What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2022-01-28 · 134 added, 67 removed, 416 unchanged (33% of the section changed)

3 unchanged sentences

Quarters Ended

Six Months Ended

(in millions, except per share data)

7 unchanged sentences

Interest expense

Other income (expense), net

Other income, net

Income from continuing operations before income taxes

13 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

14 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 41

Accounts receivable, net of allowance for doubtful accounts of $ 50 and $ 41 , respectively

Prepaid expenses and other current assets

26 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Quarter Ended December 24, 2021

For the Quarter Ended March 25, 2022

Common Shares

3 unchanged sentences

(in millions)

Balance at December 24, 2021

Other comprehensive income

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Balance at March 25, 2022

For the Six Months Ended March 25, 2022

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at September 24, 2021

4 unchanged sentences

Repurchase of common shares

Balance at March 25, 2022

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended March 26, 2021

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at December 25, 2020

For the Quarter Ended December 25, 2020

Other comprehensive income

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Balance at March 26, 2021

For the Six Months Ended March 26, 2021

Common Shares

9 unchanged sentences

Repurchase of common shares

Balance at December 25, 2020

Balance at March 26, 2021

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Quarters Ended

Six Months Ended

(in millions)

18 unchanged sentences

Acquisition of businesses, net of cash acquired

Proceeds from divestiture of businesses, net of cash retained by businesses sold

Net cash used in investing activities

Cash flows from financing activities:

Net increase in commercial paper

Proceeds from issuance of debt

Repayment of debt

22 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

5 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

21 unchanged sentences

Facility and other exit costs

Property, plant, and equipment

Total Activity

1 unchanged sentence

During fiscal 2022, we initiated a restructuring program associated with footprint consolidation and cost structure improvements across all segments.

During the quarter ended December 24, 2021, we recorded restructuring and related charges of $ 33 million in connection with this program.

We expect to complete all restructuring actions commenced during the quarter ended December 24, 2021 by the end of fiscal 2024 and anticipate that any additional charges will be insignificant.

During the six months ended March 25, 2022, we recorded restructuring and related charges of $ 53 million in connection with this program.

We expect to complete all restructuring actions commenced during the six months ended March 25, 2022 by the end of fiscal 2024 and to incur additional charges of approximately $ 12 million.

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 quarters ended December 24, 2021 and December 25, 2020, we recorded restructuring charges of $ 4 million and $ 142 million, respectively.

In connection with this program, during the six months ended March 25, 2022 and March 26, 2021, we recorded net restructuring charges of $ 6 million and $ 153 million, respectively.

We expect to complete all restructuring actions commenced during fiscal 2021 by the end of fiscal 2023 and to incur additional charges of approximately $ 8 million related to employee severance and facility exit costs.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2021 program by segment:

The following table summarizes expected, incurred, and remaining charges for the fiscal 2021 program by segment as of March 25, 2022:

(in millions)

5 unchanged sentences

Pre-Fiscal 2021 Actions

During the quarters ended December 24, 2021 and December 25, 2020, we recorded net restructuring credits of $ 4 million and charges of $ 7 million, respectively, related to pre-fiscal 2021 actions.

During the six months ended March 25, 2022 and March 26, 2021, we recorded net restructuring credits of $ 4 million and charges of $ 7 million, respectively, related to pre-fiscal 2021 actions.

We expect additional charges related to pre-fiscal 2021 actions to be insignificant.

6 unchanged sentences

Restructuring reserves

During the quarter ended December 24, 2021, we acquired one business for a cash purchase price of $ 125 million, net of cash acquired.

During the six months ended March 25, 2022, we acquired one business for a cash purchase price of $ 127 million, net of cash acquired.

The acquisition was reported as part of our Communications Solutions segment from the date of acquisition.

We acquired one business for a cash purchase price of $ 106 million, net of cash acquired, during the quarter ended December 25, 2020.

We acquired one business for a cash purchase price of $ 106 million, net of cash acquired, during the six months ended March 26, 2021.

The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.

14 unchanged sentences

Currency translation and other

December 24, 2021 (1)

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

During the quarter ended December 24, 2021, we recognized goodwill in the Communications Solutions segment in connection with a recent acquisition.

Also during the quarter ended December 24, 2021, we recognized purchase price adjustments in the Industrial Solutions segment in connection with prior year acquisitions, including two acquisitions that closed late in the fourth quarter of fiscal 2021.

March 25, 2022 (1)

(1) At March 25, 2022 and September 24, 2021, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 3,091 million, $ 669 million, and $ 489 million, respectively.

During the six months ended March 25, 2022, we recognized goodwill in the Communications Solutions segment in connection with a recent acquisition.

Also during the six months ended March 25, 2022, we recognized purchase price adjustments in the Industrial Solutions segment in connection with prior year acquisitions, including two acquisitions that closed late in the fourth quarter of fiscal 2021.

See Note 3 for additional information regarding acquisitions.

1 unchanged sentence

Intangible assets consisted of the following:

December 24, 2021

March 25, 2022

September 24, 2021

2 unchanged sentences

Intellectual property

Intangible asset amortization expense was $ 48 million for the quarters ended December 24, 2021 and December 25, 2020.

At December 24, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:

Intangible asset amortization expense was $ 49 million and $ 48 million for the quarters ended March 25, 2022 and March 26, 2021, respectively, and $ 97 million and $ 96 million for the six months ended March 25, 2022 and March 26, 2021, respectively.

At March 25, 2022, the aggregate amortization expense on intangible assets is expected to be as follows:

(in millions)

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the quarter ended December 24, 2021, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, called for the early redemption of all of its outstanding 3.50 % senior notes due in February 2022, representing $ 500 million aggregate principal amount.

The notes were redeemed in November 2021.

As of December 24, 2021, TEGSA had $ 479 million of commercial paper outstanding at a weighted-average interest rate of 0.25 %.

TEGSA had no commercial paper outstanding at September 24, 2021.

The fair value of our debt, based on indicative valuations, was approximately $ 4,343 million and $ 4,465 million at December 24, 2021 and September 24, 2021, respectively.

During the quarter ended March 25, 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.

The notes are fully and unconditionally guaranteed as to payment on an unsecured basis by TE Connectivity Ltd.

During the quarter ended March 25, 2022, we reclassified € 550 million of 1.10 % senior notes due in March 2023 from long-term debt to short-term debt on the Condensed Consolidated Balance Sheet.

During the six months ended March 25, 2022, TEGSA completed an early redemption of $ 500 million aggregate principal amount of 3.50 % senior notes due in February 2022.

The fair value of our debt, based on indicative valuations, was approximately $ 4,137 million and $ 4,465 million at March 25, 2022 and September 24, 2021, respectively.

The components of lease cost were as follows:

Quarters Ended

Six Months Ended

(in millions)

3 unchanged sentences

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

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

Payments for operating leases (1)

Right-of-use assets, including modifications and extensions, obtained in exchange for operating lease liabilities

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

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

1 unchanged sentence

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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

use tax, real estate tax, and transfer tax.

Trade Compliance Matters

10 unchanged sentences

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 December 24, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 18 million to $ 46 million, and we accrued $ 21 million as the probable loss, which was the best estimate within this range.

As of March 25, 2022, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 18 million to $ 45 million, and we accrued $ 21 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.

1 unchanged sentence

We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

At December 24, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 132 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

At March 25, 2022, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 120 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 $ 118 million as of December 24, 2021 and are expected to expire at various dates through fiscal 2025.

These performance guarantees and letters of credit had a combined value of approximately $ 117 million as of March 25, 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;

3 unchanged sentences

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 € 500 million and € 700 million at December 24, 2021 and September 24, 2021, respectively.

Certain contracts were terminated in the quarter ended December 24, 2021;

The aggregate notional value of these contracts was € 300 million and € 700 million at March 25, 2022 and September 24, 2021, respectively.

Certain contracts were terminated in the six months ended March 25,

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

the remaining contracts mature in the fourth quarter of fiscal 2022.

1 unchanged sentence

dollars at a weighted-average rate of 5.28 % per annum.

Upon maturity, we will pay the notional value of the contracts in

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

euros and receive U.S.

Upon maturity, we will pay the notional value of the contracts in euros and receive U.S.

dollars from our counterparties.

5 unchanged sentences

Other liabilities

At December 24, 2021 and September 24, 2021, collateral received from or paid to our counterparties approximated the net derivative position.

At March 25, 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.

1 unchanged sentence

Quarters Ended

Six Months Ended

(in millions)

4 unchanged sentences

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 $ 3,055 million and $ 3,798 million at December 24, 2021 and September 24, 2021, respectively.

The aggregate notional value of these hedges was $ 3,166 million and $ 3,798 million at March 25, 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 $ 1,576 million and $ 1,430 million at December 24, 2021 and September 24, 2021, respectively.

The aggregate notional value of the contracts under this program was $ 1,691 million and $ 1,430 million at March 25, 2022 and September 24, 2021, respectively.

Under the terms of these contracts, we receive interest in U.S.

13 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

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

(1) Recorded as currency translation, a component of accumulated other comprehensive income (loss).

(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 utilize forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated issuance of fixed rate debt.

These contracts had an aggregate notional value of $ 450 million at December 24, 2021 and September 24, 2021 and were designated as cash flow hedges.

These forward starting interest rate swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

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 six months ended March 25, 2022, we terminated forward starting interest rate swap contracts with an aggregate notional value of $ 450 million as a result of the issuance of our 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 no such balances at March 25, 2022:

September 24,

4 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

3 unchanged sentences

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 $ 545 million and $ 512 million at December 24, 2021 and September 24, 2021, respectively, and were designated as cash flow hedges.

These contracts had an aggregate notional value of $ 599 million and $ 512 million at March 25, 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:

8 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

15 unchanged sentences

Net periodic pension benefit cost (credit)

During the quarter ended December 24, 2021, we contributed $ 9 million to our non-U.S.

Six Months Ended

(in millions)

Operating expense:

Other (income) expense:

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Amortization of prior service credit

Net periodic pension benefit cost (credit)

During the six months ended March 25, 2022, we contributed $ 18 million to our non-U.S.

pension plans.

We recorded income tax expense of $ 110 million and $ 60 million for the quarters ended December 24, 2021 and December 25, 2020, respectively.

The income tax expense for the quarter ended December 24, 2021 included a $ 17 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 $ 75 million related to this transaction, with a portion recognized in the quarter ended December 24, 2021 and the remainder to be recognized in the remaining quarters of fiscal 2022.

In addition, the income tax expense for the quarter ended December 24, 2021 included $ 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 $ 11 million during the quarter ended December 24, 2021.

The income tax expense for the quarter ended December 25, 2020 included a $ 29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets .

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 December 24, 2021.

We recorded income tax expense of $ 136 million and $ 106 million for the quarters ended March 25, 2022 and March 26, 2021, respectively.

The income tax expense for the quarter ended March 25, 2022 included $ 27 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate enacted in the canton of Schaffhausen on December 27, 2021.

In addition, the income tax expense for the quarter ended March 25, 2022 included a $ 19 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 $ 75 million related to this transaction, with a portion recognized in the first six months of fiscal 2022 and the remainder to be recognized in the remaining quarters of fiscal 2022.

We recorded income tax expense of $ 246 million and $ 166 million for the six months ended March 25, 2022 and March 26, 2021, respectively.

The income tax expense for the six months ended March 25, 2022 included a $ 36 million income tax benefit related to the tax impacts of the intercompany transaction discussed above and $ 27 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate enacted in the canton of Schaffhausen.

In addition, the income tax expense for the six months ended March 25, 2022 included $ 12 million of income tax expense related to an income tax audit of an acquired entity.

The income tax expense for the six months ended March 26, 2021 included a $ 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 quarter ended March 25, 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 $ 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 quarter ended March 25, 2022 or Condensed Consolidated Balance Sheet as of March 25, 2022.

Earnings Per Share

1 unchanged sentence

Quarters Ended

Six Months Ended

(in millions)

Dilutive impact of share-based compensation arrangements

For the quarter ended December 24, 2021, 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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the quarter and six months ended March 25, 2022, 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.

Shareholders’ Equity

Common Shares Held in Treasury

In March 2022, our shareholders approved the cancellation of approximately 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 is subject to a notice period and filing with the commercial register in Switzerland and is not yet reflected on the Condensed Consolidated Balance Sheet.

We paid cash dividends to shareholders as follows:

Quarters Ended

Six Months Ended

Dividends paid per common share

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.

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity.

At December 24, 2021 and September 24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 163 million and $ 327 million, respectively.

At March 25, 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 $ 723 million and $ 327 million, respectively.

Share Repurchase Program

Common shares repurchased under the share repurchase program were as follows:

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

Repurchase value

At December 24, 2021, we had $ 1.3 billion of availability remaining under our share repurchase authorization.

At March 25, 2022, we had $ 839 million of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

2 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

Share-based compensation expense

As of December 24, 2021, there was $ 214 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.2 years.

As of March 25, 2022, there was $ 180 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.0 years.

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

3 unchanged sentences

Performance share awards

As of December 24, 2021, we had 11 million shares available for issuance under the TE Connectivity Ltd.

As of March 25, 2022, we had 11 million shares available for issuance under the TE Connectivity Ltd.

2007 Stock and Incentive Plan, amended and restated as of September 17, 2020.

10 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

15 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

15 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

2 unchanged sentences

Communications Solutions

Subsequent Event

On December 27, 2021, the canton of Schaffhausen in Switzerland enacted a reduction to its corporate income tax rate.

We expect to recognize approximately $ 25 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate in the quarter ending March 25, 2022, the period of enactment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements