TE Connectivity(US:TEL)2022-04-29 15:26Part I. Financial Information Financial Statements Presents unaudited Condensed Consolidated Financial Statements for quarterly and six-month periods, including Statements of Operations, Balance Sheets, and Cash Flows with accompanying notes Condensed Consolidated Statements of Operations Highlights | Indicator | For the Quarter Ended March 25, 2022 (Millions USD) | For the Quarter Ended March 26, 2021 (Millions USD) | For the Six Months Ended March 25, 2022 (Millions USD) | For the Six Months Ended March 26, 2021 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $4,007 | $3,738 | $7,825 | $7,260 | | Gross margin | $1,337 | $1,210 | $2,567 | $2,356 | | Operating income | $705 | $612 | $1,377 | $1,060 | | Net income | $560 | $506 | $1,126 | $887 | | Diluted EPS | $1.71 | $1.51 | $3.43 | $2.66 | Condensed Consolidated Balance Sheets Highlights | Indicator | As of March 25, 2022 (Millions USD) | As of September 24, 2021 (Millions USD) | | :--- | :--- | :--- | | Total current assets | $7,417 | $7,263 | | Total assets | $21,451 | $21,462 | | Total current liabilities | $5,046 | $4,656 | | Total liabilities | $10,902 | $10,714 | | Total shareholders' equity | $10,442 | $10,634 | Condensed Consolidated Statements of Cash Flows Highlights | Indicator | For the Six Months Ended March 25, 2022 (Millions USD) | For the Six Months Ended March 26, 2021 (Millions USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $945 | $1,220 | | Net cash used in investing activities | ($383) | ($323) | | Net cash used in financing activities | ($1,012) | ($101) | | Net (decrease) increase in cash | ($454) | $803 | Notes to Condensed Consolidated Financial Statements Details accounting policies and financial items, including a new restructuring program, a Communications Solutions acquisition, debt issuance and redemption, and segment performance - In fiscal 2022, a new restructuring program was initiated for footprint consolidation and cost structure improvements, with charges of $53 million recorded in the first six months and an expected $50 million in annualized cost savings by the end of fiscal 202432125 - During the first six months of fiscal 2022, the company acquired one business in the Communications Solutions segment for a cash purchase price of $127 million, net of cash acquired38 - In Q2 2022, TEGSA, a wholly-owned subsidiary, issued $600 million of 2.50% senior notes due 2032 and completed an early redemption of $500 million of 3.50% senior notes4647 Net Sales by Segment (Six Months Ended) | Segment | March 25, 2022 (Millions USD) | March 26, 2021 (Millions USD) | Change % | | :--- | :--- | :--- | :--- | | Transportation Solutions | $4,472 | $4,511 | -0.9% | | Industrial Solutions | $2,134 | $1,825 | +16.9% | | Communications Solutions | $1,219 | $924 | +31.9% | | Total | $7,825 | $7,260 | +7.8% | Operating Income by Segment (Six Months Ended) | Segment | March 25, 2022 (Millions USD) | March 26, 2021 (Millions USD) | Change % | | :--- | :--- | :--- | :--- | | Transportation Solutions | $804 | $706 | +13.9% | | Industrial Solutions | $271 | $187 | +44.9% | | Communications Solutions | $302 | $167 | +80.8% | | Total | $1,377 | $1,060 | +29.9% | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 and first-half fiscal 2022 financial results, highlighting sales growth, gross margin improvements, and the impact of global events, along with the Q3 fiscal 2022 outlook - For Q2 2022, net sales increased 7.2% year-over-year, with organic growth of 8.4%, and for the first six months, net sales increased 7.8% year-over-year, with organic growth of 8.2%100112113 - The company suspended business in Russia and paused operations in Ukraine, which has increased costs for transportation, energy, and raw materials, though the direct financial impact was not significant in the first half of fiscal 2022100101 - For Q3 fiscal 2022, the company expects net sales of approximately $3.9 billion and diluted EPS from continuing operations of approximately $1.71, factoring in an estimated $154 million negative impact on sales from foreign currency exchange rates and a 300 basis point negative impact on sales from COVID-19 shutdowns in China107 Results of Operations Analyzes Q2 2022 net sales growth, organic contributions, currency impacts, and gross margin improvements driven by volume and pricing actions offsetting higher material costs Net Sales Change Analysis (Q2 2022 vs Q2 2021) | Component | Value (Millions USD) | Growth % | | :--- | :--- | :--- | | Net Sales Growth | $269 | 7.2% | | Organic Net Sales Growth | $316 | 8.4% | | Acquisitions (Divestitures) | $63 | 1.7% | | Foreign Currency Translation | ($110) | -2.9% | - Gross margin for Q2 2022 increased by $127 million year-over-year, primarily due to higher volume and positive pricing actions, which were partially offset by higher material costs119 - The company expects to purchase approximately 225 million lbs of copper, 140,000 troy oz of gold, 2.9 million troy oz of silver, and 15,000 troy oz of palladium in fiscal 2022, and has experienced price increases in these commodities122 Segment Results Details performance across Transportation, Industrial, and Communications Solutions segments, highlighting sales growth, organic contributions, and operating margins for Q2 and the first six months - Transportation Solutions: Q2 sales grew 1.2% year-over-year, with 4.5% organic growth offset by currency headwinds, achieving an operating margin of 17.7%, while sales for the first six months declined 0.9%131134 - Industrial Solutions: Q2 sales grew 12.9% year-over-year, driven by 10.5% organic growth and contributions from acquisitions, resulting in an operating margin of 13.8%, with sales for the first six months growing 16.9%138140 - Communications Solutions: Q2 sales grew 23.8% year-over-year, driven by 22.8% organic growth, achieving an operating margin of 23.9%, with sales for the first six months growing 31.9%143144 Liquidity and Capital Resources Discusses the company's liquidity, cash flow from operations, debt activities, share repurchases, and dividend payments, affirming sufficient resources for future needs - Net cash from operating activities decreased by $275 million to $945 million in the first six months of fiscal 2022 compared to the prior year, primarily due to higher incentive compensation payments and increased working capital148 - During the first six months of fiscal 2022, the company repurchased 5 million common shares for $752 million, with $839 million remaining available under the share repurchase authorization as of March 25, 202284157 - In March 2022, shareholders approved a dividend of $2.24 per share for the upcoming year, to be paid in four quarterly installments of $0.56 per share, representing an increase from the previous dividend82156 Quantitative and Qualitative Disclosures About Market Risk Reports no significant changes in market risk exposures during the first six months of fiscal 2022, referring to the Annual Report for comprehensive details - There have been no significant changes in the company's exposures to market risk during the first six months of fiscal 2022182 Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 25, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 25, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective183 - There were no changes in internal control over financial reporting during the quarter ended March 25, 2022, that have materially affected or are reasonably likely to materially affect internal controls184 Part II. Other Information Legal Proceedings Reports no material developments in legal proceedings since the last Annual Report on Form 10-K, referring to previous filings for further information - No material developments in legal proceedings have occurred since the last Annual Report on Form 10-K187 Risk Factors Highlights no material changes to risk factors, emphasizing business interruptions from global instability, including the Russia-Ukraine conflict and COVID-19 impacts in China - The company faces risks of significant business interruptions from natural disasters, war (including the Russia-Ukraine conflict), and health crises like the COVID-19 pandemic, which has impacted operations in China189 - The company is subject to global risks of political, economic, and military instability, including changes in trade policies, tax laws, and volatile conditions in China, where it has 16 principal manufacturing sites and derives 22% of its net sales190193 Unregistered Sales of Equity Securities and Use of Proceeds Details the company's common share repurchases during the quarter ended March 25, 2022, including total shares and average price paid Issuer Purchases of Equity Securities (Quarter Ended March 25, 2022) | Period | Total Shares Purchased | Average Price Paid Per Share (USD) | Shares Purchased as Part of Program | Remaining Authorization (USD) | | :--- | :--- | :--- | :--- | :--- | | Dec 25, 2021 – Jan 21, 2022 | 652,930 | $159.76 | 652,700 | $1,240,380,078 | | Jan 22 – Feb 25, 2022 | 1,397,553 | $144.33 | 1,394,900 | $1,039,050,472 | | Feb 26 – Mar 25, 2022 | 1,512,625 | $132.19 | 1,512,000 | $839,175,200 | | Total | 3,563,108 | $142.00 | 3,559,600 | | Exhibits Lists exhibits filed with the Form 10-Q, including indenture agreements, CEO and CFO certifications, and Inline XBRL data files