TE Connectivity Ltd. (TEL) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2015 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sujal Shah. Please go ahead.

Good morning and thank you for joining us today. Today we'll be discussing TE Connectivity's first quarter results along with the announcements to sell our Broadband Network Business to CommScope. With me today are Chairman and Chief Executive Officer, Tom Lynch; and Chief Financial Officer, Bob Hau, who will provide an overview of the transaction, review our first quarter results and guidance and then talk about TE going forward. We will conclude with a Q&A session. During the course of this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, for participants on the Q&A portion of today's call, I would like to remind everyone to limit themselves to one follow-up question to make sure we're able to cover all the questions during the allotted time. Now let me turn the call over to Tom for opening comments.

Thanks, Sujal, and good morning to everyone. Certainly very exciting time for our company and we have a lot to cover this morning and let me start by covering the transaction we announced earlier this morning. So please turn to Slide 4. Earlier this morning, we announced a definitive agreement to sell our BNS business, which consists of TE's Telecommunication Enterprise Networks and Wireless business to CommScope. CommScope is an industry leader and we believe they are the right company to lead our BNS team and business forward. Our BNS team has build a successful business and I want to thank them for their contribution, innovation, leadership and commitment to TE over the years and we look forward to working closely with CommScope to close out the transaction. Our decision to sell BNS is really a key step in our strategy to continue to focus on strengthening the company's leadership position in the attractive connectivity and sensor market where we provide solutions that are essential for the connected world. As you know earlier this year, we made the strategic decision to establish a leadership position in the sensor business. We believe that focus on connectivity and sensors with special emphasis on harsh environment solutions, position TE to provide our customers with an unmatched range of solutions and to further accelerate sales and profit growth. When this transaction is complete, 90% of our revenue will be focused on providing connectivity and sensor solutions, which enable our customers to capitalize on the megatrends of safer, greener, smarter and more connected. As billions of devices, objects and people become part of the internet of things, TE technology will play an increasingly key role. We have an unmatched range of products to meet these needs and unmatched resources facing the customer, designing and supplying the products. Following the close of the transaction, 80% of our revenue will be focused on providing solutions for harsh environment applications, up from 50% several years ago. This has been a major focus of our strategy and I am very pleased with our progress and the results, which we will touch on in more detail when we review the quarter. TE has a decade long track record of clear leadership and meeting the demand of connectivity and harsh applications. This is our sweet spot and importantly the transaction will enable us to continue to maintain a very balanced capital allocation strategy. We intend to use the bulk of the proceeds from the transaction for share repurchase, while we also continue to aggressively invest organically and inorganically. Now please turn to Slide 5 and I'll provide an overview of the transaction. The value of the transaction is $3 billion in cash with the valuation of approximately 10 times adjusted EBITDA. We believe this is an attractive valuation for the business, which generated $1.9 billion of revenue in fiscal 2014. We expect the transaction to be neutral to adjusted earnings per share one year after closure when you factor in the use of the proceeds. Our guidance provided this morning includes BNS; however, moving forward BNS will be reported as discontinued operation. As I mentioned earlier, the majority of the proceeds of the transaction are expected to be used for share buyback with flexibility to make strategic investment. The Board has authorized an increase to our share buyback authorization by $3 billion making our total share repurchase authorization now approximately $3.7 billion. We do expect the transaction to close by the end of calendar 2015 subject to customary closing regulation. Now I am going to shift over to the quarter and talk about the highlights in the quarters and now then I'll hand it off to Bob Hau, who will go into the quarter in some detail. So Slide 7 provides a summary of our Q1 results. We delivered strong results for Q1 with organic revenue growth in line with expectations and 20% adjusted EPS growth year-over-year. Total company orders were $3.7 billion, up 9%, excluding SubCom, orders were up 4%. Book-to-bill excluding SubCom was 1.03%. We continue to execute our strategy to strengthen our leadership position in harsh environment applications with harsh business revenue growth of 10% year-over-year. We continue to grow faster than the market in China in our harsh environment businesses. TEOA continues to drive profitability and enhance our margins. Adjusted gross margins were up 100 basis year-over-year and adjusted operating margins expanded to 16%. We're really pleased with the performance of Measurement Specialties and AST and have been successful in obtaining new sensor design wins across multiple market segments. I would say these acquisitions have pretty much seamlessly come into our company. For fiscal 2015, we're holding our full year adjusted EPS guidance at the midpoint of $4.20 despite a much worsening headwind from FX. We expect continued strong performance from our harsh businesses and the continued recovery of SubCom to offset this FX headwind. And then lastly, our Board has recommended an increase in the dividend to $1.32 per share. This is the fifth consecutive year of double-digit increase in the dividend. Our shareholders will vote on this proposal in March and it should go into effect in June. With the most recent move of the dollar versus world currencies, our 2015 FX headwinds are now approximately $900 million in revenue and $0.35 in earnings per share versus last year, versus the full year guidance we provided last quarter, we have an incremental impact of $500 million on the revenue line and $0.20 per share. Despite this headwind, we're maintaining our full year adjusted EPS guidance of $4.20, which delivers double-digit earnings per share growth. I have to say we feel pretty good about this performance. Now I'll turn it over to Bob to cover our segment result's financials and guidance in a little more detail.

Thanks Tom and good morning, everyone. I'll start with the transportation on Slide 8, a business which continues to perform exceptionally well and extend our leadership position. In Q1, we grew 8% organically with OEM vehicle production growth of less than 1%. This performance reflects the steady increase in content growth, coupled with our broad based share gains over the last several years. Q1 was our first quarter owning Measurement Specialties and the integration momentum of this business is ahead of our expectations. Within the first 90 days, we secured a new integrated sense in connector design win in medical application and our engaged new automotive applications. We continue to expect our total sensor business to grow above market due to our unique combination of technology, resources and broad deep customer relationships. Total transportation, adjusted operating income was $345 million in Q1, up 16% year-over-year with 80 basis points expansion in adjusted operating margins due to volume growth, favorable mix and strong productivity execution. Looking forward, we expect another good quarter in Q2 with actual sales growth up mid single digits. Please turn to Slide 9. Our Industrial Solutions segment performed well in Q2 with 3% actual and organic sales growth, representing the sixth consecutive quarter of year-over-year growth for this segment. Industrial equipment was flat organically with growth in China offset by market softness in Europe and Japan. In Aerospace, Defense, Oil, and Gas, we saw 8% organic growth, driven by continued strength in commercial aerospace. We received many questions about revenue risk from falling oil prices and our exposure is actually quite limited. As a result, we would expect continued strength in commercial aerospace to more than offset slight weakness in our oil and gas business. In our energy business, we saw 1% organic growth with gains in Americas, offsetting market softness in Europe and China. Adjusted operating income was $101 million in Q1, up 1% versus the prior year and we continue to invest in footprint optimization and go-to-market resources to accelerate profitable growth. For Q2 we expect to grow low single digits with mid single digit growth organically. Turning to Slide 10, our Network segment grew 2% year-over-year on an organic basis, driven by growth in our SubCom business as a result of projects that are ramping ahead of schedule. We're increasing our revenue outlook for SubCom to approximately $650 million for fiscal 2015 and expect our three large projects, which recently came into force to contribute over $900 million over the next two to three years. Our Broadband and DataComm businesses declined versus the prior year impacted by regional declines and project delays. In Q2, we expect total network solutions revenue growth in the high teens organically, driven by SubCom with Broadband and DataComm up slightly organically. If you turn to Slide 11, I'll discuss our Consumer Solutions segment. In consumer devices, we continue to narrow our focus in order to improve profitability, while continuing to invest in technologies that are important to the company as a whole such as miniaturization, antennas and wearable enablers. Today we're announcing plans to combine our Consumer Devices and DataComm business units. The customers we serve in these businesses are converging and much of the underlying technology and products are quite similar. This is the next key step to accelerate the performance in these businesses, which are core to our connectivity portfolio. Please turn to Slide 12, where I'll provide more details and earnings. Adjusted operating income was $555 million, up 14% versus the prior year. The growth versus the prior year is driven by improved manufacturing productivity across the company and volume leverage. GAAP operating income was $477 million and included $27 million of restructuring and other charges, most of which were in the Consumer Solutions segment and $51 million of acquisition related charges in the quarter as expected. Adjusted EPS was $0.98 for the quarter above the high end of guidance, driven by strong productivity, mix and cost management. GAAP EPS was $1.14 for the quarter and GAAP EPS included acquisition related charges of $0.09, restructuring and other charges of $0.06 and income related to tax items of $0.31. The tax item primarily stems from the effective settlement of essentially all pre-separation tax matters with the exception of the inner company debt issue. We're currently scheduled for litigation in February of 2016 if no settlement can be reached prior to that time. For the full year 2015, I continue to expect approximately $50 million to $75 million of restructuring and other charges and reflecting $0.10 at midpoint of our guidance, up slightly versus last year. We expect roughly $0.22 of charges associated with recent acquisitions, which we more than offset by gains from the settlement of tax liabilities. Turning to Slide 13, I'll discuss the financial metrics that are tied to the TE operating advantage or TEOA. Our adjusted gross income in the quarter was 34.6%. This is an expansion of 100 basis points versus the prior year, driven primarily by productivity gains from TEOA initiatives and leverage on additional volume. Adjusted operating margins expanded 140 basis points, driven by productivity and operating expense leverage. Total operating expenses were $643 million in the quarter with SG&A decreasing versus the prior year and R&D increasing to $184 million, mostly from acquisitions and the support growth primarily in transportation. Total operating expenses were 18.6% of sales, down 40 basis points from the prior year. Cash from continuing operations was $295 million and our free cash flow in Q1 was $162 million. Free cash flow was impacted by the timing of tax payments and SubCom project activity. Gross capital expenditures were up slightly year-over-year and net capital expenditures were up $16 million versus the prior year. I expect capital spending rate to be approximately 5% of sales for 2015. I note we added a balance sheet and cash flow summary in the appendix of this slide for additional details. Now I'll turn it back to Tom/

Thanks Bob. Please turn to Slide 14 and I'll cover our outlook at a high level with additional details provided in the slide. We expect to deliver another solid quarter in Q2 with revenue of $3.55 billion to $3.6 billion, up 3% to 6% year-over-year and in line with our normal seasonal patterns. We expect adjusted earnings per share of $0.98 to $1.02, an increase of 3% to 7% year-over-year. Our Q2 outlook does include a headwind from currency exchange rates which are negatively affecting our guidance by approximately $250 million in revenue and $0.10 per share versus the prior quarter, I am sorry, versus the prior year. Our second quarter performance will be driven by the continued strong performance of our harsh environment businesses, the building momentum in SubCom and contributions from our sensor and oil and gas acquisition. This is more than offsetting the significant FX headwind. Now if you'll turn to Slide 15, for the full year, we expect to deliver another year of double-digit adjusted EPS growth, despite these strong FX headwinds. We have a number of catalysts for growth. The strong secular trend is increasing electronic content, especially in harsh applications, our expansion into the high growth sensor market and the recovering SubCom business. For the full year, we now expect revenue of $14.45 billion to $14.85 billion, up 5% versus the prior year and this reflects 6% organic growth. And note that the total impact of currency exchange rates is approximately $900 million versus the prior year. Our new revenue guidance represents $150 million of incremental organic growth versus our October view with increases in transportation and industrial appliance and SubCom. And as I mentioned earlier we're maintaining our adjusted EPS guidance to a range of $4.05 to $4.35 per share, representing year-over-year growth of 11% at the midpoint. Just for clarity, compared to our prior guidance last quarter, this represents a $0.20 operational improvement offsetting a $0.20 headwind from that foreign exchange. To provide a baseline for the performance of our business organically, adjusted EPS would have grown in the neighborhood or 20% year-over-year and constant currencies and for one for the negative impact of a $1. But the good news is we're offsetting this with strong performance in the business. I am now going to spend a few minutes talking about how we think about TE going forward post the BNS sale, so please turn to Slide 17. In the nine years I've been here, I've never felt better about the opportunities facing the company and our ability to seize them. These mega trends of safe green, smart and connected represent a market opportunity of approximately $165 billion for connectivity and sensor solution and we are the leading provider of these solutions. These markets are expected to grow at roughly 2X GDP over the long term driven by this increase in electronic content in virtually every industry. Please turn to Slide 18 and I'll give you a few examples of the accelerating content story. In the automotive market, we're capitalizing on our leadership in connectivity to become a leader in sensors and our customers are very excited about the combination. This combination of connectors and sensors represents a potential of approximately $400 of content for the average vehicle. Today we're the clear leader with content of slightly above $60 per vehicle. So there is a lot of opportunity and we're investing in the resources to capture more of it. In the commercial aerospace market, there is going to be about 37,000 new planes expected to be delivered over the next 20 years and all have a significant increase in electronic content. On top of that, TE content is increasing pretty significantly and in almost every platform as a result of the increased organic investments over the last several years, coupled with the very strategic Deutsche acquisition, which is going very well. Our customers increasingly see us as a solutions provider, which is driving up our content per design opportunity that's very exciting. We're getting to do things we hadn’t had the opportunity to do a few years ago. And in some cases, where we bring a broader solution, we can actually see our content go up eight to 10 times over prior model. In the industrial equipment market, electronic content is also increasing due to a variety of reasons, but you can see the big increases in factory automations, robotics and the smart factory we see it all over the world and all of these require more sensors and more connectivity and we are very well positioned with these product lines. Please turn to Slide 19, as you know, the core of our strategy over the past several years has been to strengthen our leadership and harsh environment application. Post the BNS transaction, this will represent approximately 80% of our business. Harsh environments demand excellent, engineering and manufacturing and the typical application we're involved very early with our customers in the design phase and they're increasingly relying on us to provide the products, sensor pass more signal, operate in higher power environments and take less space and weight. This is our specialty and what we see increasing system knowledge in these applications is very important and that is the strength of ours. These solutions typically have a lot of stickiness because the cost of change is high and our customers rely on the value we provide and continue to ask us to do more. We are having a very positive reaction as I said earlier to the expansion of our sensor capabilities because that gives us more options to meet customer needs and these are customers that are typically looking to reduce the numbers of suppliers in order to get more strategic suppliers and simplify their own supply chain. In the harsh environment markets, we've been steadily increasing inorganic and organic investments. We've expanded engineering and field resources at a faster rate and sales growth over the past several years and our performance in TEOA is consistently driving up quality performance and our margin performance. Please turn to Slide 20 and I'll wrap things up before we go to Q&A. So really the summary of today is going forward TE will be more focused than ever on what we do best. 90% of our portfolio will be focused on sensors and connectors and almost 80% will be in harsh environment application. We have the broadest and deepest censoring connectivity solutions on the market and we will continue to strengthen this portfolio to be our customer's best choice. We also feel this portfolio will enable us to accelerate our sales and profit growth and continue to make TE a top choice for investors. So with that, let's open it up for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Amit Daryanani from RBC Capital Markets. Please go ahead.

Thanks and congrats on a nice guide and asset sale guys. Maybe to start with the fiscal '15 guide, I am just curious how do you think commodities are playing out in the guide? My math is that it's a $0.08, $0.09 benefit for you guys, but I think your hedges could delay this. So curious how commodities are playing out and any updated thoughts on potential looking to start hedging FX as we go forward given how severe the impact has been for you guys?

Hi Amit, thanks. I would say we're definitely seeing commodity cost come down as you know. With copper, our strategy has always been to hedge that to mach cost with price and the timing of the cycles out there. So in particular, the big decline in copper prices that's happened recently will start to flow into us late in the year, which should provide a nice tailwind going into early next year. Bob, you want to talk about…

Yes, so first starting from an impact, you're right. You're a little bit heavy given the timing of the hedges and how those play out around the metals, copper, gold and silver. It's probably $0.05, $0.06 benefit to 2015 and of course if metals continue where they're at, it will be a nice tailwind for us into 2016. In terms of currency, as you know we are largely naturally hedged from a transactional standpoint. We have factories around the globe and we build locally for our local customers and so from a transactional standpoint, we don't have much exposure and where we do, we actually do hedge the remaining exposure. From a translational standpoint, which is the impact that Tom talked about in his opening remarks, we do not hedge and I think you'll find a vast majority of the companies that have foreign currency exposure on a translational standpoint, don't hedge those currencies that would be taking a bet on where those currencies will be going and I don't want to take that bet.

Fair enough. And then I was wondering if you could just may be touch on the Transportation Solutions business, that you guys had really impressive I think organic growth in the December quarter, your order book looks like it remains fairly robust. The auto production environment I think has been fairly stable over the last 90 days, so I am curious, do you think content growth broadly is starting to pick up from the 5%, 6% threshold that you have in the past of do you guys think you see more market share wins, what's driving the strength on the transportation organic growth basis?

Content is drifting up, but the big thing in this time period is the share we won three and four years ago. It's the design ins, particularly that we won coming out of the crises when we kept investing in engineering and our auto business across the world. And in two areas that we got -- that we weren’t leaders, but we were the leader in the U.S., but with tremendous opportunity in China we made significant investments in those regions. We always had a large investment in Europe and it's really paid off. So I would say more than anything it's the design ins that we won that take a few years to come to pass. We do see content continuing to drift up I don't think it's at the outside. It's probably that 4% to 6% range might be 4.5% to 6%, 4.5% to 6.5%, but a lot depends on in there mix and stuff like that, but for us it's been -- it's been more of the design wins of recent years.

Okay. Thank you, Amit. Can we have the next question please.

Your next question comes from the line of Amitabh Passi from UBS. Please go ahead.

Hi guys. Thank you. And congrats again from my end. I guess Tom, my first question for us is how are you thinking about the rest of the portfolio, particularly if we look at some of the underperforming segments and at your networks DataComm, consumer solutions, maybe if you can just give us an update in terms of the rest of the portfolio?

As Bob mentioned on DataComm and consumer, we actually decided to and we're announcing that real time that we're putting those businesses together into one business. The customers are all becoming the same. There was always customer overlap and now it's converging more and more especially in China. The technology particularly the core connectivity technology that goes inside a box is very similar. So we see a much -- more opportunity to leverage that and this is going to help our scale and cost effectiveness, which we need to drive the profitability up. So that's the plan there and I think it's important that people understand that DataComm and consumer are very, very core to the business. I view them as core as automotive because it's another range of products. If you think of a company like ours, our specialty is connecting and we're building specialty in censors and those applications at knowledge, they go into a variety of different applications that happen to be stronger in some than others, but the core technology, the core science, the physics, the manufacturing practices, the supply chain, they're all very similar, they're all practically identical. So those are core businesses and the strategy really is to be more selective because the profit pools have changed a lot more in consumer and DataComm than they had in the long cycle industrial, transportation type businesses. With respect to energy; energy, I've used a very good solid business for us. It's been a little less of expectation for the last couple of years because it's Europe more than anything else, we're growing ahead of market in the U.S. we have a nice niche, a strong niche position because we're selective in China, but we expect as the energy grid has to be upgraded in Europe, that we're well positioned and it's a very focused well run business.

Excellent, and then just as a follow-up Bob, on industrial… Excellent. And then, just as a follow-up, Bob. On industrial solutions can you may be remind us again what needs to occur to structurally drive margins potentially into the mid to upper-teens? And then may be just related, can you just clarify what the gross margin was for BNS?

From industrial solutions standpoint, we've seen some nice margin lift in that business over the last couple of years. We've now got six consecutive quarters of growth. So we're seeing some volume leverage that will flow through. As I mentioned, in the current quarter we're down just slightly on a year-over-year basis, really driven by some investments we're making in footprint optimization moving some product around to get it in the right factories, as well as some investments in go-to-market resources. Our sales folks, product people that support our customers, as they develop their next generation products to make sure we're there with them. Both of those actions will continue to drive cost out to the footprint optimization as well as top line revenue growth. So the 13% slightly below company average right now, but we'll see that continue to expand in later part of this year and obviously into the future.

And what I'd add to that is that in our aerospace business is well above company average. And our industrial equipment business right at may be slightly below company average, but we expect it to be at or above company average in the next two quarters. And it's the energy business which is more -- it's just really suffering from a very slow market right now that has pulled that down. But I'm pretty confident that with a slight uptick in sales, I mean when we're at 1% you don't get much operating leverage and the team has done a good job of holding their margin there. But that will pick up. I mean it's only going to probably be at 3% to 4% grower, but when that happens we have a lot of operating leverage in that business. So, as we've said before, we view this business, we expect this business to be kind of a high-teens operating margin business and that's the moves we're making to ensure we get there.

And in terms of BNS, we don't provide operating margin by segment, but we have said in the past and continue to be public with operating margin for broadband networks business is slightly above company average nicely into the double-digit level.

Gross margin, right?

It's operating margin.

Okay.

All right. Thank you, Amitabh. Could we have next question, please?

Your next question comes from the line of Mike Wood from Macquarie. Please go ahead.

Hi. Congratulations. First question just on the upside that you called out in the quarter of Measurement Specialties, is that coming from end market growth or has there been any tweaks that you've put into the business so far.

Hi Mike. Thanks, by the way. I would say it's mostly the market right now. We haven't had a chance to let's say impact sales growth with most of our focus has been on the integration as to fully understand what we have so we can help set the priorities. Our biggest challenge which is a great challenge is more opportunities than we can deal with, so that's a big priority. But getting out of the gate then leading the numbers they had signed up for Measurement was important. Our own internal sensor business continuing to be strong and just continuing to ride on that back of a very robust market, which is exciting -- which as exciting, maybe more exciting to me because it gets to the strategic part of it. Now the reason we did it is we're seeing -- we're getting in a lot more request for proposals participating and having customers ask us to bid in some of these harsh businesses, the customers that we knew, but now bidding the MEAS technology. That doesn’t result in revenue for few years, as you know, but we're happy to see that this is happening quickly. And that's really the theory of why we did this in the power of the combination that our go-to-market resources and global supply chain with MEAS' very broad and deep engineering team and technology pipeline. And we're seeing it. We're only one quarter into it. One quarter obviously doesn't make a gain, but it's what we've seen in them some, so very pleased that it at least getting off to a good start.

Great. And for my follow-up, and I understand if you can't provide detail on this, but given your new focus which is primarily on harsh, these critical use applications typically carry high margin. So do you have a longer term margin goal for the company given this new focus, or also just a new benchmarking peer set that you're measuring your performance on?

I'd say the way to think about it, Mike, is no, we have not set like we did years ago, the 15% margin goal. When we set that we felt that was really critical to prove that the company had reached the point of strong operating capability. Now, its drive a growth of 5% to 7% consistently, organic growth and we would expect to drive 50 basis point plus margin growth. Of course, all of our businesses have aggressive targets for sales growth and margin growth with TEOA. It's how we decide what parts of the portfolio to go after. But we have not set a new sort of external margin threshold that we want to reach. Will we? May be. We want to get through the divestiture of BNS and the integration of MEAS. But I think generally, if you listen to us we think we can maintain and continue to drive strong transportation margins. We think there's room in industrial margins. The BNS margin will be a net sale accretive to the company. And we have pretty much all upside in the consumer device margin and the DataComm margin because they are low. So there's a lot of margin drivers in the company. And I think you see it in Q1 where we hit, and we had some nice mix in Q1 for sure. So maybe we got a few -- 20 or 30 basis points more than the typical, but we're knocking on the door of 16 and we feel good about that.

Great. Thanks.

All right. Thank you, Mike. Could we have the next question, please?

Your next question comes from the line of Jim Suva from Citi. Please go ahead. Jim Suva, your line is open. Okay. We'll move on. We'll go to your next question. That question comes from the line of Matt Sheerin from Stifel. Please go ahead.

Yes. Thanks and good morning. Just another question regarding the sale of the networking business. It looks like a portion of the DataComm business has been carved out within the sale to CommScope. Is that the wireless part? And could you tell us what the run rate of your DataComm business is now.

None of the DataComm business has carved out. We -- wireless, to your point, is a broad term. So when we talk about wireless in our networks business, we're talking about distributed antenna systems, but any of the wireless product that DataComm has, has stayed with data comm.

Okay. So you're keeping that. Okay. And, could…

What is in BNS today.

Got you. And just regarding the Measurement Specialties, I know the sensor business is sitting within your transportation business, but Measurement also sells into industrial and consumer markets. Will that business also be working with your other segments in terms of cross-selling and sales opportunities, or will these running on a standalone basis?

Now from the day one that’s we did. And that's one of the things I'm most pleased about that in all of our relevant businesses, most relevant businesses where we want to broaden the sensor opportunity quickly, lot of activity in automotive, lot of activity in industrial transportation, lot of activity in medical, significant activity in aerospace even though that's much longer cycle. To be able to bring sensor solution to the table to a big customer it enhances your standing with that customer, and significant activity in the appliance business. So we've already mapped the people in the -- our traditional businesses into the sensor business with some ground rules that we don't overwhelm the new sensor team. But I am very pleased with the collaboration and the sensibility that everybody is using in how to pursue opportunities but not get out ahead of our headlights. And we've got a couple of design in already which frankly happened sooner than I thought.

Matt, that's one the reasons you may have noticed in our Transportation Solutions slide in the presentation. We are now reporting three different business units within the Transportation Solutions segment; automotive, commercial transport and sensors to provide the visibility into the sensor business that is, as you point out, more than an automotive.

Got it. Okay. Thanks very much.

Yeah.

All right. Thank you, Matt. Could we have the next question, please?

Your next question comes from the line of Steven Fox from Cross Research. Please go ahead.

Thank you. Good morning. Just on the transaction, first of all, in terms of use of proceeds, I understand where investing in your stock could be a good way to neutralize EPS dilution, but can you just sort of give us a sense of where you stand versus pursuing other acquisitions and may be could be even more accretive use of funds.

First, Steve thanks. We have a pretty robust pipeline, as we've talked about before. That pipeline is very focused on harsh. And as always in these situations, you never know how and when things are going to break free. So, we have priorities, how they would fit. And I think the nice thing is that as we showed last year, we could make significant moves like SEACON measurement in AST, significant investments in acquisitions and continue to have a very balanced return of capital in form of dividend increases and share repurchase. We will -- to us that's kind of an ideal year, may be not spent $2 billion in capital every year, but if the right opportunity was there, we will seize it if it's doable. So we clearly view what's the strong operational performance we have now and there's still room for improvement that putting more on the top line is the top priority. We see our customers wanting us to do more because disability to integrate and package that we're very good at and we already do an automotive and industrial transportation and aerospace and defense and are starting to do an industrial really helps the customer. So this idea of a broad range of connectivity and sensors is very potent from the customers' point of view. So we're always looking to add into that. So I would -- you would expect to see us continuing to do a nice mix of M&A and capital returns.

Great. And then just to clarify a couple of comments, Tom, in terms of the Measurement Specialties business. You're saying that the revenues reported today are all basically from the company's acquired book of business. But that you -- the teams have already gotten together, and I've pulled some sales synergies that we should start seeing over the next few quarters. And if you could talk about what that little hanging fruit sort of revolves around. Thanks.

As we've pointed out when we made the acquisitions, Steve, the sales -- the design in sale synergies like any design in sale synergies take a while, so that's kind of year two, year three. The short-term sale synergies are more out of two paths. One, we have more people selling to all these customers, so can we sell more existing solutions to a customer just because we're in front of more customers. So we expect to start to see some of that towards the end of the year. And what in the products that can go through the channel. So our channel team, its lead by John Wainwright is working with our channel partners to identify what are the practical products that can be sold through the channel. And we view that as the shortest term revenue synergy. But the longer ones are when we see that we can integrate a sensor into a wire and a certain application, whether it'd be an industrial or medical or whatever that takes a few years to turn into revenue, all consistent with our acquisition plan.

Great. That's very helpful. Congratulations on the transaction.

Thank you, Steve. Could we have next question please?

Your next question comes from the line of Shawn Harrison from Longbow Research. Please go ahead.

Hi. Good morning and congratulations on the results. I just wanted to dig in on two things in terms of the broadband networks business being sold and also the buyback. It looks like maybe the accretion this year from that business would have been or the earnings contribution -- excuse me-- would have been around $0.40 to $0.45 meaning that you pick up at least 50 basis points of margin consolidated once the business is sold. But maybe why not accelerate the buyback earlier? You guys don't have significant leverage to even fill that gap earlier than let's say 18 to 24 months out.

Yeah. Shawn, thanks for the question. In terms of their profitability, we're little bit higher than what you've suggested, but order of magnitude that's about right. In terms of the share buyback, as we noted in our opening comments, we anticipate the deal to close by the end of the calendar year, and so that $3 billion of cash isn't available until the deal closes at the end of the year. It doesn't mean -- we are already and will continue to be active in our ongoing share buyback program. We bought back this most recently completed quarter and we'll continue to do that as part of our return to capital program. But the $3 billion when that becomes available we'll increase that activity.

Okay. And then there's a follow-up, with the combination of DataComm and consumer devices, EBIT margin is probably best case scenario right now or maybe mid-single-digits other than revenue synergies. How do you see the margins for that business long-term? Can it be add a mid-teens EBIT margins and what steps need to be taken other than just bring yourselves of low margin business to get there.

Sure. And again, you've got peal back the onion a little bit. So, if you look at in both businesses, the core connector businesses, the EBIT margin is well above that. In DataComm we have been investing in high-speed solutions and those product lines, if you have measured them and as we do product line profitability, they are losing money because they are in investment stage and the designing is just starting. So the core business where we miniaturize connectors, go into server, storage, smartphones, pretty decent business, not as high operating margin as industrial or industrial transportation that's there. Then its can we be successful with these R&D initiatives we have what I call. I mean they're not pure R&D because we're selling the products, but they just haven't been adapted across the industries yet. And so that's really the question. How long will we pursue those? We really believe in this insatiable data world that for datacenters and for other applications in our company, high speed, more than five, 10, 12 gigabit is going to be necessary. So we're developing fiber connectivity and copper connectivity for 25 gig plus. Those are strategic investments that happen to reside in the DataComm business. And then we're looking at some other advanced technologies that are most naturally in the consumer business because that's where you get the initial application that may not be the most where we get the bang for the buck eventually. Certain type of manufacturing that we're applying there because the miniaturization that's where the trend starts there. And by the way, over the years we have seen the ability to miniaturize their move quickly into our automotive business where it's been more and more important over the last five years. So it's not -- the good news is it's not just that's you've got to cost reduce this thing. And if you keep cost reducing it, you make it an uncompetitive business. No, two-thirds of our business is solid and can get better, no questions. That's the core connector business and one-third are investments we're making, and we have milestones that we hold ourselves to that are proof points that either yes we have the right technology, or the market is taking the technology. And when we see those not happen, and I'll give you good example of a product line Magnetic that we divested last year, that was one of those. We felt like we had a better way to solve the Magnetic's issues and it turned out we didn't so we divested it. So that's how I think about those businesses. But they are very core-wise, they are core connectivity businesses. And how big they'll be in the portfolio is to be determined, but they will be in the portfolio.

Right. And just quickly, Tom. I'm sorry. The follow-up on the 25, 40 gig move. In the last time on the call you thought may be toward the end of the year you would see some greater adoption. Do you still view that as potential dynamic exiting the fiscal year?

I do. It's not going to be big in the numbers because it takes time. But the good news is we won contracts. The program management is starting to plan the installation and all good signs. But the rate of winning needs to increase for this to look like it is the business we thought it would be. We're not surprised it's kind of tracking to what we thought when we had a reset. And the industry, with all the change it went through, began to embrace these kind of things a little slower. But all the customers are saying they need to get there. It's just the rate at which they're going to get there.

Thanks so much, and congrats again.

Thanks.

Thank you, Shawn. Could we have next question please.

Your next question comes from the line of Craig Hettenbach from Morgan Stanley. Please go ahead.

Yes. Thanks so much. Quite a ride, Tom, in terms of I think of since the split from Tyco, a lot of portfolio management, arguably much for the better at this point. So with that I'd love to get your thoughts in terms of oppose the latest sale, what that means in terms of that, the clarity of the strategy, the organization and as you execute to the harsh environment going forward.

Sure. From the strategy that we've had inside the company, has been pretty darn that we've had a strategy map that I think we modify a little bit every couple of years, but it's been fundamentally consistent around connectivity. We got more granular when we acquired Deutsche around; become much more aggressive around harsh connectivity and what that meant was acquire. We were moving at a nice pace and we always had a strong harsh business. But then in a sense took the double down approach and we are fortunate Deutsche came on the market and we got it. We were incubating the sensor business to see is that a place that we should go into or not. We didn't know. And we had some doubts. But when we kind of broke through a few years ago, then we decided logical place for us to be, not only because sensor is a good business and the skills we have are similar no exact, but the skills you need to be successful on sensors, but more importantly, because we see the conversions in the solutions. And so, then -- as that moved from let's see if we want to be in sensors too, this needs to be a new platform for the company, that changed the focus on networks. That made networks an important part of the business, but not as critical. And we also concluded that in that time to really have the kind of business in broadband networks that we have in harsh or could have in sensors, we needed to augment the product line pretty significantly a much broader wireless capability, which is not really something we could develop organically. And that was going to be a bit of a challenge. And then, we weighed that against other opportunities. We decided we're going to have to optimize that business another way. Now we were fortunate enough to find a very strategic buyer. Because, you may have a business you -- optimization may not mean selling because you're not going to get the value for it. But we got a very strategic buyer, perfect set. So we could get more value than we could by running it ourselves or spending it out or something like that. So I think our patience of pursuing an optimal solution in this case paid off. So now you get to the point where 90% connectors and sensors, 80% harsh. A pretty consistent strategy, the manufacturing methods are the same pretty much in these businesses. How you go to market are very similar, the applications are slightly different. The sharing of technology, you're sharing it across 90% of the business now. And it's very exciting, especially at a time when customers are asking us to come in earlier in the architecture. And that's why the solutions we're bringing in many cases today they're not sell support solutions. There really are how do we optimize higher power, higher-speed and a smaller footprint on this manifold in this vehicle platform, what else can you do for us here? So that's pretty exciting to us because it starts to open up other new paths for growing the business. And we don't want to -- we want to completely focus around that.

Got it. Thanks for that. As a follow-up on MEAS and sensors specifically, when we talk about growing that above market, can you give any context in terms of are there certain niches where they play where they are very strong that are growing faster than the market relative to utilizing your larger sales force and distribution channel that should drive growth too. Can you give any context in terms of how that shapes out?

Yeah. The business grew up with a very customer-focus which is good, but not so much an industry-focus. So going in when a customer here or there and really do well with that customer because in the smaller company you often say that catch 22 well, where do I get the resources. I don't want to get out ahead of my headlights. So we're bringing them into more; for example, appliance customers than they were in before. We're bringing them into more medical customers than they were in before. They weren't in automotive customers and we're bringing them in there. And in industrial transportation where they have a very nice business, the combination of their sensor business and our connector business it's very attractive to our customers. So that's how I really think about it if I hit your question.

It does. Thanks.

Welcome.

All right. Thank you, Craig. Could we have next question please?

Your next question comes from the line of Wamsi Mohan from Bank of America/Merrill Lynch. Please go ahead.

Yes. Thank you, good morning. Tom, you commented about -- commented on lower energy prices as it pertains to the oil and gas portfolio. But I was wondering are you seeing any trends of change in purchasing behavior from a demand standpoint in the transportation business given where gas prices are, and I have a follow-up for Bob.

I would say that our customers, Wamsi, anticipate some of that. But it's probably still too early. When we talk to them, they will tell us that is a typical trend. Gas prices go down in the U.S. with the improving economy, trucks go up, we like that. We have a lot of content on trucks. But I think it's too early to say that we're seeing the trends yet; although, the mix of content, as I alluded to earlier, is still moving in a strong direction.

Right.

But if prices stay low that that will help demand.

Okay. Great. Thanks. And Bob, can you talk a little bit about any synergies that might come from this divestiture, particularly because of maybe shared facility usage or overhead absorption? And what sort of things you intend to do operationally to offset some of that? And do you anticipate anything like site consolidation, et cetera? Thanks.

For the most part, from a factory standpoint, our BNS business had standalone facilities. So, those facilities will transact with the field. So we don't have a lot of work from a standpoint of factory remaining of X% for or having to find a way to manufacture something that is in a facility that is going, relatively segregated, so not a lot of work and worry there. There are, of course, some shared services activities, some corporate functions. We've got a year before the deal closes; and of course, we have a transaction services agreement post deal closure. So we got some time to work through those issues. We don't anticipate it to be an issue one way or another.

Okay. Great. Thank you.

All right, Wamsi. Could we have the next question please?

Your next question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead.

Yes. Good morning, and thanks very much for taking the questions. I was hoping you could elaborate a little bit more on some of your prior comments about potentially looking to make some additional investments with the proceeds from the BNS sale. I know you talked about some of the product lines and you are excited to be an IOT-type focus company now with industrial and automotive. But maybe you could just touch on to how you are thinking about your end market diversification going forward? And just as you exit BNS, the exposure to auto and industrial would go up, and just if you could talk about your comfort levels with exposure to those markets. And as you're thinking about making investments, do want to try and increase your exposure into other areas?

Thanks Mark. So in terms of the first part of the question, increasing organic investments, we have seen over the last five years is pretty good correlation, particularly in the harsh businesses, which are strong suit that when we invest and increase the number of engineers and field engineers, field engineers in our industrial business because there's lots of customers in fragmented market and design engineers. And then in our more OEM kid of business like commercial air, automotive, industrial transportation, design engineers. So wherever we have the opportunity to put -- find the right design engineers, put them close to the customer, we take it. It's kind of an open-ended charge to go get those folks because there is such a correlation. And the more that we can be sitting with the customer and the architecture, the better job we can do for them and the more business we get. And you can see it best in the rate of growth in our commercial air businesses and our automotive and industrial transportation businesses. More recently, we've been applying that to our industrial equipment business and our appliance business, high margin, high market share businesses where co-design and because we have a lot of systems knowledge, we can really help the customer to design their products, the insides of their products, the electrical system or the electronic systems function, much more effective. So we make those investments were the customers are receptive to them and where we can get the engineers and the right engineers. It's much less about if are we going to hold off on investing in automotive until we bring industrial up, no. And the reason is because of the content growth. Automotive grew 4.5%, vehicle production last year projected somewhere around 2.5% this year. We're still going to be mid to high single digits growth because of the designing wins we had and the vehicle content growth. So, this content growth is probably as good and it's consistent as it's ever been at least in the nine years I've been here. So it provides an element of growth that, while the business itself might cycle, this should be a good business for us in most cycles. On top of that, if you look at what our margins were five or six years ago, they are dramatically improved, because we've become much more effective at what we do and how we design. And by the way, our customers share in that improvement. And even with that, the margins are up. So that, when the cycle maybe goes into a down cycle, our wherewithal is so much stronger. So now I don't look at it from hey I wouldn't want to get a bunch of new design wins or acquire some technology that is relevant to us. If it's automotive because it makes us bigger because I just think the underlying trend is so positive there. But it's clear that when we look across the portfolio, sensors in general and the industrial markets we serve in particular are very, very high priorities for M&A. It plays through our strong suite. We've been making smaller acquisitions there to in some cases give us a portfolio like SEACON or broaden our portfolio like this company Sibas that we acquired in China in the last few months. Not a big company, but a significant product line we didn't have that they only sold in China that will now take around the world. So, you will continue to see us make small technology acquisitions so that the solution strategy we can bring more and more to the customer. And it's all relevant. It all has to do with collectivity or sensors. All right, does that carry your question?

Yes, that's very helpful. And then, for a follow-up, just on the SG&A, the dollars came down sequentially and I think the SG&A as a percentage of sales was at one of lowest levels in several years. Maybe first just how much of that was some of the TEOA initiatives versus just FX causing SG&A to come down? And then maybe you can help us think about what the SG&A levels will run at going forward.

Mark, from a standpoint of the benefit, year-over-year, we've done about 40 basis points. There are certainly benefit in both areas of TEOA. As you know, last year, we expanded TEOA from what had been a factory productivity and a lean product development process in our DNE organization to really be as we call it TEOA everywhere in our G&A functions are now seeing the benefit of that. There's also definitely some tailwind from an FX standpoint. So it's a combination of both. And, as we continue to see organic growth, we'd expect that percent of sales to generate some leverage throughout the course of the year.

But just add to that, the area that we've been consistently investing in and happens to show up in this line, but it's really the digital effort to accelerate the digitization of the company better website, better product information, things like that. So that's going to continue. We view that as essential to our value proposition. And so, we're not -- there are some areas we're not investing and we feel we're adequate in the back office. That's not an area. That's a strategic area that we're investing in the S portion of G&A. And, we're not shy about putting field resources in the field, particularly in harsh environments where the solutions are more complex and the ability to help the customer through the design, from a field, applications, engineering perspective, it's important. And then thirdly, we're going to be investing in field resources and sensors. We've started to take advantage of all of these opportunities. And they are growers. So, the multiplier to growth is very positive. It takes a few years. But I think with our margin improvement and the leverage across the balance of our SG&A that sums it out adequately and continues to put a lot of fuel into the growth pipeline.

Thank you, Mark. Can we have the next question please?

Your next question comes from the line of William Stein from SunTrust. Please go ahead.

Great. Thanks for taking my question and congratulations on a very strong operational outlook. First I am hoping to get a clarification. When asked about margins, I think you said you wouldn't disclose gross margin. But operating margin on BNS was above company average, nicely double-digit that's surprising to me. Did I hear that right?

Yes. I believe I said and should have said it is slightly below company average.

Got it. Okay. And then my kind of real question I guess is actually about SubCom. We spent a lot of time today talking about kind of what's core and in particular talking about harsh and then other things that you came to decide wanted course that you're divesting. This is an area that certainly I think sits in the category of harsh, but you've also talked about it as in a way, very different and potentially not core to the company, but of course, it's difficult to find a buyer. We're seeing your only real competitor I think in this space Alcatel-Lucent, looking like they're to IPO this business. Understanding that the timing might not be right given the toughing position of that revenue. Is there something you could consider?

We could yes. Are we? No. We've looked at this many times. The most important thing about the business is they're the best in the world at what they do. So, when you start out with that, at least my philosophy is you got to be careful that you don't run away from a business too fast. And given the uniqueness of the business, it really is worth more inside the portfolio that the out. Sure there is a lot of people would love it but I know they either don't have the wherewithal to pay. If you contrasted to BNS, BNS is another good business. We weren’t sitting here with our finger on the red button, let's get rid of this thing was a strategic decision that it's not going to get as much priority as it did before sensors. It still can be a very good business. We think there is a good cycle or a solid cycle coming. And, when we cross with the strategic buyer that could but it at a price where they could get their value and we could get our value, it made total sense. And, if you look at somebody else indicated earlier in the call, that's been kind of our approach to the businesses, you could call a niche business that are on the outside of the portfolio. In this case, SubCom is a niche, but it's a world leader in what it does. So it has real value. And I think it's going to be with us for a long time.

Great, thank you.

You're welcome.

Thank you, Will. Can we have the next question please?

Your next question comes from the line of Sherri Scribner from Deutsche Bank. Please go ahead.

Hi, thanks. I was just hoping you could give us a little more detail on the pieces of the BNS businesses that you're just selling and what specifically those products are and how much of that came from the ADC acquisition?

Sure. There's really I would say three -- a lot of products, but if you wanted to break it down, what we call the telecom business was half of that came from ABC and half of that came from TE. And those are the fiber optic and copper connectivity solutions that are in the outside plant of a telecom or a cable network. So they're connecting the fibers and the coppers and collect that go from the origination of the signal out of a cable head end or a central office for telecom through the network to your house or to a node close to your house. That's half of the business, a little over half of the business. About 40% of the business are what we refer to enterprise. So that's sort of the conventional way to describe it as structured cable in the enterprise or in the data center. So that's where in your office you have the communication cable behind the wall that provide that come to the outlet that we used to plug our PCs in to get data and we now have wireless access point on the end of those cables. And that's a business -- that's a lot of small transactions all around the world. And then, the remaining piece of the business for us is this relatively small niche digital antenna business. All of the digital antenna business came from ADC. About 20% of the enterprise business came from ADC and a little over half of the telecom business came from ADC.

Okay, thank you. That's helpful. And then just thinking about the consumer business that business has been declining for you in terms of revenue on a year-over-year basis since you broke it out. I am trying to understand what type of goals do have for that business? And what needs to happen there before you make a decision that maybe that's also a piece of business that you may want to divest?

Yes I have said before I hate to never say never. But, because you can imagine we study and think about this a lot. But I have not come up with any multitude of scenarios that we've played out where we would sell our consumer device connectivity business. It is what we do. What we're doing differently, is coming at it much more as a product and a platform business. So, while we have it in a segment in a vertical market, it's optimize miniaturization. Optimize antennas things like that. Optimize high-speed cable assemblies that are needed with the capability that is needed all over the company. Some of the company has its own capability and some of it relies on consumer. But to really come at it from much more of a platform basis, so that it's much less trying to pick a winner that you win which in this consumer business is very, very difficult to do. And because we've been trailing it for a few years, it makes it even more difficult when you're not the incumbent. So the strategy there is to run it a little differently. And by combining it with the DataComm, it would be more cost-effective. It would be better with the customers. So we're not -- we collaborate nicely, but really one face with the customer. And the focus is to put more emphasis and more investment which we will be able to, once we do this on a really critical technologies and get out of stuff that I know we've been in it for 15 years, but that's become a real commodity in the business and you're never going to make double-digit margins on it. We expect these businesses over the next say 18 to 24 months things will get back to double-digit margins and I don't think that's a whim. There is a real plan to get there. That's based on some success that we've had already in platforms.

Thanks Tom that's helpful. And then Bob, I just wanted to ask in terms of the cash balance. It looks like the cash balance now is relatively low after acquisitions. Can you just let us know what type of cash levers you need to run the business and I know there are some timing issues in there. If you can just tell us what brings that cash level backup. Thank you.

Sure. Thanks. The cash balance is down a bit, obviously in the current quarter we paid for the measurement acquisitions. So we had built up quite a bit of cash in the preceding quarters. But, we're sitting at about $900 million of cash, a level that we're very comfortable with. $0.5 billion to $1 billion, $0.75 billion is kind of what we need to operate and not an issue there whatsoever and of course we're very strong cash generating business. First quarter is traditionally our latest quarter and that will be the case for 2015 also. So that will ramp as we get into Q2 and beyond.

Thank you.

All right. Thank you, Sherri. Can we have the next question please?

Your next question comes from the line of Jim Suva from Citi. Please go ahead.

Thank you very much. Could you first of all I have a question for each of you. Maybe if Bob could let us know little bit, just to be clear, the stock -- accelerated stock buyback announced today and I assume fiscal '15 EPS does not include anything from the accelerated portion of that? And then Tom, on the consumer you mentioned that you're narrowing your focus. TE from the spin in 2007, the first few years was about narrowing the focus and now we haven't heard that for the past few years or at least maybe I don't remember it now. It seems like you're talking about narrowing consumer focus little bit again, but that narrowing of the consumer be completed? Thank you.

Soon I hope Jim. There are some chunks. The first phase of it, you have a good memory was we really outsourced a lot of products back in the day and resold it under our brand-name. And concluded back then that really didn't make much sense given the changing circumstances in the industry. At one time it did, but it didn't. And that had distracted us a bit. Now it's really about -- it's really about platforming and getting out of these commodity applications where you're not really leveraging what we do best, precision engineering, high-speed, high power throughput. So I think we were too fragmented and the first go-round wasn’t good enough and as the market continue to be very dynamic, there has only been one consistent player on top and everybody else underneath has changed than I think for where we were in the order of our position and our part of the market, we suffered from that. But I do feel like we have the team that's come in over the last couple of years and the product range that we're developing, that gives us the ability to not bet on customers, but provide core capability that you have to tailor or semi-customized for the customers. It's a bit of a change. This business has never been if I would have ranked us from strongest to weakest, it's never been amongst our strongest I would say over the last five or six years. I feel like we're rebuilding our strength because the fundamental knowhow is there and now we're much more focused. The results have to be produced. There's no question about it. But I would say over the last six to nine months I feel it taking shape that it's going to be a solid business. And I keep saying to everyone who asks me, would you consider selling this business? Never say never, but I don't even think about it because these are the products we make. The billions of things we punch out a year, these are products and they go into other places. So we're pretty confident we will move the performance of the business up that we move nicely with the Chinese OEMs. It's not enough to celebrate with. But it's through the key milestone of the last six month to change our position meaningfully there not just accidentally. And we've done that. It's not enough to declare victory. But we have a pretty stringent milestone here that we hold ourselves to and we're making progress. But it's going to be a couple of years before this is the double-digit business. But there's a clear path to get there.

And then Jim, from the standpoint of the share repurchase, we did not announce an accelerated share repurchase program. What we've said was the majority of the proceeds will be used for share repurchase. The Board of Directors did authorize an increase in our repurchase program, adding $3 billion. So we now have $3.7 billion of authorization and we will continue to buyback shares for our prior program, though the balance of this year, and then once the transaction closes, by the end of this calendar year, that $3 billion will be available for repurchase at that time.

Great. Thanks for the clarification.

Thank you, Jim. Looks like there are no further questions. So if you do have question please contact Investor Relations at TE. Thank you for joining us this morning and have a great day.

Thanks everyone.

Thank you.

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