
Related
and Other
53 Weeks
Impact of
52 Weeks
U.S. GAAP
Charges (3)
Charges, Net
Tax Items (4)
(Non-GAAP) (2)
53rd Week
(Non-GAAP) (1)(2)
($ in millions, except per share data)
Operating Income
$ 1,902
$ 32
$ 2
$ —
$ 1,936
$ (55) $ 1,881
Operating Margin
15.5%
15.8%
15.7% Diluted Earnings per
Share fromContinuingOperations
$ 5.26
$ 0.07
$ —
$ (1.25) $ 4.08
$ (0.13) $ 3.95
(1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of thefiscal year.(2) See description of non-GAAP measures contained in this release.(3) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer orderbacklog recorded in cost of sales.(4)Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRSthrough the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax chargesrelated to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions,as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien.
TE CONNECTIVITY LTD.
RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURESTO FORWARD-LOOKING GAAP FINANCIAL MEASURES
As of November 2, 2016(UNAUDITED)
Outlook for
Quarter Ending
December 30,
Outlook for
2016
Fiscal 2017
Diluted earnings per share from continuing operations (GAAP)
$0.84 - $0.88
$3.84 - $4.14
Restructuring and other charges, net
0.13
0.31
Acquisition related charges
0.01
0.04
Adjusted diluted earnings per share from continuing operations (non-GAAP) (1)
$0.98 - $1.02
$4.19 - $4.49
Net sales growth (GAAP)
4 - 8%
0.5 - 5.5%
Impact of additional week
N/A
2
Net sales growth excluding the impact of the additional week in fiscal 2016 (non-GAAP) (1)
N/A
2.5 - 7.5%
Translation
(1)
—
(Acquisitions) divestitures, net
(2)
(2)
Organic net sales growth excluding the impact of the additional week in fiscal 2016 (non-GAAP) (1)
1 - 5%
0.5 - 5.5%
(1) See description of non-GAAP measures contained in this release.
Exhibit 99.2
Q4 2016 Earnings November 2, 2016
Forward-Looking Statements and Non-GAAP Measures 2 Forward-Looking Statements This presentation 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 presentation include statements addressing our future financial condition and operating results. 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 and data and 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; and the possible effects on us of changes in tax laws, tax treaties and other legislation. 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, 2015 as well as in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reportsfiled by us with the U.S. Securities and Exchange Commission. Non-GAAP Measures Where we have used non-GAAP financial measures, reconciliations to the most comparable GAAP measure are provided, along with a disclosure on the usefulness of the non-GAAP measure, in this presentation.
Strong quarter with record adjusted EPS and free cash flow Sales of $3.3B in line with guidance Adjusted EPS of $1.27, above the high end of guidance Excluding the additional week in Q4, year-over-year sales were up 2% organically and adjusted EPS were up 27% to $1.14, a new record Orders growth both sequentially and Y/Y, with book to bill of 1.03 excluding SubCom Adjusted Operating Margin of 16.5% Generated record quarterly Free Cash Flow of $594M Strengthened our harsh environment portfolio with the acquisition of Intercontec in Industrial Solutions SubCom awarded the Pacific Light Cable Network (PLCN), a transpacific cable system with Google & Facebook (Announced in October) Note: Q4 FY16 includes an additional week which contributed sales of $238M and Adjusted EPS of $0.13 Q4 Highlights 3 Adjusted EPS, Organic Net Sales Growth Excluding the Impact of the Additional Week, Adjusted EPS Excluding the Impact of the Additional Week, Adjusted Operating Margin and Free Cash Flow are non-GAAP measures; see Appendix for description and reconciliation.
Delivered solid performance in a challenging economic environment Sales of $12.24B, flat Y/Y and up 2% organically Delivered mid-single digit organic growth in Transportation Industrial Solutions showed sequential 2H growth following 1H supply chain corrections SubCom grew 25% Y/Y, with a current backlog of $1B of programs in force Adjusted Operating Margins of 15.8% Adjusted EPS of $4.08, up 13% Y/Y and $0.08 above original guidance midpoint set a year ago Excluding the additional week, Adjusted EPS were $3.95, up 10% Y/Y Generated $1.6B of Free Cash Flow Returned $3.1B to shareholders through dividends and share repurchases Harsh strategy continuing to deliver Benefitting from secular trend of content growth; driving integrated solutions for customers Expanded our harsh portfolio with acquisitions in interventional medical, industrial connectors and automotive sensors Sold Circuit Protection as we continue to focus on harsh applications Note: FY16 includes an additional week which contributed sales of $238M and Adjusted EPS of $0.13 FY16 Highlights 4 Organic Net Sales Growth, Adjusted EPS, Adjusted EPS Excluding the Impact of the Additional Week, Adjusted Operating Margin and Free Cash Flow are non-GAAP measures; see Appendix for description and reconciliation.
FY15 FY16 FY16 FY16 Q4 Q3 Q4 14 Week Q4 13 Week Transportation 1,480 1,659 1,854 1,704 Industrial 720 879 888 832 Communications Ex SubCom 448 399 447 416 Total TE Ex SubCom 2,648 2,937 3,189 2,952 Book to Bill Ex SubCom 0.95 1.01 1.03 1.03 Segment Orders Summary ($ in millions) 5 Transportation Y/Y growth in all regions with significant strength in China Y/Y growth in all Industrial businesses excluding Oil and Gas Communications Y/Y orders growth excluding the impact of the sale of Circuit Protection; orders grew 4% sequentially Note: Comments based on 13 week orders Healthy Book to Bill of 1.03: Sequential and Y/Y growth
Y/Y Growth Rates Actual 14 Week Organic 13 Week Organic Automotive $1,311 16% 15% 6% Commercial Transportation 215 13% 12% 4% Sensors 210 11% 4% (2)% Transportation Solutions $1,736 15% 13% 5% $ in Millions Sales Automotive organic sales growth driven by Asia and Europe Commercial Transportation organic growth above market driven by our strength in China and EMEA Sensors growth in automotive offset by softness in industrial related markets Note: Comments based on 13 week organic results Business Performance Actual Up 15% Organic Up 13% Reported Organic Orders $1,854 25% 25% Adjusted Operating Margin Operating margins in line with expectations Organic Sales Growth, Organic Net Sales Growth Excluding the Impact of the Additional Week and Adjusted Operating Margin are non-GAAP measures; see Appendix for description and reconciliation. Transportation Solutions 6 20.3% 19.6% Q4 2015 Q4 2016 $1,508 $1,736 Q4 2015 Q4 2016
Y/Y Growth Rates Actual 14 Week Organic 13 Week Organic Industrial Equipment $427 25% 1% (7)% Aerospace & Defense 269 14% 13% 6% Oil and Gas 30 (25)% (23)% (27)% Energy 193 12% 13% 6% Industrial Solutions $919 16% 6% (2)% $ in Millions Sales Industrial Equipment growth includes the Creganna acquisition; organic decline due to weak global industrial markets Aerospace and Defense growth driven by strength in Commercial Air and gains in Defense business Oil and Gas markets remain weak Energy growth driven by China and the Americas Note: Comments based on 13 week organic results Business Performance Actual Up 16% Organic Up 6% Adjusted Operating Margin Industrial Solutions 7 Reported Organic Orders $888 23% 10% Operating margins in line with expectations; Y/Y impacted by Oil and Gas weakness Organic Sales Growth, Organic Net Sales Growth Excluding the Impact of the Additional Week and Adjusted Operating Margin are non-GAAP measures; see Appendix for description and reconciliation. $792 $919 Q4 2015 Q4 2016 13.9% 13.4% Q4 2015 Q4 2016
Y/Y Growth Rates Actual 14 Week Organic 13 Week Organic SubCom $239 18% 18% 13% Appliances 176 11% 10% 3% Data & Devices 262 (19)% (6)% (13)% Communications Solutions $677 (1)% 6% (1)% $ in Millions Sales SubCom remains robust with $1B of backlog Appliances growth driven by strength in Asia Data & Devices delivered another quarter of sequential growth; actual sales decline due to Circuit Protection sale; organic decline driven by product exits Note: Comments based on 13 week organic results Business Performance Actual Down 1% Organic Up 6% Reported Organic Orders ex SubCom $447 -% 10% Adjusted Operating Margin Operating margins expand 180bps sequentially; up Y/Y due to productivity 8 Communications Solutions Organic Sales Growth, Organic Net Sales Growth Excluding the Impact of the Additional Week and Adjusted Operating Margin are non-GAAP measures; see Appendix for description and reconciliation. 10.5% 12.9% Q4 2015 Q4 2016 $684 $677 Q4 2015 Q4 2016
Net Sales Excluding the Impact of the Additional Week, Adjusted Operating Income, Adjusted Operating Income Excluding the Impact of the Additional Week, Adjusted Operating Margin, Adjusted Operating Margin Excluding the Impact of the Additional Week, Adjusted EPS and Adjusted EPS Excluding the Impact of the Additional Week are non-GAAP measures; see Appendix for description. *Represents Diluted Earnings Per Share from Continuing Operations 14 Week 13 Week ($ in Millions, except per share amounts) Q4 FY15 Q4 FY16 Q4 FY16 Net Sales $ 2,984 $ 3,332 $ 3,094 Operating Income $ 407 $ 517 $ 462 Operating Margin 13.6% 15.5% 14.9% Acquisition Related Charges 11 4 4 Restructuring & Other Charges, net 70 30 30 Adjusted Operating Income $ 488 $ 551 $ 496 Adjusted Operating Margin 16.4% 16.5% 16.0% Earnings Per Share* $ 0.34 $ 1.22 $ 1.09 Acquisition Related Charges 0.03 0.01 0.01 Restructuring & Other Charges, net 0.13 0.04 0.04 Tax Items 0.40 - - Adjusted EPS $ 0.90 $ 1.27 $ 1.14 Q4 Financial Summary 9
$ in Millions Adjusted Gross Margin Percentage Adjusted Operating Margin Free Cash Flow Adjusted Gross Margin Percentage, Free Cash Flow, Adjusted Operating Margin and Adjusted EBITDA Margin are non-GAAP measures; See Appendix for description and reconciliation. Q4 Operating Metrics 10 Adjusted EBITDA Margin $389 $594 Q4 2015 Q4 2016 32.5% 33.2% Q4 2015 Q4 2016 16.4% 16.5% Q4 2015 Q4 2016 21.7% 20.9% Q4 2015 Q4 2016
Guidance* Strong sales and Adjusted EPS growth Y/Y Transportation Solutions Industrial Solutions Communications Solutions TE Connectivity Highlights Sales $2.95B to $3.05B Adjusted EPS $0.98 to $1.02 Sales up 6% Y/Y and up 3% organically at midpoint Adjusted EPS up 19% at the midpoint Up Mid Single Digits Up Mid Single Digits Organic Down Mid Single Digits Up Low Single Digits Organic Up Mid Teens Flat Organic * Assumes foreign exchange rates and commodity prices that are consistent with current levels Organic Sales Growth and Adjusted EPS are non-GAAP measures; see Appendix for description and reconciliation. Q1 Outlook 11 Automotive growth expected in China and EMEA, with mid single digit growth expected on 2% global auto production growth; Commercial Transportation growth expected above market, with strength in Asia heavy trucks Industrial Solutions growth driven by interventional medical and Intercontec acquisitions; organic growth flat due to weakness in Oil and Gas markets Communications organic growth driven by Appliances and SubCom; Q1 growth impacted by the sale of the Circuit Protection business
Sales Up 5% with double digit Adjusted EPS growth Y/Y Sales of $12.3B - $12.9B Adjusted EPS of $4.19 - $4.49 Sales up 5% Y/Y and up 3% organically at midpoint Adjusted EPS up 10% at midpoint vs. 52 week FY16 at $3.95 Up Mid Single Digits Up Mid Single Digits Organic Flat Y/Y Up Low Single Digits Organic Up Low Double Digits Up Low Single Digits Organic FY17 Outlook* vs 52 week prior year Guidance* Transportation Solutions Industrial Solutions TE Connectivity Highlights 12 Communications Solutions * Assumes foreign exchange rates and commodity prices that are consistent with current levels; Growth comparisons to prior year exclude the impact of an additional week in the fourth quarter of fiscal 2016 ($238M Revenue and $0.13 Adjusted EPS) Organic Sales Growth, Net Sales Growth Excluding the Impact of the Additional Week, Organic Net Sales Growth Excluding the Impact of the Additional Week, Adjusted EPS and Adjusted EPS Excluding the Impact of the Additional Week are non-GAAP measures; see Appendix for description and reconciliation. Expect Automotive organic growth in the mid-single digits on ~1% increase in global auto production, reflecting content growth trends; Commercial Transportation expected to perform better than market with content expansion; Sensors growth driven by new platform ramps Industrial Solutions growth driven by acquisitions, momentum in interventional medical applications, and gains in Commercial Aerospace and Defense Communications organic growth expected in Appliances and SubCom up mid single digits Y/Y; Data and Devices impacted by sale of Circuit Protection in March 2016
Additional Information 13
Q4 FY16 Impact of Additional Week 14 Q4 13 Week Q4 Sales Impact of 14th Week Sales (Normalized) Actual Growth Organic Growth Automotive $1,311 $(102) $1,209 7.2% 6.3% Commercial Transportation 215 (15) 200 5.3 4.2 Sensors 210 (13) 197 3.7 (2.3) Transportation Solutions 1,736 (130) 1,606 6.5 4.9 Industrial Equipment 427 (32) 395 15.2 (7.1) Aerospace, Defense, Oil & Gas 299 (20) 279 1.1 0.9 Energy 193 (13) 180 4.0 5.8 Industrial Solutions 919 (65) 854 7.8 (1.5) Data and Devices 262 (21) 241 (25.4) (13.3) Subsea Communications 239 (11) 228 12.9 13.1 Appliances 176 (11) 165 3.8 3.0 Communications Solutions 677 (43) 634 (7.3) (0.9) Total TE $3,332 $(238) $3,094 3.7% 1.9% Net Sales Excluding the Impact of the Additional Week, Net Sales Growth Excluding the Impact of the Additional Week and Organic Net Sales Growth Excluding the Impact of the Additional Week are non-GAAP measures; see Appendix for description and reconciliation.
Sales (in millions) Adjusted EPS Q4 2015 Results $2,984 $0.90 FX Benefit 11 0.01 Operational Performance 99 0.23 Q4 2016 Results (13 Weeks) $3,094 $1.14 Additional Week 238 0.13 Q4 2016 Results* $3,332 $1.27 Y/Y Q4 2016 15 Net Sales Excluding the Impact of the Additional Week, Adjusted EPS Excluding the Impact of the Additional Week and Adjusted EPS are non-GAAP measures; See Appendix for description and reconciliation. * 14 Week Quarter
Y/Y 2016 16 Sales (in millions) Adjusted EPS 2015 Results $12,233 $3.60 FX Impact (254) (0.07) Operational Performance 21 0.42 2016 Results (52 Weeks) $12,000 $3.95 2016 Growth in Constant Currency - 12% Additional Week 238 0.13 2016 Results* $12,238 $4.08 2016 Growth in Constant Currency 2% 15% Net Sales Excluding the Impact of the Additional Week, Adjusted EPS Excluding the Impact of the Additional Week and Adjusted EPS are non-GAAP measures; See Appendix for description and reconciliation. * 53 Week Year Double digit Adjusted EPS growth despite challenged macro environment
Y/Y Q1 2017 17 Adjusted EPS is a non-GAAP measure; See Appendix for description and reconciliation. Sales (in millions) Adjusted EPS Q1 2016 Results $2,833 $0.84 Operational Performance 82 0.13 Acquisitions / Divestitures, net 64 0.02 FX Benefit 21 0.01 Q1 2017 Guidance $3,000 $1.00 Guidance Range: Sales $2.95B to $3.05B Adjusted EPS $0.98 to $1.02
Y/Y 2017 18 Net Sales Excluding the Impact of the Additional Week, Adjusted EPS Excluding the Impact of the Additional Week and Adjusted EPS are non-GAAP measures; See Appendix for description and reconciliation. * 53 Week Year Sales (in millions) Adjusted EPS 2016 Results* $12,238 $4.08 Additional Week (238) (0.13) 2016 – 52 Weeks $12,000 $3.95 Operational Performance 416 0.33 Acquisitions / Divestitures, net 184 0.06 FX Impact N/M N/M 2017 Guidance $12,600 $4.34 Guidance Range: Sales of $12.3B - $12.9B Adjusted EPS of $4.19 - $4.49
Liquidity Summary ($ in Millions) Q4 2015 Q4 2016 Beginning Cash Balance $701 $694 Free Cash Flow 389 594 Dividends (132) (132) Share repurchases (512) (130) Acquisitions, net of cash acquired 1 (342) Net increase (decrease) in commercial paper (131) 30 Proceeds from sale of discontinued operations, net 2,957 - Other 56 (67) Ending Cash Balance $3,329 $647 Total Debt $3,884 $4,070 ($ in Millions) Q4 2015 Q4 2016 Cash from Continuing Operations $540 $782 Capital expenditures, net Pre-separation and BNS related tax payments, net (168) 17 (203) 15 Free Cash Flow $389 $594 A/R - $ $2,120 $2,046 Days Sales Outstanding* 64 60 Inventory (Excl. CIP) - $ $1,569 $1,414 Days on Hand* 70 62 Accounts Payable - $ $1,143 $1,090 Days Outstanding* 51 47 Free Cash Flow is a non-GAAP measure, see Appendix for description * Adjusted to exclude the impact of acquisitions and the additional week in FY16 Free Cash Flow and Working Capital Liquidity, Cash & Debt Q4 Balance Sheet & Cash Flow Summary 19
Appendix 20
Non-GAAP Measures 21 “Organic Net Sales Growth,” “Organic Net Sales Growth Excluding the Impact of the Additional Week,” “Net Sales Excluding the Impact of the Additional Week,” “Net Sales Growth Excluding the Impact of the Additional Week,” “Net Sales in Constant Currency,” “Adjusted Gross Margin,” “Adjusted Gross Margin Percentage,” “Adjusted Operating Income,” “Adjusted Operating Income Excluding the Impact of the Additional Week,” Adjusted Operating Margin Excluding the Impact of the Additional Week,” “Adjusted Operating Income in Constant Currency,” “Adjusted Operating Margin,” “Adjusted Other Income, Net,” “Adjusted Income Tax Expense,” “Adjusted Effective Tax Rate,” ”Adjusted Income from Continuing Operations,” “Adjusted Earnings Per Share,” “Adjusted Earnings Per Share Excluding the Impact of the Additional Week,” “Adjusted Earnings Per Share in Constant Currency,” “Adjusted EBITDA,” “Adjusted EBITDA Margin,” 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 Net 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 Net Sales Growth consists of the impact from foreign currency exchange rates and acquisitions and divestitures, if any. Organic Net Sales Growth is auseful 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. Organic Net Sales Growth Excluding the Impact of the Additional Week, Net Sales Excluding the Impact of the Additional Week, and Net Sales Growth Excluding the Impact of the Additional Week – represent Organic Net Sales Growth, net sales (the most comparable GAAP measure), and net sales growth (the most comparable GAAP measure), respectively, excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year. We believe these measures are useful to investors because they provide insight into our underlying operating results, trends, and the comparability of these results between periods. Net 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 sales. Adjusted Gross Margin and Adjusted Gross Margin Percentage – represent gross margin and gross margin percentage, respectively, (the most comparable GAAP measures) before special items including acquisition related charges, if any. We present Adjusted Gross Margin and Adjusted Gross Margin Percentage before special items to give investors a perspective on the underlying business results. These measures should be considered in conjunction with gross margin calculated using our GAAP results in order to understand the amounts, character and impact of adjustments to gross margin. 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 otherincome 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 useful to investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods. Adjusted Operating Income Excluding the Impact of the Additional Week and Adjusted Operating Margin Excluding the Impact of the Additional Week – represents Adjusted Operating Income and Adjusted Operating Margin, respectively, excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. We believe these measures are useful to investors because they provide 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.
Non-GAAP Measures (cont.) 22 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 Effective Tax Rate – represents effective income tax rate (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 Effective Tax Rate to provide investors further information regarding the tax rate 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 (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 (the most comparable GAAP measure) before specialitems, 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 insight into our underlying operating results, trends, and the comparability of these results between periods, since it excludes the impact of special items, which may recur, but tend to be irregular as to timing. It also is a significant component in our incentive compensation plans. Adjusted Earnings Per Share Excluding the Impact of the Additional Week – represents Adjusted Earnings Per Share excluding the impact of the additional week in the fourth quarter of the fiscal year for fiscal years which are 53 weeks in length. We believe Adjusted Earnings Per Share Excluding the Impact of the Additional Week is useful to investors because it provides insight into our underlying operating results, trends, and the comparability of these results between periods. 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. Adjusted EBITDA and Adjusted EBITDA Margin -represent net income and net income as a percentage of net sales, respectively, (the most comparable GAAP measures) before interest expense, interest income, income taxes, depreciation, and amortization, as adjusted for net other income, income from discontinued operations, and 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 EBITDA and Adjusted EBITDA Margin to give investors a
perspective in assessing our operating performance, trends, and the comparability of our results between periods. 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. 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, 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 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.
23 Segment Summary for the Quarter & Year Ended September 30, 2016 Operating Adjusted Operating Y/Y Actual Y/Y Organic Margin for the Margin for the September 25, September 30, Sales Sales Quarter Ended Quarter Ended Segment 2015 2016 Growth Growth (1) September 30, 2016 September 30, 2016 (1) Transportation Solutions 1,508 $ 1,736 $ 15.1 % 13.4 % 19.8 % 19.6 % Industrial Solutions 792 919 16.0 6.0 12.9 13.4 Communications Solutions 684 677 (1.0) 5.9 8.0 12.9 Total 2,984 $ 3,332 $ 11.7 % 9.8 % 15.5 % 16.5 % Operating Adjusted Operating Y/Y Actual Y/Y Organic Margin for the Margin for the September 25, September 30, Sales Sales Year Ended Year Ended Segment 2015 2016 Growth Growth (1) September 30, 2016 September 30, 2016 (1) Transportation Solutions 6,351 $ 6,503 $ 2.4 % 4.9 % 18.3 % 19.2 % Industrial Solutions 3,179 3,215 1.1 (2.8) 10.7 12.3 Communications Solutions 2,703 2,520 (6.8) (1.6) 14.6 11.6 Total 12,233 $ 12,238 $ - % 1.5 % 15.5 % 15.8 % (1) See description and reconciliation of non-GAAP measures contained in this Appendix. ($ in millions) For the Quarters Ended Net Sales ($ in millions) Net Sales For the Years Ended
Reconciliation of Net Sales Growth– Q4 16 vs. Q4 15 24 Acquisitions Translation (1) (Divestiture) Transportation Solutions (3) : Automotive 183 $ 16.2 % 11 $ - $ 172 $ 15.3 % 76 % Commercial Transportation 25 13.2 3 - 22 12.1 12 Sensors 20 10.5 (2) 14 8 4.2 12 Total 228 15.1 12 14 202 13.4 100 % Industrial Solutions (3) : Aerospace, Defense, Oil, and Gas: Aerospace and Defense 33 14.0 1 1 31 13.3 29 % Oil and Gas (10) (25.0) (1) - (9) (23.0) 4 Aerospace, Defense, Oil, and Gas Total 23 8.3 - 1 22 8.0 33 Industrial Equipment 84 24.5 2 79 3 0.7 46 Energy 20 11.6 (3) - 23 13.4 21 Total 127 16.0 (1) 80 48 6.0 100 % Communications Solutions (3) : Data and Devices (61) (18.9) - (47) (14) (5.8) 39 % Subsea Communications 37 18.3 - - 37 18.3 35 Appliances 17 10.7 - - 17 10.4 26 Total (7) (1.0) - (47) 40 5.9 100 % Total 348 $ 11.7 % 11 $ 47 $ 290 $ 9.8 % Percentage of (2) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes in foreign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this Appendix. (3) Industry end market information about net sales is presented consistently with our internal management reporting and may be periodically revised as management deems necessary. Net Sales for the Change in Net Sales for the Quarter Ended September 30, 2016 Segment's Total (1) Represents the change in net sales resulting from changes in foreign currency exchange rates. versus Net Sales for the Quarter Ended September 25, 2015 Total Organic (2) September 30, 2016 ($ in millions) Quarter Ended
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended September 30, 2016 25 Restructuring Acquisition and Other Related Charges Adjusted U.S. GAAP Charges (1)(2) (Credits), Net (2) (Non-GAAP) (3) Operating Income: Transportation Solutions 344 $ 3 $ (6) $ 341 $ Industrial Solutions 119 1 3 123 Communications Solutions 54 - 33 87 Total 517 $ 4 $ 30 $ 551 $ Operating Margin 15.5% 16.5% Other Expense, Net (1) $ - $ - $ (1) $ Income Tax Expense (52) $ (1) $ (15) $ (68) $ Effective Tax Rate 10.6% 13.0% Income from Continuing Operations 437 $ 3 $ 15 $ 455 $ Diluted Earnings per Share from Continuing Operations 1.22 $ 0.01 $ 0.04 $ 1.27 $ (1) Includes $3 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquired customer order backlog recorded in cost of sales. (2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. (3) See description of non-GAAP measures contained in this Appendix. Adjustments ($ in millions, except per share data)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended June 24, 2016 26 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1)(2) Charges, Net (2) Items (3) (Non-GAAP) (4) Operating Income: Transportation Solutions 297 $ 2 $ 21 $ - $ 320 $ Industrial Solutions 95 16 1 - 112 Communications Solutions 60 - 9 - 69 Total 452 $ 18 $ 31 $ - $ 501 $ Operating Margin 14.5% 16.1% Other Expense, Net (651) $ - $ - $ 650 $ (1) $ Income Tax (Expense) Benefit 1,019 $ (3) $ (10) $ (1,086) $ (80) $ Effective Tax Rate 446.9% 17.0% Income from Continuing Operations 791 $ 15 $ 21 $ (436) $ 391 $ Diluted Earnings per Share from Continuing Operations 2.19 $ 0.04 $ 0.06 $ (1.21) $ 1.08 $ ($ in millions, except per share data) Adjustments (4) See description of non-GAAP measures contained in this Appendix. (3) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. (1) Includes $11 million of acquisition and integration costs and $7 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales. (2) 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.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended September 25, 2015 27 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1)(2) Charges, Net (2) Items (3) (Non-GAAP) (4) Operating Income: Transportation Solutions 272 $ 5 $ 29 $ - $ 306 $ Industrial Solutions 84 6 20 - 110 Communications Solutions 51 - 21 - 72 Total 407 $ 11 $ 70 $ - $ 488 $ Operating Margin 13.6% 16.4% Other Income, Net 9 $ - $ - $ (5) $ 4 $ Income Tax Expense (252) $ 1 $ (17) $ 168 $ (100) $ Effective Tax Rate 64.9% 21.6% Income from Continuing Operations Attributable to TE Connectivity Ltd. 136 $ 12 $ 53 $ 163 $ 364 $ Diluted Earnings per Share from Continuing Operations Attributable to TE Connectivity Ltd. 0.34 $ 0.03 $ 0.13 $ 0.40 $ 0.90 $ (1) Includes $9 million of acquisition and integration costs and $2 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales. (2) 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. (3) Includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc. Also includes $63 million of income tax benefits associated with the settlement of audits of prior year income tax returns. (4) See description of non-GAAP measures contained in this Appendix. Adjustments ($ in millions, except per share data)
Impact of Additional Week for Q4 2016 28 Adjustment Adjustment Adjustment 14 Weeks Impact of 13 Weeks 14 Weeks Impact of 13 Weeks 14 Weeks Impact of 13 Weeks U.S. GAAP 14th Week (Non-GAAP) (1)(2) U.S. GAAP 14th Week (Non-GAAP) (1)(2) (Non-GAAP) (2) 14th Week (Non-GAAP) (1)(2) Net Sales: Transportation Solutions Automotive 1,311 $ (102) $ 1,209 $ 1,128 $ 16.2% (9.0)% 7.2% 15.3% (9.0)% 6.3% Commercial Transportation 215 (15) 200 190 13.2 (7.9) 5.3 12.1 (7.9) 4.2 Sensors 210 (13) 197 190 10.5 (6.8) 3.7 4.2 (6.5) (2.3) Total 1,736 (130) 1,606 1,508 15.1 (8.6) 6.5 13.4 (8.5) 4.9 Industrial Solutions Aerospace, Defense, Oil, and Gas: Aerospace and Defense 269 (18) 251 236 14.0 (7.6) 6.4 13.3 (7.5) 5.8 Oil and Gas 30 (2) 28 40 (25.0) (5.0) (30.0) (23.0) (3.6) (26.6) Aerospace, Defense, Oil, and Gas Total 299 (20) 279 276 8.3 (7.2) 1.1 8.0 (7.1) 0.9 Industrial Equipment 427 (32) 395 343 24.5 (9.3) 15.2 0.7 (7.8) (7.1) Energy 193 (13) 180 173 11.6 (7.6) 4.0 13.4 (7.6) 5.8 Total 919 (65) 854 792 16.0 (8.2) 7.8 6.0 (7.5) (1.5) Communications Solutions Data and Devices 262 (21) 241 323 (18.9) (6.5) (25.4) (5.8) (7.5) (13.3) Subsea Communications 239 (11) 228 202 18.3 (5.4) 12.9 18.3 (5.2) 13.1 Appliances 176 (11) 165 159 10.7 (6.9) 3.8 10.4 (7.4) 3.0 Total 677 (43) 634 684 (1.0) (6.3) (7.3) 5.9 (6.8) (0.9) Total 3,332 $ (238) $ 3,094 $ 2,984 $ 11.7% (8.0)% 3.7% 9.8% (7.9)% 1.9% Adjustment Acquisition Restructuring Related and Other 14 Weeks Impact of 13 Weeks U.S. GAAP Charges (3) Charges, Net (Non-GAAP) (2) 14th Week (Non-GAAP) (1)(2) Operating Income 517 $ 4 $ 30 $ 551 $ (55) $ 496 $ Operating Margin 15.5% 16.5% 16.0% Diluted Earnings per Share from Continuing Operations 1.22 $ 0.01 $ 0.04 $ 1.27 $ (0.13) $ 1.14 $ (3) Includes $3 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquired customer order backlog recorded in cost of sales. Change in Net Sales for the Quarter Ended September 30, 2016 versus Net Sales for the Quarter Ended September 25, 2015 Change in Organic Net Sales for the QuarterEnded September 30, 2016 versus Organic Net Sales for the Quarter Ended September 25, 2015 For the Quarter Ended September 30, 2016 For the Quarter Ended September 25, 2015 ($ in millions) Adjustments ($ in millions, except per share data) (1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year. (2) See description of non-GAAP measures contained in this Appendix.
Reconciliation of Net Sales Growth– 2016 vs. 2015 29 Acquisitions Translation (1) (Divestiture) Transportation Solutions (3) : Automotive 132 $ 2.8 % (134) $ - $ 266 $ 5.6 % 75 % Commercial Transportation 5 0.6 (16) - 21 2.6 13 Sensors 15 2.0 (24) 16 23 3.1 12 Total 152 2.4 (174) 16 310 4.9 100 % Industrial Solutions (3) : Aerospace, Defense, Oil, and Gas: Aerospace and Defense 24 2.5 (13) 9 28 3.0 30 % Oil and Gas (75) (37.5) (2) - (73) (36.0) 4 Aerospace, Defense, Oil, and Gas Total (51) (4.4) (15) 9 (45) (3.8) 34 Industrial Equipment 96 7.3 (14) 179 (69) (5.2) 44 Energy (9) (1.3) (34) - 25 3.6 22 Total 36 1.1 (63) 188 (89) (2.8) 100 % Communications Solutions (3) : Data and Devices (337) (24.8) (6) (123) (208) (17.8) 40 % Subsea Communications 176 24.8 - - 176 24.8 35 Appliances (22) (3.5) (11) - (11) (1.8) 25 Total (183) (6.8) (17) (123) (43) (1.6) 100 % Total 5 $ - % (254) $ 81 $ 178 $ 1.5 % (3) Industry end market information about net sales is presented consistently with our internal management reporting and may be periodically revised as management deems necessary. Total Organic (2) September 30, 2016 ($ in millions) (1) Represents the change in net sales resulting from changes in foreign currency exchange rates. (2) Represents the change in net sales resulting from volume and price changes, before consideration of acquisitions, divestitures, and the impact of changes in foreign currency exchange rates. Organic net sales growth is a non-GAAP measure. See description of non-GAAP measures contained in this Appendix. Year Ended Percentage of Change in Net Sales for the Year Ended September 30, 2016 Segment's Total versus Net Sales for the Year Ended September 25, 2015 Net Sales for the
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 30, 2016 30 Restructuring Acquisition and Other Related Charges Tax Adjusted U.S. GAAP Charges (1)(2) (Credits), Net (2) Items (3) (Non-GAAP) (4) Operating Income: Transportation Solutions 1,191 $ 9 $ 46 $ - $ 1,246 $ Industrial Solutions 343 23 31 - 397 Communications Solutions 368 - (75) - 293 Total 1,902 $ 32 $ 2 $ - $ 1,936 $ Operating Margin 15.5% 15.8% Other Income (Expense), Net (632) $ - $ - $ 650 $ 18 $ Income Tax (Expense) Benefit 779 $ (7) $ (2) $ (1,111) $ (341) $ Effective Tax Rate (67.0)% 18.5% Income from Continuing Operations 1,941 $ 25 $ - $ (461) $ 1,505 $ Diluted Earnings per Share from Continuing Operations 5.26 $ 0.07 $ - $ (1.25) $ 4.08 $ ($ in millions, except per share data) (1) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales. (2) 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. (3) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. (4) See description of non-GAAP measures contained in this Appendix. Adjustments
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 25, 2015 31 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1)(2) Charges, Net (2) Items (3) (Non-GAAP) (4) Operating Income: Transportation Solutions 1,193 $ 61 $ 39 $ - $ 1,293 $ Industrial Solutions 352 33 44 - 429 Communications Solutions 204 - 66 - 270 Total 1,749 $ 94 $ 149 $ - $ 1,992 $ Operating Margin 14.3% 16.3% Other Income (Expense), Net (55) $ - $ - $ 84 $ 29 $ Income Tax Expense (337) $ (22) $ (29) $ (36) $ (424) $ Effective Tax Rate 21.4% 22.3% Income from Continuing Operations 1,238 $ 72 $ 120 $ 48 $ 1,478 $ Diluted Earnings per Share from Continuing Operations 3.01 $ 0.18 $ 0.29 $ 0.12 $ 3.60 $ (4) See description of non-GAAP measures contained in this Appendix. (3) Includes $264 million of income tax benefits associated with the settlement of audits of prior year income tax returns as well as the related impact of $84 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. Also includes $216 million of income tax charges associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties, Inc. and $29 million of income tax charges for the tax impacts of certain intercompany dividends related to the restructuring and sale of the Broadband Network Solutions business. ($ in millions, except per share data) (1) Includes $55 million of acquisition and integration costs, $36 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales, and $3 million of restructuring costs. Adjustments (2) 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.
Impact of Additional Week for Fiscal 2016 32 Adjustment Adjustment Adjustment 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks U.S. GAAP 53rd Week (Non-GAAP) (1)(2) U.S. GAAP 53rd Week (Non-GAAP) (1)(2) (Non-GAAP) (2) 53rd Week (Non-GAAP) (1)(2) Net Sales: Transportation Solutions Automotive 4,912 $ (102) $ 4,810 $ 4,780 $ 2.8% (2.2)% 0.6% 5.6% (2.2)% 3.4% Commercial Transportation 825 (15) 810 820 0.6 (1.8) (1.2) 2.6 (1.8) 0.8 Sensors 766 (13) 753 751 2.0 (1.7) 0.3 3.1 (1.7) 1.4 Total 6,503 (130) 6,373 6,351 2.4 (2.1) 0.3 4.9 (2.1) 2.8 Industrial Solutions Aerospace, Defense, Oil, and Gas: Aerospace and Defense 975 (18) 957 951 2.5 (1.9) 0.6 3.0 (1.9) 1.1 Oil and Gas 125 (2) 123 200 (37.5) (1.0) (38.5) (36.0) (0.7) (36.7) Aerospace, Defense, Oil, and Gas Total 1,100 (20) 1,080 1,151 (4.4) (1.8) (6.2) (3.8) (1.7) (5.5) Industrial Equipment 1,419 (32) 1,387 1,323 7.3 (2.5) 4.8 (5.2) (2.1) (7.3) Energy 696 (13) 683 705 (1.3) (1.8) (3.1) 3.6 (1.9) 1.7 Total 3,215 (65) 3,150 3,179 1.1 (2.0) (0.9) (2.8) (1.9) (4.7) Communications Solutions Data and Devices 1,020 (21) 999 1,357 (24.8) (1.6) (26.4) (17.8) (1.7) (19.5) Subsea Communications 885 (11) 874 709 24.8 (1.5) 23.3 24.8 (1.3) 23.5 Appliances 615 (11) 604 637 (3.5) (1.7) (5.2) (1.8) (1.9) (3.7) Total 2,520 (43) 2,477 2,703 (6.8) (1.6) (8.4) (1.6) (1.7) (3.3) Total 12,238 $ (238) $ 12,000 $ 12,233 $ -% (1.9)% (1.9)% 1.5% (2.0)% (0.5)% Adjustment Acquisition Restructuring Related and Other 53 Weeks Impact of 52 Weeks U.S. GAAP Charges (3) Charges, Net Tax Items (4) (Non-GAAP) (2) 53rd Week (Non-GAAP) (1)(2) Operating Income 1,902 $ 32 $ 2 $ - $ 1,936 $ (55) $ 1,881 $ Operating Margin 15.5% 15.8% 15.7% Diluted Earnings per Share from Continuing Operations 5.26 $ 0.07 $ - $ (1.25) $ 4.08 $ (0.13) $ 3.95 $ (4) Includes $1,135 million of income tax benefits associated with the settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, as well as the related impact of $604 million to other expense pursuant to the tax sharingagreement with Tyco International and Covidien. Also includes income tax charges related to a $91 million increase in the valuation allowance for certain U.S. deferred tax assets; and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, as well as the related impact of $46 million to other expense pursuant to the tax sharing agreement with Tyco International and Covidien. (2) See description of non-GAAP measures contained in this Appendix. Change in Net Sales for Fiscal 2016 versus Net Sales for Fiscal 2015 Change in Organic Net Sales for Fiscal 2016 versus Organic Net Sales for Fiscal 2015 (2) Fiscal 2016 Fiscal 2015 ($ in millions) Adjustments ($ in millions, except per share data) (1) Excludes the impact of an additional week in the fourth quarter of fiscal 2016. The impact of the additional week was estimated using an average weekly sales figure for the last month of the fiscal year. (3) Includes $22 million of acquisition and integration costs and $10 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended December 25, 2015 33 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1)(2) Charges, Net (2) Items (3) (Non-GAAP) (4) Operating Income: Transportation Solutions 261 $ 3 $ 16 $ - $ 280 $ Industrial Solutions 66 3 9 - 78 Communications Solutions 71 - 15 - 86 Total 398 $ 6 $ 40 $ - $ 444 $ Operating Margin 14.0% 15.7% Other Income, Net 8 $ - $ - $ - $ 8 $ Income Tax Expense (58) $ (2) $ (12) $ (28) $ (100) $ Effective Tax Rate 15.2% 23.4% Income from Continuing Operations 324 $ 4 $ 28 $ (28) $ 328 $ Diluted Earnings per Share from Continuing Operations 0.83 $ 0.01 $ 0.07 $ (0.07) $ 0.84 $ (4) See description of non-GAAP measures contained in this Appendix. (1) Includes $5 million of acquisition and integration costs and $1 million of non-cash amortization associated with fair value adjustments related to acquired inventories and customer order backlog recorded in cost of sales. (2) The tax effect of each non-GAAP adjustment is calculated based on the jurisdictions in which the expense (income) is incurred and the tax laws in effect for each such jurisdiction. (3) Income tax benefits related to deferred tax assets recognized in connection with the anticipated sale of the Circuit Protection Devices Adjustments ($ in millions, except per share data)
Reconciliation of Gross Margin & Gross Margin Percentage 34 September 25, September 30, September 25, September 30, 2015 2016 2015 2016 Net Sales 2,984 $ 3,332 $ 12,233 $ 12,238 $ Cost of Sales 2,016 2,228 8,146 8,205 Gross Margin 968 1,104 4,087 4,033 Gross Margin Percentage 32.4% 33.1% 33.4% 33.0% Acquisition Related Charges 2 1 36 10 Adjusted Gross Margin (1) 970 $ 1,105 $ 4,123 $ 4,043 $ Adjusted Gross Margin Percentage (1) 32.5% 33.2% 33.7% 33.0% (1) See description of non-GAAP measures contained in this Appendix. For the Quarters Ended For the Years Ended ($ in millions)
Reconciliation of Free Cash Flow 35 September 25, September 30, September 25, September 30, 2015 2016 2015 2016 Net cash provided by operating activities: Net cash provided by continuing operating activities 540 $ 782 $ 1,619 $ 2,019 $ Net cash provided by (used in) discontinued operating activities 84 (98) 294 (97) 624 684 1,913 1,922 Net cash provided by (used in) investing activities 2,801 (524) 636 (1,581) Net cash used in financing activities (767) (218) (1,606) (3,030) Effect of currency translation on cash (30) 11 (71) 7 Net increase (decrease) in cash and cash equivalents 2,628 $ (47) $ 872 $ (2,682) $ Net cash provided by continuing operating activities 540 $ 782 $ 1,619 $ 2,019 $ Excluding: Payments related to pre-separation U.S. tax matters, net 17 5 40 150 Payments related to income taxes on the sale of the Broadband Network Solutions business - 10 - 36 Capital expenditures, net (168) (203) (583) (620) Free cash flow (1) 389 $ 594 $ 1,076 $ 1,585 $ (1) See description of non-GAAP measures contained in this Appendix. For the Quarters Ended For the Years Ended (in millions)
Reconciliation of Adjusted EBITDA Margin 36 September 25, June 24, September 30, September 25, September 30, 2015 2016 2016 2015 2016 Net income 1,040 $ 839 $ 437 $ 2,420 $ 2,009 $ Income from discontinued operations (904) (48) - (1,182) (68) Income tax expense (benefit) 252 (1,019) 52 337 (779) Other (income) expense, net (9) 651 1 55 632 Interest expense 32 31 34 136 127 Interest income (4) (2) (7) (17) (19) Operating income 407 $ 452 $ 517 $ 1,749 $ 1,902 $ Acquisition related charges 11 18 4 94 32 Restructuring and other charges, net 70 31 30 149 2 Adjusted operating income (1) 488 $ 501 $ 551 $ 1,992 $ 1,936 $ Depreciation and amortization (2) 160 146 146 600 580 Adjusted EBITDA (1) 648 $ 647 $ 697 $ 2,592 $ 2,516 $ Net sales 2,984 $ 3,121 $ 3,332 $ 12,233 $ 12,238 $ Net income as a percentage of net sales 34.9% 26.9% 13.1% 19.8% 16.4% Adjusted EBITDA margin (1) 21.7% 20.7% 20.9% 21.2% 20.6% (2) Excludes non-cash amortization associated with fair value adjustments related to acquired customer order backlog of $1 million, $2 million, and $1 million for the quarters ended September 25, 2015, June 24, 2016, and September 30, 2016, respectively, and $16 million and $5 million for the years ended September 25, 2015 and September 30, 2016, respectively, as these charges are included in the acquisition related charges line. For the Quarters Ended For the Years Ended (1) See description of non-GAAP measures contained in this Appendix. ($ in millions)
Reconciliation of Forward-Looking Non-GAAP Financial Measures to Forward-Looking GAAP Financial Measures for Q1 2017 and Fiscal 2017 37 Outlook for Quarter Ending December 30, Outlook for 2016 (1) Fiscal 2017 (1) Diluted earnings per share from continuing operations (GAAP) $0.84 - $0.88 $3.84 - $4.14 Restructuring and other charges, net 0.13 0.31 Acquisition related charges 0.01 0.04 Adjusted diluted earnings per share from continuing operations (non-GAAP) (2) $0.98 - $1.02 $4.19 - $4.49 Net sales growth (GAAP) 4 - 8% 0.5 - 5.5% Impact of additional week N/A 2 Net sales growth excluding the impact of the additional week (non-GAAP) (2) N/A 2.5 - 7.5% Translation (1) - (Acquisitions) divestitures, net (2) (2) Organic net sales growth excluding the impact of the additional week (non-GAAP) (2) 1 - 5% 0.5 - 5.5% (1) Outlook is as of November 2, 2016. (2) See description of non-GAAP measures contained in this Appendix.
Impact of Changes in Foreign Currency Exchange Rates for Q4 2016, Fiscal 2016, Q1 2017 and Fiscal 2017 38 Adjusted Operating Net Sales Income (1) Adjusted EPS (1) Quarter ended September 25, 2015 2,984 $ 488 $ 0.90 $ Impact of changes in foreign currency exchange rates 11 4 0.01 Operational performance 99 4 0.23 Quarter ended September 30, 2016 - 13 weeks (1) 3,094 496 1.14 Impact of additional week 238 55 0.13 Quarter ended September 30, 2016 3,332 $ 551 $ 1.27 $ Adjusted Operating Net Sales Income (1) Adjusted EPS (1) Year ended September 25, 2015 12,233 $ 1,992 $ 3.60 $ Impact of changes in foreign currency exchange rates (254) (38) (0.07) Operational performance 21 (73) 0.42 Year ended September 30, 2016 - 52 weeks (1) 12,000 1,881 3.95 Impact of additional week 238 55 0.13 Year ended September 30, 2016 12,238 $ 1,936 $ 4.08 $ Net Sales Adjusted EPS (1) Quarter ended December 25, 2015 2,833 $ 0.84 $ Impact of changes in foreign currency exchange rates 21 0.01 Operational performance 82 0.13 Acquisitions (divestitures), net 64 0.02 Outlook for the quarter ending December 30, 2016 (2) 3,000 $ 1.00 $ Net Sales Adjusted EPS (1) Year ended September 30, 2016 12,238 $ 4.08 $ Impact of additional week (238) (0.13) Year ended September 30, 2016 - 52 weeks (1) 12,000 3.95 Impact of changes in foreign currency exchange rates - - Operational performance 416 0.33 Acquisitions (divestitures), net 184 0.06 Outlook for the year ending September 29, 2017 (2) 12,600 $ 4.34 $ (in millions, except per share data) (in millions, except per share data) (1) See description of non-GAAP measures contained in this Appendix. (2) Outlook is as of November 2, 2016. (in millions, except per share data) (in millions, except per share data)