TE Connectivity 10-Q 2024-03-29

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 March 29, 2024
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

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

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


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

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

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

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

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

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

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

The number of common shares outstanding as of April 19, 2024 was 306,228,494.

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q


		Page
Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations for the Quarters and Six Months Ended March 29, 2024 and March 31, 2023 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended March 29, 2024 and March 31, 2023 (unaudited)	2
	Condensed Consolidated Balance Sheets as of March 29, 2024 and September 29, 2023 (unaudited)	3
	Condensed Consolidated Statements of Equity for the Quarters and Six Months Ended March 29, 2024 and March 31, 2023 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 29, 2024 and March 31, 2023 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

Part II.	Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

i

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the				For the
	Quarters Ended				Six Months Ended
	March 29,		March 31,		March 29,		March 31,
	2024		2023		2024		2023

	(in millions, except per share data)
Net sales	$	3,967	$	4,160	$	7,798	$	8,001
Cost of sales		2,604		2,876		5,111		5,530
Gross margin		1,363		1,284		2,687		2,471
Selling, general, and administrative expenses		444		435		868		827
Research, development, and engineering expenses		184		185		357		358
Acquisition and integration costs		3		8		11		17
Restructuring and other charges, net		40		119		61		230
Operating income		692		537		1,390		1,039
Interest income		19		12		41		21
Interest expense		(19)		(20)		(37)		(41)
Other expense, net		(5)		(4)		(8)		(9)
Income from continuing operations before income taxes		687		525		1,386		1,010
Income tax (expense) benefit		(146)		(100)		959		(187)
Income from continuing operations		541		425		2,345		823
Income (loss) from discontinued operations, net of income taxes		—		8		(1)		7
Net income	$	541	$	433	$	2,344	$	830

Basic earnings per share:
Income from continuing operations	$	1.76	$	1.34	$	7.59	$	2.60
Income (loss) from discontinued operations		—		0.03		—		0.02
Net income		1.76		1.37		7.59		2.62

Diluted earnings per share:
Income from continuing operations	$	1.75	$	1.34	$	7.54	$	2.58
Income (loss) from discontinued operations		—		0.03		—		0.02
Net income		1.75		1.36		7.54		2.60

Weighted-average number of shares outstanding:
Basic		308		316		309		317
Diluted		310		318		311		319

See Notes to Condensed Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	For the				For the
	Quarters Ended				Six Months Ended
	March 29,		March 31,		March 29,		March 31,
	2024		2023		2024		2023

	(in millions)
Net income	$	541	$	433	$	2,344	$	830
Other comprehensive income (loss):
Currency translation		(113)		78		50		383
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		6		1		(12)		3
Gains on cash flow hedges, net of income taxes		10		38		38		107
Other comprehensive income (loss)		(97)		117		76		493
Comprehensive income		444		550		2,420		1,323
Less: comprehensive (income) loss attributable to noncontrolling interests		2		(2)		(2)		(11)
Comprehensive income attributable to TE Connectivity Ltd.	$	446	$	548	$	2,418	$	1,312

See Notes to Condensed Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 29,		September 29,
	2024		2023

	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	1,176	$	1,661
Accounts receivable, net of allowance for doubtful accounts of $38 and $30, respectively		2,874		2,967
Inventories		2,744		2,552
Prepaid expenses and other current assets		710		712
Total current assets		7,504		7,892
Property, plant, and equipment, net		3,799		3,754
Goodwill		5,678		5,463
Intangible assets, net		1,220		1,175
Deferred income taxes		3,813		2,600
Other assets		810		828
Total assets	$	22,824	$	21,712
Liabilities, redeemable noncontrolling interests, and equity
Current liabilities:
Short-term debt	$	1,235	$	682
Accounts payable		1,598		1,563
Accrued and other current liabilities		2,330		2,218
Total current liabilities		5,163		4,463
Long-term debt		2,961		3,529
Long-term pension and postretirement liabilities		736		728
Deferred income taxes		186		185
Income taxes		372		365
Other liabilities		846		787
Total liabilities		10,264		10,057
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests		106		104
Equity:
TE Connectivity Ltd. shareholders' equity:
Common shares, CHF 0.57 par value, 316,574,781 shares authorized and issued, and 322,470,281 shares authorized and issued, respectively		139		142
Accumulated earnings		13,689		12,947
Treasury shares, at cost, 9,695,361 and 10,487,742 shares, respectively		(1,295)		(1,380)
Accumulated other comprehensive loss		(

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Item 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

In the quarter ended March 29, 2024, 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
2.1		Merger Agreement between TE Connectivity Ltd. and TE Connectivity plc (incorporated by reference to Exhibit 2.1 of TE Connectivity’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 18, 2024)
3.1		Articles of Association of TE Connectivity Ltd., as amended and restated (incorporated by reference to Exhibit 3.1 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
10.1		Second Amended and Restated Five-Year Senior Credit Agreement, dated as of April 24, 2024, by and among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as parent guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on April 25, 2024)
10.2	‡	TE Connectivity Ltd. 2024 Stock and Incentive Plan (incorporated by reference to Appendix B to TE Connectivity’s Proxy Statement, filed with the SEC on January 17, 2024)
10.3	‡	Amendment No. 1 to Employment Agreement between TE Connectivity Corporation and Terrence R. Curtin dated March 15, 2024 (incorporated by reference to Exhibit 10.2 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
10.4	‡	Amendment No. 1 to Employment Agreement between TE Connectivity Corporation and Heath A. Mitts dated March 15, 2024 (incorporated by reference to Exhibit 10.3 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
10.5	‡	Amendment No. 1 to Employment Agreement between TE Connectivity Corporation and Steven T. Merkt dated March 15, 2024 (incorporated by reference to Exhibit 10.4 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
10.6	‡	Amendment No. 1 to Employment Agreement between TE Connectivity Corporation and Aaron K. Stucki dated March 15, 2024 (incorporated by reference to Exhibit 10.5 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
10.7	‡	Amendment No. 1 to Employment Agreement between TE Connectivity Corporation and John S. Jenkins dated March 15, 2024 (incorporated by reference to Exhibit 10.6 of TE Connectivity’s Current Report on Form 8-K, filed with the SEC on March 18, 2024)
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)

‡Management contract or compensatory plan or arrangement

*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: April 26, 2024