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Tyco Electronics Reports Strong Fiscal First Quarter and Raises Full Year Outlook

Switzerland Jan. 20, 2011 Dec. 24, 2010 $3.2 billion $0.60 $0.37 $0.13 $0.01 $0.10 $0.73 $0.47 $51 million

Tom Lynch $0.73

RAISING 2011 OUTLOOK

$1 billion

$3.45 to $3.55 billion $0.60 to $0.64 $0.10 $0.70 to $0.74 $0.64 $280 million $0.02

$13.9 to $14.3 billion $2.75 to $2.90 $0.30 $3.05 to $3.20 $2.54 $1.0 billion $0.12 $240 million $0.05

This outlook assumes current foreign exchange and commodity rates.  

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

FISCAL FIRST QUARTER 2011 RESULTS

All dollar amounts are pre-tax and stated in millions.  

% Change

% Change

($ in millions)

Dec. 24, 2010

Sept. 24, 2010

Dec. 25, 2009

Sequential

YoY

Net Sales

$3,200

$3,137

$2,892

2%

11%

Operating Income

$400

$382

$269

5%

49%

Restructuring and Other Charges

$(4)

$(56)

$(63)

Acquisition Related Charges

$(59)

$(8)

$0

Adjusted Operating Income

$463

$446

$332

4%

39%

Operating Margin

12.5%

12.2%

9.3%

Adjusted Operating Margin

14.5%

14.2%

11.5%

Sales grew 11 percent compared to the prior-year quarter and 2 percent sequentially.  Organically, sales increased 11 percent compared to the prior year and were down 2 percent sequentially.  By segment, and on an organic basis, sales in the Transportation Connectivity segment were up 16 percent compared to the prior year, driven primarily by continued growth in automotive production and increased content.  Sales in the Communications and Industrial Solutions segment were up 13 percent compared to the prior year due to broad-based growth across most end markets.  Sales were up 2 percent compared to the prior year in the Network Solutions segment driven by improvement in all end markets, excluding our SubCom business.    

The adjusted operating margin was 14.5 percent in the quarter, up 300 basis points versus the prior year and up 30 basis points sequentially.  

CASH FLOW

$154 million $45 million $35 million $1.2 billion $105 million

ORDERS

$3.2 billion

ADDITIONAL ITEMS

  • $250 million $650 million
  • March 2011 $0.18

ABOUT TYCO ELECTRONICS (TE)

US$12.1 billion www.te.com

CONFERENCE CALL AND WEBCAST

  • 8:30 a.m. EST

  • the United States the United States

  • 10:30 a.m. Jan. 20, 2011 11:59 p.m. Jan. 27, 2011 the United States the United States

NON-GAAP MEASURES

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

"Organic Sales Growth" is a useful measure used by the company to measure the underlying results and trends in the business.  The difference between reported net sales growth (the most comparable GAAP measure) and Organic Sales Growth (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures.  Organic Sales Growth is a useful measure of the company’s performance because it excludes items that:  i) are not completely under management’s control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity.  The limitation of this measure is that it excludes items that have an impact on the company’s sales.  This limitation is best addressed by using organic sales growth in combination with the GAAP results. See the accompanying tables to this release for the reconciliation presenting the components of Organic Sales Growth.

The company has presented its operating income before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, and other income or charges ("Adjusted Operating Income").  The company utilizes 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 is also a significant component in the company’s incentive compensation plans. Adjusted Operating Income is a useful measure for investors because it better reflects the company’s underlying operating results, trends, and the comparability of these results between periods.  The difference between Adjusted Operating Income and operating income (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, and other income or charges that may mask the underlying operating results and/or business trends.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease the company’s reported operating income. This limitation is best addressed by using Adjusted Operating Income in combination with operating income (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

The company has presented its operating margin before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, and other income or charges ("Adjusted Operating Margin").  The company presents Adjusted Operating Margin before special items to give investors a perspective on the underlying business results.  Because the company cannot predict the amount and timing of such items and the associated charges or gains that will be recorded in the company’s financial statements, it is difficult to include the impact of those items in the forecast.

The company has presented other income, net before special items including tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items ("Adjusted Other Income, Net"). The company presents Adjusted Other Income, Net as it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP. The difference between Adjusted Other Income, Net and other income, net (the most comparable GAAP measure) consists of tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items. The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease other income, net. This limitation is best addressed by using Adjusted Other Income, Net in combination with other income, net (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented income tax expense after adjusting for the tax effect of special items including charges related to restructuring and other charges, acquisition related charges, other income or charges, and certain significant special tax items ("Adjusted Income Tax Expense").  The company presents Adjusted Income Tax Expense to provide investors further information regarding the tax effects of adjustments used in determining the non-GAAP financial measure Adjusted Income from Continuing Operations (as defined below).  The difference between Adjusted Income Tax Expense and income tax expense (the most comparable GAAP measure) is the tax effect of adjusting items and certain significant special tax items.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease income tax expense. This limitation is best addressed by using Adjusted Income Tax Expense in combination with income tax expense (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented income from continuing operations attributable to Tyco Electronics Ltd. before special items including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, and, if applicable, related tax effects ("Adjusted Income from Continuing Operations").  The company presents Adjusted Income from Continuing Operations as it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP.  Adjusted Income from Continuing Operations provides additional information regarding the company’s underlying operating results, trends and the comparability of these results between periods.  The difference between Adjusted Income from Continuing Operations and income from continuing operations attributable to Tyco Electronics Ltd. (the most comparable GAAP measure) consists of the impact of charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, and, if applicable, related tax effects.  The limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease the company’s reported results. This limitation is best addressed by using Adjusted Income from Continuing Operations in combination with income from continuing operations attributable to Tyco Electronics Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease in reported amounts.

The company has presented diluted earnings per share from continuing operations attributable to Tyco Electronics Ltd. before special items, including charges or income related to legal settlements and reserves, restructuring and other charges, acquisition related charges, tax sharing income related to certain proposed adjustments to prior period tax returns and other tax items, certain significant special tax items, other income or charges, and, if applicable, related tax effects ("Adjusted Earnings Per Share"). The company presents Adjusted Earnings Per Share because it believes that it is appropriate for investors to consider results excluding these items in addition to its results in accordance with GAAP.  The company believes such a measure provides a picture of its results that is more comparable among periods since it excludes the impact of special items, which may recur, but tend to be irregular as to timing, thereby making comparisons between periods more difficult. This limitation is best addressed by using Adjusted Earnings Per Share in combination with diluted earnings per share from continuing operations attributable to Tyco Electronics Ltd. (the most comparable GAAP measure) in order to better understand the amounts, character and impact of any increase or decrease on reported results.

"Free Cash Flow" (FCF) is a useful measure of the company’s cash generation which is free from any significant existing obligation.  The difference between cash flows from operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows that the company believes are useful to identify.  FCF permits management and investors to gain insight into the amount that management employs to measure cash that is free from any significant existing obligation.  The difference reflects the impact from:

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

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

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

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

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

FORWARD-LOOKING STATEMENTS

This release may contain certain "forward-looking statements" within the meaning of the United States 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. Tyco Electronics has no intention and is under no obligation to update or alter (and expressly disclaims any such intention or obligation to do so) its forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by law.  The forward-looking statements in this release include statements addressing our future financial condition and operating results. 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 developments in the credit markets; conditions affecting demand for products, particularly the automotive industry and the telecommunications, computer and consumer electronics industries; future goodwill impairment; competition and pricing pressure; fluctuations in foreign currency exchange rates and commodity prices; political, economic and military instability in countries in which we operate; compliance with current and future environmental and other laws and regulations; the possible effects on us of changes in tax laws, tax treaties and other legislation; Sept. 24, 2010

TYCO ELECTRONICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Quarters Ended

December 24,

December 25,

2010

2009

(in millions, except per share data)

Net sales

$            3,200

$            2,892

Cost of sales

2,179

2,051

Gross margin

1,021

841

Selling, general, and administrative expenses

402

368

Research, development, and engineering expenses

163

138

Acquisition and integration costs

17

Restructuring and other charges, net

39

66

  Operating income  

400

269

Interest income

5

4

Interest expense

(35)

(39)

Other income, net

12

8

  Income from continuing operations before income taxes

382

242

Income tax expense

(113)

(69)

  Income from continuing operations

269

173

Loss from discontinued operations, net of income taxes

(3)

  Net income  

266

173

Less: net income attributable to noncontrolling interests

(1)

(1)

Net income attributable to Tyco Electronics Ltd.

$               265

$               172

Amounts attributable to Tyco Electronics Ltd.:

Income from continuing operations

$               268

$               172

Loss from discontinued operations

(3)

Net income  

$               265

$               172

Basic earnings per share attributable to Tyco Electronics Ltd.:

  Income from continuing operations

$              0.60

$              0.37

  Loss from discontinued operations

  Net income  

$              0.60

$              0.37

Diluted earnings (loss) per share attributable to Tyco Electronics Ltd.:

  Income from continuing operations

$              0.60

$              0.37

  Loss from discontinued operations

(0.01)

  Net income  

$              0.59

$              0.37

Cash distributions paid per common share of Tyco Electronics Ltd.

$              0.16

$              0.16

Weighted-average number of shares outstanding:

  Basic

444

459

  Diluted

449

462

TYCO ELECTRONICS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

December 24,

September 24,

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