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 March 31, 2023
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 April 21, 2023 was 315,115,072.

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 Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)	2
	Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Quarters and Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2023 and March 25, 2022 (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	38
Item 6.	Exhibits	39
Signatures		40

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the				For the
	Quarters Ended				Six Months Ended
	March 31,		March 25,		March 31,		March 25,
	2023		2022		2023		2022
	(in millions, except per share data)
Net sales	$	4,160	$	4,007	$	8,001	$	7,825
Cost of sales		2,876		2,670		5,530		5,258
Gross margin		1,284		1,337		2,471		2,567
Selling, general, and administrative expenses		435		416		827		779
Research, development, and engineering expenses		185		185		358		360
Acquisition and integration costs		8		10		17		18
Restructuring and other charges, net		119		21		230		33
Operating income		537		705		1,039		1,377
Interest income		12		4		21		6
Interest expense		(20)		(18)		(41)		(30)
Other income (expense), net		(4)		5		(9)		20
Income from continuing operations before income taxes		525		696		1,010		1,373
Income tax expense		(100)		(136)		(187)		(246)
Income from continuing operations		425		560		823		1,127
Income (loss) from discontinued operations, net of income taxes		8		—		7		(1)
Net income	$	433	$	560	$	830	$	1,126
Basic earnings per share:
Income from continuing operations	$	1.34	$	1.72	$	2.60	$	3.46
Income (loss) from discontinued operations		0.03		—		0.02		—
Net income		1.37		1.72		2.62		3.45
Diluted earnings per share:
Income from continuing operations	$	1.34	$	1.71	$	2.58	$	3.44
Income (loss) from discontinued operations		0.03		—		0.02		—
Net income		1.36		1.71		2.60		3.43
Weighted-average number of shares outstanding:
Basic		316		325		317		326
Diluted		318		327		319		328

See Notes to Condensed Consolidated Financial Statements.

1

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	For the				For the
	Quarters Ended				Six Months Ended
	March 31,		March 25,		March 31,		March 25,
	2023		2022		2023		2022
	(in millions)
Net income	$	433	$	560	$	830	$	1,126
Other comprehensive income:
Currency translation		78		(9)		383		9
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		1		4		3		8
Gains on cash flow hedges, net of income taxes		38		46		107		47
Other comprehensive income		117		41		493		64
Comprehensive income		550		601		1,323		1,190
Less: comprehensive (income) loss attributable to noncontrolling interests		(2)		1		(11)		7
Comprehensive income attributable to TE Connectivity Ltd.	$	548	$	602	$	1,312	$	1,197

See Notes to Condensed Consolidated Financial Statements.

2

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,		September 30,
	2023		2022
	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	905	$	1,088
Accounts receivable, net of allowance for doubtful accounts of $46 and $45, respectively		3,048		2,865
Inventories		2,811		2,676
Prepaid expenses and other current assets		675		639
Total current assets		7,439		7,268
Property, plant, and equipment, net		3,818		3,567
Goodwill		5,527		5,258
Intangible assets, net		1,286		1,288
Deferred income taxes		2,634		2,498
Other assets		786		903
Total assets	$	21,490	$	20,782
Liabilities, redeemable noncontrolling interests, and shareholders' equity
Current liabilities:
Short-term debt	$	286	$	914
Accounts payable		1,678		1,593
Accrued and other current liabilities		2,429		2,125
Total current liabilities		4,393		4,632
Long-term debt		3,916		3,292
Long-term pension and postretirement liabilities		731		695
Deferred income taxes		216		244
Income taxes		326		304
Other liabilities		782		718
Total liabilities		10,364		9,885
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests		106		95
Shareholders' equity:
Common shares, CHF 0.57 par value, 322,470,281 shares authorized and issued, and 330,830,781 shares authorized and issued, respectively		142		146
Accumulated earnings		11,824		12,832
Treasury shares, at cost, 7,053,036 and 12,749,540 shares, respectively		(933)		(1,681)
Accumulated other comprehensive loss		(13)		(495)
Total shareholders' equity		11,020		10,802
Total liabilities, redeemable noncontrolling interests, and shareholders' equity	$	21,490	$	20,782

See Notes to Condensed Consolidated Financial Statements.

3

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	For the Quarter Ended March 31, 2023
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity
	(in millions)
Balance at December 30, 2022	331	$	146	(14)	$	(1,854)	$	—	$	13,200	$	(128)	$	11,364
Net income	—		—	—		—		—		433		—		433
Other comprehensive income	—		—	—		—		—		—		115		115
Share-based compensation expense	—		—	—		—		31		—		—		31
Dividends	—		—	—		—		—		(744)		—		(744)
Exercise of share options	—		—	—		9		—		—		—		9
Restricted share award vestings and other activity	—		—	—		16		(31)		26		—		11
Repurchase of common shares	—		—	(2)		(199)		—		—		—		(199)
Cancellation of treasury shares	(9)		(4)	9		1,095		—		(1,091)		—		—
Balance at March 31, 2023	322	$	142	(7)	$	(933)	$	—	$	11,824	$	(13)	$	11,020

	For the Six Months Ended March 31, 2023
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity
	(in millions)
Balance at September 30, 2022	331	$	146	(13)	$	(1,681)	$	—	$	12,832	$	(495)	$	10,802
Net income	—		—	—		—		—		830		—		830
Other comprehensive income	—		—	—		—		—		—		482		482
Share-based compensation expense	—		—	—		—		63		—		—		63
Dividends	—		—	—		—		—		(744)		—		(744)
Exercise of share options	—		—	—		20		—		—		—		20
Restricted share award vestings and other activity	—		—	1		65		(63)		(3)		—		(1)
Repurchase of common shares	—		—	(4)		(432)		—		—		—		(432)
Cancellation of treasury shares	(9)		(4)	9		1,095		—		(1,091)		—		—
Balance at March 31, 2023	322	$	142	(7)	$	(933)	$	—	$	11,824	$	(13)	$	11,020

4

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED) (Continued)

	For the Quarter Ended March 25, 2022
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity
	(in millions)
Balance at December 24, 2021	336	$	148	(10)	$	(1,274)	$	—	$	12,285	$	(139)	$	11,020
Net income	—		—	—		—		—		560		—		560
Other comprehensive income	—		—	—		—		—		—		42		42
Share-based compensation expense	—		—	—		—		28		—		—		28
Dividends	—		—	—		—		—		(722)		—		(722)
Exercise of share options	—		—	—		8		—		—		—		8
Restricted share award vestings and other activity	—		—	—		3		(28)		37		—		12
Repurchase of common shares	—		—	(3)		(506)		—		—		—		(506)
Balance at March 25, 2022	336	$	148	(13)	$	(1,769)	$	—	$	12,160	$	(97)	$	10,442

	For the Six Months Ended March 25, 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	—		—	—		—		—		1,126		—		1,126
Other comprehensive income	—		—	—		—		—		—		71		71
Share-based compensation expense	—		—	—		—		60		—		—		60
Dividends	—		—	—		—		—		(722)		—		(722)
Exercise of share options	—		—	—		30		—		—		—		30
Restricted share award vestings and other activity	—		—	1		8		(60)		47		—		(5)
Repurchase of common shares	—		—	(5)		(752)		—		—		—		(752)
Balance at March 25, 2022	336	$	148	(13)	$	(1,769)	$	—	$	12,160	$	(97)	$	10,442

See Notes to Condensed Consolidated Financial Statements.

5

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the
	Six Months Ended
	March 31,		March 25,
	2023		2022
	(in millions)
Cash flows from operating activities:
Net income	$	830	$	1,126
(Income) loss from discontinued operations, net of income taxes		(7)		1
Income from continuing operations		823		1,127
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		394		392
Deferred income taxes		(70)		42
Non-cash lease cost		70		64
Provision for losses on accounts receivable and inventories		69		68
Share-based compensation expense		63		60
Impairment of held for sale businesses		67		—
Other		68		4
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net		(224)		(57)
Inventories		(273)		(411)
Prepaid expenses and other current assets		(25)		36
Accounts payable		104		15
Accrued and other current liabilities		(83)		(305)
Income taxes		35		27
Other		197		(117)
Net cash provided by operating activities		1,215		945
Cash flows from investing activities:
Capital expenditures		(372)		(351)
Proceeds from sale of property, plant, and equipment		2		63
Acquisition of businesses, net of cash acquired		(108)		(102)
Proceeds from divestiture of businesses, net of cash retained by businesses sold		51		16
Other		23		(9)
Net cash used in investing activities		(404)		(383)
Cash flows from financing activities:
Net decrease in commercial paper		(85)		—
Proceeds from issuance of debt		499		588
Repayment of debt		(591)		(558)
Proceeds from exercise of share options		20		30
Repurchase of common shares		(466)		(708)
Payment of common share dividends to shareholders		(355)		(326)
Other		(28)		(38)
Net cash used in financing activities		(1,006)		(1,012)
Effect of currency translation on cash		12		(4)
Net decrease in cash, cash equivalents, and restricted cash		(183)		(454)
Cash, cash equivalents, and restricted cash at beginning of period		1,088		1,203
Cash, cash equivalents, and restricted cash at end of period	$	905	$	749

See Notes to Condensed Consolidated Financial Statements.

6

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

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

The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2023 and fiscal 2022 are to our fiscal years ending September 29, 2023 and ended September 30, 2022, respectively.