TE Connectivity(TEL) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales increased by 4.4% in Q2 2025 and 2.3% in the first six months of fiscal 2025 compared to the same periods in fiscal 2024, driven by a 17.2% increase in the Industrial Solutions segment[125]. - Transportation Solutions segment net sales decreased by 3.9% in Q2 2025 and 5.1% in the first six months of fiscal 2025 due to declines across all end markets[125]. - Industrial Solutions segment net sales increased by 17.2% in Q2 2025 and 14.1% in the first six months of fiscal 2025, primarily from growth in digital data networks, energy, and aerospace markets[125]. - The company expects Q3 2025 net sales to be approximately $4.3 billion, up from$ 4.0 billion in Q3 2024, with diluted earnings per share projected at $2.02[126]. - Operating income for Q2 2025 was$ 748 million, up $56 million from$ 692 million in Q2 2024, resulting in an operating margin of 18.1%[143]. - Transportation Solutions segment's operating income decreased by $32 million (6.7%) in Q2 2025 and$ 73 million (7.6%) in the first six months compared to the same periods in 2024, primarily due to lower volume and price erosion[151]. - Income from continuing operations was $145 million for the first six months of fiscal 2025, compared to a loss of$ 271 million in the same period of fiscal 2024[180]. Acquisitions and Investments - In the first six months of fiscal 2025, the company acquired two businesses for a total cash purchase price of $321 million, contributing to the Industrial Solutions segment[127]. - On April 1, 2025, the company acquired Richards Manufacturing for approximately$ 2.3 billion, enhancing its Energy business within the Industrial Solutions segment[128]. - The company acquired Richards Manufacturing for approximately $2.3 billion on April 1, 2025, net of cash acquired, and entered into a 364-day senior credit agreement in anticipation of the acquisition[161]. - The company acquired two businesses for a combined cash purchase price of$ 321 million in the first six months of fiscal 2025[164]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $1,531 million in the first six months of fiscal 2025[131]. - Cash provided by operating activities increased by$ 102 million to $1,531 million in the first six months of fiscal 2025, driven by higher pre-tax income and reduced income tax payments[162]. - Capital expenditures were$ 435 million in the first six months of fiscal 2025, with expectations of approximately 5% of net sales for capital spending levels[163]. Margins and Expenses - Gross margin increased by $96 million in Q2 2025 and$ 132 million in the first six months of fiscal 2025, primarily due to higher volume, with gross margin percentages at 35.2% and 35.3% respectively[137]. - Selling, general, and administrative expenses increased by $10 million in Q2 2025 compared to Q2 2024, representing 11.0% of net sales[139]. - Net restructuring charges totaled$ 87 million in the first half of fiscal 2025, with expected annualized cost savings of approximately $70 million by the end of fiscal 2026[141]. - Restructuring and other charges increased to$ 65 million in the first six months of fiscal 2025 from $36 million in the same period of 2024[152]. Market and Economic Factors - Approximately 60% of net sales were invoiced in currencies other than the U.S. dollar in the first six months of fiscal 2025, impacting reported results due to foreign currency translation[134]. - Average copper price increased to$ 4.22 per lb in Q2 2025 from $3.79 in Q2 2024, while gold rose to$ 2,459 per troy oz from $1,966[138]. - Organic net sales in the Automotive sector decreased by 1.3% in the first half of fiscal 2025, with significant declines in the EMEA and Americas regions[149]. - Digital data networks saw a significant organic net sales increase of 78.0% in Q2 2025 and 62.8% in the first six months, attributed to growth in artificial intelligence and cloud applications[157]. - Medical segment's organic net sales decreased by 13.7% in Q2 2025 and 19.0% in the first six months, primarily due to reduced demand from inventory corrections[158]. Debt and Financing - Total debt increased from$ 4,203 million on September 27, 2024, to $5,614 million on March 28, 2025[166]. - TEGSA issued €750 million of 3.25% senior notes due in January 2033 during the second quarter of fiscal 2025[167]. - TEGSA had$ 1.5 billion of commercial paper outstanding at a weighted-average interest rate of 4.64% as of March 28, 2025[168]. - The company is in compliance with all debt covenants as of March 28, 2025, and expects to maintain compliance in the foreseeable future[172]. - TEGSA has a Five-Year Credit Facility with aggregate commitments of $1.5 billion, with no borrowings as of March 28, 2025[171]. Shareholder Returns - The company declared a quarterly dividend of$ 0.71 per ordinary share, payable on June 10, 2025[131]. - Approximately four million ordinary shares were repurchased for $615 million during the first six months of fiscal 2025[175]. Risks and Compliance - Risks associated with current and future acquisitions and divestitures[201]. - Global risks of business interruptions due to natural disasters impacting operations and customer behaviors[201]. - Political, economic, and military instability risks, particularly from ongoing military conflicts[201]. - Cybersecurity incidents and disruptions to information technology infrastructure risks[201]. - Compliance risks with environmental laws and regulations, including climate change[201]. - Increasing scrutiny regarding environmental, social, and governance matters[201]. - Risks related to antitrust or competition laws and trade regulations compliance[201]. - Potential impacts of legislative proposals on corporate effective tax rates and U.S. government contracts[201]. - Risks associated with being an Irish corporation[201]. - Impact of fluctuations in market price of shares and unsolicited takeover proposals[201].