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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Quarterly Period Ended
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or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Commission File Number)
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number) |
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(Address and postal code of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading symbol |
Name of each exchange on which registered |
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*Issued by Tyco Electronics Group S.A., an indirect wholly-owned subsidiary of TE Connectivity plc
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.
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).
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.
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Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company
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Emerging growth company
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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
The number of ordinary shares outstanding as of January 17, 2025 was
TE CONNECTIVITY PLC
INDEX TO FORM 10-Q
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TE CONNECTIVITY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the |
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Quarters Ended |
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December 27, |
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December 29, |
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2024 |
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2023 |
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(in millions, except per share data) |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, general, and administrative expenses |
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Research, development, and engineering expenses |
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Acquisition and integration costs |
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Restructuring and other charges, net |
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Operating income |
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Interest income |
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Interest expense |
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(
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(
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Other expense, net |
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(
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(
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Income from continuing operations before income taxes |
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Income tax (expense) benefit |
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(
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Income from continuing operations |
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Loss from discontinued operations, net of income taxes |
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— |
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(
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Net income |
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$ |
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$ |
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Basic earnings per share: |
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Income from continuing operations |
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$ |
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$ |
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Net income |
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Diluted earnings per share: |
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Income from continuing operations |
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$ |
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$ |
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Net income |
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Weighted-average number of shares outstanding: |
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Basic |
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Diluted |
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See Notes to Condensed Consolidated Financial Statements.
1
TE CONNECTIVITY PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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For the |
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Quarters Ended |
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December 27, |
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December 29, |
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2024 |
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2023 |
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(in millions) |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Currency translation |
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(
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Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes |
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(
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(
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Gains (losses) on cash flow hedges, net of income taxes |
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(
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Other comprehensive income (loss) |
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(
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Comprehensive income |
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Less: comprehensive (income) loss attributable to noncontrolling interests |
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(
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Comprehensive income attributable to TE Connectivity plc |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
2
TE CONNECTIVITY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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December 27, |
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September 27, |
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2024 |
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2024 |
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(in millions, except share |
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||||
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data) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant, and equipment, net |
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Goodwill |
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Intangible assets, net |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable noncontrolling interests, and shareholders' equity |
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Current liabilities: |
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Short-term debt |
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$ |
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$ |
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Accounts payable |
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Accrued and other current liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term pension and postretirement liabilities |
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Deferred income taxes |
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Income taxes |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Redeemable noncontrolling interests |
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Shareholders' equity: |
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Preferred shares, $
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Ordinary class A shares, €
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Ordinary shares, $
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Accumulated earnings |
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Ordinary shares and common shares held in treasury, at cost,
|
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(
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(
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Accumulated other comprehensive income (loss) |
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(
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Total shareholders' equity |
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Total liabilities, redeemable noncontrolling interests, and shareholders' equity |
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$ |
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$ |
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|
See Notes to Condensed Consolidated Financial Statements.
3
TE CONNECTIVITY PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
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For the Quarter Ended December 27, 2024 |
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Common/ |
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Accumulated |
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Common/ |
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Ordinary Shares |
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Other |
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Total |
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|||||||||
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Ordinary Shares |
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Held in Treasury |
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Contributed |
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Accumulated |
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Comprehensive |
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Shareholders' |
|
||||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Surplus |
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Earnings |
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Income (Loss) |
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Equity |
|
||||||
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(in millions) |
|||||||||||||||||||||
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Balance at September 27, 2024 |
|
|
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$ |
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(
|
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$ |
(
|
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$ |
— |
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$ |
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$ |
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$ |
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|
Change in place of incorporation |
|
— |
|
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(
|
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— |
|
|
— |
|
|
— |
|
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|
|
|
— |
|
|
— |
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Cancellation of treasury shares |
|
(
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— |
|
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|
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|
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— |
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(
|
|
|
— |
|
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— |
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Net income |
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— |
|
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— |
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— |
|
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— |
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— |
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— |
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Other comprehensive loss |
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— |
|
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— |
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— |
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— |
|
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— |
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— |
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(
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|
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(
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Share-based compensation expense |
|
— |
|
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— |
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— |
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— |
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|
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— |
|
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— |
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Exercise of share options |
|
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— |
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— |
|
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— |
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|
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— |
|
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— |
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|
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Restricted share award vestings and other activity |
|
|
|
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— |
|
— |
|
|
— |
|
|
(
|
|
|
|
|
|
— |
|
|
(
|
|
|
Repurchase of ordinary shares |
|
— |
|
|
— |
|
(
|
|
|
(
|
|
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
Balance at December 27, 2024 |
|
|
|
$ |
|
|
(
|
|
$ |
(
|
|
$ |
— |
|
$ |
|
|
$ |
(
|
|
$ |
|
|
|
|
|
For the Quarter Ended December 29, 2023 |
|||||||||||||||||||||
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Accumulated |
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||||
|
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Common Shares |
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Other |
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Total |
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||||||
|
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|
Common Shares |
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Held in Treasury |
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Contributed |
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Accumulated |
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Comprehensive |
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Shareholders' |
|
||||||||||
|
|
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Shares |
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Amount |
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Shares |
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Amount |
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Surplus |
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Earnings |
|
Income (Loss) |
|
Equity |
|
||||||
|
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(in millions) |
|||||||||||||||||||||
|
Balance at September 29, 2023 |
|
|
|
$ |
|
|
(
|
|
$ |
(
|
|
$ |
— |
|
$ |
|
|
$ |
(
|
|
$ |
|
|
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Net income |
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— |
|
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— |
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— |
|
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— |
|
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— |
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|
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|
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— |
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Other comprehensive income |
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— |
|
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— |
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— |
|
|
— |
|
|
— |
|
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— |
|
|
|
|
|
|
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Share-based compensation expense |
|
— |
|
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— |
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— |
|
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— |
|
|
|
|
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— |
|
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— |
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Exercise of share options |
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— |
|
|
— |
|
— |
|
|
|
|
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— |
|
|
— |
|
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— |
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|
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Restricted share award vestings and other activity |
|
— |
|
|
— |
|
— |
|
|
|
|
|
(
|
|
|
(
|
|
|
— |
|
|
(
|
|
|
Repurchase of common shares |
|
— |
|
|
— |
|
(
|
|
|
(
|
|
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
Balance at December 29, 2023 |
|
|
|
$ |
|
|
(
|
|
$ |
(
|
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
See Notes to Condensed Consolidated Financial Statements.
4
TE CONNECTIVITY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
For the |
|
||||
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|
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Quarters Ended |
|
||||
|
|
|
December 27, |
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December 29, |
|
||
|
|
|
2024 |
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2023 |
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||
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|
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(in millions) |
|
||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
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Net income |
|
$ |
|
|
$ |
|
|
|
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
|
|
Income from continuing operations |
|
|
|
|
|
|
|
|
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |
|
|
|
|
|
|
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|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
(
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|
Non-cash lease cost |
|
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|
|
|
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Provision for losses on accounts receivable and inventories |
|
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Share-based compensation expense |
|
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Other |
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of the effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
Inventories |
|
|
(
|
|
|
(
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
(
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
Accrued and other current liabilities |
|
|
(
|
|
|
(
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
Other |
|
|
(
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(
|
|
|
(
|
|
|
Proceeds from sale of property, plant, and equipment |
|
|
|
|
|
|
|
|
Acquisition of businesses, net of cash acquired |
|
|
(
|
|
|
(
|
|
|
Proceeds from divestiture of business, net of cash retained by business sold |
|
|
— |
|
|
|
|
|
Other |
|
|
(
|
|
|
(
|
|
|
Net cash used in investing activities |
|
|
(
|
|
|
(
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net increase (decrease) in commercial paper |
|
|
|
|
|
(
|
|
|
Repayment of debt |
|
|
— |
|
|
(
|
|
|
Proceeds from exercise of share options |
|
|
|
|
|
|
|
|
Repurchase of ordinary/common shares |
|
|
(
|
|
|
(
|
|
|
Payment of ordinary/common share dividends to shareholders |
|
|
(
|
|
|
(
|
|
|
Other |
|
|
(
|
|
|
(
|
|
|
Net cash used in financing activities |
|
|
(
|
|
|
(
|
|
|
Effect of currency translation on cash |
|
|
(
|
|
|
|
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
|
(
|
|
|
(
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
|
|
$ |
|
|
See Notes to Condensed Consolidated Financial Statements.
5
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The unaudited Condensed Consolidated Financial Statements of TE Connectivity plc (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and the instructions to Form 10-Q under the Securities Exchange Act of 1934. In management’s opinion, the unaudited Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period.
The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024.
Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2025 and fiscal 2024 are to our fiscal years ending September 26, 2025 and ended September 27, 2024, respectively.
Change in Place of Incorporation
The merger between TE Connectivity Ltd., our former parent entity, and TE Connectivity plc, its wholly-owned subsidiary, was completed on September 30, 2024. TE Connectivity plc, a public limited company incorporated under Irish law, was the surviving entity and, as a result, our jurisdiction of incorporation changed from Switzerland to Ireland. Shareholders received
New Segment Structure
Effective for fiscal 2025, we reorganized our management and segments to align the organization around our fiscal 2025 strategy. Our businesses in the former Communications Solutions segment have been moved into the Industrial Solutions segment. Also, the appliances and industrial equipment businesses have been combined to form the automation and connected living business. In addition, we realigned certain product lines and businesses from the Industrial Solutions and former Communications Solutions segments to the Transportation Solutions segment. The following represents the new segment structure:
| ● | Transportation Solutions —This segment contains our automotive, commercial transportation, and sensors businesses. |
| ● | Industrial Solutions —This segment contains our aerospace, defense, and marine; medical; energy; digital data networks (historically referred to as data and devices); and automation and connected living businesses. |
6
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
2. Restructuring and Other Charges, Net
Net restructuring and other charges consisted of the following:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Restructuring charges, net |
|
$ |
|
|
$ |
|
|
|
Loss on divestiture |
|
|
— |
|
|
|
|
|
Costs related to change in place of incorporation |
|
|
|
|
|
— |
|
|
Other charges (credits), net |
|
|
(
|
|
|
|
|
|
Restructuring and other charges, net |
|
$ |
|
|
$ |
|
|
Restructuring Charges, Net
Net restructuring charges by segment were as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Transportation Solutions |
|
$ |
|
|
$ |
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Restructuring charges, net |
|
$ |
|
|
$ |
|
|
Activity in our restructuring reserves was as follows:
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
||||||
|
|
|
September 27, |
|
|
|
|
Changes in |
|
Cash |
|
Non-Cash |
|
Currency |
|
December 27, |
|
||||||
|
|
|
2024 |
|
|
|
Estimate |
|
Payments |
|
Items |
|
Translation |
|
2024 |
|
|||||||
|
|
|
(in millions) |
|
|||||||||||||||||||
|
Fiscal 2025 Actions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance |
|
$ |
— |
|
$ |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
|
|
|
Property, plant, and equipment |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
(
|
|
|
— |
|
|
— |
|
|
Total |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
(
|
|
|
— |
|
|
|
|
|
Fiscal 2024 Actions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance |
|
|
|
|
|
|
|
|
— |
|
|
(
|
|
|
— |
|
|
(
|
|
|
|
|
|
Property, plant, and equipment |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
(
|
|
|
— |
|
|
— |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
|
|
|
Pre-Fiscal 2024 Actions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance |
|
|
|
|
|
|
|
|
(
|
|
|
(
|
|
|
— |
|
|
(
|
|
|
|
|
|
Facility and other exit costs |
|
|
|
|
|
|
|
|
— |
|
|
(
|
|
|
— |
|
|
(
|
|
|
|
|
|
Property, plant, and equipment |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
(
|
|
|
— |
|
|
— |
|
|
Total |
|
|
|
|
|
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
|
|
|
Total Activity |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
(
|
|
$ |
(
|
|
$ |
(
|
|
$ |
|
|
7
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Fiscal 2025 Actions
During fiscal 2025, we initiated a restructuring program associated with footprint consolidation and cost structure improvements in both of our segments. During the quarter ended December 27, 2024, we recorded restructuring charges of $
Fiscal 2024 Actions
During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization. In connection with this program, during the quarters ended December 27, 2024 and December 29, 2023, we recorded net restructuring charges of $
Pre-Fiscal 2024 Actions
During the quarters ended December 27, 2024 and December 29, 2023, we recorded net restructuring charges of $
Total Restructuring Reserves
Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Accrued and other current liabilities |
|
$ |
|
|
$ |
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
Restructuring reserves |
|
$ |
|
|
$ |
|
|
Divestiture
During the quarter ended December 29, 2023, we sold
Change in Place of Incorporation
During the quarter ended December 27, 2024, we incurred costs of $
3. Acquisitions
During the quarter ended December 27, 2024, we acquired
8
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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.
During the quarter ended December 29, 2023, we acquired approximately
4. Inventories
Inventories consisted of the following:
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Raw materials |
|
$ |
|
|
$ |
|
|
|
Work in progress |
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
Inventories |
|
$ |
|
|
$ |
|
|
5. Goodwill
The changes in the carrying amount of goodwill by segment were as follows (1) :
|
|
|
Transportation |
|
Industrial |
|
|
|
|
||
|
|
|
Solutions |
|
Solutions |
|
Total |
|
|||
|
|
|
(in millions) |
|
|||||||
|
September 27, 2024 (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Acquisitions |
|
|
— |
|
|
|
|
|
|
|
|
Currency translation |
|
|
(
|
|
|
(
|
|
|
(
|
|
|
December 27, 2024 (2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
| (1) | In connection with the reorganization of our segments, goodwill was reallocated to reporting units using a relative fair value approach. See Note 1 for additional information regarding our new segment structure. |
| (2) |
At December 27, 2024 and September 27, 2024, accumulated impairment losses for the Transportation Solutions and Industrial Solutions segments were
$
|
During the quarter ended December 27, 2024, we recognized goodwill in the Industrial Solutions segment in connection with recent acquisitions. See Note 3 for additional information regarding acquisitions.
9
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
6. Intangible Assets, Net
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 27, 2024 |
|
September 27, 2024 |
|
||||||||||||||
|
|
|
Gross |
|
|
|
|
Net |
|
Gross |
|
|
|
|
Net |
|
||||
|
|
|
Carrying |
|
Accumulated |
|
Carrying |
|
Carrying |
|
Accumulated |
|
Carrying |
|
||||||
|
|
|
Amount |
|
Amortization |
|
Amount |
|
Amount |
|
Amortization |
|
Amount |
|
||||||
|
|
|
(in millions) |
|
||||||||||||||||
|
Customer relationships |
|
$ |
|
|
$ |
(
|
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
|
Intellectual property |
|
|
|
|
|
(
|
|
|
|
|
|
|
|
|
(
|
|
|
|
|
|
Other |
|
|
|
|
|
(
|
|
|
|
|
|
|
|
|
(
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
(
|
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
Intangible asset amortization expense was $
At December 27, 2024, the aggregate amortization expense on intangible assets is expected to be as follows:
|
|
|
(in millions) |
|
|
|
Remainder of fiscal 2025 |
|
$ |
|
|
|
Fiscal 2026 |
|
|
|
|
|
Fiscal 2027 |
|
|
|
|
|
Fiscal 2028 |
|
|
|
|
|
Fiscal 2029 |
|
|
|
|
|
Fiscal 2030 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
7. Debt
As of December 27, 2024, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $
Payment obligations under TEGSA’s senior notes, commercial paper, and
The fair value of our debt, based on indicative valuations, was approximately $
10
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
8. Leases
The components of lease cost were as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Operating lease cost |
|
$ |
|
|
$ |
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
Total lease cost |
|
$ |
|
|
$ |
|
|
Cash flow information, including significant non-cash transactions, related to leases was as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Payments for operating leases (1) |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets, including modifications of existing leases, obtained in exchange for operating lease liabilities |
|
|
|
|
|
|
|
| (1) | These payments are included in cash flows from operating activities, primarily in changes in accrued and other current liabilities. |
9. Commitments and Contingencies
Legal Proceedings
In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. 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.
Trade Compliance Matters
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. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the DDTC in its ongoing investigation. We are unable to predict the timing and final outcome of the agency’s investigation. 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. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigation into these matters has yet to be completed and the final outcome of such investigation and related fines and penalties may differ from amounts currently reserved.
Environmental Matters
We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the
11
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of December 27, 2024, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $
Guarantees
In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.
At December 27, 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $
Supply Chain Finance Program
We have an agreement with a financial institution that allows participating suppliers the ability to finance payment obligations. The financial institution has separate arrangements with the suppliers and provides them with the option to request early payment for invoices. We do not determine the terms or conditions of the arrangement between the financial institution and suppliers. Our obligation to suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to finance amounts under the arrangement and we are not required to post collateral with the financial institution. The outstanding payment obligations under our supply chain finance program, which are included in accounts payable on our Condensed Consolidated Balance Sheets, were $
10. Financial Instruments
Foreign Currency Exchange Rate Risk
As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-currency swap contracts and foreign currency forward contracts, a portion of which are designated as cash flow hedges. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in foreign currency exchange rates on intercompany and other cash transactions. We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with the cash flow hedge-designated instruments addressing foreign exchange risks will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.
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 $
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 $
12
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
2029, we will pay the notional value of the contracts in the designated foreign currency and receive U.S. dollars from our counterparties. We are not required to provide collateral for these contracts.
These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Accrued and other current liabilities |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
The impacts of our hedge of net investment programs were as follows:
|
|
|
|
For the |
|
|||
|
|
|
|
Quarters Ended |
|
|||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Foreign currency exchange gains (losses) on intercompany loans and external borrowings (1) |
|
$ |
|
|
$ |
(
|
|
|
Gains (losses) on cross-currency swap contracts designated as hedges of net investment (1) |
|
|
|
|
|
(
|
|
| (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. |
Commodity Hedges
As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts. 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 $
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
|
|
Other assets |
|
|
— |
|
|
|
|
|
Accrued and other current liabilities |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
— |
|
The impacts of our commodity swap contracts were as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Gains (losses) recorded in other comprehensive income (loss) |
|
$ |
(
|
|
$ |
|
|
|
Gains (losses) reclassified from accumulated other comprehensive income (loss) into cost of sales |
|
|
|
|
|
(
|
|
13
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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.
11. Retirement Plans
The net periodic pension benefit cost for all non-U.S. and U.S. defined benefit pension plans was as follows:
|
|
|
Non-U.S. Plans |
|
U.S. Plans |
|
||||||||
|
|
|
For the |
|
For the |
|
||||||||
|
|
|
Quarters Ended |
|
Quarters Ended |
|
||||||||
|
|
|
December 27, |
|
December 29, |
|
December 27, |
|
December 29, |
|
||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
|
|
(in millions) |
|
||||||||||
|
Operating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
|
|
(
|
|
|
— |
|
|
— |
|
|
Net periodic pension benefit cost |
|
$ |
|
|
$ |
|
|
$ |
— |
|
$ |
|
|
During the quarter ended December 27, 2024, we contributed $
12. Income Taxes
We recorded income tax expense of $
The Organisation for Economic Co-operation and Development (“OECD”) and participating countries continue to work toward the enactment of a 15% global minimum corporate tax. More than 30 countries have thus far enacted global minimum tax legislation. Ireland has implemented elements of the OECD’s global minimum tax rules effective for us beginning in fiscal 2025. The global minimum tax is a significant structural change to the international taxation framework. We anticipate further legislative activity and administrative guidance throughout fiscal 2025. The legislation did not have a material impact on our cash taxes and income tax expense in the quarter ended December 27, 2024. We continue to monitor evolving tax legislation in the jurisdictions in which we operate.
See Note 17 for information regarding the impact of guidance issued by the OECD in January 2025 on the
Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of December 27, 2024, approximately $
14
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 December 27, 2024.
13. Earnings Per Share
The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:
|
|
|
For the |
|
||
|
|
|
Quarters Ended |
|
||
|
|
|
December 27, |
|
December 29, |
|
|
|
|
2024 |
|
2023 |
|
|
|
|
(in millions) |
|
||
|
Basic |
|
|
|
|
|
|
Dilutive impact of share-based compensation arrangements |
|
|
|
|
|
|
Diluted |
|
|
|
|
|
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 ordinary/common shares and inclusion would be antidilutive:
|
|
|
For the |
|
||
|
|
|
Quarters Ended |
|
||
|
|
|
December 27, |
|
December 29, |
|
|
|
|
2024 |
|
2023 |
|
|
|
|
(in millions) |
|
||
|
Antidilutive share options |
|
|
|
|
|
14. Shareholders’ Equity
Ordinary Shares
Effective for fiscal 2025, we are organized under the laws of Ireland. The rights of holders of our shares are governed by Irish law and our Irish articles of association. The par value of our ordinary shares is stated in U.S. dollars.
As discussed in Note 1, pursuant to the terms of a merger agreement between TE Connectivity Ltd. and TE Connectivity plc, shareholders received
Our articles of association authorize our board of directors to allot and issue shares up to the maximum of our authorized but unissued share capital for a period of
Ordinary Shares Held in Treasury
All treasury shares were cancelled at the beginning of fiscal 2025 in connection with our change in place of incorporation. See Note 1 for additional information regarding our change in place of incorporation.
Authorized Share Capital
In connection with our merger and change in place of incorporation, we converted
15
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
shares were re-acquired and cancelled following the merger.
Our authorized share capital consisted of
Contributed Surplus
As a result of cumulative equity transactions, including dividend activity and treasury share cancellations, our contributed surplus balance was reduced to zero with residual activity recorded against accumulated earnings as reflected on the Condensed Consolidated Statement of Shareholders’ Equity. To the extent that the contributed surplus balance continues to be zero, the impact of future transactions that normally would have been recorded as a reduction of contributed surplus will be recorded in accumulated earnings.
Dividends
We paid cash dividends to shareholders as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
Dividends paid per ordinary/common share |
|
$ |
|
|
$ |
|
|
Upon approval of a dividend payment, we record a liability with a corresponding charge to equity. At December 27, 2024 and September 27, 2024, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $
We expect future dividends to be made from accumulated earnings as defined under accounting principles generally accepted in Ireland (“Irish GAAP”).
Share Repurchase Program
During the quarter ended December 27, 2024, our board of directors authorized an increase of $
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Number of ordinary/common shares repurchased |
|
|
|
|
|
|
|
|
Repurchase value |
|
$ |
|
|
$ |
|
|
At December 27, 2024, we had $
16
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
15. Share Plans
Share-based compensation expense, which was included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Share-based compensation expense |
|
$ |
|
|
$ |
|
|
As of December 27, 2024, there was $
During the quarter ended December 27, 2024, we granted the following share-based awards as part of our annual incentive plan grant:
|
|
|
|
|
Grant-Date |
|
|
|
|
|
Shares |
|
Fair Value |
|
|
|
|
|
(in millions) |
|
|
|
|
|
Share options |
|
|
|
$ |
|
|
|
Restricted share awards |
|
|
|
|
|
|
|
Performance share awards |
|
|
|
|
|
|
As of December 27, 2024, we had
Share-Based Compensation Assumptions
The assumptions we used in the Black-Scholes-Merton option pricing model for the options granted as part of our annual incentive plan grant were as follows:
|
Expected share price volatility |
|
|
|
% |
|
|
Risk-free interest rate |
|
|
|
% |
|
|
Expected annual dividend per share |
|
$ |
|
|
|
|
Expected life of options (in years) |
|
|
|
|
|
16. Segment and Geographic Data
Effective for fiscal 2025, we reorganized our management and segments to align the organization around our fiscal 2025 strategy. See Note 1 for additional information regarding our new segment structure. The following segment information reflects the new segment reporting structure. Prior period segment results have been recast to conform to the new segment structure.
17
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Net sales by segment (1) and industry end market (2) were as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Transportation Solutions: |
|
|
|
|
|
|
|
|
Automotive |
|
$ |
|
|
$ |
|
|
|
Commercial transportation |
|
|
|
|
|
|
|
|
Sensors |
|
|
|
|
|
|
|
|
Total Transportation Solutions |
|
|
|
|
|
|
|
|
Industrial Solutions: |
|
|
|
|
|
|
|
|
Automation and connected living |
|
|
|
|
|
|
|
|
Aerospace, defense, and marine |
|
|
|
|
|
|
|
|
Digital data networks |
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
Medical |
|
|
|
|
|
|
|
|
Total Industrial Solutions |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
| (1) | Intersegment sales were not material. |
| (2) | Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. |
Net sales by geographic region (1) and segment were as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Europe/Middle East/Africa (“EMEA”): |
|
|
|
|
|
|
|
|
Transportation Solutions |
|
$ |
|
|
$ |
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Total EMEA |
|
|
|
|
|
|
|
|
Asia–Pacific: |
|
|
|
|
|
|
|
|
Transportation Solutions |
|
|
|
|
|
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Total Asia–Pacific |
|
|
|
|
|
|
|
|
Americas: |
|
|
|
|
|
|
|
|
Transportation Solutions |
|
|
|
|
|
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Total Americas |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
| (1) | Net sales to external customers are attributed to individual countries based on the legal entity that records the sale. |
18
TE CONNECTIVITY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Operating income by segment was as follows:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Transportation Solutions |
|
$ |
|
|
$ |
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
Segment assets and a reconciliation of segment assets to total assets were as follows:
|
|
|
Segment Assets |
|
||||
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Transportation Solutions |
|
$ |
|
|
$ |
|
|
|
Industrial Solutions |
|
|
|
|
|
|
|
|
Total segment assets (1) |
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
$ |
|
|
| (1) | Segment assets are composed of accounts receivable, inventories, and net property, plant, and equipment. |
17. Subsequent Event
In January 2025, the OECD released new guidance for the 15% global minimum corporate tax. We expect this guidance to impact the realizability of certain net deferred tax assets associated with a
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including but not limited to those under the heading “Forward-Looking Information” and “Part II. Item 1A. Risk Factors.”
Our Condensed Consolidated Financial Statements have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure. See “Non-GAAP Financial Measure” for additional information regarding this measure.
Ov erview
TE Connectivity plc (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more.
Change in Place of Incorporation
During the first quarter of fiscal 2025, our jurisdiction of incorporation changed from Switzerland to Ireland. We do not anticipate any material changes in our operations or financial results as a result of the change in place of incorporation. See additional information in Note 1 to the Condensed Consolidated Financial Statements.
New Segment Structure
Effective for fiscal 2025, we reorganized our management and segments to align the organization around our fiscal 2025 strategy. We now operate through two reportable segments: Transportation Solutions and Industrial Solutions. Prior period segment results have been recast to conform to the new segment structure. See additional information in Note 1 to the Condensed Consolidated Financial Statements.
Summary of Performance
| ● | Our net sales in the first quarter of fiscal 2025 were consistent with sales levels in the first quarter of fiscal 2024 as sales growth in the Industrial Solutions segment was offset by sales declines in the Transportation Solutions segment. Also, on an organic basis, our net sales were flat in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. |
| ● | Our net sales by segment were as follows: |
| ● | Transportation Solutions —Our net sales decreased 6.3% in the first quarter of fiscal 2025 as a result of sales declines in all end markets. |
| ● | Industrial Solutions —Our net sales increased 10.8% in the first quarter of fiscal 2025 primarily as a result of sales growth in the digital data networks and the aerospace, defense, and marine end markets, partially offset by sales declines in the medical end market. |
| ● | Net cash provided by operating activities was $878 million in the first quarter of fiscal 2025. |
20
Outlook
In the second quarter of fiscal 2025, we expect our net sales to be approximately $3.95 billion, as compared to $3.97 billion in the second quarter of fiscal 2024. Sales declines in the Transportation Solutions segment are expected to be largely offset by sales growth in the Industrial Solutions segment. In the second quarter of fiscal 2025, we expect diluted loss per share from continuing operations to be approximately $0.05 per share, which includes an approximate $1.87 per share impact associated with the tax matter discussed below. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $112 million and $0.01 per share, respectively, in the second quarter of fiscal 2025 as compared to the same period of fiscal 2024. Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.
In January 2025, the Organisation for Economic Co-operation and Development released new guidance for the 15% global minimum corporate tax. We are reviewing the new guidance and related interpretations and, while our assessment is not complete, it is probable that we will need to reduce certain net deferred tax assets associated with a ten-year tax credit obtained by a Swiss subsidiary by approximately $600 million during the second quarter of fiscal 2025. See Note 17 to the Condensed Consolidated Financial Statements for additional information regarding the new guidance.
Acquisitions
During the first quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired. The acquired businesses have been reported as part of our Industrial Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.
Results of Operations
Net Sales
The following table presents our net sales and the percentage of total net sales by segment:
|
|
|
For the |
|
|
|||||||||
|
|
|
Quarters Ended |
|
|
|||||||||
|
|
|
December 27, |
|
|
December 29, |
|
|
||||||
|
|
|
2024 |
|
|
2023 |
|
|
||||||
|
|
|
($ in millions) |
|
||||||||||
|
Transportation Solutions |
|
$ |
2,243 |
|
58 |
% |
|
$ |
2,393 |
|
62 |
% |
|
|
Industrial Solutions |
|
|
1,593 |
|
42 |
|
|
|
1,438 |
|
38 |
|
|
|
Total |
|
$ |
3,836 |
|
100 |
% |
|
$ |
3,831 |
|
100 |
% |
|
The following table provides an analysis of the change in our net sales by segment:
|
|
Change in Net Sales for the Quarter Ended December 27, 2024 |
|
||||||||||||||
|
|
versus Net Sales for the Quarter Ended December 29, 2023 |
|
||||||||||||||
|
|
Net Sales |
|
Organic Net Sales |
|
|
|
|
Acquisitions |
|
|||||||
|
|
Growth (Decline) |
|
Growth (Decline) |
|
Translation |
|
(Divestiture) |
|
||||||||
|
|
($ in millions) |
|
||||||||||||||
|
Transportation Solutions |
$ |
(150) |
|
(6.3) |
% |
$ |
(126) |
|
(5.2) |
% |
$ |
(12) |
|
$ |
(12) |
|
|
Industrial Solutions |
|
155 |
|
10.8 |
|
|
123 |
|
8.6 |
|
|
(6) |
|
|
38 |
|
|
Total |
$ |
5 |
|
0.1 |
% |
$ |
(3) |
|
— |
% |
$ |
(18) |
|
$ |
26 |
|
Net sales were flat in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 as the net positive impact of 0.6% from acquisitions and a divestiture was largely offset by the negative impact of foreign currency translation of 0.5% due to the weakening of certain foreign currencies. Price erosion adversely affected organic net sales by $12 million in the first quarter of fiscal 2025.
See further discussion of net sales below under “Segment Results.”
21
Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.
Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2025.
The following table presents our net sales and the percentage of total net sales by geographic region (1) :
|
|
|
For the |
|
|
|||||||||
|
|
|
Quarters Ended |
|
|
|||||||||
|
|
|
December 27, |
|
|
December 29, |
|
|
||||||
|
|
|
2024 |
|
|
2023 |
|
|
||||||
|
|
|
($ in millions) |
|
||||||||||
|
EMEA |
|
$ |
1,229 |
|
32 |
% |
|
$ |
1,411 |
|
37 |
% |
|
|
Asia–Pacific |
|
|
1,603 |
|
42 |
|
|
|
1,379 |
|
36 |
|
|
|
Americas |
|
|
1,004 |
|
26 |
|
|
|
1,041 |
|
27 |
|
|
|
Total |
|
$ |
3,836 |
|
100 |
% |
|
$ |
3,831 |
|
100 |
% |
|
| (1) | Net sales to external customers are attributed to individual countries based on the legal entity that records the sale. |
The following table provides an analysis of the change in our net sales by geographic region:
|
|
|
Change in Net Sales for the Quarter Ended December 27, 2024 |
|
||||||||||||||
|
|
|
versus Net Sales for the Quarter Ended December 29, 2023 |
|
||||||||||||||
|
|
|
Net Sales |
|
Organic Net Sales |
|
|
|
|
Acquisitions |
|
|||||||
|
|
|
Growth (Decline) |
|
Growth (Decline) |
|
Translation |
|
(Divestiture) |
|
||||||||
|
|
|
($ in millions) |
|
||||||||||||||
|
EMEA |
|
$ |
(182) |
|
(12.9) |
% |
$ |
(189) |
|
(13.4) |
% |
$ |
(4) |
|
$ |
11 |
|
|
Asia–Pacific |
|
|
224 |
|
16.2 |
|
|
216 |
|
15.7 |
|
|
(1) |
|
|
9 |
|
|
Americas |
|
|
(37) |
|
(3.6) |
|
|
(30) |
|
(2.9) |
|
|
(13) |
|
|
6 |
|
|
Total |
|
$ |
5 |
|
0.1 |
% |
$ |
(3) |
|
— |
% |
$ |
(18) |
|
$ |
26 |
|
Cost of Sales and Gross Margin
The following table presents cost of sales and gross margin information:
|
|
|
For the |
|
|
|
|
|
|||||
|
|
|
Quarters Ended |
|
|
|
|
|
|||||
|
|
|
December 27, |
|
|
December 29, |
|
|
|
|
|||
|
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||||
|
Cost of sales |
|
$ |
2,476 |
|
|
$ |
2,507 |
|
|
$ |
(31) |
|
|
As a percentage of net sales |
|
|
64.5 |
% |
|
|
65.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
$ |
1,360 |
|
|
$ |
1,324 |
|
|
$ |
36 |
|
|
As a percentage of net sales |
|
|
35.5 |
% |
|
|
34.6 |
% |
|
|
|
|
Gross margin increased $36 million in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to higher volume partially offset by price erosion.
22
We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are subject to variability in raw material prices, which continue to fluctuate for many of the raw materials we use. The following table presents the average prices incurred related to copper, gold, silver, and palladium:
|
|
|
|
|
For the |
|
||||
|
|
|
|
|
Quarters Ended |
|
||||
|
|
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
Measure |
|
2024 |
|
2023 |
|
||
|
Copper |
|
Lb. |
|
$ |
4.09 |
|
$ |
3.87 |
|
|
Gold |
|
Troy oz. |
|
|
2,305 |
|
|
1,943 |
|
|
Silver |
|
Troy oz. |
|
|
27.75 |
|
|
23.15 |
|
|
Palladium |
|
Troy oz. |
|
|
1,144 |
|
|
1,500 |
|
We expect to purchase approximately 185 million pounds of copper, 95,000 troy ounces of gold, 2.0 million troy ounces of silver, and 9,000 troy ounces of palladium in fiscal 2025.
Operating Expenses
The following table presents operating expense information:
|
|
|
For the |
|
|
|
|
|
|||||
|
|
|
Quarters Ended |
|
|
|
|
|
|||||
|
|
|
December 27, |
|
|
December 29, |
|
|
|
|
|||
|
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||||
|
Selling, general, and administrative expenses |
|
$ |
427 |
|
|
$ |
424 |
|
|
$ |
3 |
|
|
As a percentage of net sales |
|
|
11.1 |
% |
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges, net |
|
$ |
50 |
|
|
$ |
21 |
|
|
$ |
29 |
|
Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.
During fiscal 2025, we initiated a restructuring program associated with footprint consolidation and cost structure improvements in both of our segments. We incurred net restructuring charges of $43 million during the first quarter of fiscal 2025. Annualized cost savings related to the fiscal 2025 actions commenced during the first quarter of fiscal 2025 are expected to be approximately $35 million and are expected to be fully realized by the end of fiscal 2026. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2025, we expect total restructuring charges to be approximately $100 million and total cash spend, which will be funded with cash from operations, to be approximately $200 million.
During the first quarter of fiscal 2025, we incurred costs of $10 million related to our change in place of incorporation from Switzerland to Ireland. See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding the change.
See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.
23
Operating Income
The following table presents operating income and operating margin information:
|
|
|
For the |
|
|
|
|
|
|||||
|
|
|
Quarters Ended |
|
|
|
|
|
|||||
|
|
|
December 27, |
|
|
December 29, |
|
|
|
|
|||
|
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||||
|
Operating income |
|
$ |
690 |
|
|
$ |
698 |
|
|
$ |
(8) |
|
|
Operating margin |
|
|
18.0 |
% |
|
|
18.2 |
% |
|
|
|
|
Operating income included the following:
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Acquisition and integration costs |
|
$ |
5 |
|
$ |
8 |
|
|
Restructuring and other charges, net |
|
|
50 |
|
|
21 |
|
|
Taxes (non-income tax) recorded in selling, general, and administrative expenses |
|
|
— |
|
|
4 |
|
|
Total |
|
$ |
55 |
|
$ |
33 |
|
See discussion of operating income below under “Segment Results.”
Non-Operating Items
The following table presents select non-operating information:
|
|
|
For the |
|
|
|
|
|
|||||
|
|
|
Quarters Ended |
|
|
|
|
|
|||||
|
|
|
December 27, |
|
|
December 29, |
|
|
|
|
|||
|
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||||
|
Income tax expense (benefit) |
|
$ |
178 |
|
|
$ |
(1,105) |
|
|
$ |
1,283 |
|
|
Effective tax rate |
|
|
25.2 |
% |
|
|
(158.1) |
% |
|
|
|
|
Income Taxes. See Notes 12 and 17 to the Condensed Consolidated Financial Statements for discussion of income taxes.
Segment Results
Transportation Solutions
Net Sales. The following table presents the Transportation Solutions segment’s net sales and the percentage of total net sales by industry end market (1) :
|
|
|
For the |
|
|
|||||||||
|
|
|
Quarters Ended |
|
|
|||||||||
|
|
|
December 27, |
|
|
December 29, |
|
|
||||||
|
|
|
2024 |
|
|
2023 |
|
|
||||||
|
|
|
($ in millions) |
|
||||||||||
|
Automotive |
|
$ |
1,722 |
|
77 |
% |
|
$ |
1,796 |
|
75 |
% |
|
|
Commercial transportation |
|
|
312 |
|
14 |
|
|
|
356 |
|
15 |
|
|
|
Sensors |
|
|
209 |
|
9 |
|
|
|
241 |
|
10 |
|
|
|
Total |
|
$ |
2,243 |
|
100 |
% |
|
$ |
2,393 |
|
100 |
% |
|
| (1) | Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. |
24
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 December 27, 2024 |
|
||||||||||||||
|
|
|
versus Net Sales for the Quarter Ended December 29, 2023 |
|
||||||||||||||
|
|
|
Net Sales |
|
Organic Net Sales |
|
|
|
|
|
|
|
||||||
|
|
|
Decline |
|
Decline |
|
Translation |
|
Divestiture |
|
||||||||
|
|
|
($ in millions) |
|
||||||||||||||
|
Automotive |
|
$ |
(74) |
|
(4.1) |
% |
$ |
(55) |
|
(3.0) |
% |
$ |
(7) |
|
$ |
(12) |
|
|
Commercial transportation |
|
|
(44) |
|
(12.4) |
|
|
(41) |
|
(11.6) |
|
|
(3) |
|
|
— |
|
|
Sensors |
|
|
(32) |
|
(13.3) |
|
|
(30) |
|
(12.6) |
|
|
(2) |
|
|
— |
|
|
Total |
|
$ |
(150) |
|
(6.3) |
% |
$ |
(126) |
|
(5.2) |
% |
$ |
(12) |
|
$ |
(12) |
|
Net sales in the Transportation Solutions segment decreased $150 million, or 6.3%, in the first quarter of fiscal 2025 from the first quarter of fiscal 2024 due primarily to organic net sales declines of 5.2%. Our organic net sales by industry end market were as follows:
| ● | Automotive— Our organic net sales decreased 3.0% in the first quarter of fiscal 2025 as a result of declines of 17.2% in the EMEA region and 8.0% in the Americas region, partially offset by growth of 9.2% in the Asia–Pacific region. In the EMEA and Americas regions, our organic net sales were impacted by declines in vehicle production and a shift in platform mix consistent with consumer demand . Our organic net sales growth in the Asia–Pacific region was due to increased content per vehicle as well as vehicle production growth. |
| ● | Commercial transportation— Our organic net sales decreased 11.6% in the first quarter of fiscal 2025 due primarily to declines in the EMEA and Americas regions. |
| ● | Sensors— Our organic net sales decreased 12.6% in the first quarter of fiscal 2025 as a result of market weakness in both industrial and transportation applications . |
Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:
|
|
|
For the |
|
|
|
|
||||
|
|
|
Quarters Ended |
|
|
|
|
||||
|
|
|
December 27, |
|
December 29, |
|
|
|
|
||
|
|
|
2024 |
|
2023 |
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||
|
Operating income |
|
$ |
446 |
|
$ |
487 |
|
$ |
(41) |
|
|
Operating margin |
|
|
19.9 |
% |
|
20.4 |
% |
|
|
|
Operating income in the Transportation Solutions segment decreased $41 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. Excluding the items below, operating income decreased in the first quarter of fiscal 2025 primarily as a result of lower volume and price erosion, partially offset by improved manufacturing productivity.
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Restructuring and other charges, net |
|
$ |
32 |
|
$ |
14 |
|
|
Taxes (non-income tax) recorded in selling, general, and administrative expenses |
|
|
— |
|
|
3 |
|
|
Total |
|
$ |
32 |
|
$ |
17 |
|
25
Industrial Solutions
Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net sales by industry end market (1) :
|
|
|
For the |
|
|
|||||||||
|
|
|
Quarters Ended |
|
|
|||||||||
|
|
|
December 27, |
|
|
December 29, |
|
|
||||||
|
|
|
2024 |
|
|
2023 |
|
|
||||||
|
|
|
($ in millions) |
|
||||||||||
|
Automation and connected living |
|
$ |
479 |
|
30 |
% |
|
$ |
464 |
|
33 |
% |
|
|
Aerospace, defense, and marine |
|
|
334 |
|
21 |
|
|
|
290 |
|
20 |
|
|
|
Digital data networks |
|
|
413 |
|
26 |
|
|
|
279 |
|
19 |
|
|
|
Energy |
|
|
216 |
|
14 |
|
|
|
205 |
|
14 |
|
|
|
Medical |
|
|
151 |
|
9 |
|
|
|
200 |
|
14 |
|
|
|
Total |
|
$ |
1,593 |
|
100 |
% |
|
$ |
1,438 |
|
100 |
% |
|
| (1) | Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. |
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 December 27, 2024 |
|
||||||||||||||
|
|
|
versus Net Sales for the Quarter Ended December 29, 2023 |
|
||||||||||||||
|
|
|
Net Sales |
|
Organic Net Sales |
|
|
|
|
|
|
|||||||
|
|
|
Growth (Decline) |
|
Growth (Decline) |
|
Translation |
|
Acquisitions |
|
||||||||
|
|
|
($ in millions) |
|
||||||||||||||
|
Automation and connected living |
|
$ |
15 |
|
3.2 |
% |
$ |
(21) |
|
(4.5) |
% |
$ |
(2) |
|
$ |
38 |
|
|
Aerospace, defense, and marine |
|
|
44 |
|
15.2 |
|
|
45 |
|
15.4 |
|
|
(1) |
|
|
— |
|
|
Digital data networks |
|
|
134 |
|
48.0 |
|
|
134 |
|
48.0 |
|
|
— |
|
|
— |
|
|
Energy |
|
|
11 |
|
5.4 |
|
|
14 |
|
6.8 |
|
|
(3) |
|
|
— |
|
|
Medical |
|
|
(49) |
|
(24.5) |
|
|
(49) |
|
(24.5) |
|
|
— |
|
|
— |
|
|
Total |
|
$ |
155 |
|
10.8 |
% |
$ |
123 |
|
8.6 |
% |
$ |
(6) |
|
$ |
38 |
|
In the Industrial Solutions segment, net sales increased $155 million, or 10.8%, in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to organic net sales growth of 8.6% and the positive impact of 2.6% from acquisitions. Our organic net sales by industry end market were as follows:
| ● | Automation and connected living— Our organic net sales decreased 4.5% in the first quarter of fiscal 2025 due to continued weakness in factory automation applications, partially offset by strength in the appliances market . |
| ● | Aerospace, defense, and marine— Our organic net sales increased 15.4% in the first quarter of fiscal 2025 as a result of growth in all markets. |
| ● | Digital data networks —Our organic net sales increased 48.0% in the first quarter of fiscal 2025 primarily as a result of growth in artificial intelligence and cloud applications. |
| ● | Energy— Our organic net sales increased 6.8% in the first quarter of fiscal 2025 as a result of growth across all regions and strength in renewable energy applications. |
| ● | Medical— Our organic net sales decreased 24.5% in the first quarter of fiscal 2025 due primarily to reduced demand resulting from inventory corrections in the supply chain. |
26
Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:
|
|
|
For the |
|
|
|
|
||||
|
|
|
Quarters Ended |
|
|
|
|
||||
|
|
|
December 27, |
|
December 29, |
|
|
|
|
||
|
|
|
2024 |
|
2023 |
|
Change |
|
|||
|
|
|
($ in millions) |
|
|||||||
|
Operating income |
|
$ |
244 |
|
$ |
211 |
|
$ |
33 |
|
|
Operating margin |
|
|
15.3 |
% |
|
14.7 |
% |
|
|
|
Operating income in the Industrial Solutions segment increased $33 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. Excluding the items below, operating income increased in the first quarter of fiscal 2025 primarily as a result of higher volume.
|
|
|
For the |
|
||||
|
|
|
Quarters Ended |
|
||||
|
|
|
December 27, |
|
December 29, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
|
|
(in millions) |
|
||||
|
Acquisition and integration costs |
|
$ |
5 |
|
$ |
8 |
|
|
Restructuring and other charges, net |
|
|
18 |
|
|
7 |
|
|
Taxes (non-income tax) recorded in selling, general, and administrative expenses |
|
|
— |
|
|
1 |
|
|
Total |
|
$ |
23 |
|
$ |
16 |
|
Liquidity and Capital Resources
Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of €550 million of 0.00% euro-denominated senior notes due in February 2025. We may use excess cash to purchase a portion of our ordinary shares pursuant to our authorized share repurchase program, to acquire product lines, to pay dividends on our ordinary shares, or to reduce our outstanding debt. We may also use excess cash and other funding to make strategic acquisitions. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions. We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs.
Cash Flows from Operating Activities
In the first quarter of fiscal 2025, net cash provided by operating activities increased $159 million to $878 million from $719 million in the first quarter of fiscal 2024. The increase resulted primarily from the impact of changes in working capital levels. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2025 and 2024 was $49 million and $100 million, respectively.
Cash Flows from Investing Activities
Capital expenditures were $205 million and $151 million in the first quarters of fiscal 2025 and 2024, respectively. We expect fiscal 2025 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 quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired. We acquired one business for a cash purchase price of $349 million, net of cash acquired,
27
during the first quarter of fiscal 2024. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.
During the first quarter of fiscal 2024, we received net cash proceeds of $38 million related to the sale of one business. See Note 2 to the Condensed Consolidated Financial Statements for additional information.
Cash Flows from Financing Activities and Capitalization
Total debt at December 27, 2024 and September 27, 2024 was $4,205 million and $4,203 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.
As of December 27, 2024, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $345 million of commercial paper outstanding at a weighted-average interest rate of 4.50%. TEGSA had $255 million of commercial paper outstanding at a weighted-average interest rate of 4.95% at September 27, 2024.
TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of April 2029 and aggregate commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at December 27, 2024 or September 27, 2024.
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. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 27, 2024, 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. Payment obligations under TEGSA’s senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Switzerland Ltd., and its parent, TE Connectivity plc.
Payments of ordinary/common share dividends to shareholders were $189 million and $183 million in the first quarters of fiscal 2025 and 2024, respectively.
During the first quarter of fiscal 2025, our board of directors authorized an increase of $2.5 billion in our share repurchase program. We repurchased approximately two million of our ordinary shares for $310 million and approximately three million of our common shares for $420 million under the share repurchase program during the first quarters of fiscal 2025 and 2024, respectively. At December 27, 2024, we had $2.4 billion of availability remaining under our share repurchase authorization.
28
Summarized Guarantor Financial Information
As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Switzerland Ltd., and its parent, TE Connectivity plc. 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 plc, TE Connectivity Switzerland Ltd., and TEGSA on a combined basis.
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
1,320 |
|
$ |
1,164 |
|
|
Total noncurrent assets (1) |
|
|
2,678 |
|
|
2,377 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,272 |
|
|
1,362 |
|
|
Total noncurrent liabilities (2) |
|
|
7,431 |
|
|
10,738 |
|
| (1) | Includes $2,596 million and $2,368 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans receivable from non-guarantor subsidiaries. |
| (2) | Includes $4,144 million and $7,309 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans payable to non-guarantor subsidiaries. |
|
|
|
December 27, |
|
September 27, |
|
||
|
|
|
2024 |
|
2024 |
|
||
|
|
|
(in millions) |
|
||||
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
311 |
|
$ |
(271) |
|
|
Net income (loss) |
|
|
311 |
|
|
(271) |
|
Guarantees
In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2025 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows.
In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.
At December 27, 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $185 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business. In addition, as of December 27, 2024, we had $23 million of performance guarantees associated with the divestiture. We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale; however, based on historical experience, we do not anticipate having to perform on these guarantees.
Commitments and Contingencies
Legal Proceedings
In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes,
29
environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. 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.
Trade Compliance Matters
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. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the DDTC in its ongoing investigation. We are unable to predict the timing and final outcome of the agency’s investigation. 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. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigation into these matters has yet to be completed and the final outcome of such investigation and related fines and penalties may differ from amounts currently reserved.
Critical Accounting Policies and Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.
Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to “Part II. Item 7. 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 27, 2024. There were no significant changes to this information during the first quarter of fiscal 2025.
Non-GAAP Financial Measure
Organic Net Sales Growth (Decline)
We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity.
Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. 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.
Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts.
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Forward-Looking Information
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.
Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law.
The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024, 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, including recession, inflation, tariffs, and higher interest rates; |
| ● | conditions affecting demand for products in the industries we serve, particularly the automotive industry; |
| ● | risk of future goodwill impairment; |
| ● | pricing pressure and competition, including competitive risks associated with the pace of technological change; |
| ● | market acceptance of our new product introductions and product innovations and product life cycles; |
| ● | raw material availability, quality, and cost; |
| ● | product liability, warranty, and product recall claims and our ability to defend such claims; |
| ● | fluctuations in foreign currency exchange rates and impacts of offsetting hedges; |
| ● | financial condition and consolidation of customers and vendors; |
| ● | reliance on third-party suppliers; |
| ● | risks associated with current and future acquisitions and divestitures; |
| ● | global risks of business interruptions due to natural disasters or other disasters 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; |
| ● | global risks of political, economic, and military instability, including the continuing military conflicts in certain parts of the world, and volatile and uncertain economic conditions and the evolving regulatory system in China; |
| ● | risks associated with cybersecurity incidents and other disruptions to our information technology infrastructure, including as a result of artificial intelligence; |
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| ● | risks related to compliance with current and future environmental and other laws and regulations, including those related to climate change; |
| ● | risks related to the increasing scrutiny and expectations regarding environmental, social, and governance matters; |
| ● | risks associated with compliance with applicable antitrust or competition laws or applicable trade regulations; |
| ● | our ability to protect our intellectual property rights; |
| ● | risks of litigation, regulatory actions, and compliance issues; |
| ● | our ability to operate within the limitations imposed by our debt instruments; |
| ● | the possible effects on us of various non-U.S. and U.S. legislative proposals and other initiatives that, if adopted, could materially increase our worldwide corporate effective tax rate, increase global cash taxes, and negatively impact our U.S. government contracts business; |
| ● | requirements related to chemical usage, hazardous material content, recycling, and other circular economy initiatives; |
| ● | various risks associated with being an Irish corporation; |
| ● | the impact of fluctuations in the market price of our shares; and |
| ● | the impact of certain provisions of our articles of association on unsolicited takeover proposals. |
There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposures to market risk during the first quarter of fiscal 2025. For further discussion of our exposures to market risk, refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of December 27, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 27, 2024.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 27, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended September 27, 2024. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024 for additional information regarding legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024. The risk factors described in our Annual Report on Form 10-K, in addition to other information in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table presents information about our purchases of our ordinary shares during the quarter ended December 27, 2024:
|
|
|
|
|
|
|
|
|
Maximum |
|
||
|
|
|
|
|
|
|
|
Total Number of |
|
Approximate |
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
Dollar Value |
|
|
|
|
|
|
|
|
|
|
as Part of |
|
of Shares that May |
|
|
|
|
|
Total Number |
|
Average Price |
|
Publicly Announced |
|
Yet Be Purchased |
|
||
|
|
|
of Shares |
|
Paid Per |
|
Plans or |
|
Under the Plans |
|
||
|
Period |
|
Purchased (1) |
|
Share |
|
Programs (2) |
|
or Programs (2) |
|
||
|
September 28–October 25, 2024 |
|
657,447 |
|
$ |
146.94 |
|
657,447 |
|
$ |
148,014,421 |
|
|
October 26–November 29, 2024 |
|
757,106 |
|
|
151.12 |
|
757,106 |
|
|
2,533,598,970 |
|
|
November 30–December 27, 2024 |
|
660,426 |
|
|
149.15 |
|
660,426 |
|
|
2,435,099,211 |
|
|
Total |
|
2,074,979 |
|
|
149.17 |
|
2,074,979 |
|
|
|
|
| (1) | During the quarter ended December 27, 2024, all purchases were open market purchases of ordinary shares, summarized on a trade-date basis, made in conjunction with the share repurchase program announced in September 2007. This table does not include ordinary shares that we withheld in order to satisfy tax withholding requirements for the vesting and release of restricted stock units. |
| (2) | Our share repurchase program authorizes us to purchase a portion of our outstanding ordinary shares from time to time through open market or private transactions, depending on business and market conditions. The share repurchase program does not have an expiration date . During the quarter ended December 27, 2024, our board of directors authorized an increase of $2.5 billion in our share repurchase program. See Note 14 to the Condensed Consolidated Financial Statements for additional information regarding our share repurchase program. |
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ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
In the quarter ended December 27, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or
| ● |
In the quarter ended December 27, 2024,
|
| ● |
In the quarter ended December 27, 2024,
|
The trading plans described above were entered into during an open insider trading window and were in compliance with our insider trading policies and procedures. Actual sale transactions will be disclosed publicly in filings with the Securities and Exchange Commission (“SEC”) in accordance with applicable securities laws, rules, and regulations.
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ITEM 6. EXHIBITS
|
Exhibit Number |
|
Exhibit |
|
3.1 |
|
|
|
10.1 |
‡ |
|
|
10.2 |
‡ |
|
|
10.3 |
‡ |
|
|
10.4 |
‡ |
|
|
10.5 |
‡ |
|
|
10.6 |
‡ |
|
|
10.7 |
‡ |
|
|
10.8 |
‡ |
|
|
10.9 |
|
|
|
10.10 |
|
|
|
22.1 |
* |
|
|
31.1 |
* |
|
|
31.2 |
* |
|
|
32.1 |
** |
|
|
101.INS |
* |
Inline XBRL Instance Document (1) |
|
101.SCH |
* |
Inline XBRL Taxonomy Extension Schema Document |
|
101.CAL |
* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF |
* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB |
* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
104 |
* |
Cover Page Interactive Data File (2) |
|
‡ |
Management contract or compensatory plan or arrangement |
35
* Filed herewith
|
** |
Furnished herewith |
| (1) | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| (2) | Formatted in Inline XBRL and contained in exhibit 101 |
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
TE CONNECTIVITY PLC |
|
|
|
|
|
|
|
By: |
/s/ Heath A. Mitts
Heath A. Mitts
|
Date: January 24, 2025
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