TE Connectivity 10-Q 2023-06-30

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2023
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland (Jurisdiction of Incorporation)	98-0518048 (I.R.S. Employer Identification No.)
Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland (Address of principal executive offices)	+41 (0)52 633 66 61 (Registrant’s telephone number)

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


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

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

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

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

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

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

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

The number of common shares outstanding as of July 21, 2023 was 313,938,622.

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 30, 2023 and June 24, 2022 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended June 30, 2023 and June 24, 2022 (unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022 (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Quarters and Nine Months Ended June 30, 2023 and June 24, 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2023 and June 24, 2022 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

Part II.	Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 5.	Other Information	39
Item 6.	Exhibits	39
Signatures		40

i

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the				For the
	Quarters Ended				Nine Months Ended
	June 30,		June 24,		June 30,		June 24,
	2023		2022		2023		2022

	(in millions, except per share data)
Net sales	$	3,998	$	4,097	$	11,999	$	11,922
Cost of sales		2,699		2,769		8,229		8,027
Gross margin		1,299		1,328		3,770		3,895
Selling, general, and administrative expenses		431		393		1,258		1,172
Research, development, and engineering expenses		176		179		534		539
Acquisition and integration costs		9		11		26		29
Restructuring and other charges, net		53		26		283		59
Operating income		630		719		1,669		2,096
Interest income		18		3		39		9
Interest expense		(20)		(18)		(61)		(48)
Other income (expense), net		(4)		4		(13)		24
Income from continuing operations before income taxes		624		708		1,634		2,081
Income tax expense		(96)		(116)		(283)		(362)
Income from continuing operations		528		592		1,351		1,719
Income from discontinued operations, net of income taxes		—		2		7		1
Net income	$	528	$	594	$	1,358	$	1,720

Basic earnings per share:
Income from continuing operations	$	1.68	$	1.84	$	4.28	$	5.31
Income from discontinued operations		—		0.01		0.02		—
Net income		1.68		1.84		4.30		5.31

Diluted earnings per share:
Income from continuing operations	$	1.67	$	1.83	$	4.25	$	5.26
Income from discontinued operations		—		0.01		0.02		—
Net income		1.67		1.83		4.27		5.26

Weighted-average number of shares outstanding:
Basic		315		322		316		324
Diluted		317		324		318		327

See Notes to Condensed Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the				For the
	Quarters Ended				Nine Months Ended
	June 30,		June 24,		June 30,		June 24,
	2023		2022		2023		2022

	(in millions)
Net income	$	528	$	594	$	1,358	$	1,720
Other comprehensive income (loss):
Currency translation		(25)		(225)		358		(216)
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		1		4		4		12
Gains (losses) on cash flow hedges, net of income taxes		(42)		(112)		65		(65)
Other comprehensive income (loss)		(66)		(333)		427		(269)
Comprehensive income		462		261		1,785		1,451
Less: comprehensive (income) loss attributable to noncontrolling interests		(1)		4		(12)		11
Comprehensive income attributable to TE Connectivity Ltd.	$	461	$	265	$	1,773	$	1,462

See Notes to Condensed Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,		September 30,
	2023		2022

	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	1,131	$	1,088
Accounts receivable, net of allowance for doubtful accounts of $42 and $45, respectively		2,998		2,865
Inventories		2,801		2,676
Prepaid expenses and other current assets		719		639
Total current assets		7,649		7,268
Property, plant, and equipment, net		3,781		3,567
Goodwill		5,528		5,258
Intangible assets, net		1,242		1,288
Deferred income taxes		2,680		2,498
Other assets		821		903
Total assets	$	21,701	$	20,782
Liabilities, redeemable noncontrolling interests, and shareholders' equity
Current liabilities:
Short-term debt	$	291	$	914
Accounts payable		1,616		1,593
Accrued and other current liabilities		2,351		2,125
Total current liabilities		4,258		4,632
Long-term debt		3,915		3,292
Long-term pension and postretirement liabilities		735		695
Deferred income taxes		211		244
Income taxes		335		304
Other liabilities		791		718
Total liabilities		10,245		9,885
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests		107		95
Shareholders' equity:
Common shares, CHF 0.57 par value, 322,470,281 shares authorized and issued, and 330,830,781 shares authorized and issued, respectively		142		146
Accumulated earnings		12,372		12,832
Treasury shares, at cost, 8,271,688 and 12,749,540 shares, respectively		(1,085)		(1,681)
Accumulated other comprehensive loss		(80)		(495)

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Item 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

In the quarter ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K.

ITEM 6. EXHIBITS


Exhibit Number		Exhibit
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)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File(2)

*Filed herewith

**	Furnished herewith

(1)	The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

(2)	Formatted in Inline XBRL and contained in exhibit 101

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 28, 2023