Sujal Shah - Vice President of Investor Relations Tom Lynch - Chairman of the Board, Chief Executive Officer Bob Hau - Chief Financial Officer, Executive Vice President.

Amit Daryanani - RBC Capital Markets Amitabh Passi - UBS Wamsi Mohan - Bank of America/Merrill Lynch Mike Wood - Macquarie Capital (USA) Inc. Matt Sheerin - Stifel, Nicolaus & Co.

Jim Suva - Citigroup Kirti Shetty - Deutsche Bank Securities William Stein - SunTrust Robinson Humphrey Mark Delaney - Goldman Sachs Steven Fox - Cross Research Shawn Harrison - Longbow Research.

Ladies and gentlemen, thank you for standing by. Welcome to the TE Connectivity Fiscal Third Quarter Earnings 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, Vice President of Investor Relations, Mr. Sujal Shah. Please go ahead..

Good morning. Thank you for joining our conference call to discuss TE Connectivity's third quarter fiscal 2014 results. With me today are Chairman and Chief Executive Officer, Tom Lynch and Chief Financial Officer, Bob Hau. During the course of this call, we will be providing certain forward-looking information.

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. We ask you to review the sections of our press release and the accompanying slide presentation that addresses 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 www.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 are able to cover all questions during the allotted time. Now, let me turn the call over to Tom for some opening comments..

Thanks, Sujal. Good morning, everyone. I am very pleased with the results we delivered in the quarter. Sales were up 4%, despite a very weak subsea communications market. Adjusted operating margins exceeded 15%, adjusted earnings per share growth was 14% year-over-year at the high-end of our guidance range and a new record for the company.

We also continued to generate strong cash flow with over $500 million of free cash flow in the third quarter. Here are the key takeaways from today's call. Most of our key end markets have positive trends, especially in the transportation and industrial segments.

The subsea market has continued to be weak, but we believe the market has bottomed and I will share some additional good news on this market with you in a minute. We continued to generate strong performances in businesses that serve our harsh environment applications, which account for approximately 70% of our revenue.

As I mentioned earlier, we continued to deliver solid financial performance with improved operating leverage and strong cash flow. The strong cash flow enables us to return significant cash to shareholders and strengthen the company through acquisitions like those recently announced.

The last point is that we are reaffirming our full-year guidance that we gave 90 days ago, despite a weaker SubCom business in Q3 and Q4. Now, I will comment on these key takeaways in a more detail.

On the market trend side, we do continue to see positive trends in the majority of markets we serve, and the combination of these trends and strong execution will result in strong financial performance this year. During the quarter, strength in the transportation market continued and most industrial markets continued their steady improvement.

Transportation solutions grew 8% organically, with sales and order growth in all major regions. Our Industrial Solutions segment grew 4% organically and our Appliances business in the Consumer Solutions segment grew by 9% organically. Revenue in our Telecom and Enterprise businesses were largely in line with our expectations.

Revenue in the Consumer Devices and SubCom businesses were slightly below expectations in the quarter. On a regional basis, excluding SubCom, sales grew in North America, Asia and EMEA, driven by particular strength in the U.S., China and Germany. We continue to execute very strongly in businesses that focus on harsh environment applications.

As you know several years ago, we launched our strategy to increase the company's focus in the harsh environment applications. We have been increasing organic investment and have focused our acquisitions in these areas.

The strategy is paying off, as over 70% of our businesses are in these segments generating mid-to-high single-digit organic growth and above our company average margins. These solutions are highly engineered, designed in partnership with our customers and are characterized by relatively longer product cycles and higher margins.

This capability is not easily replicated and we believe that TE's ability to provide this broad range of solutions for harsh environments will remain a strong differentiator and growth driver as we move forward. Below the top-line, our efforts on TEOA continued to drive productivity gains and operating leverage.

Our gross margins have improved to the 33% to 34% range and we are now consistently generating 15% adjusted operating margins on an annual revenue run rate below $14 billion.

We also continue to generate strong cash flow with over $1 billion of free cash flow through the first nine months of the year, supporting our capital program and acquisition strategy. Subsequent to the quarter, we closed the acquisition of the SEACON Group, which expands our business in a very attractive oil and gas market.

In June, we announced the acquisition of Measurement Specialties, which establishes us as a leading supplier of sensors and connectors at nearly 40 billion to our addressable market and further increases our content in harsh applications.

Once the transaction is complete, TE will have a broad portfolio of sensors to go along with our leading portfolio of connectors. Our existing scale coupled with Measurement Specialties' product range will enable the combined companies to accelerate sensor growth as we reach many more customers. Now let's turn to Slide 3.

Revenues in the third quarter were in line with expectations and adjusted EPS of $1.00 dollar was at the high end of our guidance range and a quarterly record for the company. Free cash flow was strong at $530 million and we returned $169 million to shareholders in dividends and share repurchases.

For the full-year, as I mentioned, we are reiterating the mid-point of our revenue and EPS guidance. Expected revenue of $13.95 billion represents 5% growth versus the prior year and adjusted EPS of $3.78 represents 17% growth versus our prior year performance, a very strong year for TE.

We closed the SEACON acquisition just after the quarter and the Measurement Specialties acquisition is on track to close this calendar year. I will now provide some detail by business within each segment in the next four slides.

Unless I indicate otherwise all changes are on an organic basis, which excludes the effect of currencies, acquisitions and divestitures. Please turn Slide 4. Transportation Solutions had another great quarter with sales of $1.585 billion, up 8% over the prior year and with orders growth of 7%.

Sales and orders grew across all regions and global auto demand continues to be solid with vehicle production of about $21.4 million units. The end market continues to be healthy and TE is performing well. We delivered adjusted operating margins of 21% due to volume growth, product mix and productivity improvements driven by our TEOA program.

Looking forward, we expect another strong quarter in Q4, with sales up high single digits and operating margin expansion versus the prior year. Please turn to Page 5. Market demand in the Industrial Solutions segment was in line with our expectations in the third quarter. Revenues were up 4% and orders were up 2% versus the prior year.

The majority of the industrial markets we serve continued to gradually improve. Industrial equipment revenues were up 3%, driven primarily by double-digit growth in China. Our Aerospace, Defense, Oil and Gas business was up 8%, due to continued strength in commercial aviation and the oil and gas units.

Our energy business was up slightly in the quarter, with growth in the Americas and Asia Pacific regions offset by weakness in Europe. Adjusted operating margins were up 160 basis points versus the prior year as a result of increased volumes and productivity increases and I'm especially pleased with our margin improvement in this segment.

Looking forward, we expect another good quarter in Q4, with sales up mid-single digits organically and approximately 10% on an actual basis, including the SEACON acquisition. Please turn to Page 6. Sales in the network segment were down 8% versus the prior year, due principally to continued project delays in our SubCom business.

Excluding SubCom sales were down 2% organically. SubCom weakness drove the decline in Network Solutions' operating margin in the quarter. Just to put it in perspective, our SubCom revenues were down 50% versus last year's Q3. Telecom and Enterprise businesses were down slightly year-over-year, but in line with our expectations.

Strength in fiber-optic and wireless deployments is being offset by declines in copper network investments and our DataCom business was down 5% due to continued market related weakness. In our SubCom business, I am happy to report, we recently received down payments on two major projects.

The AAE1 project, which connects Asia, Africa and Europe, was announced in April and we received the down payment on that. Then earlier this week, we announced the Hibernia project, which will connect New York and London. That's the first significant cross-Atlantic [building] building some time which is very good news.

We also received the down payment there. Both of these projects will start in late Q4, which we believe marks the beginning of the upturn in this cycle. On a combined basis, these projects are worth approximately at 700 million plus over the next two to three years. In Q4, we expect network revenues to be flat, excluding SubCom.

While we will start to build very early stages of the build, we are not going to get too much impact from these projects until next year. Please turn to Slide 7. Revenue in our Consumer Solutions business was roughly flat versus the prior year and this continues to be kind of a tale of two cities.

We had another strong quarter in the Appliance business, where we have our global leadership position in operating margins run above our company average. Sales in this business were up 9% year-over-year, due to strengthening demand in the Americas and Asia.

This growth was offset by lower customer demand for mobile phone components and continued weakness. Although looks like a PC business is starting to stabilize in the consumer devices business. Adjusted operating margins in this segment expanded 120 basis points year-over-year, due to the strong performance in the appliance business.

In Q4, we expect revenues to be down slightly versus the prior year, due to continued weakness in the consumer devices portion of the business we do expect another solid growth quarter in our appliance business. I will turn it over to, Bob, to cover the financials in more detail..

Thanks, Tom. Good morning, everyone. Let me discuss earnings which start on Slide 8. Adjusted operating income was $550 million, up 8% versus the prior year.

GAAP operating income was $535 million and included $14 million of restructuring and other charges most of which was in the consumer segment and $1 million of acquisition related charges in the quarter. We anticipate full year restructuring charges of approximately $65 million for the full year.

Adjusted operating margin was 15.4%, up 60 basis points from Q3 last year. The improvement versus the prior year is driven by improved manufacturing and productivity across all of our segments and volume leverage in the transportation and industrial segments.

Adjusted earnings per share were $1.00 and GAAP earnings per share were $0.97 for the quarter. GAAP EPS included $0.03 of restructuring and other charges. Turning to Slide 9, our gross margin in the quarter was 33.6%. This is an 80-basis point increase versus the prior year, due to increased productivity from our TEOA or lean programs.

The cost savings from restructuring and metals, and general volume increases offset by the impact of lower SubCom sales. Our total operating expenses were $654 million in the quarter, which was up 5% versus the prior year. The increased resulted primarily from increased investments in sales and marketing to support growth initiatives.

On the right side of the slide, you will see net interest expense was $26 million in the quarter and I expect about $26 million of expense again in the fourth quarter. Adjusted other income was primarily relate to our tax sharing agreement was $9 million. In the fourth quarter, I expect other income of about $8 million.

The adjusted effective tax rate was 21.8%, slightly better than expectations as we saw large portion of our income earned in lower tax jurisdictions. I now expect the full-year effective tax rate of approximately 23%. Turning to Slide 10, I will discuss our balance sheet and free cash flow.

Cash from continuing operations was $501 million and our free cash flow in Q3 was $530 million. Net capital spending during the quarter was $171 million or 4.8% of sales. I expect the capital spending rate to be approximately 4.5% of sales for the full-year.

In addition, we made a $200 million tax payments related to a pre-separation tax audit during the quarter. Our working capital was in line with our expectations, with receivable days outstanding at 63 days. Inventory days on hand were 68 days and payable days outstanding were 54.

Now, let me discussed the sources and uses of cash outside of free cash flow shown on the right side of the slide. Began the quarter at $1.4 billion of cash and increased to $1.6 billion in advance with the acquisition of SEACON, which closed subsequent to the end of the quarter.

During the quarter, we returned the totaled of $169 million to shareholders. We paid dividends of $119 million and we repurchased about 1 million shares for $50 million. Outstanding debt remained at $3 billion at the quarter of the quarter. Now, I will turn it back to Tom..

Thanks Bob. Please turn to Slide 11, and I'll cover our outlook. We expect another strong quarter in Q4, with revenue of $3.56 billion to $3.66 billion, which will be up 47% year-over-year and we expect adjusted EPS of $0.98 to $1.02, an increase of 5% to 10% over year.

Again, that's covering up a very weak year-over-year performance in the SubCom business. We do expect continued strength in transportation and industrial. For the full-year, we expect revenue of $13.9 to $14 billion, up 5% versus the prior year. We expect adjusted earnings per share of 376 the 380 and that's an increase of 16% to 18%.

As I mentioned earlier, very, very strong year for the company. We are going to open it up for questions. Then I will make some closing comments, when we are done the Q&A.

Operator, if you could open the line for questions?.

Thank you. (Operator Instructions) Your first question comes from the line of Amit Daryanani. Please go ahead..

Thanks a lot. Good morning, guys. Two questions for me. One, I guess, Tom, on the networking side, the Subsea business, given the wins you had recently, I sort of come up with a $120 million, $130 million run rate that is feasible in FY'15 on a quarterly basis. I'm curious if that's a reasonable expectation to have.

Then, importantly, how do you think leverage plays out on the upside in the undersea business? Is this something that can sustain 50%, 60% conversion margins as you start to see some revenue growth?.

Thanks, Amit. As you know we will give guidance for the full-year next year, so I am not really going to get into any details, but I'm very encouraged. Finally these projects which we had won and been awarded are going to come into force and when we get the down payment, that's really the proof point.

I think in the beginning, it will start slow, right, as we are ramping. It will take a couple of quarters to really get at peak efficiency, but the way I would think about it at this point is it's been a pretty significant headwind for the last couple years and it should become a tailwind next year..

How do we think of conversion margins, I guess, on that business, Tom, as you start to get incremental sales?.

Well, again, I don't want to get too specific on that, but it will be reasonable margin conversion. The first job, as you build, as you add jobs you’re your capacity, the conversion margins increase, so we are still going to be not running at capacity with the first job over the second job.

If you look at our history, it's when you have three or four jobs running. That's when you really see the margins starts to ramp up, but it should be a nice positive next year..

Got it. Then just secondly on the cash flow usage dynamics, the buyback pays at $60 million this quarter was a lot below the historical trends you have done for the last several years now, I am assuming you guys are busy, because of Measurement Specialties this quarter, so maybe that negated it. Maybe just talk about why was that pace slower.

Is that something you should expect to see as you go forward or should we expect that to uptick? Then maybe just touch on the $200 million payment you guys had to make for the tax separation..

Yes. It's Bob. I guess both pieces. One, on the share repurchase, we did repurchase about 1 million shares in the current quarter for about $50 million.

That is below what we have been running over the last several quarters and it is directly attributed to the M&A activity with measurement in particular where we had as you might suspect material non-public information, so we were blacked out of the market for essentially the vast majority of the quarter. That limited that capability.

As we indicated when we announced the Measurement Specialties' acquisition, out into the future, we don't anticipate that deal impact our go-forward plans in terms of return of capital to shareholders, maintaining the two-thirds back to shareholders over time.

In terms of the $200 million pre-separation tax payment, that was done in conjunction with the other parties Covidien is Tyco International to pay in advance the 2005-2007 tax audit that is winding up its near completion.

We are waiting for the final paperwork from the IRS, so we need that payment in the third quarter to essentially stop the interest calculation on that liability..

Very helpful. Thanks a lot, guys..

Thanks, Amit..

Thank you, Amit..

Next question please?.

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

Hi. Thank you. I had a question if you could help us in terms of thinking about normalized margins as we look further to 2015, so kind of piggybacking on the last question. Automotive or transportation, you are kind of running just above 21%.

My question was, is there meaningful room to expand that? The bigger question is, network solutions, how do we think about normalized margins? Can that segment get back to at least the high single digits to lower double digits over the next four to six quarters?.

Sure. Thanks, Amitabh. The normalized margin, as you know, we are pleased to be at this 15% at under $14 billion run rate. I think, automotive - I think this is what I have said the last couple quarters, but plus 20% margin win with kind of normalized vehicle growth, which has been 2.5% to 3% range.

I feel confident that we will continue to generate these kinds of margins. This year we are getting a little extra benefit from the great, the really positive mix in heavy trucks both, the Deutsche acquisition and legacy TE business there, so that has given us a push.

Our productivity is strong in that business, so I feel good where the margins are and the ability to sustain them. I do expect that we will improve the Network Solutions margins.

SubCom is a pretty significant negative margin in the second half and as we get these two jobs rolling that will start to turn in our, what we call the B&S unit, which is Telecom, Wireless and Enterprise, that's running in double-digit margins now.

This year it will be the second year in a row that we have added 100 basis points in margin improvement there, so I do expect the Network Solutions to move back toward double-digit margins over the next year to 18 months, depending on the end demand, but we sized for that to take advantage of reasonable growth..

Tom, just as a follow-up on the network solutions, particularly Telecom Networks and Enterprise Networks, these segments are still kind of flat on a year-over-year basis.

Can you give us a sense of what you are seeing in the demand environment, perhaps by geography and how we should be thinking about growth in 2015?.

Again, we are not giving any guidance yet, but this quarter we will give you specificity around the big businesses. What we are seen around the world is mix, that the project business. In this past quarter, European projects were strong in Telecom, weak in Energy. U.S. was a little soft.

I think, there is so much going on right now at the macro level in the U.S. telecom-related business that's delayed a few things, but we believe the fundamentals are there to support solid growth in the U.S. going forward.

Australia, that important job is building, despite the political uncertainty, so there is and China, as we have mentioned, we have been retreating a little bit from the China market, because a good portion of that market just isn't very attractive. It's kind of a mixed bag.

The good news is that we have a really win rate on the fiber awards, and the fiber portion of the network for the second year in a row is growing in solid double-digit.

Copper is shrinking, but the good news is the copper base is getting smaller and smaller, so we think the math is the turn pretty soon where that double-digit fiber growth and more and more jobs out there is going to start to deliver this into kind of a low to mid single-digit business and there was pretty good operating leverage in the telecom portion of that business, because it's a nice margin business because of highly engineered products there..

Okay. Thank you..

Thank you, Amitabh.

Next question please?.

Your next question comes from a line of Wamsi Mohan. Please go ahead..

Yes. Thank you. Good morning.

Bob, can you bridge the [90]-basis point decline in transportation margins on a quarter-on-quarter basis? Obviously, it is still very strong versus a year ago, but any color you can share in terms of how it played out between price volume mix or was operating margin more driven by increased investments? If so, where those investments were focused? I have a follow-up..

Essentially, from a sequential quarter-over-quarter, there are probably two significant drivers. The first one being the main one and it's a bit of mix of the automotive versus the industrial commercial vehicle piece, the heavy trucks. We're overweighed in the second quarter on the commercial vehicle business which has a higher operating margin.

Secondly, we are making investments in the combined transportation business and that is ramping up over time, so there is a bit more in terms of OpEx in the third quarter relative to the second quarter of this year..

Okay. Thanks.

Tom, can you talk a little bit about that commercial transport strength and how much longer it can persist? I think a couple quarters ago, you had noted there were pre-buys and expected that market to sort of soften, sounds like there were puts and takes by different regions, but you are still tracking pretty strongly, so just wondering is there something that is driving more persistent strength in that business over the next few quarters as well? To touch on Consumer Devices really quick, that was weaker.

Sounds like even next quarter you are not really expecting that to recover. There are some significant consumer product ramps that are happening as we speak, so are you not levered to that? How do you feel about your position in that market longer term? Thanks..

Sure. The commercial business for the next quarter, it looks, and we will talk again next quarter about what we see in '15. It has been a little bit stronger than we had expected throughout the year. I think you are seeing the pent-up demand in heavy trucks in the U.S. and China and a little bit in Europe, just starting.

I think, there's still a fair amount of momentum in the market, because the new China emissions standards don't cut over really until January, so there's a pre-buy, but most of is going to be the post-buy.

As we are across all of our businesses, the China businesses is strong again, so if that continues there's strong activity which will require continued investment in heavy trucks and we will see the shift away from the local that we are beginning to see from the local truck manufacturers, so there are more multi-nationals because of the emissions standard.

I don't expect it to continue with this rate. Buried within that is a pretty weak Mining, Construction and Agricultural business. It's growing at a much lower rate, the Mining business as you know has been very weak for the last six months for heavy equipment, so I would expect heavy truck demand to start slow down.

Then the heavy equipment demand to start to pick up and this continue to be a very solid growth business for us..

Thanks, Tom.

On Consumer Devices?.

Consumer, we have a thin base. That's our issue, of if a customer or two has a shift, we pay. We can get a nice windfall or we suffer and we are just thinly based in the business. We continue to be selective. I think the team is doing a good job, but that is just not a strong business for us. As I think I have indicated.

It's going to take a couple of years really to some wind in our back..

Thanks, Tom..

Thank you, Wamsi.

The next question please?.

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

Hi. Thank you. Thanks for the color on the $200 million tax payment. How does this compare to that [scenario] in your reserves regarding the intercompany interest exclusion and would there be any major variance versus what you have reserved in the settlement based on - it seems like you are nearing that closure..

Yes. The $200 million was essentially settling or is an anticipation of settling the '05-'07 audit period excluding intercompany debt. Once we get the final settlement, which we anticipate now in the fourth quarter, essentially we will have settled all pre-separation matters with the exception of the intercompany debt.

As you know that is currently going through the tax courts. We anticipate that to take some period of time. We are always open to settlement conversations, but right now that looks like it's going to wind through the tax courts which will take a couple of years.

When we first separated and started talking about the tax liability for the company pre-separation tax liability, we essentially indicated $600 million to $700 million of cash payments would be anticipated over an extended period of time.

With this most recent payment, we have essentially got about $450 million of that behind us, so going forward once we settled that intercompany debt, we think there is another $200 million of cash will have to be paid out..

Great.

With, Measurement Specialties, since the announcement, there has been some news about a factory strike in China and shareholder lawsuits fairness, which I think that gets filed typically after every public company is taken out, but are these issues settled and would they have any impact on the timing of closing?.

No. They are not going to have any impact. Again, we haven't closed yet, so I won't imagine they are managing through the labor issue in China, which also is not unusual in these kind of deals too. It's they anticipated it, we anticipated and the shareholder suit is it happens every time I think..

Okay. Great. Thank you..

…any real issues..

All right. Thank you, Mike.

Can we have the next question please?.

Your next comes from the line of Matt Sheerin. Please go ahead..

Yes. Thanks. Good morning. I just wanted a follow-up on your comments regarding the profitability in Network Solutions. Tom excess Subsea or SubCom business, sounds like you were saying the other three segments are at high-single digit to low double-digit operating profit.

I just wanted to double check that, particularly on DataCom, with profitability there. It's unsure.

Although, obviously, year-over-year comps are getting easier there, still doesn't look like you are optimistic about that market, so what's your near and long-term strategy there in terms of profitability? Whether or not you are going to take another look at restructuring that business or taking another approach?.

I would break the Networks, really, and it's kind of we have it in three major pieces, so there's the Telecom, Wireless and Enterprise businesses that are submarkets, but we have them run by one team.

That's the business I answered to the earlier question on that has operating margins in low double digits today, where we have strong market positions, where we have a great fiber product line and we are really seeing the shift to fiber continue to increase.

I think that's well positioned, as the market picks up, as that mix of fiber and copper continues to move in our favor to have operating leverage on the margin. SubCom, I talked about that's negative margin, but historically it will run in the double-digit range and DataCom is still the weakest margin of the three in the single digits.

A lot of that is because we are investing pretty significantly in the next generation platforms, and we have very little revenue there, so I feel good about those high-speed platforms, but there is no question. We are winning awards, but the markets are adopting slowly.

As you know in that whole space right now, there is an awful lot of change going on in the whole, what I would call the communication equipment infrastructure side. Again, we don't have a real strong position there.

I think there is an opportunity for us, we are investing for the company relatively modest amount - significant in that business, but pretty modest amount of investment to make sure we have a strong high-speed play..

Okay. Thanks.

Then just wanted to follow-up regarding the SEACON acquisition, could you tell us what the revenue contribution approximately would be this quarter? Is it roughly $30 million or so?.

Yes. That's exactly right. There is about $30 million, $35 million of revenue and that is encompassed in our guidance for fourth quarter..

Okay. Thanks a lot..

Thanks, Matt.

Can we have the next question please?.

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

Thank you and congratulations to you and your team. I have two questions. The first is, when we consider the transportation segment, I believe long-term you are saying that growth rate should kind of be 6% to 8%.

Now that we are seeing that Europe is improving, which has very high content per cars and also there is newer hybrid technology catching on, and you just posted organic growth rate of 8%.

Is there anything in there that makes it especially on the high end or are we actually shifting towards - long-term we could be at the upper end of that normal range of 6% to 8% or even higher given the hybrid technology coming on? Then the second question is, I guess, for Bob, the CFO, on restructuring with these acquisitions that are being folded in.

Outlook on restructuring charges that I believe you have been kind of actively focused on reducing your restructuring.

I did not know if that was on an apples-to-apples basis or all of a sudden now with acquisitions we need to model in some additional integration, acquisition restructuring charges?.

Thank you, Jim. Regarding the automotive growth rate, you are right. We do see it at 6% to 8% and we took that up a little over a year ago. We used to see it as 5% to 7%, a couple factors in there. More, I would say content-driven for sure.

I think it will - most so called experts would see that the typical production growth is going to be in the 3% to 4% range, so solid content. HEV, hybrid electric vehicles, definitely the bigger that gets the bigger that is for all of our supplying into the market, because that's more content.

Then, of course, the Measurement acquisition is going to help our content. As we get their products and we start selling them in to the automotive market, which they're not today, they have a nice business in the industrial transportation, but the really big opportunity is automotive and we would expect. We are not changing.

You know, it's too early to change the range, because there are so many factors that go in to that. Certainly, I would say there is a lot more pointing to the higher part of the range than the lower part of the range at this point..

Great.

Then on restructuring charges?.

Yes, Jim.

In terms of restructuring, both acquisitions that we have got going on right now SEACON just recently closed and Measurement that will close by the end of the calendar year, either one of them have significant restructuring associated with them, so I don't anticipate big movement above what we have indicated as kind of more normal level of restructuring on an annual basis about $50 million to $75 million, I think, will be in line with that going forward.

Of course, as we look at our acquisitions that may change, but we will indicate that when that changes..

That's great news across the board. Thanks and congratulations to you and your team there..

Thanks, Jim..

Thank you.

Can we have the next question please?.

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

Hi, this is Kirti Shetty call on behalf of Sherri Scribner. I actually just had one question one the operating margins.

Given your long-term target of 15%, and looking at where you have reached this quarter was around 15.4%, how should we think about the target? Do you still maintain it at 15% or how should we be visioning your op margins going forward?.

I think the best way to think about it is, as we laid out our operating model, we would expect the business in an economy that has grown 3% to 4% to grow by 5% to 7%organically and that operating model should generate in a kind of a normal copper environment, no big swings in exchange rate 20% to 25% flow through.

All other things being equal, we would expect that to lift our margins 30 basis points to 50 basis points..

Okay..

We are not setting a new target like we did before, but I think we have good operating leverage in the company now. Of course, our big thing is to continue to drive solid consistent double-digit EPS growth and cash flow that continues to approximate net income. As we are on track this year for another year of free cash flow above 10% of our revenue..

Okay. Got it.

Just to look at the different segments, I was just wondering, is there any kind of seasonality that we can look into? For example the transportation and especially with networking and given the SEACON weakness and things like that?.

Yes. It's interesting. I think, seasonality, it still exists, but it's because the markets are so global now, the seasonality pronounced as it used to be.

Having said that, which will typically see like we are seeing now in our fourth quarter Automotive, sequentially, will go down because its heavy vacation in August and that's when the biggest model changeover occurs in August. Typically, broadband or the non-SubCom DataCom portion of Networks, this will be a stronger quarter because of the weather.

You know it's pretty much good weather everywhere typically and that's a business that's very affected by that's, because it's outside primarily. Then, we are not in a big consumer. We don't have a big consumer-electronics business, but that cycle would typically be strong right now because of getting ready for the holiday season.

I think over time these peaks and valleys of seasonality are starting to get smoothed out of it..

Okay. Got it. Thanks. Then one last, just wanted to confirm. You said the guidance factors and the SEACON acquisition of 30 million to 35.

Was that million?.

That's correct.

In terms of revenue, right?.

Yes. Okay. Great. Thank you..

Thank you..

All right. Thank you.

Can we have the next question please?.

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

Great. Thanks for taking the question. First, I'm wondering if you can comment on PCs. I think you noted that as weak in the quarter, but we started to see that turned at a lot of companies in particular, Intel, so I am wondering if you can give some color there..

I mean, it looks like that business might be finally leveling off. We still have a pretty nice position in the PC business. In the grand scheme of things of the company, it's not that big, so up or down. We like it being up better than down so that's encouraging, but our real focus there is to build a better position in smartphones and tablets.

You know, we are better than we were a couple years ago, but we are still not where we need to be..

Great. Then in the wireless infrastructure end market, I apologize if you already mentioned this, but I must have missed it. This is an area where people have been paying a lot of attention to relative to try to China Mobile build and we saw one very problematic data point last night. I wonder what you are seeing in that market..

Yes. I mean, again, we have a pretty [nichie] wireless infrastructure business, so in our DataCom business, that business is going well. I would say more, because we have a great product line that goes on the tower, so as much the sheer benefit is market.

Then in our the Telecom business, we have a digital antenna system and that business is pretty vibrant right now in the U.S. as its way of expanding coverage and capacity, especially around large venues like stadiums, so we are seeing that pick up. Again, in the grand scheme of wireless, we are kind of a niche player.

I don't think it would be indicative of a trend one way or another..

That's helpful, Tom. Just one other one I can squeeze it in. On the M&A pipeline, you guys have been pretty clear that you are focused on sensors.

Now, with Measurement Specialties, what should we think about as the focus going forward? Is the company ready and able to target additional acquisitions? How should we think about that, please?.

Sure. I would say, I would start with were folks on harsh environment, so continuing to build that part of our business. If you go back a few years it was about 60% of our business.

With these two new acquisitions, it's moving close to 75% of our business as we have also sold out of things like Magnetics and Touch, so we are continuing to reposition the company. I think that's working well for us.

We do have a very, let's say, robust pipeline as you know it usually takes longer rather than shorter to bring the ones that you really like, and if you can bring them in at all, so we do have the desire and the capability to do more and we are very selective. We had two hit quickly here. It just happened to be that's the way the timing worked out.

Two years before that and, you know, it's two plus years before that, so there is no real consistent timing I would say.

What I like about where we sit today is, we are building a good reputation for how to do these and I think we are an attractive acquirer to a company and I know the companies that are coming in feel really good about coming in to TE and we are also selective, really selective.

I think, we want to continue both, organically and inorganically, build that harsh because that's our sweet spot. That's what we do best and we think we can do it better than anybody..

Thanks, Tom. That's helpful. Appreciate it..

Thanks, Will..

Thank you.

Could we have the next question please?.

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

Thanks very much for taking the questions. Bob, I am hoping you can help me bridge the implied operating margin guidance for 4Q versus 4Q of 2013. It seems by my math that op margins are relatively flat year-over-year.

I think you guys should be getting some restructuring and commodity benefits that are flowing through on a year-over-year basis, but maybe you could just help me understand and quantify what some of the dollar headwinds are, be it, Subsea being lower profitability, maybe mix or some of these other factors you already discussed, like the new investments..

Yes. Thanks, Mark. Yes. We are about flat. The biggest swing is Subsea of sure. I mean, it was reasonably probable last year and unreasonably loss this year, if could say it that way. That's a single biggest thing.

Pretty much everything tracking, I think, Consumer Devices down a little bit kind of hanging around the same margin level we have been, but I think the good news is that consistent margin in the Industrial business company and the Transportation business now operating at consistently above 20%.

That transportation business can move from 22% to 21% to [20% to 20.5%] depending on mix in the region we are selling in, but what I am really happy about it is it is consistently above 20%. We feel it will be consistently above 20..

That's helpful. Thank you. Then maybe you could just help me understand specifically what we should be expecting for restructuring savings for this year and then into next year.

My understanding was there should have been about $100 million of savings that the company was expecting to realize in fiscal '15, but sounds like there were some reinvestments going on, and maybe you could just help me understand what the net savings now we should be thinking about now?.

Yes. The restructuring benefit for a 2014 is about $80 million. We have been saying $70 million to $80 million. We are at the upper end of that range. Our expenditures is a little bit about what we were anticipating in the first half of the year, so there is a slightly more benefit accrued.

A big chunk of that benefit is associated with the large restructuring actions we took last year, so we got some of the benefits in '13, we get the majority of the benefit in 2014. I would expect a more nominal benefit in thousand '15. We will give some color around that when we give 2015 guidance at the end of the fourth quarter..

Thank you very much..

Thank you..

Thanks, Mark.

Can we have next question please?.

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

Thanks. Good morning. Two questions from me. First of all, just to be clear on the SubCom business. It lost money last quarter. It looks like it lost more $0.02 per share than you were thinking going into the quarter, but you are saying that the next couple of quarters the loss sort of don't get any worse and start to improve mid-year next fiscal year.

Can you give us an idea of when breakeven will come back? Secondly, just on the Auto market, just to be clear, it looks like auto production ticked up a little bit more than you would have said 90 days ago, your Transportation sales are basically unchanged, so was there anything you saw in the channel in terms of inventory build that made you sort of maintain the sales outlook you have relative to what is going on in the end demand? Thanks..

Yes. Let me answer the second one on Auto. I mean, you know, the industry numbers, they are always getting refined. We have pretty good visibility into what our customers are telling us to build for them and it is a strong fourth quarter. Sure by far the strongest since I have been here.

There isn't any underlying conclusion to draw from that Steve, I think it's the strong fourth quarter and we will see how it plays out, but we at this time in a quarter, we are responding to what the customers are telling us to build.

Could it be a little better or worse? Yes, but it's not going to be - I would be surprised if it was materially different and we don't really see any inventory issues. We are not hearing anything around that kind of watch outs and we are pretty plugged into that. The first part of your question on SubCom, I think, yes. You summed it up.

It has cost relative to where we were before few cents versus our guidance. 90 days ago, we offset that with other improvements, which is the good news and that's kind of early I would Q2 to start to be profitable again, but we will get specific on our guidance, we will give a little granularity there.

We will be further into the projects and see at what rate they are building, but we are hiring people in New Hampshire.

That's the ultimate sign, because we don't do that unless the designs are pretty much finished and customers are ready to eat get going, so that's why we are feeling better, but not giddy given how the last few years have been in SubCom..

Understandable, I appreciate the color. Thanks..

Welcome..

Thanks, Steve.

The next question please?.

Your final question today comes from the line of Shawn Harrison. Please go ahead..

Hi. Just following up on the SubCom, Tom, as you gave with within Network Solutions implies that business lost $15 million to $20 million in the June quarter.

Am I in the right ballpark with that math?.

Yes..

Okay.

I guess, maybe the better question is, when do you expect it to break even again?.

Yes, Shawn. I think, with risk of avoiding giving guidance too early, I think it's going to be in the first half of next year. I want to see us, how do we come out of this quarter, at what run rate on the projects. As I said, we are hiring the people. That means we are building the cable.

Once the ships get in the water with the cable, then historically jobs run very consistently other than weather, but we always have that. The key thing is, get the award, get the down payment, that's happened. Start building the cable, that's starting.

Then get the cable on the ships and the ships are in the, we are actually starting to lay cable and then it's a lot easier to predict, but that's how I feel about it right now.

Certainly, our team has a strong view of what is going to happened, but before I go out there with more granularity, I would like to see how we come out of this last quarter of the year..

That's fair. Then just on SEACON.

What is the EBIT margin projected to be for that business? I think, initially it was like a 30% EBIT margin, which would imply something like $0.07 to $0.08 of maybe potential EPS accretion in 2015, but if any more granularity on the profitability of SEACON, as we enter 2015?.

Yes. Shawn. It's Bob. The business is about, call it, $120 million of revenue and when we announced the acquisition, we did indicate that they do about 30% EBITA margin, so you got the numbers right. Obviously, we haven't given 2015 guidance for the total company.

Certainly, not for SEACON at this point in time, but that is that 30% EBITDA margin of pre-acquisition..

Okay.

Would you expect a lot of integration costs? If so would that just fall into 2014?.

There is not a lot of integration costs and we just completed the deal, so we are now in the midst of bringing that company into the full, but there is not significant restructuring solution with it..

Okay. Thanks so much..

Thanks, Shawn..

Thanks, everybody, for your questions. Just a few closing comments, I'm excited because we are coming down the stretch of a very good year for the company. As I mentioned earlier, we expect to deliver 5% organic growth overcoming an incredibly weak SubCom business, 17% adjusted EPS growth and another tremendous year of free cash flow.

Our harsh environment portfolio is performing very well. We are really pleased with that and we also are continuing to strengthen the company with the strategic acquisitions of SEACON and Measurement Specialties.

As Bob indicated, we will continue to consistently return capital to shareholders, so I think we have very balanced capital allocation strategy, I think we have a balanced business strategy and I feel good about where the company is positioned. Thanks again for joining us this morning and have a good day and a great rest of the summer..

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