What changed in this filing

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Item 1. Financial Statements

2023-01-27 compared with 2022-07-29 · 107 added, 201 removed, 361 unchanged (46% of the section changed)

3 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions, except per share data)

7 unchanged sentences

Interest expense

Other income, net

Other income (expense), net

Income from continuing operations before income taxes

1 unchanged sentence

Income from continuing operations

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

Loss from discontinued operations, net of income taxes

Basic earnings per share:

9 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

Other comprehensive income (loss):

Other comprehensive income:

Currency translation

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

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

Other comprehensive income (loss)

Gains on cash flow hedges, net of income taxes

Other comprehensive income

Comprehensive income

8 unchanged sentences

Cash and cash equivalents

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

Accounts receivable, net of allowance for doubtful accounts of $ 45

Prepaid expenses and other current assets

17 unchanged sentences

Shareholders' equity:

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

Common shares, CHF 0.57 par value, 330,830,781 shares authorized and issued

Accumulated earnings

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Quarter Ended June 24, 2022

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at March 25, 2022

Other comprehensive loss

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Cancellation of treasury shares

Balance at June 24, 2022

For the Nine Months Ended June 24, 2022

For the Quarter Ended December 30, 2022

Common Shares

4 unchanged sentences

Balance at September 30, 2022

Other comprehensive loss

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Cancellation of treasury shares

Balance at June 24, 2022

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended June 25, 2021

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at March 26, 2021

Other comprehensive income

3 unchanged sentences

Repurchase of common shares

Cancellation of treasury shares

Balance at June 25, 2021

For the Nine Months Ended June 25, 2021

Balance at December 30, 2022

For the Quarter Ended December 24, 2021

Common Shares

9 unchanged sentences

Repurchase of common shares

Cancellation of treasury shares

Balance at June 25, 2021

Balance at December 24, 2021

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Quarters Ended

(in millions)

Cash flows from operating activities:

Income from discontinued operations, net of income taxes

Loss from discontinued operations, net of income taxes

Income from continuing operations

15 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

Net increase (decrease) in commercial paper

Repayment of debt

4 unchanged sentences

Effect of currency translation on cash

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

Net decrease in cash, cash equivalents, and restricted cash

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

15 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

Restructuring charges, net

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

Impairment of held for sale businesses and (gain) loss on divestitures, net

Other charges, net

2 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

13 unchanged sentences

Employee severance

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

Property, plant, and equipment

Fiscal 2022 Actions:

1 unchanged sentence

Facility and other exit costs

Property, plant, and equipment

Pre-Fiscal 2022 Actions:

1 unchanged sentence

Facility and other exit costs

Property, plant, and equipment

Total Activity

Fiscal 2023 Actions

During fiscal 2023, we initiated a restructuring program associated with cost structure improvements primarily in the Transportation Solutions and Communications Solutions segments.

During the quarter ended December 30, 2022, we recorded restructuring charges of $ 105 million in connection with this program.

We expect to complete all restructuring actions commenced during the quarter ended December 30, 2022 by the end of fiscal 2024, and we expect additional charges related to the actions commenced during the quarter ended December 30, 2022 to be insignificant.

Fiscal 2022 Actions

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

During the nine months ended June 24, 2022, we recorded restructuring and related charges of $ 84 million in connection with this program.

We expect to complete all restructuring actions commenced during the nine months ended June 24, 2022 by the end of fiscal 2024 and to incur additional charges of approximately $ 16 million.

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

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

We expect to complete all restructuring actions commenced during fiscal 2022 by the end of fiscal 2024 and to incur additional charges of approximately $ 21 million related primarily to employee severance and facility exit costs.

The following table summarizes charges incurred for the fiscal 2022 program by segment as of December 30, 2022:

(in millions)

2 unchanged sentences

Communications Solutions

Fiscal 2021 Actions

During fiscal 2021, we initiated a restructuring program across all segments to optimize our manufacturing footprint and improve the cost structure of the organization.

In connection with this program, during the nine months ended June 24, 2022 and June 25, 2021, we recorded net restructuring charges of $ 3 million and $ 162 million, respectively.

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

Pre-Fiscal 2022 Actions

During the quarter ended December 30, 2022, we recorded restructuring credits of $ 1 million related to pre-fiscal 2022 actions.

We expect that any additional charges related to restructuring actions commenced prior to 2022 will be insignificant.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

(in millions)

Transportation Solutions

Industrial Solutions

Communications Solutions

Pre-Fiscal 2021 Actions

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

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

Total Restructuring Reserves

5 unchanged sentences

Restructuring reserves

During the nine months ended June 24, 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.

We acquired two businesses for a combined cash purchase price of $ 125 million, net of cash acquired, during the nine months ended June 25, 2021.

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

On December 30, 2022, we acquired one business for a cash purchase price of $ 109 million, net of cash acquired.

Due to the timing of the transaction, which was reported as part of our Industrial Solutions segment, we preliminarily allocated the purchase price to goodwill and identifiable intangible assets.

Our valuation of identifiable intangible assets, assets acquired, and liabilities assumed is currently in process;

therefore, the current allocation is subject to adjustment upon finalization of the valuations.

The amount of these potential adjustments could be significant.

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

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

Also during the quarter ended December 24, 2021, we finalized the purchase price allocation of certain fiscal 2021 acquisitions, which included the recognition of $ 25 million of cash acquired.

Inventories consisted of the following:

11 unchanged sentences

September 30, 2022 (1)

Purchase price adjustments

Currency translation and other

June 24, 2022 (1)

(1) At June 24, 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 nine months ended June 24, 2022, we recognized goodwill in the Communications Solutions segment in connection with recent acquisitions.

Also during the nine months ended June 24, 2022, we recognized purchase price adjustments in the Industrial Solutions segment in connection with prior year acquisitions, including two acquisitions that closed late in the fourth quarter of fiscal 2021.

December 30, 2022 (1)

(1) At December 30, 2022 and September 30, 2022, 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 30, 2022, we recognized goodwill in the Industrial Solutions segment in connection with a recent acquisition.

See Note 3 for additional information regarding acquisitions.

1 unchanged sentence

Intangible assets consisted of the following:

June 24, 2022

December 30, 2022

September 30, 2022

2 unchanged sentences

Intellectual property

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

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

Intangible asset amortization expense was $ 46 million and $ 48 million for the quarters ended December 30, 2022 and December 24, 2021, respectively.

At December 30, 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 nine months ended June 24, 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 nine months ended June 24, 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 nine months ended June 24, 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.

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

As of December 30, 2022, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, had $ 231 million of commercial paper outstanding at a weighted-average interest rate of 4.70 %.

TEGSA had $ 370 million of commercial paper outstanding at a weighted-average interest rate of 3.45 % at September 30, 2022.

The fair value of our debt, based on indicative valuations, was approximately $ 4,046 million and $ 3,990 million at December 30, 2022 and September 30, 2022, respectively.

The components of lease cost were as follows:

Quarters Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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

Nine Months Ended

Quarters Ended

(in millions)

3 unchanged sentences

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Commitments and Contingencies

2 unchanged sentences

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)

Trade Compliance Matters

We are investigating our past compliance with relevant U.S.

We have been investigating our past compliance with relevant U.S.

trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S.

1 unchanged sentence

State Department’s Directorate of Defense Trade Controls (“DDTC”).

We are cooperating with the BIS and DDTC on these matters, and both our internal assessment and the resulting investigations by the agencies remain ongoing.

We are cooperating with the BIS and DDTC on these matters, and the resulting investigations are ongoing.

We have also been contacted by the U.S.

Department of Justice concerning aspects of these matters.

We are unable to predict the timing and final outcome of the agencies’ investigations.

An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties.

While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Environmental Matters

1 unchanged sentence

The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

As of June 24, 2022, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 17 million to $ 45 million, and we accrued $ 20 million as the probable loss, which was the best estimate within this range.

As of December 30, 2022, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 17 million to $ 44 million, and we accrued $ 20 million as the probable loss, which was the best estimate within this range.

We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

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 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.

At December 30, 2022, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 170 million, excluding those related to our former Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business.

In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale.

These performance guarantees and letters of credit had a combined value of approximately $ 116 million as of June 24, 2022 and are expected to expire at various dates through fiscal 2027.

These performance guarantees and letters of credit had a combined value of approximately $ 59 million as of December 30, 2022 and are expected to expire at various dates through fiscal 2027.

We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees;

however, based on historical experience, we do not anticipate having to perform.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Financial Instruments

Foreign Currency Exchange Rate Risk

We utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans.

The aggregate notional value of these contracts was € 200 million and € 700 million at June 24, 2022 and September 24, 2021, respectively.

Certain contracts were terminated during the nine months ended June 24, 2022;

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

Under the terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros at 3.50 % per annum and receive interest in U.S.

dollars at a weighted-average rate of 5.26 % per annum.

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

dollars from our counterparties.

In connection with the cross-currency swap contracts, both counterparties to each contract are required to provide cash collateral.

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

September 24,

(in millions)

Prepaid expenses and other current assets

Other liabilities

At June 24, 2022 and September 24, 2021, collateral received from or paid to our counterparties approximated the net derivative position.

Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset position, or prepaid expenses and other current assets when the contracts are in a net liability position on the Condensed Consolidated Balance Sheets.

We may utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans.

As of fiscal year end 2022, all such cross-currency swap contracts had been terminated or matured and were settled;

additionally, all related collateral positions were settled.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The impacts of these cross-currency swap contracts were as follows:

Quarters Ended

Nine Months Ended

Quarter Ended

(in millions)

Losses recorded in other comprehensive income (loss)

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

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

Gains excluded from the hedging relationship (1)

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

Hedge of Net Investment

We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies.

The aggregate notional value of these hedges was $ 2,203 million and $ 3,798 million at June 24, 2022 and September 24, 2021, respectively.

The aggregate notional value of these hedges was $ 2,247 million and $ 1,658 million at December 30, 2022 and September 30, 2022, 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 $ 1,767 million and $ 1,430 million at June 24, 2022 and September 24, 2021, respectively.

The aggregate notional value of the contracts under this program was $ 2,237 million and $ 1,873 million at December 30, 2022 and September 30, 2022, respectively.

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

3 unchanged sentences

We are not required to provide collateral for these contracts.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

6 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

2 unchanged sentences

(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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Interest Rate Risk Management

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

During the nine months ended June 24, 2022, we terminated forward starting interest rate swap contracts with an aggregate notional value of $ 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 June 24, 2022:

September 24,

(in millions)

Prepaid expenses and other current assets

Accrued and other current liabilities

During fiscal 2022, we terminated forward starting interest rate swap contracts as a result of the issuance of our 2.50 % senior notes due in 2032.

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

Quarters Ended

Nine Months Ended

Quarter Ended

(in millions)

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

Gains recorded in other comprehensive income (loss)

Commodity Hedges

1 unchanged sentence

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 $ 605 million and $ 512 million at

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 24, 2022 and September 24, 2021, respectively, and were designated as cash flow hedges.

These contracts had an aggregate notional value of $ 542 million and $ 566 million at December 30, 2022 and September 30, 2022, respectively, and were designated as cash flow hedges.

These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

6 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

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

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

Gains recorded in other comprehensive income (loss)

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

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Retirement Plans

7 unchanged sentences

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Amortization of prior service credit

Net periodic pension benefit cost (credit)

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended

(in millions)

Operating expense:

Other (income) expense:

Interest cost

Expected return on plan assets

Expected returns on plan assets

Amortization of net actuarial loss

1 unchanged sentence

Net periodic pension benefit cost (credit)

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

During the quarter ended December 30, 2022, we contributed $ 10 million to our non-U.S.

pension plans.

We recorded income tax expense of $ 116 million and $ 124 million for the quarters ended June 24, 2022 and June 25, 2021, respectively.

The income tax expense for the quarter ended June 24, 2022 included a $ 21 million income tax benefit related to the tax impacts of an intercompany transaction.

Our estimated annual effective tax rate for fiscal 2022 includes a total income tax benefit of approximately $ 75 million related to this transaction, with a portion recognized in the nine months ended June 24, 2022 and the remainder to be recognized in the fourth quarter of fiscal 2022.

We recorded income tax expense of $ 362 million and $ 290 million for the nine months ended June 24, 2022 and June 25, 2021, respectively.

The income tax expense for the nine months ended June 24, 2022 included a $ 57 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 corporate tax rate enacted in the canton of Schaffhausen.

In addition, the income tax expense for the nine months ended June 24, 2022 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 nine months ended June 24, 2022.

The income tax expense for the nine months ended June 25, 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 nine months ended June 24, 2022, we completed additional intercompany transactions that resulted in a non-U.S.

subsidiary recording an increase in deferred tax assets for tax loss and credit carryforwards of approximately $ 4.0 billion.

We do not expect this subsidiary to generate sufficient future taxable income to realize these deferred tax assets;

therefore, we recognized a corresponding increase to the valuation allowance.

Accordingly, there was no impact to the Condensed Consolidated Statement of Operations for the nine months ended June 24, 2022 or Condensed Consolidated Balance Sheet as of June 24, 2022.

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

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We recorded income tax expense of $ 87 million and $ 110 million for the quarters ended December 30, 2022 and December 24, 2021, 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 and $ 12 million of income tax expense related to an income tax audit of an acquired entity.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of December 30, 2022, approximately $ 20 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

Earnings Per Share

1 unchanged sentence

Quarters Ended

Nine Months Ended

(in millions)

Dilutive impact of share-based compensation arrangements

For both the quarter and nine months ended June 24, 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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following 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:

Quarters Ended

(in millions)

Antidilutive share options

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 was subject to a notice period and filing with the commercial register in Switzerland and became effective in May 2022.

We paid cash dividends to shareholders as follows:

Quarters Ended

Nine 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 June 24, 2022 and September 24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 538 million and $ 327 million, respectively.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At December 30, 2022 and September 30, 2022, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 177 million and $ 356 million, respectively.

Share Repurchase Program

During the quarter ended June 24, 2022, our board of directors authorized an increase of $ 1.5 billion in our share repurchase program.

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

Nine Months Ended

Quarters Ended

(in millions)

1 unchanged sentence

Repurchase value

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

At December 30, 2022, we had $ 1.4 billion of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Quarters Ended

Nine Months Ended

(in millions)

Share-based compensation expense

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

As of December 30, 2022, there was $ 210 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 30, 2022, we granted the following share-based awards as part of our annual incentive plan grant:

3 unchanged sentences

Performance share awards

As of June 24, 2022, we had 11 million shares available for issuance under the TE Connectivity Ltd.

As of December 30, 2022, we had 8 million shares available for issuance under the TE Connectivity Ltd.

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

8 unchanged sentences

Segment and Geographic Data

Effective for fiscal 2023, we realigned certain product lines from the Industrial Solutions segment to the Communications Solutions segment.

We continue to operate through three reporting segments:

Transportation Solutions, Industrial Solutions, and Communications Solutions.

The following segment information reflects our current segment reporting structure.

Prior period segment results have been restated to conform to the current segment reporting structure.

As a result of the restatement, which was not significant, $ 7 million and $ 30 million of net sales and $ 3 million and $ 13 million of operating income for the first quarter and full year of fiscal 2022, respectively, were transferred from the Industrial Solutions segment to the Communications Solutions segment.

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

Quarters Ended

Nine Months Ended

(in millions)

4 unchanged sentences

Industrial equipment

Aerospace, defense, oil, and gas

Aerospace, defense, and marine

Total Industrial Solutions

8 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

Europe/Middle East/Africa (“EMEA”):

Asia–Pacific:

Transportation Solutions

1 unchanged sentence

Communications Solutions

Asia–Pacific:

Total Asia–Pacific

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

1 unchanged sentence

Communications Solutions

Total Asia–Pacific

Transportation Solutions

5 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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