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TE Connectivity Ltd. – ‘10-Q’ for 6/24/22

On:  Friday, 7/29/22, at 11:06am ET   ·   For:  6/24/22   ·   Accession #:  1558370-22-11353   ·   File #:  1-33260

Previous ‘10-Q’:  ‘10-Q’ on 4/29/22 for 3/25/22   ·   Next:  ‘10-Q’ on 1/27/23 for 12/30/22   ·   Latest:  ‘10-Q’ on 1/26/24 for 12/29/23   ·   1 Reference:  To:  TE Connectivity Ltd. – ‘8-K’ on / for 5/19/22

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 7/29/22  TE Connectivity Ltd.              10-Q        6/24/22   70:10M                                    Toppan Merrill Bridge/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   3.24M 
 2: EX-22.1     Published Report re: Matters Submitted to a Vote    HTML     21K 
                of Security Holders                                              
 3: EX-31.1     Certification -- §302 - SOA'02                      HTML     26K 
 4: EX-31.2     Certification -- §302 - SOA'02                      HTML     27K 
 5: EX-32.1     Certification -- §906 - SOA'02                      HTML     23K 
11: R1          Document and Entity Information                     HTML     73K 
12: R2          Condensed Consolidated Statements of Operations     HTML    129K 
13: R3          Condensed Consolidated Statements of Comprehensive  HTML     58K 
                Income                                                           
14: R4          Condensed Consolidated Balance Sheets               HTML    133K 
15: R5          Condensed Consolidated Balance Sheets               HTML     31K 
                (Parenthetical)                                                  
16: R6          Condensed Consolidated Statements of Shareholders'  HTML    101K 
                Equity                                                           
17: R7          Condensed Consolidated Statements of Cash Flows     HTML    116K 
18: R8          Basis of Presentation                               HTML     23K 
19: R9          Restructuring and Other Charges, Net                HTML    230K 
20: R10         Acquisitions                                        HTML     21K 
21: R11         Inventories                                         HTML     35K 
22: R12         Goodwill                                            HTML     50K 
23: R13         Intangible Assets, Net                              HTML     69K 
24: R14         Debt                                                HTML     26K 
25: R15         Leases                                              HTML     62K 
26: R16         Commitments and Contingencies                       HTML     27K 
27: R17         Financial Instruments                               HTML    154K 
28: R18         Retirement Plans                                    HTML    106K 
29: R19         Income Taxes                                        HTML     27K 
30: R20         Earnings Per Share                                  HTML     42K 
31: R21         Shareholders' Equity                                HTML     52K 
32: R22         Share Plans                                         HTML     60K 
33: R23         Segment and Geographic Data                         HTML    185K 
34: R24         Restructuring and Other Charges, Net (Tables)       HTML    239K 
35: R25         Inventories (Tables)                                HTML     36K 
36: R26         Goodwill (Tables)                                   HTML     50K 
37: R27         Intangible Assets, Net (Tables)                     HTML     71K 
38: R28         Leases (Tables)                                     HTML     64K 
39: R29         Financial Instruments (Tables)                      HTML    158K 
40: R30         Retirement Plans (Tables)                           HTML    102K 
41: R31         Earnings Per Share (Tables)                         HTML     41K 
42: R32         Shareholders' Equity (Tables)                       HTML     51K 
43: R33         Share Plans (Tables)                                HTML     64K 
44: R34         Segment and Geographic Data (Tables)                HTML    185K 
45: R35         Restructuring and Other Charges, Net -              HTML     43K 
                Restructuring and Other Charges (Details)                        
46: R36         Restructuring and Other Charges, Net -              HTML     63K 
                Restructuring Reserve Activity (Details)                         
47: R37         Restructuring and Other Charges, Net - Actions      HTML     50K 
                (Details)                                                        
48: R38         Restructuring and Other Charges, Net -              HTML     28K 
                Restructuring Reserve Balances (Details)                         
49: R39         Acquisitions (Details)                              HTML     27K 
50: R40         Inventories (Details)                               HTML     29K 
51: R41         Goodwill (Details)                                  HTML     43K 
52: R42         Intangible Assets, Net (Details)                    HTML     61K 
53: R43         Debt - Summary (Details)                            HTML     50K 
54: R44         Leases - Components of Lease Cost (Details)         HTML     26K 
55: R45         Leases - Cash Flow Information (Details)            HTML     23K 
56: R46         Commitments and Contingencies (Details)             HTML     34K 
57: R47         Financial Instruments (Details)                     HTML     94K 
58: R48         Retirement Plans (Details)                          HTML     48K 
59: R49         Income Taxes (Details)                              HTML     41K 
60: R50         Earnings Per Share (Details)                        HTML     31K 
61: R51         Shareholders' Equity (Details)                      HTML     43K 
62: R52         Share Plans (Details)                               HTML     61K 
63: R53         Segment and Geographic Data - Net Sales by Segment  HTML     53K 
                and Industry End Market (Details)                                
64: R54         Segment and Geographic Data - Net Sales by          HTML     50K 
                Geographic Region and Segment (Details)                          
65: R55         Segment and Geographic Data - Operating Income by   HTML     29K 
                Segment (Details)                                                
68: XML         IDEA XML File -- Filing Summary                      XML    122K 
66: XML         XBRL Instance -- tel-20220624x10q_htm                XML   3.01M 
67: EXCEL       IDEA Workbook of Financial Reports                  XLSX    111K 
 7: EX-101.CAL  XBRL Calculations -- tel-20220624_cal                XML    165K 
 8: EX-101.DEF  XBRL Definitions -- tel-20220624_def                 XML    451K 
 9: EX-101.LAB  XBRL Labels -- tel-20220624_lab                      XML   1.04M 
10: EX-101.PRE  XBRL Presentations -- tel-20220624_pre               XML    716K 
 6: EX-101.SCH  XBRL Schema -- tel-20220624                          XSD    130K 
69: JSON        XBRL Instance as JSON Data -- MetaLinks              357±   526K 
70: ZIP         XBRL Zipped Folder -- 0001558370-22-011353-xbrl      Zip    384K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I
"Financial Information
"Item 1
"Financial Statements
"Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)
"Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)
"Condensed Consolidated Balance Sheets as of June 24, 2022 and September 24, 2021 (unaudited)
"Condensed Consolidated Statements of Shareholders' Equity for the Quarters and Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)
"Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 24, 2022 and June 25, 2021 (unaudited)
"Notes to Condensed Consolidated Financial Statements (unaudited)
"Item 2
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3
"Quantitative and Qualitative Disclosures About Market Risk
"Item 4
"Controls and Procedures
"Part II
"Other Information
"Legal Proceedings
"Item 1A
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Item 6
"Exhibits
"Signatures

This is an HTML Document rendered as filed.  [ Alternative Formats ]



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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i 10-Q

(Mark One)

 i 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended  i June 24, 2022

or

 i 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 i 001-33260

(Commission File Number)

Graphic

 i TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

 i Switzerland
(Jurisdiction of Incorporation)

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

 i Mühlenstrasse 26,  i CH-8200  i Schaffhausen,  i Switzerland

(Address of principal executive offices)

 i +41  i (0)52  i 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

 i Common Shares, Par Value CHF 0.57

 i TEL

 i 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.  i 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).  i 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.

 i Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company  i 

Emerging growth company  i 

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  i  No 

The number of common shares outstanding as of July 22, 2022 was  i 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

i

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

$

 i 4,097

$

 i 3,845

$

 i 11,922

$

 i 11,105

Cost of sales

 

 i 2,769

 

 i 2,577

 

 i 8,027

 

 i 7,481

Gross margin

 

 i 1,328

 

 i 1,268

 

 i 3,895

 

 i 3,624

Selling, general, and administrative expenses

 

 i 393

 i 366

 

 i 1,172

 i 1,128

Research, development, and engineering expenses

 

 i 179

 i 168

 

 i 539

 i 504

Acquisition and integration costs

 

 i 11

 i 9

 

 i 29

 i 23

Restructuring and other charges, net

 

 i 26

 i 11

 

 i 59

 i 195

Operating income

 i 719

 i 714

 i 2,096

 i 1,774

Interest income

 i 3

 i 3

 i 9

 i 14

Interest expense

 

( i 18)

( i 14)

 

( i 48)

( i 42)

Other income, net

 

 i 4

 i 2

 

 i 24

 i 5

Income from continuing operations before income taxes

 

 i 708

 

 i 705

 

 i 2,081

 

 i 1,751

Income tax expense

 

( i 116)

( i 124)

 

( i 362)

( i 290)

Income from continuing operations

 

 i 592

 

 i 581

 

 i 1,719

 

 i 1,461

Income (loss) from discontinued operations, net of income taxes

 

 i 2

( i 1)

 

 i 1

 i 6

Net income

$

 i 594

$

 i 580

$

 i 1,720

$

 i 1,467

Basic earnings per share:

Income from continuing operations

$

 i 1.84

$

 i 1.76

$

 i 5.31

$

 i 4.41

Income from discontinued operations

 

 i 0.01

 

 

 

 i 0.02

Net income

 

 i 1.84

 

 i 1.76

 

 i 5.31

 

 i 4.43

Diluted earnings per share:

Income from continuing operations

$

 i 1.83

$

 i 1.74

$

 i 5.26

$

 i 4.39

Income from discontinued operations

 

 i 0.01

 

 

 

 i 0.02

Net income

 

 i 1.83

 

 i 1.74

 

 i 5.26

 

 i 4.41

Weighted-average number of shares outstanding:

Basic

 

 i 322

 i 330

 

 i 324

 i 331

Diluted

 

 i 324

 i 333

 

 i 327

 i 333

See Notes to Condensed Consolidated Financial Statements.

1

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

$

 i 594

$

 i 580

$

 i 1,720

$

 i 1,467

Other comprehensive income (loss):

Currency translation

 

( i 225)

 i 40

( i 216)

 i 172

Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes

 

 i 4

 i 7

 i 12

 i 19

Gains (losses) on cash flow hedges, net of income taxes

 

( i 112)

( i 15)

( i 65)

 i 42

Other comprehensive income (loss)

 

( i 333)

 

 i 32

 

( i 269)

 

 i 233

Comprehensive income

 i 261

 i 612

 i 1,451

 i 1,700

Less: comprehensive (income) loss attributable to noncontrolling interests

 i 4

( i 2)

 i 11

( i 4)

Comprehensive income attributable to TE Connectivity Ltd.

$

 i 265

$

 i 610

$

 i 1,462

$

 i 1,696

See Notes to Condensed Consolidated Financial Statements.

2

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

$

 i 820

$

 i 1,203

Accounts receivable, net of allowance for doubtful accounts of $ i 54 and $ i 41, respectively

 

 i 3,132

 

 i 2,928

Inventories

 

 i 3,028

 

 i 2,511

Prepaid expenses and other current assets

 

 i 603

 

 i 621

Total current assets

 

 i 7,583

 

 i 7,263

Property, plant, and equipment, net

 

 i 3,712

 

 i 3,778

Goodwill

 

 i 5,352

 

 i 5,590

Intangible assets, net

 

 i 1,355

 

 i 1,549

Deferred income taxes

 

 i 2,478

 

 i 2,499

Other assets

 

 i 868

 

 i 783

Total assets

$

 i 21,348

$

 i 21,462

Liabilities, redeemable noncontrolling interests, and shareholders' equity

Current liabilities:

Short-term debt

$

 i 822

$

 i 503

Accounts payable

 

 i 1,917

 

 i 1,911

Accrued and other current liabilities

 

 i 2,319

 

 i 2,242

Total current liabilities

 

 i 5,058

 

 i 4,656

Long-term debt

 

 i 3,380

 

 i 3,589

Long-term pension and postretirement liabilities

 

 i 1,094

 

 i 1,139

Deferred income taxes

 

 i 186

 

 i 181

Income taxes

 

 i 322

 

 i 302

Other liabilities

 

 i 771

 

 i 847

Total liabilities

 

 i 10,811

 

 i 10,714

Commitments and contingencies (Note 9)

Redeemable noncontrolling interests

 i 103

 i 114

Shareholders' equity:

Common shares, CHF  i  i 0.57 /  par value,  i 330,830,781 shares authorized and issued, and  i 336,099,881 shares authorized and issued, respectively

 

 i 146

 i 148

Accumulated earnings

 

 i 12,084

 

 i 11,709

Treasury shares, at cost,  i 10,425,219 and  i 9,060,919 shares, respectively

 

( i 1,370)

 

( i 1,055)

Accumulated other comprehensive loss

 

( i 426)

 

( i 168)

Total shareholders' equity

 

 i 10,434

 

 i 10,634

Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$

 i 21,348

$

 i 21,462

See Notes to Condensed Consolidated Financial Statements.

3

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

 

 i 336

$

 i 148

 

( i 13)

$

( i 1,769)

$

$

 i 12,160

$

( i 97)

$

 i 10,442

Net income

 

 

 

 

 

 

 i 594

 

 

 i 594

Other comprehensive loss

 

 

 

 

 

 

 

( i 329)

 

( i 329)

Share-based compensation expense

 

 

 

 

 

 i 28

 

 

 

 i 28

Dividends

 

 

 

 

 

 

 i 5

 

 

 i 5

Exercise of share options

 

 

 

 

 i 4

 

 

 

 

 i 4

Restricted share award vestings and other activity

 

 

 

 i 1

 

 i 6

 

( i 28)

 

 i 32

 

 

 i 10

Repurchase of common shares

 

 

 

( i 3)

 

( i 320)

 

 

 

 

( i 320)

Cancellation of treasury shares

( i 5)

 

( i 2)

 

 i 5

 

 i 709

 

 

( i 707)

 

 

Balance at June 24, 2022

 i 331

$

 i 146

 

( i 10)

$

( i 1,370)

$

$

 i 12,084

$

( i 426)

$

 i 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

 

 i 336

$

 i 148

 

( i 9)

$

( i 1,055)

$

$

 i 11,709

$

( i 168)

$

 i 10,634

Net income

 

 

 

 

 

 

 i 1,720

 

 

 i 1,720

Other comprehensive loss

 

 

 

 

 

 

 

( i 258)

 

( i 258)

Share-based compensation expense

 

 

 

 

 

 i 88

 

 

 

 i 88

Dividends

 

 

 

 

( i 717)

 

 

( i 717)

Exercise of share options

 

 

 

 

 i 34

 

 

 

 

 i 34

Restricted share award vestings and other activity

 

 

 

 i 2

 

 i 14

 

( i 88)

 

 i 79

 

 

 i 5

Repurchase of common shares

 

 

 

( i 8)

 

( i 1,072)

 

 

 

 

( i 1,072)

Cancellation of treasury shares

( i 5)

 

( i 2)

 

 i 5

 

 i 709

 

 

( i 707)

 

 

Balance at June 24, 2022

 i 331

$

 i 146

 

( i 10)

$

( i 1,370)

$

$

 i 12,084

$

( i 426)

$

 i 10,434

4

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

 

 i 339

$

 i 149

 

( i 9)

$

( i 775)

$

$

 i 10,541

$

( i 246)

$

 i 9,669

Net income

 i 580

 i 580

Other comprehensive income

 

 

 

 

 

 

 i 30

 

 i 30

Share-based compensation expense

 

 

 

 

 

 i 24

 

 

 

 i 24

Dividends

 

 

 

 

 

 

 i 3

 

 

 i 3

Exercise of share options

 

 

 

 

 i 11

 

 

 

 

 i 11

Restricted share award vestings and other activity

 

 

 

 

 i 6

 

( i 24)

 

 i 29

 

 

 i 11

Repurchase of common shares

 

 

 

( i 2)

 

( i 282)

 

 

 

 

( i 282)

Cancellation of treasury shares

( i 3)

 

( i 1)

 

 i 3

 

 i 262

 

 

( i 261)

 

 

Balance at June 25, 2021

 i 336

$

 i 148

 

( i 8)

$

( i 778)

$

$

 i 10,892

$

( i 216)

$

 i 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

 

 i 339

$

 i 149

 

( i 8)

$

( i 669)

$

$

 i 10,348

$

( i 445)

$

 i 9,383

Net income

 i 1,467

 i 1,467

Other comprehensive income

 

 

 

 

 

 

 

 i 229

 

 i 229

Share-based compensation expense

 

 

 

 

 

 i 73

 

 

 

 i 73

Dividends

 

 

 

 

 

 

( i 658)

 

 

( i 658)

Exercise of share options

 

 

 

 i 2

 

 i 130

 

 

 

 

 i 130

Restricted share award vestings and other activity

 

 

 

 

 i 90

 

( i 73)

 

( i 4)

 

 

 i 13

Repurchase of common shares

 

 

 

( i 5)

 

( i 591)

 

 

 

 

( i 591)

Cancellation of treasury shares

( i 3)

 

( i 1)

 

 i 3

 

 i 262

 

 

( i 261)

 

 

Balance at June 25, 2021

 i 336

$

 i 148

 

( i 8)

$

( i 778)

$

$

 i 10,892

$

( i 216)

$

 i 10,046

See Notes to Condensed Consolidated Financial Statements.

5

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

$

 i 1,720

$

 i 1,467

Income from discontinued operations, net of income taxes

 

( i 1)

 

( i 6)

Income from continuing operations

 

 i 1,719

 

 i 1,461

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

Depreciation and amortization

 

 i 597

 

 i 590

Deferred income taxes

 

( i 18)

 

( i 62)

Non-cash lease cost

 i 98

 i 90

Provision for losses on accounts receivable and inventories

 

 i 79

 

 i 32

Share-based compensation expense

 

 i 88

 

 i 73

Other

 

( i 19)

 

( i 45)

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:

Accounts receivable, net

 

( i 108)

 

( i 638)

Inventories

 

( i 439)

 

( i 482)

Prepaid expenses and other current assets

 

 i 57

 

( i 14)

Accounts payable

 

( i 48)

 

 i 646

Accrued and other current liabilities

 

( i 316)

 

 i 110

Income taxes

 

 i 53

 

 i 61

Other

 

( i 219)

 

 i 80

Net cash provided by operating activities

 

 i 1,524

 

 i 1,902

Cash flows from investing activities:

Capital expenditures

 

( i 556)

 

( i 454)

Proceeds from sale of property, plant, and equipment

 

 i 98

 

 i 85

Acquisition of businesses, net of cash acquired

 

( i 116)

 

( i 126)

Other

 

 i 6

 

( i 2)

Net cash used in investing activities

 

( i 568)

 

( i 497)

Cash flows from financing activities:

Net increase in commercial paper

 

 i 237

 

Proceeds from issuance of debt

 

 i 588

 

 i 661

Repayment of debt

 

( i 558)

 

( i 706)

Proceeds from exercise of share options

 

 i 34

 

 i 130

Repurchase of common shares

 

( i 1,086)

 

( i 518)

Payment of common share dividends to shareholders

 

( i 506)

 

( i 483)

Other

 

( i 39)

 

( i 27)

Net cash used in financing activities

 

( i 1,330)

 

( i 943)

Effect of currency translation on cash

 

( i 9)

 

 i 9

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

( i 383)

 

 i 471

Cash, cash equivalents, and restricted cash at beginning of period

 

 i 1,203

 

 i 945

Cash, cash equivalents, and restricted cash at end of period

$

 i 820

$

 i 1,416

See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 i 

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 24, 2021.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2022 and fiscal 2021 are to our fiscal years ending September 30, 2022 and ended September 24, 2021, respectively.

 i 

2. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Restructuring charges, net

$

 i 26

$

 i 10

$

 i 69

$

 i 170

(Gain) loss on divestitures and impairment of held for sale businesses

( i 10)

 i 21

Other charges, net

 

 

 i 1

 

 

 i 4

Restructuring and other charges, net

$

 i 26

$

 i 11

$

 i 59

$

 i 195

 / 

Net restructuring and related charges by segment were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Transportation Solutions

$

 i 9

$

 i 2

$

 i 24

$

 i 130

Industrial Solutions

 

 i 11

 

 i 6

 

 i 29

 

 i 26

Communications Solutions

 

 i 6

 

 i 2

 

 i 16

 

 i 14

Restructuring charges, net

 i 26

 i 10

 i 69

 i 170

Plus: charges included in cost of sales(1)

 i 4

 i 16

Restructuring and related charges, net

$

 i 30

$

 i 10

$

 i 85

$

 i 170

(1)Charges included in cost of sales were attributable to inventory-related charges within the Industrial Solutions segment.
 / 
 / 

7

Table of Contents

TE CONNECTIVITY LTD.

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

Activity in our restructuring reserves was as follows:

 i 

Balance at

Balance at

  

September 24,

Changes in

Cash

Non-Cash

Currency

June 24,

    

2021

    

Charges

    

Estimate

    

Payments

    

Items

    

Translation

    

2022

    

(in millions)

Fiscal 2022 Actions:

Employee severance

$

$

 i 57

$

$

( i 4)

$

$

$

 i 53

Property, plant, and equipment and other non-cash charges

 i 27

( i 27)

 i 

Total

 i 84

( i 4)

( i 27)

 i 53

Fiscal 2021 Actions:

Employee severance

 i 152

 i 2

( i 4)

( i 73)

( i 10)

 i 67

Facility and other exit costs

 i 2

 i 3

( i 4)

 i 1

Property, plant, and equipment

 i 2

( i 2)

 i 

Total

 i 154

 i 7

( i 4)

( i 77)

( i 2)

( i 10)

 i 68

Pre-Fiscal 2021 Actions:

Employee severance

 i 135

( i 7)

( i 34)

( i 10)

 i 84

Facility and other exit costs

 i 15

 i 8

( i 4)

( i 11)

 i 8

Property, plant, and equipment

 i 4

( i 3)

( i 1)

 i 

Total

 i 150

 i 12

( i 14)

( i 45)

( i 1)

( i 10)

 i 92

Total Activity

$

 i 304

$

 i 103

$

( i 18)

$

( i 126)

$

( i 30)

$

( i 20)

$

 i 213

 / 

Fiscal 2022 Actions

During fiscal 2022, we initiated a restructuring program associated with footprint consolidation and cost structure improvements across all segments. During the nine months ended June 24, 2022, we recorded restructuring and related charges of $ i 84 million in connection with this program. We expect to complete all restructuring actions commenced during the nine months ended June 24, 2022 by the end of fiscal 2024 and to incur additional charges of approximately $ i 16 million.

 i 

The following table summarizes expected, incurred, and remaining charges for the fiscal 2022 program by segment as of June 24, 2022:

Total

Cumulative

Remaining

Expected

Charges

Expected

    

Charges

    

Incurred

    

Charges

    

(in millions)

Transportation Solutions

$

 i 28

$

 i 24

$

 i 4

Industrial Solutions

 

 i 47

 

 i 45

 

 i 2

Communications Solutions

 

 i 25

 

 i 15

 

 i 10

Total

$

 i 100

$

 i 84

$

 i 16

 / 

Fiscal 2021 Actions

During fiscal 2021, we initiated a restructuring program across all segments to optimize our manufacturing footprint and improve the cost structure of the organization. In connection with this program, during the nine months ended June 24, 2022 and June 25, 2021, we recorded net restructuring charges of $ i 3 million and $ i 162 million, respectively. We expect additional charges related to fiscal 2021 actions to be insignificant.

8

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

The following table summarizes charges incurred for the fiscal 2021 program by segment as of June 24, 2022:

Cumulative

Charges

    

Incurred

    

(in millions)

Transportation Solutions

$

 i 125

Industrial Solutions

 

 i 49

Communications Solutions

 

 i 24

Total

$

 i 198

 / 

Pre-Fiscal 2021 Actions

During the nine months ended June 24, 2022 and June 25, 2021, we recorded net restructuring credits of $ i 2 million and charges of $ i 8 million, respectively, related to pre-fiscal 2021 actions. We expect additional charges related to pre-fiscal 2021 actions to be insignificant.

Total Restructuring Reserves

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

 i 

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Accrued and other current liabilities

$

 i 160

$

 i 236

Other liabilities

 

 i 53

 

 i 68

Restructuring reserves

$

 i 213

$

 i 304

 / 

 i 

3. Acquisitions

During the nine months ended June 24, 2022, we acquired  i two businesses for a combined cash purchase price of $ i 141 million, net of cash acquired. The acquisitions were reported as part of our Communications Solutions segment from the date of acquisition.

We acquired  i two businesses for a combined cash purchase price of $ i 125 million, net of cash acquired, during the nine months ended June 25, 2021. The acquisitions were reported as part of our Industrial Solutions segment from the date of acquisition.

 / 
 i 

4. Inventories

Inventories consisted of the following:

 i 

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Raw materials

$

 i 419

$

 i 320

Work in progress

 

 i 1,190

 

 i 991

Finished goods

 

 i 1,419

 

 i 1,200

Inventories

$

 i 3,028

$

 i 2,511

 / 

 / 

9

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TE CONNECTIVITY LTD.

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

 i 

5. Goodwill

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

 i 

    

Transportation

    

Industrial

    

Communications

    

    

Solutions

Solutions

Solutions

Total

(in millions)

September 24, 2021(1)

$

 i 1,549

$

 i 3,446

$

 i 595

$

 i 5,590

Acquisitions

 i 82

 i 82

Purchase price adjustments

( i 101)

( i 101)

Currency translation and other

 

( i 64)

 

( i 130)

 

( i 25)

 

( i 219)

June 24, 2022(1)

$

 i 1,485

$

 i 3,215

$

 i 652

$

 i 5,352

(1)At June 24, 2022 and September 24, 2021, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ i  i 3,091 /  million, $ i  i 669 /  million, and $ i  i 489 /  million, respectively.
 / 

During the nine months ended June 24, 2022, we recognized goodwill in the Communications Solutions segment in connection with recent acquisitions. Also during the nine months ended June 24, 2022, we recognized purchase price adjustments in the Industrial Solutions segment in connection with prior year acquisitions, including  i two acquisitions that closed late in the fourth quarter of fiscal 2021. See Note 3 for additional information regarding acquisitions.

 / 
 i 

6. Intangible Assets, Net

Intangible assets consisted of the following:

 i 

June 24, 2022

September 24, 2021

    

Gross

    

    

Net

    

Gross

    

    

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

    

(in millions)

Customer relationships

$

 i 1,687

$

( i 700)

$

 i 987

$

 i 1,766

$

( i 660)

$

 i 1,106

Intellectual property

 i 1,216

( i 860)

 i 356

 i 1,262

( i 832)

 i 430

Other

 

 i 18

 

( i 6)

 

 i 12

 

 i 19

 

( i 6)

 

 i 13

Total

$

 i 2,921

$

( i 1,566)

$

 i 1,355

$

 i 3,047

$

( i 1,498)

$

 i 1,549

 / 

Intangible asset amortization expense was $ i  i 48 /  million for both the quarters ended June 24, 2022 and June 25, 2021, and $ i 145 million and $ i 144 million for the nine months ended June 24, 2022 and June 25, 2021, respectively.

 i 

At June 24, 2022, the aggregate amortization expense on intangible assets is expected to be as follows:

    

(in millions)

  

Remainder of fiscal 2022

$

 i 48

Fiscal 2023

 i 191

Fiscal 2024

 

 i 161

Fiscal 2025

 

 i 146

Fiscal 2026

 

 i 139

Fiscal 2027

 

 i 120

Thereafter

 

 i 550

Total

$

 i 1,355

 / 

 / 

10

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

7. Debt

During the nine months ended June 24, 2022, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, issued $ i 600 million aggregate principal amount of  i 2.50% senior notes due in February 2032. The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur. The notes are fully and unconditionally guaranteed as to payment on an unsecured basis by TE Connectivity Ltd.

During the nine months ended June 24, 2022, we reclassified € i 550 million of  i 1.10% senior notes due in March 2023 from long-term debt to short-term debt on the Condensed Consolidated Balance Sheet.

During the nine months ended June 24, 2022, TEGSA completed an early redemption of $ i 500 million aggregate principal amount of  i 3.50% senior notes due in February 2022.

As of June 24, 2022, TEGSA had $ i 237 million of commercial paper outstanding at a weighted-average interest rate of  i 1.92%. TEGSA had  i no commercial paper outstanding at September 24, 2021.

The fair value of our debt, based on indicative valuations, was approximately $ i 4,134 million and $ i 4,465 million at June 24, 2022 and September 24, 2021, respectively.

 / 
 i 

8. Leases

The components of lease cost were as follows:

 i 

For the

For the

Quarters Ended

    

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

    

(in millions)

    

Operating lease cost

$

 i 34

$

 i 31

$

 i 98

$

 i 90

Variable lease cost

 i 15

 i 13

 i 40

 i 37

Total lease cost

$

 i 49

$

 i 44

$

 i 138

$

 i 127

 / 

Cash flow information, including significant non-cash transactions, related to leases was as follows:

 i 

For the

Nine Months Ended

June 24,

June 25,

    

2022

    

2021

    

    

(in millions)

    

Cash paid for amounts included in the measurement of lease liabilities:

Payments for operating leases(1)

$

 i 92

$

 i 90

Right-of-use assets, including modifications of existing leases, obtained in exchange for operating lease liabilities

 i 102

 i 65

(1)These payments are included in cash flows from operating activities, primarily in changes in accrued and other current liabilities.
 / 
 / 

11

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

9. Commitments and Contingencies

Legal Proceedings

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

Trade Compliance Matters

We are investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and both our internal assessment and the resulting investigations by the agencies remain ongoing. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Environmental Matters

We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of June 24, 2022, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ i 17 million to $ i 45 million, and we accrued $ i 20 million as the probable loss, which was the best estimate within this range. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

Guarantees

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

At June 24, 2022, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ i 134 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $ i 116 million as of June 24, 2022 and are expected to expire at various dates through fiscal 2027. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

 / 

12

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

10. Financial Instruments

Foreign Currency Exchange Rate Risk

We utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. The aggregate notional value of these contracts was € i 200 million and € i 700 million at June 24, 2022 and September 24, 2021, respectively. Certain contracts were terminated during the nine months ended June 24, 2022; the remaining contracts mature in the fourth quarter of fiscal 2022. Under the terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros at  i 3.50% per annum and receive interest in U.S. dollars at a weighted-average rate of  i 5.26% per annum. Upon maturity, we will pay the notional value of the contracts in euros and receive U.S. dollars from our counterparties. In connection with the cross-currency swap contracts, both counterparties to each contract are required to provide cash collateral.

These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

 i 

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Prepaid expenses and other current assets

$

 i 18

$

Other liabilities

 

 

 i 20

 / 

At June 24, 2022 and September 24, 2021, collateral received from or paid to our counterparties approximated the net derivative position. Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset position, or prepaid expenses and other current assets when the contracts are in a net liability position on the Condensed Consolidated Balance Sheets. The impacts of these cross-currency swap contracts were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Losses recorded in other comprehensive income (loss)

$

( i 1)

$

( i 1)

$

( i 6)

    

$

( i 5)

Gains (losses) excluded from the hedging relationship(1)

 

 i 13

 

( i 11)

 

 i 52

 

( i 23)

(1)Gains and losses excluded from the hedging relationship are recognized prospectively in selling, general, and administrative expenses and are offset by losses and gains generated as a result of re-measuring certain intercompany loans to the U.S. dollar.
 / 

Hedge of Net Investment

We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies. The aggregate notional value of these hedges was $ i 2,203 million and $ i 3,798 million at June 24, 2022 and September 24, 2021, respectively.

We also use a cross-currency swap program to hedge our net investment in certain foreign operations. The aggregate notional value of the contracts under this program was $ i 1,767 million and $ i 1,430 million at June 24, 2022 and September 24, 2021, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of  i 1.51% per annum and pay  i no interest. Upon the maturity of these contracts at various dates through fiscal 2026, we will pay the notional value of the contracts in the designated foreign currency and receive U.S. dollars from our counterparties. We are not required to provide collateral for these contracts.

 / 

13

Table of Contents

TE CONNECTIVITY LTD.

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

These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

 i 

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Prepaid expenses and other current assets

$

 i 28

$

 i 3

Other assets

 

 i 97

 

 i 18

Accrued and other current liabilities

 i 13

Other liabilities

 i 18

 / 

The impacts of our hedge of net investment programs were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Foreign currency exchange gains (losses) on intercompany loans and external borrowings(1)

$

 i 156

$

( i 46)

$

 i 344

$

( i 81)

Gains (losses) on cross-currency swap contracts designated as hedges of net investment(1)

 

 i 78

 

( i 14)

 

 i 148

 

( i 41)

(1)Recorded as currency translation, a component of accumulated other comprehensive income (loss), and offset by changes attributable to the translation of the net investment.
 / 

Interest Rate Risk Management

We may utilize forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated issuance of fixed rate debt. During the nine months ended June 24, 2022, we terminated forward starting interest rate swap contracts with an aggregate notional value of $ i 450 million as a result of the issuance of our  i 2.50% senior notes due in 2032. At fiscal year end 2021, these forward starting interest rate swap contracts were recorded on the Condensed Consolidated Balance Sheet as follows; there were  i no such balances at June 24, 2022:

 i 

September 24,

    

2021

    

(in millions)

Prepaid expenses and other current assets

$

 i 7

Accrued and other current liabilities

 i 38

 / 

The impacts of these forward starting interest rate swap contracts were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Gains (losses) recorded in other comprehensive income (loss)

$

$

( i 11)

$

 i 13

    

$

 i 36

 / 

Commodity Hedges

As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in prices of commodities used in production. These contracts had an aggregate notional value of $ i  i 605 /  million and $ i 512 million at

14

Table of Contents

TE CONNECTIVITY LTD.

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

June 24, 2022 and September 24, 2021, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

 i 

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Prepaid expenses and other current assets

$

 i 2

$

 i 23

Accrued and other current liabilities

 i 57

 i 18

Other liabilities

 i 10

 i 4

 / 

The impacts of these commodity swap contracts were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Gains (losses) recorded in other comprehensive income (loss)

$

( i 106)

$

 i 24

$

( i 45)

    

$

 i 78

Gains reclassified from accumulated other comprehensive income (loss) into cost of sales

 i 15

 i 27

 i 35

 i 66

 / 

We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with commodity hedges will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.

 i 

11. Retirement Plans

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

 i 

Non-U.S. Plans

U.S. Plans

For the

For the

Quarters Ended

Quarters Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Operating expense:

Service cost

$

 i 11

$

 i 10

$

 i 2

$

 i 3

Other (income) expense:

Interest cost

 

 i 8

 

 i 7

 

 i 7

 

 i 7

Expected return on plan assets

 

( i 15)

 

( i 13)

 

( i 11)

 

( i 13)

Amortization of net actuarial loss

 

 i 6

 

 i 8

 

 

 i 3

Amortization of prior service credit

 

( i 1)

 

( i 3)

 

 

Net periodic pension benefit cost (credit)

$

 i 9

$

 i 9

$

( i 2)

$

 / 
 / 

15

Table of Contents

TE CONNECTIVITY LTD.

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

Non-U.S. Plans

U.S. Plans

For the

For the

Nine Months Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Operating expense:

Service cost

$

 i 31

$

 i 34

$

 i 6

$

 i 9

Other (income) expense:

Interest cost

 

 i 25

 

 i 21

 

 i 20

 

 i 23

Expected return on plan assets

 

( i 44)

 

( i 40)

 

( i 35)

 

( i 39)

Amortization of net actuarial loss

 

 i 19

 

 i 23

 

 i 2

 

 i 7

Amortization of prior service credit

 

( i 4)

 

( i 6)

 

 

Net periodic pension benefit cost (credit)

$

 i 27

$

 i 32

$

( i 7)

$

During the nine months ended June 24, 2022, we contributed $ i 29 million to our non-U.S. pension plans.

 i 

12. Income Taxes

We recorded income tax expense of $ i 116 million and $ i 124 million for the quarters ended June 24, 2022 and June 25, 2021, respectively. The income tax expense for the quarter ended June 24, 2022 included a $ i 21 million income tax benefit related to the tax impacts of an intercompany transaction. Our estimated annual effective tax rate for fiscal 2022 includes a total income tax benefit of approximately $ i 75 million related to this transaction, with a portion recognized in the nine months ended June 24, 2022 and the remainder to be recognized in the fourth quarter of fiscal 2022.

We recorded income tax expense of $ i 362 million and $ i 290 million for the nine months ended June 24, 2022 and June 25, 2021, respectively. The income tax expense for the nine months ended June 24, 2022 included a $ i 57 million income tax benefit related to the tax impacts of the intercompany transaction discussed above and $ i 27 million of income tax expense related to the write-down of certain deferred tax assets to the lower corporate tax rate enacted in the canton of Schaffhausen. In addition, the income tax expense for the nine months ended June 24, 2022 included $ i 12 million of income tax expense related to an income tax audit of an acquired entity. As we are entitled to indemnification of pre-acquisition period tax obligations under the terms of the purchase agreement, we recorded an associated indemnification receivable and other income of $ i 11 million during the nine months ended June 24, 2022. The income tax expense for the nine months ended June 25, 2021 included a $ i 29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.

During the nine months ended June 24, 2022, we completed additional intercompany transactions that resulted in a non-U.S. subsidiary recording an increase in deferred tax assets for tax loss and credit carryforwards of approximately $ i 4.0 billion. We do not expect this subsidiary to generate sufficient future taxable income to realize these deferred tax assets; therefore, we recognized a corresponding increase to the valuation allowance. Accordingly, there was no impact to the Condensed Consolidated Statement of Operations for the nine months ended June 24, 2022 or Condensed Consolidated Balance Sheet as of June 24, 2022.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of June 24, 2022, approximately $ i 100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of June 24, 2022.

 / 

16

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

13. Earnings Per Share

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

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Basic

 i 322

 i 330

 i 324

 i 331

Dilutive impact of share-based compensation arrangements

 i 2

 i 3

 i 3

 i 2

Diluted

 i 324

 i 333

 i 327

 i 333

 / 

For both the quarter and nine months ended June 24, 2022,  i  i one /  million share options were not included in the computation of diluted earnings per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive.

 / 
 i 

14. Shareholders’ Equity

Common Shares Held in Treasury

In March 2022, our shareholders approved the cancellation of approximately  i five million shares purchased under our share repurchase program during the period beginning September 26, 2020 and ending September 24, 2021. The capital reduction by cancellation of these shares was subject to a notice period and filing with the commercial register in Switzerland and became effective in May 2022.

Dividends

We paid cash dividends to shareholders as follows:

 i 

For the

For the

 

Quarters Ended

Nine Months Ended

 

    

June 24,

    

June 25,

    

June 24,

    

June 25,

 

    

2022

    

2021

    

2022

    

2021

    

Dividends paid per common share

$

 i 0.56

$

 i 0.50

$

 i 1.56

$

 i 1.46

 / 

In March 2022, our shareholders approved a dividend payment to shareholders of $ i 2.24 per share, payable in  i four equal quarterly installments of $ i 0.56 per share beginning in the third quarter of fiscal 2022 and ending in the second quarter of fiscal 2023.

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At June 24, 2022 and September 24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ i 538 million and $ i 327 million, respectively.

 / 

17

Table of Contents

TE CONNECTIVITY LTD.

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

Share Repurchase Program

During the quarter ended June 24, 2022, our board of directors authorized an increase of $ i 1.5 billion in our share repurchase program. Common shares repurchased under the share repurchase program were as follows:

 i 

For the

Nine Months Ended

June 24,

June 25,

    

2022

    

2021

    

(in millions)

Number of common shares repurchased

 

 i 8

 

 i 5

Repurchase value

 

$

 i 1,072

 

$

 i 591

 / 

At June 24, 2022, we had $ i 2.0 billion of availability remaining under our share repurchase authorization.

 i 

15. Share Plans

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

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Share-based compensation expense

 

$

 i 28

 

$

 i 24

$

 i 88

 

$

 i 73

 / 

As of June 24, 2022, there was $ i 160 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of  i 1.8 years.

 i 

During the quarter ended December 24, 2021, we granted the following share-based awards as part of our annual incentive plan grant:

Grant-Date

    

Shares

    

Fair Value

    

(in millions)

Share options

 i 0.8

$

 i 37.67

Restricted share awards

 i 0.3

 

 i 158.00

Performance share awards

 i 0.1

 i 158.00

 / 

As of June 24, 2022, we had  i 11 million shares available for issuance under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of September 17, 2020.

Share-Based Compensation Assumptions

 i 

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

Expected share price volatility

    

 

 i 29

%

    

Risk-free interest rate

 

 i 1.1

%

Expected annual dividend per share

$

 i 2.00

Expected life of options (in years)

 

 i  5.1

 / 

 / 

18

Table of Contents

TE CONNECTIVITY LTD.

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

 i 

16. Segment and Geographic Data

Net sales by segment(1) and industry end market(2) were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Transportation Solutions:

Automotive

$

 i 1,629

$

 i 1,600

$

 i 4,802

$

 i 4,859

Commercial transportation

 

 i 400

 

 i 382

 

 i 1,159

 

 i 1,095

Sensors

 

 i 271

 

 i 283

 

 i 811

 

 i 822

Total Transportation Solutions

 i 2,300

 i 2,265

 i 6,772

 i 6,776

Industrial Solutions:

Industrial equipment

 i 479

 i 377

 i 1,413

 i 1,011

Aerospace, defense, oil, and gas

 

 i 271

 

 i 260

 

 i 774

 

 i 777

Energy

 

 i 207

 

 i 187

 

 i 579

 

 i 544

Medical

 i 177

 i 178

 i 502

 i 495

Total Industrial Solutions

 i 1,134

 i 1,002

 i 3,268

 i 2,827

Communications Solutions:

Data and devices

 i 417

 i 329

 i 1,151

 i 841

Appliances

 

 i 246

 

 i 249

 

 i 731

 

 i 661

Total Communications Solutions

 i 663

 i 578

 i 1,882

 i 1,502

Total

$

 i 4,097

$

 i 3,845

$

 i 11,922

$

 i 11,105

(1)Intersegment sales were not material.
(2)Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.
 / 
 / 

19

Table of Contents

TE CONNECTIVITY LTD.

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

Net sales by geographic region(1) and segment were as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

$

 i 894

$

 i 913

$

 i 2,564

$

 i 2,729

Industrial Solutions

 

 i 470

 

 i 417

 

 i 1,368

 

 i 1,168

Communications Solutions

 

 i 84

 

 i 83

 

 i 263

 

 i 222

Total EMEA

 

 i 1,448

 

 i 1,413

 

 i 4,195

 

 i 4,119

Asia–Pacific:

Transportation Solutions

 

 i 825

 

 i 868

 

 i 2,636

 

 i 2,619

Industrial Solutions

 

 i 205

 

 i 183

 

 i 611

 

 i 517

Communications Solutions

 i 372

 i 333

 i 1,036

 i 877

Total Asia–Pacific

 

 i 1,402

 

 i 1,384

 

 i 4,283

 

 i 4,013

Americas:

Transportation Solutions

 i 581

 i 484

 i 1,572

 i 1,428

Industrial Solutions

 

 i 459

 

 i 402

 

 i 1,289

 

 i 1,142

Communications Solutions

 i 207

 i 162

 i 583

 i 403

Total Americas

 

 i 1,247

 

 i 1,048

 

 i 3,444

 

 i 2,973

Total

$

 i 4,097

$

 i 3,845

$

 i 11,922

$

 i 11,105

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

Operating income by segment was as follows:

 i 

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Transportation Solutions

$

 i 383

$

 i 433

$

 i 1,187

$

 i 1,139

Industrial Solutions

 i 169

 i 148

 i 440

 i 335

Communications Solutions

 i 167

 i 133

 i 469

 i 300

Total

$

 i 719

$

 i 714

$

 i 2,096

$

 i 1,774

 / 

20

Table of Contents

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

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

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

The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure. See “Non-GAAP Financial Measure” for additional information regarding this measure.

Overview

TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.

The third quarter and first nine months of fiscal 2022 included the following:

Our net sales increased 6.6% and 7.4% in the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021 due primarily to sales growth in the Industrial Solutions and Communications Solutions segments. On an organic basis, our net sales increased 10.6% and 9.0% during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021.
Our net sales by segment were as follows:
Transportation Solutions—Our net sales increased 1.5% in the third quarter of fiscal 2022 due to sales increases in the automotive and commercial transportation end markets, partially offset by sales declines in the sensors end market. In the first nine months of fiscal 2022, our net sales were flat as compared to the first nine months of fiscal 2021 as sales declines in the automotive and sensors end markets were offset by sales increases in the commercial transportation end market.
Industrial Solutions—Our net sales increased 13.2% and 15.6% in the third quarter and first nine months of fiscal 2022, respectively, primarily as a result of sales increases in the industrial equipment end market.
Communications Solutions—Our net sales increased 14.7% and 25.3% in the third quarter and first nine months of fiscal 2022, respectively, due primarily to sales increases in the data and devices end market.
Net cash provided by operating activities was $1,524 million in the first nine months of fiscal 2022.

Russia-Ukraine Military Conflict

We are monitoring the military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated sanctions. We suspended our business operations in Russia, and our operations in Ukraine have been reduced

21

Table of Contents

to focus on the safety of our employees. We have experienced increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. The increased costs and supply chain implications resulting from the conflict have not been significant to our business, and we have been able to partially mitigate them through price increases or productivity. Neither Russia nor Ukraine represents a material portion of our business, and the military conflict has not had a significant impact on our business, financial condition, or result of operations during the first nine months of fiscal 2022.

The full impact of the military conflict on our business operations and financial performance remains uncertain. The extent to which the conflict may impact our business in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, and supply chain disruptions. We will continue to actively monitor the conflict and assess the related sanctions and other effects and may take further actions if necessary.

COVID-19 Pandemic

The COVID-19 pandemic has affected nearly all regions around the world and resulted in business slowdowns or shutdowns and travel restrictions in affected areas. The pandemic had a negative impact on certain of our businesses in fiscal 2021 and continued to impact certain of our operations in China in the first nine months of fiscal 2022. The pandemic has not had a significant impact on our ability to staff our operations, and we do not expect that it will continue to have a significant impact on our businesses globally in fiscal 2022. Throughout our operations, we implemented additional health and safety measures for the protection of our employees, including providing personal protective equipment, enhanced cleaning and sanitizing of our facilities, and remote working arrangements.

The COVID-19 pandemic has impacted and continues to impact our business operations globally, causing disruption in our suppliers’ and customers’ supply chains, some of our business locations to reduce or suspend operations, and a reduction in demand for certain products from direct customers or end markets. In addition, the pandemic had far-reaching impacts on many additional aspects of our operations, both directly and indirectly, including with respect to its impacts on customer behaviors, business and manufacturing operations, inventory, our employees, and the market generally. We assessed the impact of the COVID-19 pandemic and adjusted our operations and businesses, a number of which are operating as essential businesses, and will continue to do so if necessary.

The extent to which the pandemic will continue to impact our business and the markets we serve will depend on future developments which may include the further spread of the virus, variant strains of the virus, and the resumption of high levels of infections and hospitalizations as well as the success of public health advancements, including vaccine production and distribution. While certain of our operations were shut down in China for a period of time in fiscal 2022, we do not expect the COVID-19 pandemic to have a significant impact on our businesses globally in fiscal 2022. However, it may have a negative impact on our financial condition, liquidity, and results of operations in future periods.

In response to the pandemic and resulting economic environment, we have taken and continue to focus on actions to manage costs. These include restructuring and other cost reduction initiatives, such as reducing discretionary spending and travel. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, shareholders, and the communities in which we operate.

Outlook

In the fourth quarter of fiscal 2022, we expect our net sales to be approximately $4.2 billion as compared to $3.8 billion in the fourth quarter of fiscal 2021. We expect diluted earnings per share from continuing operations to be approximately $1.79 per share in the fourth quarter of fiscal 2022. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $275 million and $0.11 per share, respectively, in the fourth quarter of fiscal 2022 as compared to the fourth quarter of fiscal 2021. Additionally, this outlook includes approximately $250 million in net sales and $0.10 earnings per share resulting from an additional week in the fourth quarter of fiscal 2022.

We expect our net sales to be approximately $16.1 billion in fiscal 2022 as compared to $14.9 billion in fiscal 2021. We expect diluted earnings per share from continuing operations to be approximately $7.04 per share in fiscal 2022. This

22

Table of Contents

outlook includes an additional week in fiscal 2022 and reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $700 million and $0.17 per share, respectively, in fiscal 2022 as compared to fiscal 2021.

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

We are monitoring the current macroeconomic environment, including any continued impacts from the Russia-Ukraine military conflict and the COVID-19 pandemic, and its potential effects on our customers and the end markets we serve. We have taken actions to manage costs and will continue to closely manage our costs in line with economic conditions. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund future capital needs. See further discussion in “Liquidity and Capital Resources.”

Acquisition

During the first nine months of fiscal 2022, we acquired two businesses for a combined cash purchase price of $141 million, net of cash acquired. The acquisitions were reported as part of our Communications Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Results of Operations

Net Sales

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

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

    

2021

    

    

2022

    

    

2021

    

    

 

($ in millions)

 

Transportation Solutions

$

2,300

56

%  

$

2,265

59

%  

$

6,772

57

%  

$

6,776

61

%  

Industrial Solutions

 

1,134

 

28

 

1,002

 

26

 

3,268

 

27

 

2,827

 

25

Communications Solutions

 

663

 

16

 

578

 

15

 

1,882

 

16

 

1,502

 

14

Total

$

4,097

 

100

%  

$

3,845

 

100

%  

$

11,922

 

100

%  

$

11,105

 

100

%  

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

Change in Net Sales for the Quarter Ended June 24, 2022

Change in Net Sales for the Nine Months Ended June 24, 2022

versus Net Sales for the Quarter Ended June 25, 2021

versus Net Sales for the Nine Months Ended June 25, 2021

Net Sales

Organic Net Sales

Acquisitions

Net Sales

Organic Net Sales

Acquisitions

    

Growth

Growth

Translation

(Divestiture)

    

Growth (Decline)

Growth

    

Translation

    

(Divestitures)

    

($ in millions)

 

Transportation Solutions

$

35

 

1.5

%  

$

192

 

8.3

%  

$

(157)

$

$

(4)

 

(0.1)

%  

$

251

 

3.7

%  

$

(255)

$

Industrial Solutions

 

132

 

13.2

 

125

 

12.7

 

(53)

 

60

 

441

 

15.6

 

380

 

13.5

 

(101)

 

162

Communications Solutions

 

85

 

14.7

 

92

 

15.9

 

(20)

 

13

 

380

 

25.3

 

378

 

25.1

 

(29)

 

31

Total

$

252

 

6.6

%  

$

409

 

10.6

%  

$

(230)

$

73

$

817

 

7.4

%  

$

1,009

 

9.0

%  

$

(385)

$

193

Net sales increased $252 million, or 6.6%, in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021. The increase in net sales resulted from organic net sales growth of 10.6% and net sales contributions of 1.9% from acquisitions and a divestiture, partially offset by the negative impact of foreign currency translation of 5.9% due to the weakening of certain foreign currencies. In the third quarter of fiscal 2022, pricing actions positively affected organic net sales by $159 million.

23

Table of Contents

In the first nine months of fiscal 2022, net sales increased $817 million, or 7.4%, as compared to the first nine months of fiscal 2021. The increase in net sales resulted from organic net sales growth of 9.0% and net sales contributions of 1.8% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 3.4% due to the weakening of certain foreign currencies. Pricing actions positively affected organic net sales by $332 million in the first nine months of fiscal 2022.

See further discussion of net sales below under “Segment Results.”

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

Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first nine months of fiscal 2022.

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

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

    

2021

    

    

2022

    

    

2021

    

    

($ in millions)

EMEA

$

1,448

36

%  

$

1,413

37

%  

$

4,195

35

%  

$

4,119

37

%  

Asia–Pacific

1,402

 

34

1,384

 

36

4,283

 

36

4,013

 

36

Americas

 

1,247

 

30

 

1,048

 

27

 

3,444

 

29

 

2,973

 

27

Total

$

4,097

 

100

%  

$

3,845

 

100

%  

$

11,922

 

100

%  

$

11,105

 

100

%  

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

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

Change in Net Sales for the Quarter Ended June 24, 2022

Change in Net Sales for the Nine Months Ended June 24, 2022

versus Net Sales for the Quarter Ended June 25, 2021

versus Net Sales for the Nine Months Ended June 25, 2021

Net Sales

Organic Net Sales

Acquisitions

Net Sales

Organic Net Sales

Acquisitions

    

Growth

    

Growth

    

Translation

    

(Divestiture)

    

Growth

    

Growth

Translation

(Divestitures)

    

($ in millions)

 

EMEA

$

35

 

2.5

%  

$

152

 

10.7

%  

$

(161)

$

44

$

76

 

1.8

%  

$

258

6.2

%  

$

(297)

$

115

Asia–Pacific

 

18

1.3

76

5.4

(72)

14

 

270

 

6.7

 

319

 

7.9

 

(88)

 

39

Americas

 

199

 

19.0

 

181

 

17.3

 

3

 

15

 

471

 

15.8

 

432

 

14.5

 

 

39

Total

$

252

 

6.6

%  

$

409

 

10.6

%  

$

(230)

$

73

$

817

 

7.4

%  

$

1,009

9.0

%  

$

(385)

$

193

24

Table of Contents

Cost of Sales and Gross Margin

The following table presents cost of sales and gross margin information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Cost of sales

$

2,769

$

2,577

$

192

$

8,027

$

7,481

$

546

As a percentage of net sales

 

67.6

%

 

67.0

%

 

  

 

67.3

%

 

67.4

%

 

  

Gross margin

$

1,328

$

1,268

$

60

$

3,895

$

3,624

$

271

As a percentage of net sales

 

32.4

%

 

33.0

%

 

  

 

32.7

%

 

32.6

%

 

  

Gross margin increased $60 million and $271 million in the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021. The increases were primarily a result of the positive impact of pricing actions and higher volume, partially offset by inflationary pressure on material and operating costs.

We use a wide variety of raw materials in the manufacture of our products, and cost of sales and gross margin are subject to variability in raw material prices. In recent years, raw material prices and availability have been impacted by worldwide events, including the COVID-19 pandemic and, more recently, the military conflict between Russia and Ukraine. As a result, we have experienced shortages and price increases in some of our input materials—including copper, gold, silver, and palladium—however, we have been able to initiate pricing actions which have partially offset these impacts. The following table presents the average prices incurred related to copper, gold, silver, and palladium:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

Measure

    

2022

    

2021

    

2022

    

2021

    

Copper

 

Lb.

$

4.12

$

3.41

 

$

4.02

$

3.07

 

Gold

 

Troy oz.

 

1,850

 

1,735

 

 

1,826

 

1,664

 

Silver

Troy oz.

24.72

22.92

24.31

21.11

Palladium

 

Troy oz.

 

2,383

 

2,438

 

 

2,370

 

2,229

 

We expect to purchase approximately 215 million pounds of copper, 135,000 troy ounces of gold, 2.7 million troy ounces of silver, and 15,000 troy ounces of palladium in fiscal 2022.

Operating Expenses

The following table presents operating expense information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Selling, general, and administrative expenses

$

393

$

366

$

27

$

1,172

$

1,128

$

44

As a percentage of net sales

 

9.6

%

 

9.5

%

 

  

 

9.8

%

 

10.2

%

 

  

Restructuring and other charges, net

$

26

$

11

$

15

$

59

$

195

$

(136)

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $27 million and $44 million in the third quarter and first nine months of fiscal 2022, respectively, from the same periods of fiscal 2021 due primarily to increased selling expenses to support higher sales levels, the impact of inflation, and incremental expenses attributable to recent acquisitions, partially offset by lower incentive compensation costs.

25

Table of Contents

Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.

During fiscal 2022 and 2021, we initiated restructuring programs associated with footprint consolidation and cost structure improvements across all segments. We incurred net restructuring and related charges of $85 million during the first nine months of fiscal 2022, of which $16 million was recorded in cost of sales. Annualized cost savings related to the fiscal 2022 actions commenced during the first nine months of fiscal 2022 are expected to be approximately $75 million and are expected to be realized by the end of fiscal 2024. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2022, we expect total restructuring charges to be approximately $150 million and total spending, which will be funded with cash from operations, to be approximately $160 million.

See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.

Operating Income

The following table presents operating income and operating margin information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Operating income

$

719

$

714

$

5

$

2,096

$

1,774

$

322

Operating margin

 

17.5

%

 

18.6

%

 

  

 

17.6

%

 

16.0

%

 

  

Operating income included the following:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Acquisition-related charges:

 

  

 

  

 

  

 

  

Acquisition and integration costs

$

11

$

9

$

29

$

23

Charges associated with the amortization of acquisition-related fair value adjustments

 

1

 

 

9

 

3

 

12

 

9

 

38

 

26

Restructuring and other charges, net

 

26

 

11

 

59

 

195

Restructuring-related charges recorded in cost of sales

4

16

Total

$

42

$

20

$

113

$

221

See discussion of operating income below under “Segment Results.”

26

Table of Contents

Non-Operating Items

The following table presents select non-operating information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Income tax expense

$

116

$

124

$

(8)

$

362

$

290

$

72

Effective tax rate

 

16.4

%

 

17.6

%

 

  

 

17.4

%

 

16.6

%

 

  

Income Taxes. See Note 12 to the Condensed Consolidated Financial Statements for discussion of items impacting income tax expense and the effective tax rate for the third quarters and first nine months of fiscal 2022 and 2021.

Segment Results

Transportation Solutions

Net Sales. The following table presents the Transportation Solutions segment’s net sales and the percentage of total net sales by industry end market(1):

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

    

2021

    

    

2022

    

    

2021

    

    

($ in millions)

Automotive

$

1,629

    

71

%  

$

1,600

    

71

%  

$

4,802

71

%  

$

4,859

72

%  

Commercial transportation

 

400

 

17

 

382

 

17

 

1,159

 

17

 

1,095

 

16

Sensors

 

271

 

12

 

283

 

12

 

811

 

12

 

822

 

12

Total

$

2,300

 

100

%  

$

2,265

 

100

%  

$

6,772

 

100

%  

$

6,776

 

100

%  

(1)Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

The following table provides an analysis of the change in the Transportation Solutions segment’s net sales by industry end market:

Change in Net Sales for the Quarter Ended June 24, 2022

Change in Net Sales for the Nine Months Ended June 24, 2022

versus Net Sales for the Quarter Ended June 25, 2021

versus Net Sales for the Nine Months Ended June 25, 2021

    

Net Sales

    

Organic Net Sales

    

    

Net Sales

    

Organic Net Sales

    

    

Growth (Decline)

Growth

Translation

Growth (Decline)

Growth

Translation

 

($ in millions)

 

Automotive

$

29

1.8

%  

$

148

9.1

%  

$

(119)

$

(57)

(1.2)

%  

$

137

2.7

%  

$

(194)

Commercial transportation

 

18

 

4.7

 

38

 

9.8

 

(20)

 

64

 

5.8

 

95

 

8.6

 

(31)

Sensors

 

(12)

 

(4.2)

 

6

 

1.5

 

(18)

 

(11)

 

(1.3)

 

19

 

2.2

 

(30)

Total

$

35

 

1.5

%  

$

192

 

8.3

%  

$

(157)

$

(4)

 

(0.1)

%  

$

251

 

3.7

%  

$

(255)

Net sales in the Transportation Solutions segment increased $35 million, or 1.5%, in the third quarter of fiscal 2022 from the third quarter of fiscal 2021 due to organic net sales growth of 8.3%, partially offset by the negative impact of foreign currency translation of 6.8%. Our organic net sales by industry end market were as follows:

Automotive—Our organic net sales increased 9.1% in the third quarter of fiscal 2022 with growth of 15.0% in the Americas region, 8.2% in the EMEA region, and 7.4% in the Asia–Pacific region. Overall, our organic net sales growth resulted primarily from increased content per vehicle. Global automotive production in the third quarter of fiscal 2022 was consistent with third quarter fiscal 2021 levels.

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Commercial transportation—Our organic net sales increased 9.8% in the third quarter of fiscal 2022 due primarily to market growth in the Americas and EMEA regions as well as content and share gains.
Sensors—Our organic net sales increased 1.5% in the third quarter of fiscal 2022 as a result of growth in industrial applications, partially offset by declines in transportation applications.

In the first nine months of fiscal 2022, net sales in the Transportation Solutions segment decreased slightly as compared to the first nine months of fiscal 2021 as the negative impact of foreign currency translation of 3.8% was offset by organic net sales growth of 3.7%. Our organic net sales by industry end market were as follows:

Automotive—Our organic net sales increased 2.7% in the first nine months of fiscal 2022 with growth of 6.5% in the Asia–Pacific region and 5.9% in the Americas region, partially offset by declines of 2.4% in the EMEA region. Overall, our organic net sales increased due primarily to increased content per vehicle, despite declines in global automotive production.
Commercial transportation—Our organic net sales increased 8.6% in the first nine months of fiscal 2022 primarily as a result of market growth in the Americas and EMEA regions as well as content and share gains.
Sensors—Our organic net sales increased 2.2% in the first nine months of fiscal 2022 due to growth in industrial applications, partially offset by declines in transportation applications.

Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Operating income

$

383

$

433

$

(50)

$

1,187

$

1,139

$

48

Operating margin

 

16.7

%

 

19.1

%

 

 

17.5

%

 

16.8

%

 

Operating income in the Transportation Solutions segment decreased $50 million in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021 and increased $48 million in the first nine months of fiscal 2022 as compared to the same period of fiscal 2021. Excluding the items below, operating income in the third quarter and first nine months of fiscal 2022 decreased primarily as a result of inflationary pressure on material and operating costs, partially offset by the positive impact of pricing actions.

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Acquisition-related charges:

 

  

 

  

 

 

  

Acquisition and integration costs

$

5

$

5

$

12

$

12

Charges associated with the amortization of acquisition-related fair value adjustments

 

 

 

 

3

 

5

 

5

 

12

 

15

Restructuring and other charges, net

9

2

 

12

 

130

Total

$

14

$

7

$

24

$

145

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Industrial Solutions

Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net sales by industry end market(1):

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

    

2021

    

    

2022

    

    

2021

    

    

($ in millions)

Industrial equipment

$

479

 

42

%  

$

377

 

37

%  

$

1,413

 

43

%  

$

1,011

 

36

%  

Aerospace, defense, oil, and gas

271

24

260

26

774

24

777

27

Energy

 

207

 

18

 

187

 

19

 

579

 

18

 

544

 

19

Medical

177

 

16

178

18

502

15

495

18

Total

$

1,134

 

100

%  

$

1,002

 

100

%  

$

3,268

 

100

%  

$

2,827

 

100

%  

(1)Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

The following table provides an analysis of the change in the Industrial Solutions segment’s net sales by industry end market:

Change in Net Sales for the Quarter Ended June 24, 2022

Change in Net Sales for the Nine Months Ended June 24, 2022

versus Net Sales for the Quarter Ended June 25, 2021

versus Net Sales for the Nine Months Ended June 25, 2021

Net Sales

Organic Net Sales

Acquisition

Net Sales

Organic Net Sales

Acquisitions

    

Growth (Decline)

    

Growth

    

Translation

    

(Divestiture)

    

Growth (Decline)

    

Growth

    

Translation

    

(Divestitures)

    

($ in millions)

 

Industrial equipment

$

102

 

27.1

%  

$

71

 

19.1

%  

$

(30)

$

61

$

402

 

39.8

%  

$

283

27.9

%  

$

(55)

$

174

Aerospace, defense, oil, and gas

 

11

4.2

22

8.7

(10)

(1)

 

(3)

(0.4)

16

2.0

(18)

(1)

Energy

20

 

10.7

 

31

 

16.7

 

(11)

 

35

 

6.4

 

69

12.7

 

(23)

(11)

Medical

 

(1)

 

(0.6)

 

1

 

0.6

 

(2)

 

 

7

 

1.4

 

12

2.2

 

(5)

Total

$

132

 

13.2

%  

$

125

 

12.7

%  

$

(53)

$

60

$

441

15.6

%  

$

380

 

13.5

%  

$

(101)

$

162

In the Industrial Solutions segment, net sales increased $132 million, or 13.2%, in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021 due to organic net sales growth of 12.7% and net sales contributions of 5.9% from an acquisition and a divestiture, partially offset by the negative impact of foreign currency translation of 5.4%. Our organic net sales by industry end market were as follows:

Industrial equipment—Our organic net sales increased 19.1% in the third quarter of fiscal 2022 due to growth in all regions and continued strength in factory automation and controls applications.
Aerospace, defense, oil, and gas—Our organic net sales increased 8.7% in the third quarter of fiscal 2022 primarily as a result of growth in the commercial aerospace and the defense markets.
Energy—Our organic net sales increased 16.7% in the third quarter of fiscal 2022 with growth across all regions and continued strength in renewable energy applications.
Medical—Our organic net sales increased 0.6% in the third quarter of fiscal 2022 due to market growth in surgical and imaging as well as interventional medical applications.

Net sales in the Industrial Solutions segment increased $441 million, or 15.6%, in the first nine months of fiscal 2022 as compared to the first nine months of fiscal 2021 due to organic net sales growth of 13.5% and net sales contributions

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of 5.7% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 3.6%. Our organic net sales by industry end market were as follows:

Industrial equipment—Our organic net sales increased 27.9% in the first nine months of fiscal 2022 as a result of growth in all regions and continued strength in factory automation and controls applications.
Aerospace, defense, oil, and gas—Our organic net sales increased 2.0% in the first nine months of fiscal 2022 due to growth in the commercial aerospace market, partially offset by declines in the oil and gas and the defense markets.
Energy—Our organic net sales increased 12.7% in the first nine months of fiscal 2022 due to growth across all regions and continued strength in renewable energy applications.
Medical—Our organic net sales increased 2.2% in the first nine months of fiscal 2022 as a result of market growth in surgical and imaging as well as interventional medical applications.

Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Operating income

$

169

$

148

$

21

$

440

$

335

$

105

Operating margin

 

14.9

%

 

14.8

%

 

  

 

13.5

%

 

11.9

%

 

  

Operating income in the Industrial Solutions segment increased $21 million and $105 million in the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021. Excluding the items below, operating income increased primarily as a result of higher volume and the positive impact of pricing actions, partially offset by inflationary pressure on material and operating costs.

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

2022

    

2021

    

(in millions)

Acquisition-related charges:

 

  

 

  

 

  

 

  

 

Acquisition and integration costs

$

5

$

4

$

15

$

11

Charges associated with the amortization of acquisition-related fair value adjustments

 

1

 

 

9

 

 

6

 

4

 

24

 

11

Restructuring and other charges, net

 

11

 

6

 

31

 

49

Restructuring-related charges recorded in cost of sales

4

16

Total

$

21

$

10

$

71

$

60

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Communications Solutions

Net Sales. The following table presents the Communications Solutions segment’s net sales and the percentage of total net sales by industry end market(1):

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

    

2021

    

    

2022

    

    

2021

    

    

($ in millions)

Data and devices

$

417

63

%  

$

329

57

%  

$

1,151

61

%  

$

841

56

%  

Appliances

 

246

 

37

 

249

 

43

 

731

 

39

 

661

 

44

Total

$

663

 

100

%  

$

578

 

100

%  

$

1,882

 

100

%  

$

1,502

 

100

%  

(1)Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

The following table provides an analysis of the change in the Communications Solutions segment’s net sales by industry end market:

Change in Net Sales for the Quarter Ended June 24, 2022

Change in Net Sales for the Nine Months Ended June 24, 2022

versus Net Sales for the Quarter Ended June 25, 2021

versus Net Sales for the Nine Months Ended June 25, 2021

    

Net Sales

    

Organic Net Sales

    

    

Net Sales

    

Organic Net Sales

    

    

Growth (Decline)

Growth

Translation

Acquisition

Growth

Growth

Translation

Acquisition

($ in millions)

Data and devices

$

88

26.7

%  

$

86

26.2

%  

$

(11)

$

13

$

310

36.9

%  

$

295

35.0

%  

$

(16)

$

31

Appliances

 

(3)

 

(1.2)

 

6

 

2.2

 

(9)

 

 

70

 

10.6

 

83

 

12.4

 

(13)

 

Total

$

85

 

14.7

%  

$

92

 

15.9

%  

$

(20)

 

$

13

$

380

 

25.3

%  

$

378

 

25.1

%  

$

(29)

$

31

Net sales in the Communications Solutions segment increased $85 million, or 14.7%, in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021 due primarily to organic net sales growth of 15.9%. Our organic net sales by industry end market were as follows:

Data and devices—Our organic net sales increased 26.2% in the third quarter of fiscal 2022 as a result of market strength in all regions and growth across all product lines.
Appliances—Our organic net sales increased 2.2% in the third quarter of fiscal 2022 due to sales growth in the Americas and EMEA regions attributable primarily to share gains, partially offset by declines in the Asia–Pacific region.

In the first nine months of fiscal 2022, net sales in the Communications Solutions segment increased $380 million, or 25.3%, as compared to the first nine months of fiscal 2021 due primarily to organic net sales growth of 25.1%. Our organic net sales by industry end market were as follows:

Data and devices—Our organic net sales increased 35.0% in the first nine months of fiscal 2022 due to market strength in all regions and growth across all product lines.
Appliances—Our organic net sales increased 12.4% in the first nine months of fiscal 2022 due to sales growth in the Americas and EMEA regions resulting primarily from share gains, partially offset by declines in the Asia–Pacific region.

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Table of Contents

Operating Income. The following table presents the Communications Solutions segment’s operating income and operating margin information:

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

2022

    

2021

    

Change

     

2022

    

2021

    

Change

    

($ in millions)

Operating income

$

167

$

133

$

34

$

469

$

300

$

169

Operating margin

 

25.2

%

 

23.0

%

 

 

24.9

%

 

20.0

%

 

  

Operating income in the Communications Solutions segment increased $34 million and $169 million in the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021. Excluding the items below, operating income increased due primarily to higher volume.

For the

For the

Quarters Ended

Nine Months Ended

June 24,

June 25,

June 24,

June 25,

    

    

2022

    

2021

    

2022

    

2021

(in millions)

Acquisition and integration costs

$

1

$

$

2

$

Restructuring and other charges, net

6

3

16

16

Total

$

7

$

3

$

18

$

16

Liquidity and Capital Resources

Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of €550 million of 1.10% senior notes due in March 2023. We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions. We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs.

Cash Flows from Operating Activities

In the first nine months of fiscal 2022, net cash provided by operating activities decreased $378 million to $1,524 million from $1,902 million in the first nine months of fiscal 2021. The decrease resulted primarily from the impact of increased working capital levels including changes in accrued and other current liabilities resulting from higher incentive compensation payments, partially offset by higher pre-tax income. The amount of income taxes paid, net of refunds, during the first nine months of fiscal 2022 and 2021 was $326 million and $291 million, respectively.

Cash Flows from Investing Activities

Capital expenditures were $556 million and $454 million in the first nine months of fiscal 2022 and 2021, respectively. We expect fiscal 2022 capital spending levels to be approximately 5% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.

During the first nine months of fiscal 2022, we acquired two businesses for a combined cash purchase price of $141 million, net of cash acquired. We acquired two businesses for a combined cash purchase price of $125 million, net of cash

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Table of Contents

acquired, during the first nine months of fiscal 2021. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Cash Flows from Financing Activities and Capitalization

Total debt at June 24, 2022 and September 24, 2021 was $4,202 million and $4,092 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.

During the first nine months of fiscal 2022, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, issued $600 million aggregate principal amount of 2.50% senior notes due in February 2032. The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur.

During the first nine months of fiscal 2022, TEGSA completed an early redemption of $500 million aggregate principal amount of 3.50% senior notes due in February 2022.

As of June 24, 2022, TEGSA had $237 million of commercial paper outstanding at a weighted-average interest rate of 1.92%. TEGSA had no commercial paper outstanding at September 24, 2021.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of June 2026 and total commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at June 24, 2022 or September 24, 2021.

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of June 24, 2022, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future.

In addition to the Credit Facility, TEGSA is the borrower under our senior notes and commercial paper. TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by its parent, TE Connectivity Ltd.

Payments of common share dividends to shareholders were $506 million and $483 million in the first nine months of fiscal 2022 and 2021, respectively.

In March 2022, our shareholders approved a dividend payment to shareholders of $2.24 per share, payable in four equal quarterly installments of $0.56 per share beginning in the third quarter of fiscal 2022 and ending in the second quarter of fiscal 2023.

During the third quarter of fiscal 2022, our board of directors authorized an increase of $1.5 billion in our share repurchase program. We repurchased approximately eight million of our common shares for $1,072 million and approximately five million of our common shares for $591 million under the share repurchase program during the first nine months of fiscal 2022 and 2021, respectively. At June 24, 2022, we had $2.0 billion of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Ltd. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present

33

Table of Contents

summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd. and TEGSA on a combined basis.

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Balance Sheet Data:

Total current assets

$

736

$

452

Total noncurrent assets(1)

 

4,265

 

1,829

Total current liabilities

 

1,567

 

1,144

Total noncurrent liabilities(2)

17,824

12,443

(1)Includes $4,167 million and $1,810 million as of June 24, 2022 and September 24, 2021, respectively, of intercompany loans receivable from non-guarantor subsidiaries.
(2)Includes $14,445 million and $8,832 million as of June 24, 2022 and September 24, 2021, respectively, of intercompany loans payable to non-guarantor subsidiaries.

For the

For the

Nine Months Ended

Fiscal Year Ended

June 24,

September 24,

    

2022

    

2021

    

(in millions)

Statement of Operations Data:

Loss from continuing operations

$

(13)

$

(486)

Net loss

 

(13)

 

(479)

Guarantees

In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2022 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows.

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

At June 24, 2022, we had outstanding letters of credit, letters of guarantee, and surety bonds of $134 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $116 million as of June 24, 2022 and are expected to expire at various dates through fiscal 2027. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

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Table of Contents

Commitments and Contingencies

Legal Proceedings

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

Trade Compliance Matters

We are investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and both our internal assessment and the resulting investigations by the agencies remain ongoing. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Critical Accounting Policies and Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.

Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021. There were no significant changes to this information during the first nine months of fiscal 2022.

Non-GAAP Financial Measure

Organic Net Sales Growth (Decline)

We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity.

Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The tables presented in

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“Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP.

Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts.

Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law.

The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021, and in this report, could cause our results to differ materially from those expressed in forward-looking statements:

conditions in the global or regional economies and global capital markets, and cyclical industry conditions, including recession, inflation, and higher interest rates;
conditions affecting demand for products in the industries we serve, particularly the automotive industry;
risk of future goodwill impairment;
competition and pricing pressure;
market acceptance of our new product introductions and product innovations and product life cycles;
raw material availability, quality, and cost;
fluctuations in foreign currency exchange rates and impacts of offsetting hedges;
financial condition and consolidation of customers and vendors;
reliance on third-party suppliers;
risks associated with current and future acquisitions and divestitures;
global risks of business interruptions due to natural disasters or other disasters such as the COVID-19 pandemic, which have impacted and could continue to negatively impact our results of operations as well as

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customer behaviors, business, and manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business;
global risks of political, economic, and military instability, including continuing military conflict between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries, and volatile and uncertain economic conditions in China;
risks associated with security breaches and other disruptions to our information technology infrastructure;
risks related to compliance with current and future environmental and other laws and regulations;
risks associated with compliance with applicable antitrust or competition laws or applicable trade regulations;
our ability to protect our intellectual property rights;
risks of litigation;
our ability to operate within the limitations imposed by our debt instruments;
the possible effects on us of various non-U.S. and U.S. legislative proposals and other initiatives that, if adopted, could materially increase our worldwide corporate effective tax rate, increase global cash taxes, and negatively impact our U.S. government contracts business;
various risks associated with being a Swiss corporation;
the impact of fluctuations in the market price of our shares; and
the impact of certain provisions of our articles of association on unsolicited takeover proposals.

There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposures to market risk during the first nine months of fiscal 2022. For further discussion of our exposures to market risk, refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of June 24, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 24, 2022.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 24, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended September 24, 2021, except as set forth in “Part II. Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarterly period ended December 24, 2021. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021 and “Part II. Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarterly period ended December 24, 2021 for additional information regarding legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021 except as described below. The risk factors described in our Annual Report on Form 10-K, in addition to other information set forth below and in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.

We have suffered and could continue to suffer significant business interruptions, including impacts resulting from the COVID-19 pandemic and other macroeconomic factors.

Our operations and those of our suppliers and customers, and the supply chains that support their operations, may be vulnerable to interruption by natural disasters such as earthquakes, tsunamis, typhoons, tornados, or floods; other disasters such as fires, explosions, acts of terrorism, or war, including continuing military conflict between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries; disease or other adverse health developments, including impacts resulting from the COVID-19 pandemic; or failures of management information or other systems due to internal or external causes. In addition, such interruptions could result in a widespread crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our end customers’ products. If a business interruption occurs and we are unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations, financial position, and cash flows could be materially adversely affected. The COVID-19 pandemic impacted and continues to impact countries, communities, workforces, supply chains, and markets around the world, and as a result, we have experienced disruptions and restrictions on our employees’ ability to travel, as well as temporary closures of our facilities and the facilities of our customers, suppliers, and other vendors in our supply chain. As a result of the ongoing impacts of the COVID-19 pandemic, some of our employees are continuing to work from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks. The COVID-19 pandemic had a negative impact on certain of our businesses in fiscal 2021 and continued to impact certain of our operations in China in the first nine months of fiscal 2022. While certain of our operations in China were shut down for a period of time in fiscal 2022, we do not expect the COVID-19 pandemic to have a significant impact on our businesses globally in fiscal 2022. However, it may have a negative impact on our financial condition, liquidity, and results of operations in future periods. The extent to which the COVID-19 pandemic will further impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the further spread of the virus to additional persons and geographic regions; the severity of the virus; variant strains of the virus; the duration of the pandemic; resumption of high levels of infections and hospitalizations; the success of public health advancements, including vaccine production and distribution; the resulting impact on our suppliers’ and customers’ supply chains and financial positions, including their ability to pay us; the actions that may be taken by various governmental authorities in response to the outbreak in jurisdictions in which we operate; and the possible impact on the global economy and local economies in which we operate. Further, to the extent the COVID-19 pandemic adversely affects our business, results of operations, or financial condition, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section and in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021.

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We are subject to global risks of political, economic, and military instability.

Our workforce; manufacturing, research, administrative, and sales facilities; markets; customers; and suppliers are located throughout the world. As a result, we are exposed to risks that could negatively affect sales or profitability, including:

changes in global trade policies, including sanctions, tariffs, trade barriers, and trade disputes;
regulations related to customs and import/export matters;
variations in lengths of payment cycles and challenges in collecting accounts receivable;
tax law and regulatory changes in Switzerland, the U.S., and the European Union (“EU”) among other jurisdictions, including tax law and regulatory changes that may be effected as a result of tax policy recommendations from quasi-governmental organizations such as the Organisation for Economic Co-operation and Development (“OECD”), examinations by taxing authorities, variations in tax laws from country to country, changes to the terms of income tax treaties, and difficulties in the tax-efficient repatriation of cash generated or held in a number of jurisdictions;
employment regulations and local labor conditions, including increases in employment costs, particularly in low-cost regions in which we currently operate;
difficulties protecting intellectual property;
instability in economic or political conditions, including sovereign debt levels, Eurozone uncertainty, inflation, recession, and actual or anticipated military or political conflicts, including continuing military conflict between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries;
the impact of the United Kingdom’s withdrawal from the EU (commonly referred to as “Brexit”) could cause disruptions to, and create uncertainty surrounding, our business, including affecting our relationships with existing and potential customers and suppliers; and
the impact of each of the foregoing on our outsourcing and procurement arrangements.

We have sizeable operations in China. As of fiscal year end 2021, we had 16 principal manufacturing sites in China. In addition, approximately 22% of our net sales were made to customers in China in both fiscal 2021 and the first nine months of fiscal 2022. Economic conditions in China have been, and may continue to be, volatile and uncertain. In addition, the legal and regulatory system in China continues to evolve and is subject to change. Accordingly, our operations and transactions with customers in China could be adversely affected by changes to market conditions, changes to the regulatory environment, or interpretation of Chinese law.

In addition, any downgrade by rating agencies of long-term U.S. sovereign debt or downgrades or defaults of sovereign debt of other nations may negatively affect global financial markets and economic conditions, which could negatively affect our business, financial condition, and liquidity.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information about our purchases of our common shares during the quarter ended June 24, 2022:

Maximum

Total Number of

Approximate

Shares Purchased

Dollar Value

as Part of

of Shares that May

Total Number

Average Price

Publicly Announced

Yet Be Purchased

of Shares

Paid Per

Plans or

Under the Plans

Period

    

Purchased(1)

    

Share(1)

    

Programs(2)

    

or Programs(2)

    

March 26–April 22, 2022

703,324

$

127.15

703,300

$

749,753,574

April 23–May 27, 2022

 

1,038,179

 

123.93

 

1,030,000

 

622,114,801

May 28–June 24, 2022

 

841,100

 

122.87

 

841,100

 

2,018,771,036

Total

 

2,582,603

124.46

 

2,574,400

 

  

(1)These columns include the following transactions which occurred during the quarter ended June 24, 2022:
(i)the acquisition of 8,203 common shares from individuals in order to satisfy tax withholding requirements in connection with the vesting of restricted share awards issued under equity compensation plans; and
(ii)open market purchases totaling 2,574,400 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007.
(2)During the quarter ended June 24, 2022, our board of directors authorized an increase of $1.5 billion in our share repurchase program. Our share repurchase program authorizes us to purchase a portion of our outstanding common shares from time to time through open market or private transactions, depending on business and market conditions. The share repurchase program does not have an expiration date.

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ITEM 6. EXHIBITS

Exhibit Number

Exhibit

3.1

Articles of Association of TE Connectivity Ltd., as amended and restated (incorporated by reference to Exhibit 3.1 to TE Connectivity’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2022)

22.1

*

Guaranteed Securities

31.1

*

Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

*

Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

**

Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document(1)(2)

101.SCH

Inline XBRL Taxonomy Extension Schema Document(2)

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document(2)

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document(2)

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document(2)

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document(2)

104

Cover Page Interactive Data File(3)

*Filed herewith

**

Furnished herewith

(1)Submitted electronically with this report in accordance with the provisions of Regulation S-T
(2)The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
(3)Formatted in Inline XBRL and contained in exhibit 101

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TE CONNECTIVITY LTD.

By:

/s/ Heath A. Mitts

Heath A. Mitts
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)

Date: July 29, 2022

42


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
9/30/22
9/24/22
Filed on:7/29/22
7/22/22
6/25/22
For Period end:6/24/22
5/27/22SD
4/22/22
3/25/2210-Q
12/24/2110-Q
9/24/2110-K
6/25/2110-Q
6/24/21
3/26/2110-Q
9/26/20
9/25/2010-K
9/17/20
 List all Filings 


1 Previous Filing that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/19/22  TE Connectivity Ltd.              8-K:5,9     5/19/22   11:517K                                   Toppan Merrill/FA
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