UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 24, 2022
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland
(Jurisdiction of Incorporation)

98-0518048
(I.R.S. Employer Identification No.)

Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland

(Address of principal executive offices)

+41 (0)52 633 66 61

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Shares, Par Value CHF 0.57	TEL	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of common shares outstanding as of July 22, 2022 was 319,838,968.

Table of Contents

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q


		Page
Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)	2
	Condensed Consolidated Balance Sheets as of June 24, 2022 and September 24, 2021 (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

Part II.	Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
Signatures		42

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the				For the
	Quarters Ended				Nine Months Ended
	June 24,		June 25,		June 24,		June 25,
	2022		2021		2022		2021

	(in millions, except per share data)
Net sales	$	4,097	$	3,845	$	11,922	$	11,105
Cost of sales		2,769		2,577		8,027		7,481
Gross margin		1,328		1,268		3,895		3,624
Selling, general, and administrative expenses		393		366		1,172		1,128
Research, development, and engineering expenses		179		168		539		504
Acquisition and integration costs		11		9		29		23
Restructuring and other charges, net		26		11		59		195
Operating income		719		714		2,096		1,774
Interest income		3		3		9		14
Interest expense		(18)		(14)		(48)		(42)
Other income, net		4		2		24		5
Income from continuing operations before income taxes		708		705		2,081		1,751
Income tax expense		(116)		(124)		(362)		(290)
Income from continuing operations		592		581		1,719		1,461
Income (loss) from discontinued operations, net of income taxes		2		(1)		1		6
Net income	$	594	$	580	$	1,720	$	1,467

Basic earnings per share:
Income from continuing operations	$	1.84	$	1.76	$	5.31	$	4.41
Income from discontinued operations		0.01		—		—		0.02
Net income		1.84		1.76		5.31		4.43

Diluted earnings per share:
Income from continuing operations	$	1.83	$	1.74	$	5.26	$	4.39
Income from discontinued operations		0.01		—		—		0.02
Net income		1.83		1.74		5.26		4.41

Weighted-average number of shares outstanding:
Basic		322		330		324		331
Diluted		324		333		327		333

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the				For the
	Quarters Ended				Nine Months Ended
	June 24,		June 25,		June 24,		June 25,
	2022		2021		2022		2021

	(in millions)
Net income	$	594	$	580	$	1,720	$	1,467
Other comprehensive income (loss):
Currency translation		(225)		40		(216)		172
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		4		7		12		19
Gains (losses) on cash flow hedges, net of income taxes		(112)		(15)		(65)		42
Other comprehensive income (loss)		(333)		32		(269)		233
Comprehensive income		261		612		1,451		1,700
Less: comprehensive (income) loss attributable to noncontrolling interests		4		(2)		11		(4)
Comprehensive income attributable to TE Connectivity Ltd.	$	265	$	610	$	1,462	$	1,696

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 24,		September 24,
	2022		2021

	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	820	$	1,203
Accounts receivable, net of allowance for doubtful accounts of $54 and $41, respectively		3,132		2,928
Inventories		3,028		2,511
Prepaid expenses and other current assets		603		621
Total current assets		7,583		7,263
Property, plant, and equipment, net		3,712		3,778
Goodwill		5,352		5,590
Intangible assets, net		1,355		1,549
Deferred income taxes		2,478		2,499
Other assets		868		783
Total assets	$	21,348	$	21,462
Liabilities, redeemable noncontrolling interests, and shareholders' equity
Current liabilities:
Short-term debt	$	822	$	503
Accounts payable		1,917		1,911
Accrued and other current liabilities		2,319		2,242
Total current liabilities		5,058		4,656
Long-term debt		3,380		3,589
Long-term pension and postretirement liabilities		1,094		1,139
Deferred income taxes		186		181
Income taxes		322		302
Other liabilities		771		847
Total liabilities		10,811		10,714
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests		103		114
Shareholders' equity:
Common shares, CHF 0.57 par value, 330,830,781 shares authorized and issued, and 336,099,881 shares authorized and issued, respectively		146		148
Accumulated earnings		12,084		11,709
Treasury shares, at cost, 10,425,219 and 9,060,919 shares, respectively		(1,370)		(1,055)
Accumulated other comprehensive loss		(426)		(168)
Total shareholders' equity		10,434		10,634
Total liabilities, redeemable noncontrolling interests, and shareholders' equity	$	21,348	$	21,462

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)


	For the Quarter Ended June 24, 2022
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)
Balance at March 25, 2022	336	$	148	(13)	$	(1,769)	$	—	$	12,160	$	(97)	$	10,442
Net income	—		—	—		—		—		594		—		594
Other comprehensive loss	—		—	—		—		—		—		(329)		(329)
Share-based compensation expense	—		—	—		—		28		—		—		28
Dividends	—		—	—		—		—		5		—		5
Exercise of share options	—		—	—		4		—		—		—		4
Restricted share award vestings and other activity	—		—	1		6		(28)		32		—		10
Repurchase of common shares	—		—	(3)		(320)		—		—		—		(320)
Cancellation of treasury shares	(5)		(2)	5		709		—		(707)		—		—
Balance at June 24, 2022	331	$	146	(10)	$	(1,370)	$	—	$	12,084	$	(426)	$	10,434


	For the Nine Months Ended June 24, 2022
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)
Balance at September 24, 2021	336	$	148	(9)	$	(1,055)	$	—	$	11,709	$	(168)	$	10,634
Net income	—		—	—		—		—		1,720		—		1,720
Other comprehensive loss	—		—	—		—		—		—		(258)		(258)
Share-based compensation expense	—		—	—		—		88		—		—		88
Dividends	—		—	—		—		—		(717)		—		(717)
Exercise of share options	—		—	—		34		—		—		—		34
Restricted share award vestings and other activity	—		—	2		14		(88)		79		—		5
Repurchase of common shares	—		—	(8)		(1,072)		—		—		—		(1,072)
Cancellation of treasury shares	(5)		(2)	5		709		—		(707)		—		—
Balance at June 24, 2022	331	$	146	(10)	$	(1,370)	$	—	$	12,084	$	(426)	$	10,434

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED) (Continued)


	For the Quarter Ended June 25, 2021
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)
Balance at March 26, 2021	339	$	149	(9)	$	(775)	$	—	$	10,541	$	(246)	$	9,669
Net income	—		—	—		—		—		580		—		580
Other comprehensive income	—		—	—		—		—		—		30		30
Share-based compensation expense	—		—	—		—		24		—		—		24
Dividends	—		—	—		—		—		3		—		3
Exercise of share options	—		—	—		11		—		—		—		11
Restricted share award vestings and other activity	—		—	—		6		(24)		29		—		11
Repurchase of common shares	—		—	(2)		(282)		—		—		—		(282)
Cancellation of treasury shares	(3)		(1)	3		262		—		(261)		—		—
Balance at June 25, 2021	336	$	148	(8)	$	(778)	$	—	$	10,892	$	(216)	$	10,046


	For the Nine Months Ended June 25, 2021
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)
Balance at September 25, 2020	339	$	149	(8)	$	(669)	$	—	$	10,348	$	(445)	$	9,383
Net income	—		—	—		—		—		1,467		—		1,467
Other comprehensive income	—		—	—		—		—		—		229		229
Share-based compensation expense	—		—	—		—		73		—		—		73
Dividends	—		—	—		—		—		(658)		—		(658)
Exercise of share options	—		—	2		130		—		—		—		130
Restricted share award vestings and other activity	—		—	—		90		(73)		(4)		—		13
Repurchase of common shares	—		—	(5)		(591)		—		—		—		(591)
Cancellation of treasury shares	(3)		(1)	3		262		—		(261)		—		—
Balance at June 25, 2021	336	$	148	(8)	$	(778)	$	—	$	10,892	$	(216)	$	10,046

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the
	Nine Months Ended
	June 24,		June 25,
	2022		2021

	(in millions)
Cash flows from operating activities:
Net income	$	1,720	$	1,467
Income from discontinued operations, net of income taxes		(1)		(6)
Income from continuing operations		1,719		1,461
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		597		590
Deferred income taxes		(18)		(62)
Non-cash lease cost		98		90
Provision for losses on accounts receivable and inventories		79		32
Share-based compensation expense		88		73
Other		(19)		(45)
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net		(108)		(638)
Inventories		(439)		(482)
Prepaid expenses and other current assets		57		(14)
Accounts payable		(48)		646
Accrued and other current liabilities		(316)		110
Income taxes		53		61
Other		(219)		80
Net cash provided by operating activities		1,524		1,902
Cash flows from investing activities:
Capital expenditures		(556)		(454)
Proceeds from sale of property, plant, and equipment		98		85
Acquisition of businesses, net of cash acquired		(116)		(126)
Other		6		(2)
Net cash used in investing activities		(568)		(497)
Cash flows from financing activities:
Net increase in commercial paper		237		—
Proceeds from issuance of debt		588		661
Repayment of debt		(558)		(706)
Proceeds from exercise of share options		34		130
Repurchase of common shares		(1,086)		(518)
Payment of common share dividends to shareholders		(506)		(483)
Other		(39)		(27)
Net cash used in financing activities		(1,330)		(943)
Effect of currency translation on cash		(9)		9
Net increase (decrease) in cash, cash equivalents, and restricted cash		(383)		471