What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-04-29 · 143 added, 135 removed, 314 unchanged (47% of the section changed)

10 unchanged sentences

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 second quarter and first six months of fiscal 2022 included the following:

● Our net sales increased 7.2% and 7.8% in the second quarter and first six 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 8.4% and 8.2% during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021.

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 1.2% in the second 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 six months of fiscal 2022, our net sales decreased 0.9% due primarily to sales declines in the automotive end market, partially offset by sales increases in the commercial transportation end market.

● Industrial Solutions —Our net sales increased 12.9% and 16.9% in the second quarter and first six months of fiscal 2022, respectively, primarily as a result of sales increases in the industrial equipment end market.

● Communications Solutions —Our net sales increased 23.8% and 31.9% in the second quarter and first six months of fiscal 2022, respectively, due to sales increases in both the data and devices and the appliances end markets.

● Net cash provided by operating activities was $945 million in the first six months of fiscal 2022.

● 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 paused

We suspended our business operations in Russia, and our operations in Ukraine have been reduced

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.

These increased costs and supply chain implications 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 six months of fiscal 2022.

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.

The full impact of the military conflict on our business operations and financial performance remains uncertain.

3 unchanged sentences

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 six 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, with the exception of certain locations in China where operations are shutdown .

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.

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.

3 unchanged sentences

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.

With the exception of shutdowns in China, we do not expect the COVID-19 pandemic to have a significant impact on our businesses in fiscal 2022.

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.

2 unchanged sentences

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.

In the third quarter of fiscal 2022, we expect our net sales to be approximately $3.9 billion as compared to $3.8 billion in the third quarter of fiscal 2021.

We expect shutdowns in China related to the COVID-19 pandemic to negatively impact our net sales by approximately 300 basis points in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021.

We expect diluted earnings per share from continuing operations to be approximately $1.71 per share in the third quarter of fiscal 2022.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $154 million and $0.02 per share, respectively, in the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021.

Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

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.

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.

2 unchanged sentences

See further discussion in “Liquidity and Capital Resources.”

During the first six months of fiscal 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.

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.

2 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

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

Change in Net Sales for the Quarter Ended March 25, 2022

Change in Net Sales for the Six Months Ended March 25, 2022

versus Net Sales for the Quarter Ended March 26, 2021

versus Net Sales for the Six Months Ended March 26, 2021

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

Organic Net Sales

(Divestitures)

(Divestiture)

Growth (Decline)

4 unchanged sentences

Communications Solutions

Net sales increased $269 million, or 7.2%, in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021.

The increase in net sales resulted from organic net sales growth of 8.4% and net sales contributions of 1.7% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 2.9% due to the weakening of certain foreign currencies.

In the second quarter of fiscal 2022, pricing actions positively affected organic net sales by $121 million.

In the first six months of fiscal 2022, net sales increased $565 million, or 7.8%, as compared to the first six months of fiscal 2021.

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.

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 $173 million in the first six months of fiscal 2022.

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.”

5 unchanged sentences

Approximately 60% of our net sales were invoiced in currencies other than the U.S.

dollar in the first six months of fiscal 2022.

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) :

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

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

Change in Net Sales for the Quarter Ended March 25, 2022

Change in Net Sales for the Six Months Ended March 25, 2022

versus Net Sales for the Quarter Ended March 26, 2021

versus Net Sales for the Six Months Ended March 26, 2021

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

Organic Net Sales

(Divestitures)

(Divestiture)

(Divestitures)

3 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

As a percentage of net sales

Gross margin increased $127 million and $211 million in the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021.

The increases were primarily a result of higher volume and the positive impacts of pricing actions, partially offset by higher material costs and, to a lesser degree, the negative impact of foreign currency translation.

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.

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:

Quarters Ended

Six Months Ended

Nine Months Ended

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.

2 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

Selling, General, and Administrative Expenses.

Selling, general, and administrative expenses increased $15 million and $17 million in the second quarter and first six months of fiscal 2022, respectively, from the same periods of fiscal 2021 due primarily to increased selling expenses to support higher sales levels and incremental expenses attributable to recently acquired businesses, partially offset by lower incentive compensation costs.

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.

Restructuring and Other Charges, Net.

2 unchanged sentences

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 $55 million during the first six months of fiscal 2022, of which $12 million was recorded in cost of sales.

Annualized cost savings related to the fiscal 2022 actions commenced during the first six months of fiscal 2022 are expected to be approximately $50 million and are expected to be realized by the end of fiscal 2024.

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.

4 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

8 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

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 second quarters and first six months of fiscal 2022 and 2021.

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

2 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

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 March 25, 2022

Change in Net Sales for the Six Months Ended March 25, 2022

versus Net Sales for the Quarter Ended March 26, 2021

versus Net Sales for the Six Months Ended March 26, 2021

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

Organic Net Sales

2 unchanged sentences

Growth (Decline)

($ in millions)

Commercial transportation

Net sales in the Transportation Solutions segment increased $27 million, or 1.2%, in the second quarter of fiscal 2022 from the second quarter of fiscal 2021 due to organic net sales growth of 4.5%, partially offset by the negative impact of foreign currency translation of 3.3%.

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 4.9% in the second quarter of fiscal 2022 with growth of 7.9% in the Americas region, 6.4% in the Asia–Pacific region, and 2.1% in the EMEA region.

Our overall net sales increased due primarily to increased content per vehicle, despite declines in global automotive production.

● Commercial transportation— Our organic net sales increased 5.4% in the second quarter of fiscal 2022 primarily as a result of market growth in the EMEA and Americas regions.

● Sensors— Our organic net sales were flat in the second quarter of fiscal 2022 as growth in industrial applications was offset by declines in transportation applications.

In the first six months of fiscal 2022, net sales in the Transportation Solutions segment decreased $39 million, or 0.9%, as compared to the first six months of fiscal 2021 due to the negative impact of foreign currency translation of 2.2%, partially offset by organic net sales growth of 1.3%.

● 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 .

● 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 were essentially flat in the first six months of fiscal 2022 with declines of 7.6% in the EMEA region, largely offset by growth of 6.0% in the Asia–Pacific region and 1.4% in the Americas region.

The impact of declines in global automotive production were offset by increased content per vehicle.

● Commercial transportation— Our organic net sales increased 7.9% in the first six months of fiscal 2022 primarily as a result of market growth in the EMEA and Americas regions.

● Sensors— Our organic net sales increased 2.5% in the first six months of fiscal 2022 as growth in industrial applications was partially offset by declines in transportation applications.

● 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.

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Transportation Solutions segment increased $11 million and $98 million in the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021.

Excluding the items below, operating income in the second quarter of fiscal 2022 increased slightly as the positive impacts of pricing actions were largely offset by higher material and utilities costs.

Excluding the items below, operating income in the first six months of fiscal 2022 decreased primarily as a result of higher material and utilities costs, partially offset by the positive impacts of pricing actions.

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.

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

6 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

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 March 25, 2022

Change in Net Sales for the Six Months Ended March 25, 2022

versus Net Sales for the Quarter Ended March 26, 2021

versus Net Sales for the Six Months Ended March 26, 2021

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

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestitures)

Growth (Decline)

(Divestiture)

Growth (Decline)

3 unchanged sentences

Aerospace, defense, oil, and gas

In the Industrial Solutions segment, net sales increased $123 million, or 12.9%, in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021 due to organic net sales growth of 10.5% and net sales contributions of 5.3% from an acquisition and divestitures, partially offset by the negative impact of foreign currency translation of 2.9%.

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 27.2% in the second quarter of fiscal 2022 due to growth in all regions primarily as a result of strength in factory automation and controls applications.

● Aerospace, defense, oil, and gas— Our organic net sales were flat in the second quarter of fiscal 2022 as declines in the defense market were largely offset by growth in the commercial aerospace market.

● Energy— Our organic net sales increased 4.8% in the second quarter of fiscal 2022 with growth across all regions and continued strength in renewable energy applications.

● Medical— Our organic net sales decreased 1.2% in the second quarter of fiscal 2022 due primarily to sales declines in interventional medical applications.

Net sales in the Industrial Solutions segment increased $309 million, or 16.9%, in the first six months of fiscal 2022 as compared to the first six months of fiscal 2021 due to organic net sales growth of 13.9% and net sales contributions of 5.6% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 2.6%.

● 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

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 33.0% in the first six months of fiscal 2022 as a result of growth in all regions due primarily to strength in factory automation and controls applications.

● Aerospace, defense, oil, and gas— Our organic net sales decreased 1.4% in the first six months of fiscal 2022 with declines in the defense and the oil and gas markets partially offset by growth in the commercial aerospace market.

● Energy— Our organic net sales increased 10.5% in the first six months of fiscal 2022 due to growth across all regions and continued strength in renewable energy applications.

● Medical— Our organic net sales increased 3.1% in the first six months of fiscal 2022 primarily as a result of market growth in interventional medical applications.

● 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.

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Industrial Solutions segment increased $37 million and $84 million in the second quarter and first six 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 impacts of pricing actions.

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.

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

7 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

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 March 25, 2022

Change in Net Sales for the Six Months Ended March 25, 2022

versus Net Sales for the Quarter Ended March 26, 2021

versus Net Sales for the Six Months Ended March 26, 2021

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

Organic Net Sales

Growth (Decline)

($ in millions)

Data and devices

Net sales in the Communications Solutions segment increased $119 million, or 23.8%, in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021 due primarily to organic net sales growth of 22.8%.

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 35.0% in the second quarter of fiscal 2022 primarily as a result of market strength and growth in high-speed cloud applications.

● Appliances— Our organic net sales increased 7.3% in the second quarter of fiscal 2022 due to sales growth in the Americas and EMEA regions attributable primarily to share gains.

In the first six months of fiscal 2022, net sales in the Communications Solutions segment increased $295 million, or 31.9%, as compared to the first six months of fiscal 2021 due primarily to organic net sales growth of 30.8%.

● 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 40.7% in the first six months of fiscal 2022 due primarily to market strength and growth in high-speed cloud applications.

● Appliances— Our organic net sales increased 18.4% in the first six months of fiscal 2022 as a result of sales growth in the Americas and EMEA regions attributable primarily to share gains.

● 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.

Operating Income.

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Communications Solutions segment increased $45 million and $135 million in the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of fiscal 2021.

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.

Quarters Ended

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(in millions)

9 unchanged sentences

Cash Flows from Operating Activities

In the first six months of fiscal 2022, net cash provided by operating activities decreased $275 million to $945 million from $1,220 million in the first six months of fiscal 2021.

The decrease resulted primarily from the impact of higher incentive compensation payments and increased working capital levels, partially offset by higher pre-tax income.

The amount of income taxes paid, net of refunds, during the first six months of fiscal 2022 and 2021 was $177 million and $181 million, respectively.

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 $351 million and $284 million in the first six months of fiscal 2022 and 2021, respectively.

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 six months of fiscal 2022, we acquired one business for a cash purchase price of $127 million, net of cash acquired.

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

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

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 March 25, 2022 and September 24, 2021 was $4,051 million and $4,092 million, respectively.

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 second quarter of fiscal 2022, Tyco Electronics Group S.A.

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

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 March 25, 2022 or September 24, 2021.

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.

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None of our covenants are presently considered restrictive to our operations.

As of March 25, 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.

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 $326 million and $318 million in the first six months of fiscal 2022 and 2021, respectively.

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.

We repurchased approximately five million of our common shares for $752 million and approximately three million of our common shares for $309 million under the share repurchase program during the first six months of fiscal 2022 and 2021, respectively.

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

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

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In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries.

The following tables present summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd.

The following tables present

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.

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Total noncurrent liabilities (2)

(1) Includes $2,627 million and $1,810 million as of March 25, 2022 and September 24, 2021, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $12,726 million and $8,832 million as of March 25, 2022 and September 24, 2021, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Six Months Ended

(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.

Nine Months Ended

Fiscal Year Ended

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

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.

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

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.

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;

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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 six months of fiscal 2022.

There were no significant changes to this information during the first nine months of fiscal 2022.

Non-GAAP Financial Measure

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We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations.

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

The tables presented in

“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.

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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;

● 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;

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● 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 customer behaviors, business, and manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business;

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;

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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 2. Management’s Discussion and Analysis