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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 26, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland
(Jurisdiction of Incorporation)

98-0518048
(I.R.S. Employer Identification No.)

Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland

(Address of principal executive offices)

+41 (0)52 633 66 61

(Registrant’s telephone number)

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common Shares, Par Value CHF 0.57

TEL

New York Stock Exchange

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

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

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

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

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

The number of common shares outstanding as of April 19, 2021 was 330,224,626.

Table of Contents

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q

   

   

   

Page

Part I.

Financial Information

Item 1.

Financial Statements

1

Condensed Consolidated Statements of Operations for the Quarters and Six Months Ended March 26, 2021 and March 27, 2020 (unaudited)

1

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters and Six Months Ended March 26, 2021 and March 27, 2020 (unaudited)

2

Condensed Consolidated Balance Sheets as of March 26, 2021 and September 25, 2020 (unaudited)

3

Condensed Consolidated Statements of Equity for the Quarters and Six Months Ended March 26, 2021 and March 27, 2020 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 26, 2021 and March 27, 2020 (unaudited)

6

Notes to Condensed Consolidated Financial Statements (unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

Part II.

Other Information

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6.

Exhibits

39

Signatures

40

i

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the

For the

Quarters Ended

Six Months Ended

March 26,

March 27,

March 26,

March 27,

    

2021

    

2020

    

2021

    

2020

    

(in millions, except per share data)

Net sales

$

3,738

$

3,195

$

7,260

$

6,363

Cost of sales

 

2,528

 

2,166

 

4,904

 

4,304

Gross margin

 

1,210

 

1,029

 

2,356

 

2,059

Selling, general, and administrative expenses

 

401

352

 

762

719

Research, development, and engineering expenses

 

174

158

 

336

319

Acquisition and integration costs

 

6

12

 

14

19

Restructuring and other charges, net

 

17

22

 

184

46

Impairment of goodwill

900

900

Operating income (loss)

612

(415)

1,060

56

Interest income

8

5

11

11

Interest expense

 

(13)

(11)

 

(28)

(23)

Other income, net

 

4

11

 

3

16

Income (loss) from continuing operations before income taxes

 

611

 

(410)

 

1,046

 

60

Income tax expense

 

(106)

(42)

 

(166)

(489)

Income (loss) from continuing operations

 

505

 

(452)

 

880

 

(429)

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

 

1

(4)

 

7

(1)

Net income (loss)

$

506

$

(456)

$

887

$

(430)

Basic earnings (loss) per share:

Income (loss) from continuing operations

$

1.53

$

(1.35)

$

2.66

$

(1.28)

Income (loss) from discontinued operations

 

 

(0.01)

 

0.02

 

Net income (loss)

 

1.53

 

(1.37)

 

2.68

 

(1.29)

Diluted earnings (loss) per share:

Income (loss) from continuing operations

$

1.51

$

(1.35)

$

2.64

$

(1.28)

Income (loss) from discontinued operations

 

 

(0.01)

 

0.02

 

Net income (loss)

 

1.51

 

(1.37)

 

2.66

 

(1.29)

Weighted-average number of shares outstanding:

Basic

 

331

334

 

331

334

Diluted

 

334

334

 

333

334

See Notes to Condensed Consolidated Financial Statements.

1

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

For the

For the

Quarters Ended

Six Months Ended

March 26,

March 27,

March 26,

March 27,

    

2021

    

2020

    

2021

    

2020

    

(in millions)

Net income (loss)

$

506

$

(456)

$

887

$

(430)

Other comprehensive income (loss):

Currency translation

 

21

(114)

132

(64)

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

 

6

8

12

16

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

 

28

(53)

57

(22)

Other comprehensive income (loss)

 

55

 

(159)

 

201

 

(70)

Comprehensive income (loss)

561

(615)

1,088

(500)

Less: comprehensive (income) loss attributable to noncontrolling interests

4

2

(2)

2

Comprehensive income (loss) attributable to TE Connectivity Ltd.

$

565

$

(613)

$

1,086

$

(498)

See Notes to Condensed Consolidated Financial Statements.

2

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

March 26,

September 25,

    

2021

    

2020

    

(in millions, except share

data)

Assets

Current assets:

Cash and cash equivalents

$

1,748

$

945

Accounts receivable, net of allowance for doubtful accounts of $35 and $29, respectively

 

2,921

 

2,377

Inventories

 

2,134

 

1,950

Prepaid expenses and other current assets

 

619

 

512

Total current assets

 

7,422

 

5,784

Property, plant, and equipment, net

 

3,662

 

3,650

Goodwill

 

5,342

 

5,224

Intangible assets, net

 

1,548

 

1,593

Deferred income taxes

 

2,204

 

2,178

Other assets

 

789

 

813

Total assets

$

20,967

$

19,242

Liabilities, redeemable noncontrolling interests, and shareholders' equity

Current liabilities:

Short-term debt

$

919

$

694

Accounts payable

 

1,793

 

1,276

Accrued and other current liabilities

 

2,327

 

1,720

Total current liabilities

 

5,039

 

3,690

Long-term debt

 

3,602

 

3,452

Long-term pension and postretirement liabilities

 

1,299

 

1,336

Deferred income taxes

 

140

 

143

Income taxes

 

277

 

252

Other liabilities

 

827

 

874

Total liabilities

 

11,184

 

9,747

Commitments and contingencies (Note 9)

Redeemable noncontrolling interests

114

112

Shareholders' equity:

Common shares, CHF 0.57 par value, 338,953,381 shares authorized and issued

 

149

149

Accumulated earnings

 

10,541

 

10,348

Treasury shares, at cost, 8,520,155 and 8,295,878 shares, respectively

 

(775)

 

(669)

Accumulated other comprehensive loss

 

(246)

 

(445)

Total shareholders' equity

 

9,669

 

9,383

Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$

20,967

$

19,242

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

For the Quarter Ended March 26, 2021

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at December 25, 2020

 

339

$

149

 

(8)

$

(655)

$

$

10,672

$

(305)

$

9,861

$

$

9,861

Net income

 

 

 

 

 

 

506

 

 

506

 

 

506

Other comprehensive income

 

 

 

 

 

 

 

59

 

59

 

 

59

Share-based compensation expense

 

 

 

 

 

30

 

 

 

30

 

 

30

Dividends

 

 

 

 

 

 

(661)

 

 

(661)

 

 

(661)

Exercise of share options

 

 

 

1

 

44

 

 

 

 

44

 

 

44

Restricted share award vestings and other activity

 

 

 

 

18

 

(30)

 

24

 

 

12

 

 

12

Repurchase of common shares

 

 

 

(2)

 

(182)

 

 

 

 

(182)

 

 

(182)

Balance at March 26, 2021

339

$

149

 

(9)

$

(775)

$

$

10,541

$

(246)

$

9,669

$

$

9,669

For the Six Months Ended March 26, 2021

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at September 25, 2020

 

339

$

149

 

(8)

$

(669)

$

$

10,348

$

(445)

$

9,383

$

$

9,383

Net income

 

 

 

 

 

 

887

 

 

887

 

 

887

Other comprehensive income

 

 

 

 

 

 

 

199

 

199

 

 

199

Share-based compensation expense

 

 

 

 

 

49

 

 

 

49

 

 

49

Dividends

 

 

 

 

(661)

 

 

(661)

 

 

(661)

Exercise of share options

 

 

 

2

 

119

 

 

 

 

119

 

 

119

Restricted share award vestings and other activity

 

 

 

 

84

 

(49)

 

(33)

 

 

2

 

 

2

Repurchase of common shares

 

 

 

(3)

 

(309)

 

 

 

 

(309)

 

 

(309)

Balance at March 26, 2021

339

$

149

 

(9)

$

(775)

$

$

10,541

$

(246)

$

9,669

$

$

9,669

4

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended March 27, 2020

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at December 27, 2019

 

351

$

154

 

(17)

$

(1,389)

$

$

12,206

$

(414)

$

10,557

$

$

10,557

Acquisition

 

 

 

 

 

 

 

 

 

107

 

107

Net loss

(456)

(456)

(456)

Other comprehensive loss

 

 

 

 

 

 

 

(157)

 

(157)

 

(2)

 

(159)

Share-based compensation expense

 

 

 

 

 

15

 

 

 

15

 

 

15

Dividends

 

 

 

 

 

 

(635)

 

 

(635)

 

 

(635)

Exercise of share options

 

 

 

 

13

 

 

 

 

13

 

 

13

Restricted share award vestings and other activity

 

 

 

 

17

 

(15)

 

7

 

 

9

 

 

9

Repurchase of common shares

 

 

 

(3)

 

(280)

 

 

 

 

(280)

 

 

(280)

Balance at March 27, 2020

351

$

154

 

(20)

$

(1,639)

$

$

11,122

$

(571)

$

9,066

$

105

$

9,171

For the Six Months Ended March 27, 2020

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at September 27, 2019

 

351

$

154

 

(16)

$

(1,337)

$

$

12,256

$

(503)

$

10,570

$

$

10,570

Acquisition

 

 

 

 

 

 

 

 

 

107

 

107

Net loss

(430)

(430)

(430)

Other comprehensive loss

 

 

 

 

 

 

 

(68)

 

(68)

 

(2)

 

(70)

Share-based compensation expense

 

 

 

 

 

37

 

 

 

37

 

 

37

Dividends

 

 

 

 

 

 

(635)

 

 

(635)

 

 

(635)

Exercise of share options

 

 

 

 

27

 

 

 

 

27

 

 

27

Restricted share award vestings and other activity

 

 

 

1

 

94

 

(37)

 

(69)

 

 

(12)

 

 

(12)

Repurchase of common shares

 

 

 

(5)

 

(423)

 

 

 

 

(423)

 

 

(423)

Balance at March 27, 2020

351

$

154

 

(20)

$

(1,639)

$

$

11,122

$

(571)

$

9,066

$

105

$

9,171

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the

Six Months Ended

March 26,

March 27,

    

2021

    

2020

    

(in millions)

Cash flows from operating activities:

Net income (loss)

$

887

$

(430)

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

 

(7)

 

1

Income (loss) from continuing operations

 

880

 

(429)

Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:

Impairment of goodwill

900