Edgar Filing: TE Connectivity Ltd.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 30, 2016
Or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260
(Commission File Number)

TE CONNECTIVITY LTD.
(Exact name of registrant as specified in its charter)


Switzerland (Jurisdiction of Incorporation)		98-0518048 (I.R.S. Employer Identification No.)

Rheinstrasse 20
CH-8200 Schaffhausen, Switzerland
(Address of principal executive offices)

+41 (0)52 633 66 61
(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of common shares outstanding as of January 23, 2017 was 355,292,904.

Table of Contents

TE CONNECTIVITY LTD.
INDEX TO FORM 10-Q



Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations for the Quarters Ended December 30, 2016 and December 25, 2015 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended December 30, 2016 and December 25, 2015 (Unaudited)	2
	Condensed Consolidated Balance Sheets as of December 30, 2016 and September 30, 2016 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders' Equity for the Quarters Ended December 30, 2016 and December 25, 2015 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 30, 2016 and December 25, 2015 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
Part II.	Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	39
Signatures		40

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Quarters Ended

	December 30, 2016			December 25, 2015
	(in millions, except per share data)
Net sales	$	3,063		$	2,833
Cost of sales		1,998			1,888

Gross margin		1,065			945
Selling, general, and administrative expenses		372			340
Research, development, and engineering expenses		158			162
Acquisition and integration costs		2			5
Restructuring and other charges, net		47			40

Operating income		486			398
Interest income		5			6
Interest expense		(31	)		(30	)
Other income, net		—			8

Income from continuing operations before income taxes		460			382
Income tax expense		(54	)		(58	)

Income from continuing operations		406			324
Income from discontinued operations, net of income taxes		3			29

Net income	$	409		$	353



Basic earnings per share:
Income from continuing operations	$	1.14		$	0.84
Income from discontinued operations		0.01			0.08
Net income		1.15			0.92
Diluted earnings per share:
Income from continuing operations	$	1.13		$	0.83
Income from discontinued operations		0.01			0.07
Net income		1.14			0.91
Dividends paid per common share	$	0.37		$	0.33
Weighted-average number of shares outstanding:
Basic		356			385
Diluted		359			390

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	For the Quarters Ended

	December 30, 2016			December 25, 2015
	(in millions)
Net income.	$	409		$	353
Other comprehensive loss:
Currency translation		(185	)		(85	)
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		13			2
Gains (losses) on cash flow hedges, net of income taxes		16			(7	)

Other comprehensive loss		(156	)		(90	)

Comprehensive income.	$	253		$	263

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 30, 2016			September 30, 2016

	(in millions, except share data)
Assets
Current assets:
Cash and cash equivalents	$	665		$	647
Accounts receivable, net of allowance for doubtful accounts of $17		2,034			2,046
Inventories		1,636			1,596
Prepaid expenses and other current assets		474			486

Total current assets		4,809			4,775
Property, plant, and equipment, net		2,956			3,052
Goodwill		5,363			5,492
Intangible assets, net		1,800			1,879
Deferred income taxes		2,290			2,111
Other assets		397			299

Total Assets	$	17,615		$	17,608



Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt	$	1,052		$	331
Accounts payable		1,123			1,090
Accrued and other current liabilities		1,189			1,437
Deferred revenue		149			208

Total current liabilities		3,513			3,066
Long-term debt		2,976			3,739
Long-term pension and postretirement liabilities		1,474			1,502
Deferred income taxes		194			207
Income taxes		266			247
Other liabilities		355			362

Total Liabilities		8,778			9,123

Commitments and contingencies (Note 8)
Shareholders' equity:
Common shares, CHF 0.57 par value, 382,835,381 shares authorized and issued		168			168
Contributed surplus		1,729			1,801
Accumulated earnings		9,256			8,682
Treasury shares, at cost, 27,334,732 and 27,554,005 shares, respectively		(1,618	)		(1,624	)
Accumulated other comprehensive loss		(698	)		(542	)

Total Shareholders' Equity		8,837			8,485

Total Liabilities and Shareholders' Equity	$	17,615		$	17,608

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

	Common Shares				Treasury Shares											Accumulated Other Comprehensive Loss

	Common Shares				Treasury Shares						Contributed Surplus			Accumulated Earnings					Total Sharedholders' Equity
	Shares		Amount		Shares			Amount			Contributed Surplus			Accumulated Earnings					Total Sharedholders' Equity
	(in millions)
Balance at September 30, 2016		383	$	168		(28	)	$	(1,624	)	$	1,801		$	8,682	$	(542	)	$	8,485
Adoption of ASU 2016-09		—		—		—			—			—			165		—			165
Net income		—		—		—			—			—			409		—			409
Other comprehensive loss		—		—		—			—			—			—		(156	)		(156	)
Share-based compensation expense		—		—		—			—			24			—		—			24
Exercise of share options		—		—		1			26			—			—		—			26
Restricted share award vestings and other activity		—		—		2			82			(96	)		—		—			(14	)
Repurchase of common shares		—		—		(2	)		(102	)		—			—		—			(102	)

Balance at December 30, 2016		383	$	168		(27	)	$	(1,618	)	$	1,729		$	9,256	$	(698	)	$	8,837



Balance at September 25, 2015		414	$	182		(20	)	$	(1,256	)	$	4,359		$	6,673	$	(373	)	$	9,585
Net income		—		—		—			—			—			353		—			353
Other comprehensive loss		—		—		—			—			—			—		(90	)		(90	)
Share-based compensation expense		—		—		—			—			23			—		—			23
Exercise of share options		—		—		1			34			—			—		—			34
Restricted share award vestings and other activity		—		—		1			88			(98	)		—		—			(10	)
Repurchase of common shares		—		—		(20	)		(1,318	)		—			—		—			(1,318	)

Balance at December 25, 2015		414	$	182		(38	)	$	(2,452	)	$	4,284		$	7,026	$	(463	)	$	8,577

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Quarters Ended

	December 30, 2016			December 25, 2015
	(in millions)
Cash Flows From Operating Activities:
Net income	$	409		$	353
Income from discontinued operations, net of income taxes		(3	)		(29	)

Income from continuing operations		406			324
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		160			146
Deferred income taxes		(69	)		(58	)
Provision for losses on accounts receivable and inventories		4			21
Share-based compensation expense		24			22
Other		4			9
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net		(30	)		237
Inventories		(59	)		(99	)
Prepaid expenses and other current assets		31			16
Accounts payable		64			(31	)
Accrued and other current liabilities		(70	)		(130	)
Deferred revenue		(59	)		(71	)
Income taxes		28			28
Other		(30	)		(23	)

Net cash provided by continuing operating activities		404			391
Net cash used in discontinued operating activities		—			(1	)

Net cash provided by operating activities		404			390

Cash Flows From Investing Activities:
Capital expenditures		(130	)		(139	)
Proceeds from sale of property, plant, and equipment		4			1
Other		(28	)		17

Net cash used in investing activities		(154	)		(121	)

Cash Flows From Financing Activities:
Net increase in commercial paper		10			—
Proceeds from exercise of share options		25			34
Repurchase of common shares		(93	)		(1,249	)
Payment of common share dividends to shareholders		(132	)		(127	)
Other		(19	)		(29	)

Net cash used in continuing financing activities		(209	)		(1,371	)
Net cash provided by discontinued financing activities		—			1

Net cash used in financing activities		(209	)		(1,370	)

Effect of currency translation on cash		(23	)		(5	)
Net increase (decrease) in cash and cash equivalents		18			(1,106	)
Cash and cash equivalents at beginning of period		647			3,329

Cash and cash equivalents at end of period	$	665		$	2,223

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation and Accounting Pronouncements

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of TE Connectivity Ltd. ("TE Connectivity" or the "Company," which may be referred to as "we," "us," or "our") have been prepared in United States ("U.S.") dollars, in accordance with accounting principles generally accepted in the U.S. ("GAAP") and the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. In management's opinion, the unaudited Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period.

The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2017 and fiscal 2016 are to our fiscal years ending September 29, 2017 and September 30, 2016, respectively.

Recently Adopted Accounting Pronouncement

In March 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2016-09, an update to Accounting Standards Codification 718, Compensation—Stock Compensation, to simplify various aspects of accounting for share-based payments to employees. We elected to early adopt this update in the first quarter of fiscal 2017. The provisions of the update addressing the accounting for excess tax benefits and deficiencies were adopted using a modified retrospective transition approach, with a cumulative-effect adjustment to beginning accumulated earnings and a corresponding increase in deferred tax assets of $165 million. The provision of the update addressing the presentation on the statement of cash flows of employee taxes paid via the withholding of shares was applied retrospectively and did not have a material impact on our Condensed Consolidated Financial Statements. Adoption of other provisions, which were applied prospectively, also did not have a material impact on our Condensed Consolidated Financial Statements.

2. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Restructuring charges, net	$	46	$	35
Other charges		1		5

	$	47	$	40

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. Restructuring and Other Charges, Net (Continued)

Net restructuring charges by segment were as follows:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Transportation Solutions	$	24	$	15
Industrial Solutions		20		9
Communications Solutions		2		11

Restructuring charges, net	$	46	$	35

Activity in our restructuring reserves during the quarter ended December 30, 2016 is summarized as follows:

	Balance at September 30, 2016		Charges		Changes in Estimates			Cash Payments			Non-Cash Items			Currency Translation			Balance at December 30, 2016

	(in millions)
Fiscal 2017 Actions:
Employee severance	$	—	$	45	$	—		$	(4	)	$	—		$	—		$	41
Property, plant, and equipment		—		1		—			—			(1	)		—			—

Total		—		46		—			(4	)		(1	)		—			41

Fiscal 2016 Actions:
Employee severance		54		2		—			(12	)		—			(2	)		42
Facility and other exit costs		—		1		—			(1	)		—			—			—

Total		54		3		—			(13	)		—			(2	)		42

Pre-Fiscal 2016 Actions:
Employee severance		25		—		(3	)		(3	)		—			(2	)		17
Facility and other exit costs		12		—		—			(2	)		—			—			10

Total		37		—		(3	)		(5	)		—			(2	)		27

Total Activity	$	91	$	49	$	(3	)	$	(22	)	$	(1	)	$	(4	)	$	110

Fiscal 2017 Actions

During fiscal 2017, we initiated a restructuring program associated with headcount reductions impacting all segments and product line closures primarily impacting the Transportation Solutions and Industrial Solutions segments. In connection with this program, during the quarter ended December 30, 2016, we recorded restructuring charges of $46 million. We expect to complete all restructuring actions commenced during the quarter ended December 30, 2016 by the end of fiscal 2018 and to incur total charges of approximately $52 million.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. Restructuring and Other Charges, Net (Continued)

Fiscal 2016 Actions

During fiscal 2016, we initiated a restructuring program associated with headcount reductions impacting all segments and product line closures in the Communications Solutions segment. In connection with this program, during the quarters ended December 30, 2016 and December 25, 2015, we recorded restructuring charges of $3 million and $32 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2016 by the end of fiscal 2019 and to incur total charges of approximately $168 million with remaining charges related primarily to employee severance.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2016 program by segment:

	Total Expected Charges		Cumulative Charges Incurred		Remaining Expected Charges

	(in millions)
Transportation Solutions	$	45	$	38	$	7
Industrial Solutions		30		28		2
Communications Solutions		93		67		26

Total	$	168	$	133	$	35

Pre-Fiscal 2016 Actions

Prior to fiscal 2016, we initiated a restructuring program associated with headcount reductions and product line closures, primarily impacting the Communications Solutions and Industrial Solutions segments. During the quarters ended December 30, 2016 and December 25, 2015, we recorded restructuring credits of $3 million and charges of $3 million, respectively, related to pre-fiscal 2016 actions. We do not expect to incur any additional charges related to pre-fiscal 2016 actions.

Total Restructuring Reserves

Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:

	December 30, 2016		September 30, 2016

	(in millions)
Accrued and other current liabilities	$	84	$	64
Other liabilities		26		27

Restructuring reserves	$	110	$	91

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. Discontinued Operations

The following table presents certain components of income from discontinued operations, net of income taxes:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Pre-tax loss from discontinued operations	$	—	$	(2	)
Pre-tax gain on sale of discontinued operations		3		38
Income tax expense		—		(7	)

Income from discontinued operations, net of income taxes	$	3	$	29

During fiscal 2015, we sold our Broadband Network Solutions ("BNS") business for $3.0 billion in cash and recognized a pre-tax gain of $1.1 billion on the transaction. During the quarter ended December 25, 2015, we recognized an additional pre-tax gain of $38 million on the divestiture, related primarily to pension and net working capital adjustments. The BNS business met the discontinued operations criteria and was reported as such in all periods presented on the Condensed Consolidated Financial Statements. Prior to reclassification to discontinued operations, the BNS business was included in the former Network Solutions segment.

4. Inventories

Inventories consisted of the following:

	December 30, 2016		September 30, 2016

	(in millions)
Raw materials	$	260	$	241
Work in progress		498		504
Finished goods		723		669
Inventoried costs on long-term contracts		155		182

Inventories	$	1,636	$	1,596

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. Goodwill

The changes in the carrying amount of goodwill by segment were as follows:

	Transportation Solutions			Industrial Solutions			Communications Solutions			Total

	(in millions)
September 30, 2016⁽¹⁾	$	1,903		$	3,005		$	584		$	5,492
Currency translation and other⁽²⁾		(31	)		(89	)		(9	)		(129	)

December 30, 2016⁽¹⁾	$	1,872		$	2,916		$	575		$	5,363

(1): At December 30, 2016 and September 30, 2016, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $2,191 million, $669 million, and $1,514 million, respectively.
(2): Includes a reduction of goodwill of $28 million associated with adjustments made to the purchase price allocation of certain fiscal 2016 acquisitions primarily within the Industrial Solutions segment.

6. Intangible Assets, Net

Intangible assets consisted of the following:

	December 30, 2016							September 30, 2016

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in millions)
Customer relationships	$	1,301	$	(229	)	$	1,072	$	1,332	$	(212	)	$	1,120
Intellectual property		1,278		(571	)		707		1,300		(563	)		737
Other		35		(14	)		21		36		(14	)		22

Total	$	2,614	$	(814	)	$	1,800	$	2,668	$	(789	)	$	1,879

Intangible asset amortization expense was $42 million and $34 million for the quarters ended December 30, 2016 and December 25, 2015, respectively.

The aggregate amortization expense on intangible assets is expected to be as follows:

	(in millions)

Remainder of fiscal 2017	$	125
Fiscal 2018		167
Fiscal 2019		165
Fiscal 2020		157
Fiscal 2021		154
Fiscal 2022		153
Thereafter		879

Total	$	1,800

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7. Debt

During the quarter ended December 30, 2016, we reclassified $708 million of 6.55% senior notes due 2017 from long-term debt to short-term debt on the Condensed Consolidated Balance Sheet.

As of December 30, 2016, Tyco Electronics Group S.A. ("TEGSA"), our 100%-owned subsidiary, had $340 million of commercial paper outstanding at a weighted-average interest rate of 0.98%. TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 0.69% at September 30, 2016.

The fair value of our debt, based on indicative valuations, was approximately $4,246 million and $4,424 million at December 30, 2016 and September 30, 2016, respectively.

8. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

Environmental Matters

We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of December 30, 2016, we concluded that it was probable that we would incur remedial costs in the range of $17 million to $42 million, and that the best estimate within this range was $20 million. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

Guarantees

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

At December 30, 2016, we had outstanding letters of credit, letters of guarantee, and surety bonds of $265 million.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

8. Commitments and Contingencies (Continued)

In the normal course of business, we are liable for contract completion and product performance. In the opinion of management, such obligations will not materially affect our results of operations, financial position, or cash flows.

We generally record estimated product warranty costs when contract revenues are recognized under the percentage-of-completion method for construction related contracts; other warranty reserves are not significant. The estimation is based primarily on historical experience and actual warranty claims. Amounts accrued for warranty claims were $45 million and $48 million at December 30, 2016 and September 30, 2016, respectively.

Tax Sharing Agreement

In fiscal 2007, we became an independent, publicly traded company owning the former electronics businesses of Tyco International plc ("Tyco International"). On June 29, 2007, Tyco International distributed all of our shares, as well as its shares of its former healthcare businesses ("Covidien"), to its common shareholders (the "separation"). As a result of subsequent transactions, Tyco International and Covidien now operate as part of Johnson Controls International plc and Medtronic plc, respectively.

Upon separation, we entered into a Tax Sharing Agreement, under which we share responsibility for certain of our, Tyco International's, and Covidien's income tax liabilities based on a sharing formula for periods prior to and including June 29, 2007. We, Tyco International, and Covidien share 31%, 27%, and 42%, respectively, of income tax liabilities that arise from adjustments made by tax authorities to our, Tyco International's, and Covidien's income tax returns. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and indemnifications with Tyco International and Covidien. We have substantially settled all pre-separation U.S. federal income tax matters with the Internal Revenue Service. Certain shared U.S. state and non-U.S. income tax matters remain open. We do not expect these matters will have a material effect on our results of operations, financial position, or cash flows.

9. Financial Instruments

We hedge our net investment in certain foreign operations using intercompany non-derivative financial instruments denominated in the same currencies. The aggregate notional value of these hedges was $3,267 million and $3,480 million at December 30, 2016 and September 30, 2016, respectively. Foreign exchange gains of $222 million and $55 million in the quarters ended December 30, 2016 and December 25, 2015, respectively, were recorded as currency translation, a component of accumulated other comprehensive loss, offsetting foreign exchange losses attributable to the translation of the net investment.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. Retirement Plans

The net periodic pension benefit cost for all U.S. and non-U.S. defined benefit pension plans was as follows:

	U.S. Plans						Non-U.S. Plans

	For the Quarters Ended						For the Quarters Ended
	December 30, 2016			December 25, 2015			December 30, 2016			December 25, 2015
	(in millions)
Service cost	$	3		$	2		$	13		$	12
Interest cost		11			13			9			13
Expected return on plan assets		(13	)		(15	)		(18	)		(18	)
Amortization of net actuarial loss		10			10			11			9
Amortization of prior service credit		—			—			(2	)		(1	)

Net periodic pension benefit cost	$	11		$	10		$	13		$	15

11. Income Taxes

We recorded income tax expense of $54 million and $58 million for the quarters ended December 30, 2016 and December 25, 2015, respectively. The income tax expense for the quarter ended December 30, 2016 included a $30 million income tax benefit associated with the tax impacts of certain intercompany restructurings and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards. The income tax expense for the quarter ended December 25, 2015 included a $28 million income tax benefit related to deferred tax assets recognized in connection with the anticipated sale of the Circuit Protection Devices business, which closed during the second quarter of fiscal 2016.

We record accrued interest as well as penalties related to uncertain tax positions as part of income tax expense. As of December 30, 2016 and September 30, 2016, we had $58 million and $54 million, respectively, of accrued interest and penalties related to uncertain tax positions on the Condensed Consolidated Balance Sheets, recorded primarily in income taxes. During the quarter ended December 30, 2016, we recognized $3 million of income tax expense related to interest and penalties on the Condensed Consolidated Statement of Operations.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that up to approximately $90 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 30, 2016.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

12. Earnings Per Share

The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Basic		356		385
Dilutive impact of share-based compensation arrangements		3		5

Diluted		359		390

There were two million share options that were not included in the computation of diluted earnings per share for the quarters ended December 30, 2016 and December 25, 2015, because the instruments' underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive.

13. Equity

Dividends

We paid a cash dividend of $0.37 per share to shareholders out of contributed surplus during the quarter ended December 30, 2016.

Upon shareholders' approval of the annual dividend payment during fiscal year 2016, we recorded a liability with a corresponding charge to contributed surplus. At December 30, 2016 and September 30, 2016, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $132 million and $263 million, respectively.

Share Repurchase Program

Common shares repurchased under the share repurchase program were as follows:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Number of common shares repurchased		2		20
Amount repurchased	$	102	$	1,318

At December 30, 2016, we had $1.0 billion of availability remaining under our share repurchase authorization.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. Share Plans

Total share-based compensation expense, which was included primarily in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows:

	For the Quarters Ended

	December 30, 2016		December 25, 2015
	(in millions)
Share-based compensation expense	$	24	$	22

As of December 30, 2016, there was $192 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.5 years.

During the quarter ended December 30, 2016, we granted the following share-based awards as part of our annual incentive plan grant:

	Shares		Weighted-Average Grant-Date Fair Value

	(in millions)
Share options		2.1	$	12.79
Restricted share awards		0.7		66.74
Performance share awards		0.3		66.74

As of December 30, 2016, we had 13 million shares available for issuance under our stock and incentive plans, of which the TE Connectivity Ltd. 2007 Stock and Incentive Plan, as amended and restated, was the primary plan.

Share-Based Compensation Assumptions

The weighted-average assumptions we used in the Black-Scholes-Merton option pricing model for the options granted as part of our annual incentive plan grant were as follows:


Expected share price volatility		24	%
Risk free interest rate		1.9	%
Expected annual dividend per share	$	1.48
Expected life of options (in years)		5.6

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

15. Segment Data

Net sales and operating income by segment were as follows:

	Net Sales⁽¹⁾				Operating Income

	For the Quarters Ended				For the Quarters Ended
	December 30, 2016		December 25, 2015		December 30, 2016		December 25, 2015
	(in millions)
Transportation Solutions	$	1,675	$	1,507	$	343	$	261
Industrial Solutions		795		709		67		66
Communications Solutions		593		617		76		71

Total	$	3,063	$	2,833	$	486	$	398

(1): Intersegment sales were not material and were recorded at selling prices that approximated market prices.

16. Tyco Electronics Group S.A.

Tyco Electronics Group S.A. ("TEGSA"), a Luxembourg company and our 100%-owned subsidiary, is a holding company that owns, directly or indirectly, all of our operating subsidiaries. TEGSA is the obligor under our senior notes, commercial paper, and five-year unsecured senior revolving credit facility, which are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd. The following tables present condensed consolidating financial information for TE Connectivity Ltd., TEGSA, and all other subsidiaries that are not providing a guarantee of debt but which represent assets of TEGSA, using the equity method of accounting.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Statement of Operations (UNAUDITED)
For the Quarter Ended December 30, 2016

	TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total

	(in millions)
Net sales	$	—		$	—		$	3,063		$	—		$	3,063
Cost of sales		—			—			1,998			—			1,998

Gross margin		—			—			1,065			—			1,065
Selling, general, and administrative expenses, net		28			(88	)		432			—			372
Research, development, and engineering expenses		—			—			158			—			158
Acquisition and integration costs		—			—			2			—			2
Restructuring and other charges, net		—			—			47			—			47

Operating income (loss)		(28	)		88			426			—			486
Interest income		—			—			5			—			5
Interest expense		—			(31	)		—			—			(31	)
Equity in net income of subsidiaries		440			356			—			(796	)		—
Equity in net income of subsidiaries of discontinued operations		3			4			—			(7	)		—
Intercompany interest income (expense), net		(6	)		27			(21	)		—			—

Income from continuing operations before income taxes		409			444			410			(803	)		460
Income tax expense		—			—			(54	)		—			(54	)

Income from continuing operations		409			444			356			(803	)		406
Income (loss) from discontinued operations, net of income taxes		—			(1	)		4			—			3

Net income		409			443			360			(803	)		409
Other comprehensive loss		(156	)		(156	)		(175	)		331			(156	)

Comprehensive income	$	253		$	287		$	185		$	(472	)	$	253

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Statement of Operations (UNAUDITED)
For the Quarter Ended December 25, 2015

	TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total

	(in millions)
Net sales	$	—		$	—		$	2,833		$	—		$	2,833
Cost of sales		—			—			1,888			—			1,888

Gross margin		—			—			945			—			945
Selling, general, and administrative expenses, net		36			(28	)		332			—			340
Research, development, and engineering expenses		—			—			162			—			162
Acquisition and integration costs		—			—			5			—			5
Restructuring and other charges, net		—			—			40			—			40

Operating income (loss)		(36	)		28			406			—			398
Interest income		—			—			6			—			6
Interest expense		—			(30	)		—			—			(30	)
Other income, net		—			—			8			—			8
Equity in net income of subsidiaries		361			351			—			(712	)		—
Equity in net income of subsidiaries of discontinued operations		29			76			—			(105	)		—
Intercompany interest income (expense), net		(1	)		12			(11	)		—			—

Income from continuing operations before income taxes		353			437			409			(817	)		382
Income tax expense		—			—			(58	)		—			(58	)

Income from continuing operations		353			437			351			(817	)		324
Income (loss) from discontinued operations, net of income taxes		—			(47	)		76			—			29

Net income		353			390			427			(817	)		353
Other comprehensive loss		(90	)		(90	)		(86	)		176			(90	)

Comprehensive income	$	263		$	300		$	341		$	(641	)	$	263

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Balance Sheet (UNAUDITED)
As of December 30, 2016

	TE Connectivity Ltd.		TEGSA		Other Subsidiaries		Consolidating Adjustments			Total

	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	665	$	—		$	665
Accounts receivable, net		—		—		2,034		—			2,034
Inventories		—		—		1,636		—			1,636
Intercompany receivables		26		1,457		37		(1,520	)		—
Prepaid expenses and other current assets		2		34		438		—			474

Total current assets		28		1,491		4,810		(1,520	)		4,809
Property, plant, and equipment, net		—		—		2,956		—			2,956
Goodwill		—		—		5,363		—			5,363
Intangible assets, net		—		—		1,800		—			1,800
Deferred income taxes		—		—		2,290		—			2,290
Investment in subsidiaries		10,417		19,577		—		(29,994	)		—
Intercompany loans receivable		20		3,817		10,391		(14,228	)		—
Other assets		—		42		355		—			397

Total Assets	$	10,465	$	24,927	$	27,965	$	(45,742	)	$	17,615



Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt	$	—	$	1,051	$	1	$	—		$	1,052
Accounts payable		1		—		1,122		—			1,123
Accrued and other current liabilities		134		94		961		—			1,189
Deferred revenue		—		—		149		—			149
Intercompany payables		1,493		—		27		(1,520	)		—

Total current liabilities		1,628		1,145		2,260		(1,520	)		3,513
Long-term debt		—		2,974		2		—			2,976
Intercompany loans payable		—		10,391		3,837		(14,228	)		—
Long-term pension and postretirement liabilities		—		—		1,474		—			1,474
Deferred income taxes		—		—		194		—			194
Income taxes		—		—		266		—			266
Other liabilities		—		—		355		—			355

Total Liabilities		1,628		14,510		8,388		(15,748	)		8,778

Total Shareholders' Equity		8,837		10,417		19,577		(29,994	)		8,837

Total Liabilities and Shareholders' Equity	$	10,465	$	24,927	$	27,965	$	(45,742	)	$	17,615

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Balance Sheet (UNAUDITED)
As of September 30, 2016

	TE Connectivity Ltd.		TEGSA		Other Subsidiaries		Consolidating Adjustments			Total

	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	647	$	—		$	647
Accounts receivable, net		—		—		2,046		—			2,046
Inventories		—		—		1,596		—			1,596
Intercompany receivables		37		1,314		48		(1,399	)		—
Prepaid expenses and other current assets		3		17		466		—			486

Total current assets		40		1,331		4,803		(1,399	)		4,775
Property, plant, and equipment, net		—		—		3,052		—			3,052
Goodwill		—		—		5,492		—			5,492
Intangible assets, net		—		—		1,879		—			1,879
Deferred income taxes		—		—		2,111		—			2,111
Investment in subsidiaries		10,053		19,425		—		(29,478	)		—
Intercompany loans receivable		22		3,739		10,313		(14,074	)		—
Other assets		—		14		285		—			299

Total Assets	$	10,115	$	24,509	$	27,935	$	(44,951	)	$	17,608



Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt	$	—	$	330	$	1	$	—		$	331
Accounts payable		1		—		1,089		—			1,090
Accrued and other current liabilities		266		57		1,114		—			1,437
Deferred revenue		—		—		208		—			208
Intercompany payables		1,363		—		36		(1,399	)		—

Total current liabilities		1,630		387		2,448		(1,399	)		3,066
Long-term debt		—		3,737		2		—			3,739
Intercompany loans payable		—		10,314		3,760		(14,074	)		—
Long-term pension and postretirement liabilities		—		—		1,502		—			1,502
Deferred income taxes		—		—		207		—			207
Income taxes		—		—		247		—			247
Other liabilities		—		18		344		—			362

Total Liabilities		1,630		14,456		8,510		(15,473	)		9,123

Total Shareholders' Equity		8,485		10,053		19,425		(29,478	)		8,485

Total Liabilities and Shareholders' Equity	$	10,115	$	24,509	$	27,935	$	(44,951	)	$	17,608

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Statement of Cash Flows (UNAUDITED)
For the Quarter Ended December 30, 2016

	TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total

	(in millions)
Cash Flows From Operating Activities:
Net cash provided by (used in) operating activities	$	(30	)	$	22		$	412		$	—		$	404

Cash Flows From Investing Activities:
Capital expenditures		—			—			(130	)		—			(130	)
Proceeds from sale of property, plant, and equipment		—			—			4			—			4
Change in intercompany loans		—			(141	)		—			141			—
Other		—			4			(32	)		—			(28	)

Net cash used in investing activities		—			(137	)		(158	)		141			(154	)

Cash Flows From Financing Activities:
Changes in parent company equity⁽¹⁾		22			105			(127	)		—			—
Net increase in commercial paper		—			10			—			—			10
Proceeds from exercise of share options		—			—			25			—			25
Repurchase of common shares		—			—			(93	)		—			(93	)
Payment of common share dividends to shareholders		(132	)		—			—			—			(132	)
Loan activity with parent		140			—			1			(141	)		—
Other		—			—			(19	)		—			(19	)

Net cash provided by (used in) financing activities		30			115			(213	)		(141	)		(209	)

Effect of currency translation on cash		—			—			(23	)		—			(23	)
Net increase in cash and cash equivalents		—			—			18			—			18
Cash and cash equivalents at beginning of period		—			—			647			—			647

Cash and cash equivalents at end of period	$	—		$	—		$	665		$	—		$	665

(1): Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

16. Tyco Electronics Group S.A. (Continued)

Condensed Consolidating Statement of Cash Flows (UNAUDITED)
For the Quarter Ended December 25, 2015

	TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total

	(in millions)
Cash Flows From Operating Activities:
Net cash provided by (used in) continuing operating activities	$	(48	)	$	(19	)	$	458		$	—		$	391
Net cash used in discontinued operating activities		—			—			(1	)		—			(1	)

Net cash provided by (used in) operating activities		(48	)		(19	)		457			—			390

Cash Flows From Investing Activities:
Capital expenditures		—			—			(139	)		—			(139	)
Proceeds from sale of property, plant, and equipment		—			—			1			—			1
Proceeds from divestiture of discontinued operations⁽¹⁾		—			(54	)		54			—			—
Change in intercompany loans		—			106			—			(106	)		—
Other		—			(15	)		32			—			17

Net cash provided by (used in) investing activities		—			37			(52	)		(106	)		(121	)

Cash Flows From Financing Activities:
Changes in parent company equity⁽²⁾		22			(17	)		(5	)		—			—
Proceeds from exercise of share options		—			—			34			—			34
Repurchase of common shares		(1,249	)		—			—			—			(1,249	)
Payment of common share dividends to shareholders		(128	)		—			1			—			(127	)
Loan activity with parent		1,403			—			(1,509	)		106			—
Other		—			(1	)		(28	)		—			(29	)

Net cash provided by (used in) continuing financing activities		48			(18	)		(1,507	)		106			(1,371	)
Net cash provided by discontinued financing activities		—			—			1			—			1

Net cash provided by (used in) financing activities		48			(18	)		(1,506	)		106			(1,370	)

Effect of currency translation on cash		—			—			(5	)		—			(5	)
Net decrease in cash and cash equivalents		—			—			(1,106	)		—			(1,106	)
Cash and cash equivalents at beginning of period		—			—			3,329			—			3,329

Cash and cash equivalents at end of period	$	—		$	—		$	2,223		$	—		$	2,223

(1): Represents the internal allocation of proceeds associated with the divestiture of our BNS business.
(2): Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including but not limited to those under the heading "Forward-Looking Information" and "Part II. Item 1A. Risk Factors."

Our Condensed Consolidated Financial Statements have been prepared in United States ("U.S.") dollars, in accordance with accounting principles generally accepted in the U.S. ("GAAP").

The following discussion includes organic net sales growth which is a non-GAAP financial measure. We believe this non-GAAP financial measure, together with GAAP financial measures, provides useful information to investors because it is one of the financial measures that management uses in evaluating the underlying results of our operations. See "Non-GAAP Financial Measure" for more information about this non-GAAP financial measure, including our reasons for including the measure and material limitations with respect to the usefulness of the measure.

Overview

TE Connectivity Ltd. ("TE Connectivity" or the "Company," which may be referred to as "we," "us," or "our") is a global technology leader. We design and manufacture connectivity and sensor solutions that are essential in today's increasingly connected world. We help our customers solve the need for intelligent, efficient, and high-performing products and solutions.

Highlights for the first quarter of fiscal 2017 include the following:

•

Our net sales increased 8.1% in the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016 with sales growth in the Transportation Solutions and Industrial Solutions segments, partially offset by sales declines in the Communications Solutions segment. Foreign currency exchange rates negatively impacted net sales by $25 million in the first quarter of fiscal 2017 as compared to the same period of fiscal 2016. On an organic basis, our net sales increased 6.6% during the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016.

•

Our net sales by segment were as follows:

•: Transportation Solutions—Our net sales increased 11.1% in the first quarter of fiscal 2017 as a result of sales increases in all end markets.
•: Industrial Solutions—Our net sales increased 12.1% during the first quarter of fiscal 2017 due primarily to increased sales in the industrial equipment end market where we benefitted from sales contributions from recent acquisitions.
•: Communications Solutions—Our net sales decreased 3.9% in the first quarter of fiscal 2017 with sales declines in the data and devices end market resulting from the divestiture of our Circuit Protection Devices ("CPD") business in fiscal 2016 and sales decreases in the subsea communications end market, partially offset by sales increases in the appliances end market.

•

Net cash provided by continuing operating activities was $404 million in the first quarter of fiscal 2017.

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Outlook

In the second quarter of fiscal 2017, we expect net sales to be between $3.025 billion and $3.125 billion. This reflects sales growth in the Industrial Solutions and, to a lesser degree, the Transportation Solutions segments, partially offset by sales declines in the Communications Solutions segment relative to the second quarter of fiscal 2016. Additional information regarding expectations for our reportable segments for the second quarter of fiscal 2017 as compared to the same period of fiscal 2016 is as follows:

•: Transportation Solutions—We expect our net sales to increase in the automotive end market due primarily to growth in the Asia–Pacific and Europe/Middle East/Africa ("EMEA") regions. We expect global automotive production to increase approximately 2%. We also expect our net sales to increase in the sensors and commercial transportation end markets.
•: Industrial Solutions—We expect our net sales to increase in the industrial equipment end market due primarily to recent acquisitions and continued recovery in the factory automation and process controls systems market. Also, we expect our net sales to increase in the aerospace and defense market.
•: Communications Solutions—We expect our net sales to decline in the data and devices end market primarily as a result of the divestiture of our CPD business. This decline is expected to be partially offset by sales growth in the appliances and subsea communications end markets.

We expect diluted earnings per share from continuing operations to be in the range of $0.97 to $1.01 per share in the second quarter of fiscal 2017. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $63 million and $0.03 per share, respectively, in the second quarter of fiscal 2017 as compared to the second quarter of fiscal 2016.

For fiscal 2017, we expect net sales to be between $12.2 billion and $12.6 billion as compared to $12.2 billion in fiscal 2016 which included an additional week. This increase is attributable primarily to sales growth in the Industrial Solutions segment, partially offset by sales declines in the Communications Solutions segment. Additional information regarding expectations for our reportable segments for fiscal 2017 compared to fiscal 2016 is as follows:

•: Transportation Solutions—We expect our net sales in the automotive end market to be consistent with prior year levels with the benefits of increased content per vehicle and market share gains offset by the impact of the additional week in fiscal 2016. We expect growth of approximately 2% in global automotive production. We expect our net sales to increase in the sensors and commercial transportation end markets.
•: Industrial Solutions—We expect our net sales to increase in the industrial equipment end market due primarily to recent acquisitions. We expect our net sales to decline in the energy end market, with this decrease partially offset by expected net sales growth in the aerospace and defense market.
•: Communications Solutions—We expect our net sales growth in the subsea communications and appliances end markets to be more than offset by sales declines in the data and devices end market due primarily to the divestiture of our CPD business.

We expect diluted earnings per share from continuing operations to be in the range of $4.04 to $4.24 per share in fiscal 2017. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $300 million and $0.14 per share, respectively, in fiscal 2017 as compared to fiscal 2016.

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The above outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

We are monitoring the current macroeconomic environment, including the expected exit of the United Kingdom from the European Union, and its potential effects on our customers and the end markets we serve. We continue to closely manage our costs in line with economic conditions. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund future capital needs. See further discussion in "Liquidity and Capital Resources."

Results of Operations

Net Sales

The following table presents our net sales and the percentage of total net sales by segment:

	For the Quarters Ended

	December 30, 2016				December 25, 2015
	($ in millions)
Transportation Solutions	$	1,675	55	%	$	1,507	53	%
Industrial Solutions		795	26			709	25
Communications Solutions		593	19			617	22

Total	$	3,063	100	%	$	2,833	100	%

The following table provides an analysis of the change in our net sales by segment:

	Change in Net Sales for the Quarter Ended December 30, 2016 versus Net Sales for the Quarter Ended December 25, 2015

	Total					Translation			Acquisitions (Divestiture)			Organic
	($ in millions)
Transportation Solutions	$	168		11.1	%	$	(15	)	$	11		$	172		11.4	%
Industrial Solutions		86		12.1			(7	)		94			(1	)	(0.2	)
Communications Solutions		(24	)	(3.9	)		(3	)		(36	)		15		2.5

Total	$	230		8.1	%	$	(25	)	$	69		$	186		6.6	%

Net sales increased $230 million, or 8.1%, in the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016. The increase in net sales resulted from organic net sales growth of 6.6% and net sales contributions from acquisitions and a divestiture of 2.4%, partially offset by the negative impact of foreign currency translation of 0.9%. Price erosion adversely affected organic net sales by $51 million in the first quarter of fiscal 2017.

See further discussion of net sales below under "Segment Results."

Net Sales by Geographic Region. Our business operates in three geographic regions—the Americas, EMEA, and Asia–Pacific—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.

Approximately 56% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2017.

Table of Contents

The following table presents our net sales and the percentage of total net sales by geographic region⁽¹⁾:

	For the Quarters Ended

	December 30, 2016				December 25, 2015
	($ in millions)
Americas	$	1,005	33	%	$	971	34	%
EMEA		971	32			940	33
Asia–Pacific		1,087	35			922	33

Total	$	3,063	100	%	$	2,833	100	%

(1): Net sales to external customers are attributed to individual countries based on the legal entity that records the sale.

The following table provides an analysis of the change in our net sales by geographic region:

	Change in Net Sales for the Quarter Ended December 30, 2016 versus Net Sales for the Quarter Ended December 25, 2015

	Total				Translation			Acquisitions (Divestiture)			Organic
	($ in millions)
Americas	$	34	3.5	%	$	—		$	40		$	(6	)	(0.6	)%
EMEA		31	3.3			(16	)		53			(6	)	(0.6	)
Asia–Pacific		165	17.9			(9	)		(24	)		198		21.8

Total	$	230	8.1	%	$	(25	)	$	69