UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended ~~June 25,~~December 24, 2021
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland
(Jurisdiction of Incorporation)

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

Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland

(Address of principal executive offices)

+41 (0)52 633 66 61

(Registrant’s telephone number)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common Shares, Par Value CHF 0.57	TEL	New York Stock Exchange

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

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

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

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

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

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

The number of common shares outstanding as of ~~July 23, 2021~~January 21, 2022 was ~~327,996,918.~~325,575,225.

Table of Contents

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q


		Page
Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations for the Quarters ~~and Nine Months~~ Ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Quarters ~~and Nine Months~~ Ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020 (unaudited)	2
	Condensed Consolidated Balance Sheets as of ~~June 25,~~December 24, 2021 and September ~~25, 2020~~24, 2021 (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Quarters ~~and Nine Months~~ Ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the ~~Nine Months~~Quarters Ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020 (unaudited)	65
	Notes to Condensed Consolidated Financial Statements (unaudited)	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3833
Item 4.	Controls and Procedures	3833

Part II.	Other Information
Item 1.	Legal Proceedings	3934
Item 1A.	Risk Factors	3934
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4034
Item 6.	Exhibits	4135
Signatures		4236

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions, except per share data)								(in millions, except per share data)
Net sales	$	3,845	$	2,548	$	11,105	$	8,911	$	3,818	$	3,522
Cost of sales		2,577		1,841		7,481		6,145		2,588		2,376
Gross margin		1,268		707		3,624		2,766		1,230		1,146
Selling, general, and administrative expenses		366		321		1,128		1,040		363		361
Research, development, and engineering expenses		168		146		504		465		175		162
Acquisition and integration costs		9		8		23		27		8		8
Restructuring and other charges, net		11		98		195		144		12		167
Impairment of goodwill		—		—		—		900
Operating income		714		134		1,774		190		672		448
Interest income		3		2		14		13		2		3
Interest expense		(14)		(13)		(42)		(36)		(12)		(15)
Other income, net		2		4		5		20
Other income (expense), net										15		(1)
Income from continuing operations before income taxes		705		127		1,751		187		677		435
Income tax expense		(124)		(185)		(290)		(674)		(110)		(60)
Income (loss) from continuing operations		581		(58)		1,461		(487)
Income from continuing operations										567		375
Income (loss) from discontinued operations, net of income taxes		(1)		17		6		16		(1)		6
Net income (loss)	$	580	$	(41)	$	1,467	$	(471)
Net income									$	566	$	381

Basic earnings (loss) per share:
Income (loss) from continuing operations	$	1.76	$	(0.18)	$	4.41	$	(1.46)
Income (loss) from discontinued operations		—		0.05		0.02		0.05
Net income (loss)		1.76		(0.12)		4.43		(1.41)
Basic earnings per share:
Income from continuing operations									$	1.73	$	1.13
Income from discontinued operations										—		0.02
Net income										1.73		1.15

Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	1.74	$	(0.18)	$	4.39	$	(1.46)
Income (loss) from discontinued operations		—		0.05		0.02		0.05
Net income (loss)		1.74		(0.12)		4.41		(1.41)
Diluted earnings per share:
Income from continuing operations									$	1.72	$	1.13
Income from discontinued operations										—		0.02
Net income										1.72		1.14

Weighted-average number of shares outstanding:
Basic		330		330		331		333		327		331
Diluted		333		330		333		333		330		333

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(UNAUDITED)


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Net income (loss)	$	580	$	(41)	$	1,467	$	(471)
Other comprehensive income (loss):
Net income									$	566	$	381
Other comprehensive income:
Currency translation		40		21		172		(43)		18		111
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		7		7		19		23		4		6
Gains (losses) on cash flow hedges, net of income taxes		(15)		37		42		15
Other comprehensive income (loss)		32		65		233		(5)
Comprehensive income (loss)		612		24		1,700		(476)
Less: comprehensive income attributable to noncontrolling interests		(2)		(3)		(4)		(1)
Comprehensive income (loss) attributable to TE Connectivity Ltd.	$	610	$	21	$	1,696	$	(477)
Gains on cash flow hedges, net of income taxes										1		29
Other comprehensive income										23		146
Comprehensive income										589		527
Less: comprehensive (income) loss attributable to noncontrolling interests										6		(6)
Comprehensive income attributable to TE Connectivity Ltd.									$	595	$	521

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

June 25,

September 25,


2021

2020


(in millions, except share

data)

Assets

Current assets:

Cash and cash equivalents

$
1,416

$
945

Accounts receivable, net of allowance for doubtful accounts of $41 and $29, respectively

2,985

2,377

Inventories

2,392

1,950

Prepaid expenses and other current assets

601

512

Total current assets

7,394

5,784

Property, plant, and equipment, net

3,723

3,650

Goodwill

5,401

5,224

Intangible assets, net

1,516

1,593

Deferred income taxes

2,224

2,178

Other assets

800

813

Total assets

$
21,058

$
19,242

Liabilities, redeemable noncontrolling interests, and shareholders' equity

Current liabilities:

Short-term debt

$
505

$
694

Accounts payable

1,938

1,276

Accrued and other current liabilities

2,219

1,720

Total current liabilities

4,662

3,690

Long-term debt

3,629

3,452

Long-term pension and postretirement liabilities

1,305

1,336

Deferred income taxes

149

143

Income taxes

299

252

Other liabilities

852

874

Total liabilities

10,896

9,747

Commitments and contingencies (Note 9)

Redeemable noncontrolling interests

116

112

Shareholders' equity:

Common shares, CHF 0.57 par value, 336,099,881 shares authorized and issued, and 338,953,381 shares authorized and issued, respectively

148

149

Accumulated earnings

10,892

10,348

Treasury shares, at cost, 7,518,936 and 8,295,878 shares, respectively

(778)

(669)

Accumulated other comprehensive loss

(216)

(445)

Total shareholders' equity

10,046

9,383

Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$
21,058

$
19,242


	December 24,		September 24,
	2021		2021

	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	982	$	1,203
Accounts receivable, net of allowance for doubtful accounts of $41		2,844		2,928
Inventories		2,845		2,511
Prepaid expenses and other current assets		573		621
Total current assets		7,244		7,263
Property, plant, and equipment, net		3,827		3,778
Goodwill		5,503		5,590
Intangible assets, net		1,509		1,549
Deferred income taxes		2,513		2,499
Other assets		813		783
Total assets	$	21,409	$	21,462
Liabilities, redeemable noncontrolling interests, and shareholders' equity
Current liabilities:
Short-term debt	$	484	$	503
Accounts payable		1,964		1,911
Accrued and other current liabilities		1,826		2,242
Total current liabilities		4,274		4,656
Long-term debt		3,519		3,589
Long-term pension and postretirement liabilities		1,119		1,139
Deferred income taxes		192		181
Income taxes		331		302
Other liabilities		846		847
Total liabilities		10,281		10,714
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests		108		114
Shareholders' equity:
Common shares, CHF 0.57 par value, 336,099,881 shares authorized and issued		148		148
Accumulated earnings		12,285		11,709
Treasury shares, at cost, 9,911,977 and 9,060,919 shares, respectively		(1,274)		(1,055)
Accumulated other comprehensive loss		(139)		(168)
Total shareholders' equity		11,020		10,634
Total liabilities, redeemable noncontrolling interests, and shareholders' equity	$	21,409	$	21,462

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)


	For the Quarter Ended June 25, 2021																		For the Quarter Ended December 24, 2021
											Accumulated		TE Connectivity																Accumulated
											Other		Ltd.		Non-														Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'		controlling		Total		Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity		Interests		Equity		Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)																		(in millions)
Balance at March 26, 2021	339	$	149	(9)	$	(775)	$	—	$	10,541	$	(246)	$	9,669	$	—	$	9,669
Balance at September 24, 2021																			336	$	148	(9)	$	(1,055)	$	—	$	11,709	$	(168)	$	10,634
Net income	—		—	—		—		—		580		—		580		—		580	—		—	—		—		—		566		—		566
Other comprehensive income	—		—	—		—		—		—		30		30		—		30	—		—	—		—		—		—		29		29
Share-based compensation expense	—		—	—		—		24		—		—		24		—		24	—		—	—		—		32		—		—		32
Dividends	—		—	—		—		—		3		—		3		—		3
Exercise of share options	—		—	—		11		—		—		—		11		—		11	—		—	—		22		—		—		—		22
Restricted share award vestings and other activity	—		—	—		6		(24)		29		—		11		—		11	—		—	1		5		(32)		10		—		(17)
Repurchase of common shares	—		—	(2)		(282)		—		—		—		(282)		—		(282)	—		—	(2)		(246)		—		—		—		(246)
Cancellation of treasury shares	(3)		(1)	3		262		—		(261)		—		—		—		—
Balance at June 25, 2021	336	$	148	(8)	$	(778)	$	—	$	10,892	$	(216)	$	10,046	$	—	$	10,046
Balance at December 24, 2021																			336	$	148	(10)	$	(1,274)	$	—	$	12,285	$	(139)	$	11,020

For the Nine Months Ended June 25, 2021

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total


Shares

Amount

Shares

Amount

Surplus

Earnings

Loss

Equity

Interests

Equity


(in millions)

Balance at September 25, 2020

339

$
149

(8)

$
(669)

$
—

$
10,348

$
(445)

$
9,383

$
—

$
9,383

Net income

—

—

—

—

—

1,467

—

1,467

—

1,467

Other comprehensive income

—

—

—

—

—

—

229

229

—

229

Share-based compensation expense

—

—

—

—

73

—

—

73

—

73

Dividends

—

—

—

—

—

(658)

—

(658)

—

(658)

Exercise of share options

—

—

2

130

—

—

—

130

—

130

Restricted share award vestings and other activity

—

—

—

90

(73)

(4)

—

13

—

13

Repurchase of common shares

—

—

(5)

(591)

—

—

—

(591)

—

(591)

Cancellation of treasury shares

(3)

(1)

3

262

—

(261)

—

—

—

—

Balance at June 25, 2021

336

$
148

(8)

$
(778)

$
—

$
10,892

$
(216)

$
10,046

$
—

$
10,046

~~Table of Contents~~

~~TE CONNECTIVITY LTD.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(UNAUDITED) (Continued)~~

For the Quarter Ended June 26, 2020

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total


Shares

Amount

Shares

Amount

Surplus

Earnings

Loss

Equity

Interests

Equity


(in millions)

Balance at March 27, 2020

351

$
154

(20)

$
(1,639)

$
—

$
11,122

$
(571)

$
9,066

$
105

$
9,171

Net loss

—

—

—

—

—

(41)

—

(41)

—

(41)

Other comprehensive income

—

—

—

—

—

—

62

62

3

65

Share-based compensation expense

—

—

—

—

17

—

—

17

—

17

Dividends

—

—

—

—

—

2

—

2

—

2

Exercise of share options

—

—

—

2

—

—

—

2

—

2

Restricted share award vestings and other activity

—

—

—

15

(17)

12

—

10

—

10

Repurchase of common shares

—

—

(1)

(82)

—

—

—

(82)

—

(82)

Cancellation of treasury shares

(12)

(5)

12

975

—

(970)

—

—

—

—

Balance at June 26, 2020

339

$
149

(9)

$
(729)

$
—

$
10,125

$
(509)

$
9,036

$
108

$
9,144


	For the Nine Months Ended June 26, 2020																		For the Quarter Ended December 25, 2020
											Accumulated		TE Connectivity																Accumulated
											Other		Ltd.		Non-														Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'		controlling		Total		Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity		Interests		Equity		Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity

	(in millions)																		(in millions)
Balance at September 27, 2019	351	$	154	(16)	$	(1,337)	$	—	$	12,256	$	(503)	$	10,570	$	—	$	10,570
Acquisition	—		—	—		—		—		—		—		—		107		107
Net loss	—		—	—		—		—		(471)		—		(471)		—		(471)
Other comprehensive income (loss)	—		—	—		—		—		—		(6)		(6)		1		(5)
Balance at September 25, 2020																			339	$	149	(8)	$	(669)	$	—	$	10,348	$	(445)	$	9,383
Net income																			—		—	—		—		—		381		—		381
Other comprehensive income																			—		—	—		—		—		—		140		140
Share-based compensation expense	—		—	—		—		54		—		—		54		—		54	—		—	—		—		19		—		—		19
Dividends	—		—	—		—		—		(633)		—		(633)		—		(633)
Exercise of share options	—		—	—		29		—		—		—		29		—		29	—		—	1		75		—		—		—		75
Restricted share award vestings and other activity	—		—	1		109		(54)		(57)		—		(2)		—		(2)	—		—	—		66		(19)		(57)		—		(10)
Repurchase of common shares	—		—	(6)		(505)		—		—		—		(505)		—		(505)	—		—	(1)		(127)		—		—		—		(127)
Cancellation of treasury shares	(12)		(5)	12		975		—		(970)		—		—		—		—
Balance at June 26, 2020	339	$	149	(9)	$	(729)	$	—	$	10,125	$	(509)	$	9,036	$	108	$	9,144
Balance at December 25, 2020																			339	$	149	(8)	$	(655)	$	—	$	10,672	$	(305)	$	9,861

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the				For the
	Nine Months Ended				Quarters Ended
	June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020

	(in millions)				(in millions)
Cash flows from operating activities:
Net income (loss)	$	1,467	$	(471)
Income from discontinued operations, net of income taxes		(6)		(16)
Income (loss) from continuing operations		1,461		(487)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:
Impairment of goodwill		—		900
Net income					$	566	$	381
(Income) loss from discontinued operations, net of income taxes						1		(6)
Income from continuing operations						567		375
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		590		530		198		187
Deferred income taxes		(62)		459		4		(42)
Non-cash lease cost		90		79		31		30
Provision for losses on accounts receivable and inventories		32		28		33		6
Share-based compensation expense		73		54		32		19
Other		(45)		40		(9)		21
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net		(638)		182		148		(299)
Inventories		(482)		(342)		(264)		(145)
Prepaid expenses and other current assets		(14)		27		52		(87)
Accounts payable		646		(81)		15		349
Accrued and other current liabilities		110		(204)		(285)		88
Income taxes		61		20		34		17
Other		80		67		(24)		121
Net cash provided by operating activities		1,902		1,272		532		640
Cash flows from investing activities:
Capital expenditures		(454)		(439)		(172)		(142)
Proceeds from sale of property, plant, and equipment		85		6		54		1
Acquisition of businesses, net of cash acquired		(126)		(328)		(100)		(107)
Proceeds from divestiture of businesses, net of cash retained by businesses sold						16		—
Other		(2)		13		3		2
Net cash used in investing activities		(497)		(748)		(199)		(246)
Cash flows from financing activities:
Net decrease in commercial paper		—		(219)
Proceeds from issuance of debt		661		593
Net increase in commercial paper						479		—
Repayment of debt		(706)		(352)		(555)		(30)
Proceeds from exercise of share options		130		29		22		75
Repurchase of common shares		(518)		(523)		(304)		(119)
Payment of common share dividends to shareholders		(483)		(466)		(163)		(159)
Other		(27)		(32)		(31)		(19)
Net cash used in financing activities		(943)		(970)		(552)		(252)
Effect of currency translation on cash		9		(7)		(2)		11
Net increase (decrease) in cash, cash equivalents, and restricted cash		471		(453)		(221)		153
Cash, cash equivalents, and restricted cash at beginning of period		945		927		1,203		945
Cash, cash equivalents, and restricted cash at end of period	$	1,416	$	474	$	982	$	1,098

See Notes to Condensed Consolidated Financial Statements.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of TE Connectivity Ltd. (“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 ~~25, 2020.~~24, 2021.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal ~~2021~~2022 and fiscal ~~2020~~2021 are to our fiscal years ending September ~~24, 2021~~30, 2022 and ended September ~~25, 2020,~~24, 2021, respectively.

2. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Restructuring charges, net	$	10	$	98	$	170	$	144	$	21	$	149
Impairment of held for sale businesses and loss on divestitures		—		—		21		—
(Gain) loss on divestitures and impairment of held for sale businesses										(9)		17
Other charges, net		1		—		4		—		—		1
Restructuring and other charges, net	$	11	$	98	$	195	$	144	$	12	$	167

Net restructuring and related charges by segment were as follows:

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Transportation Solutions

$
2

$
55

$
130

$
77

Industrial Solutions

6

40

26

56

Communications Solutions

2

3

14

11

Restructuring charges, net

$
10

$
98

$
170

$
144


	For the
	Quarters Ended
	December 24,		December 25,
	2021		2020

	(in millions)
Transportation Solutions	$	5	$	118
Industrial Solutions		8		20
Communications Solutions		8		11
Restructuring charges, net		21		149
Plus: charges included in cost of sales⁽¹⁾		12		—
Restructuring and related charges, net	$	33	$	149

(1)

Charges included in cost of sales were attributable to inventory-related charges within the Industrial Solutions segment.

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Activity in our restructuring reserves was as follows:


	Balance at												Balance at		Balance at												Balance at
	September 25,				Changes in		Cash		Non-Cash		Currency		June 25,		September 24,				Changes in		Cash		Non-Cash		Currency		December 24,
	2020		Charges		Estimate		Payments		Items		Translation		2021		2021		Charges		Estimate		Payments		Items		Translation		2021

	(in millions)														(in millions)
Fiscal 2022 Actions:
Employee severance															$	—	$	15	$	—	$	(1)	$	—	$	—	$	14
Property, plant, and equipment and inventories																—		18		—		—		(18)		—		0
Total																—		33		—		(1)		(18)		—		14
Fiscal 2021 Actions:
Employee severance	$	—	$	170	$	(17)	$	(17)	$	—	$	2	$	138		152		1		—		(29)		—		(5)		119
Facility and other exit costs		—		2		—		(2)		—		—		0		2		1		—		(1)		—		—		2
Property, plant, and equipment		—		7		—		—		(7)		—		0		—		2		—		—		(2)		—		0
Total		—		179		(17)		(19)		(7)		2		138		154		4		—		(30)		(2)		(5)		121
Fiscal 2020 Actions:
Pre-Fiscal 2021 Actions:
Employee severance		180		3		—		(74)		—		2		111		135		—		(6)		(12)		—		(3)		114
Facility and other exit costs		8		9		—		(3)		—		—		14		15		2		—		(3)		—		—		14
Property, plant, and equipment		—		6		—		—		(6)		—		0
Total		188		18		—		(77)		(6)		2		125
Pre-Fiscal 2020 Actions:
Employee severance		93		—		(8)		(44)		—		1		42
Facility and other exit costs		4		1		—		(7)		—		2		0
Property, plant, and equipment		—		—		(3)		—		3		—		0
Total		97		1		(11)		(51)		3		3		42		150		2		(6)		(15)		—		(3)		128
Total Activity	$	285	$	198	$	(28)	$	(147)	$	(10)	$	7	$	305	$	304	$	39	$	(6)	$	(46)	$	(20)	$	(8)	$	263

Fiscal 2022 Actions

During fiscal 2022, we initiated a restructuring program associated with footprint consolidation and cost structure improvements across all segments. During the quarter ended December 24, 2021, we recorded restructuring and related charges of $33 million in connection with this program. We expect to complete all restructuring actions commenced during the quarter ended December 24, 2021 by the end of fiscal 2024 and anticipate that any additional charges will be insignificant.

Fiscal 2021 Actions

During fiscal 2021, we initiated a restructuring program across all segments to optimize our manufacturing footprint and improve the cost structure of the organization. ~~During~~In connection with this program, during the ~~nine months~~quarters ended ~~June~~December 24, 2021 and December 25, ~~2021,~~2020, we recorded ~~net~~ restructuring charges of ~~$162~~$4 million ~~in connection with this program.~~and $142 million, respectively. We expect to complete all restructuring actions commenced during ~~the nine months ended June 25,~~fiscal 2021 by the end of fiscal ~~2022~~2023 and to incur additional charges of approximately ~~$20~~$12 million related ~~primarily~~ to employee severance and facility exit costs.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2021 program by segment:


	Total		Cumulative		Remaining		Total		Cumulative		Remaining
	Expected		Charges		Expected		Expected		Charges		Expected
	Charges		Incurred		Charges		Charges		Incurred		Charges

	(in millions)						(in millions)
Transportation Solutions	$	131	$	120	$	11	$	131	$	125	$	6
Industrial Solutions		34		28		6		53		50		3
Communications Solutions		17		14		3		27		24		3
Total	$	182	$	162	$	20	$	211	$	199	$	12

~~Fiscal 2020 Actions~~

During fiscal 2020, we initiated a restructuring program associated with footprint consolidation and structural improvements, due in part to the COVID-19 pandemic, across all segments. In connection with this program, during the nine months ended June 25, 2021 and June 26, 2020, we recorded restructuring charges of $18 million and $138 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2020 by the end of fiscal 2023 and to incur additional charges of approximately $22 million related primarily to employee severance and facility exit costs.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

~~The following table summarizes expected, incurred, and remaining charges for the fiscal 2020 program by segment:~~

Total

Cumulative

Remaining

Expected

Charges

Expected


Charges

Incurred

Charges


(in millions)

Transportation Solutions

$
139

$
129

$
10

Industrial Solutions

110

102

8

Communications Solutions

41

37

4

Total

$
290

$
268

$
22

Pre-Fiscal ~~2020~~2021 Actions

~~Prior to fiscal 2020, we initiated restructuring programs associated with footprint consolidation and structural improvements impacting all segments.~~ During the ~~nine months~~quarters ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020, we recorded net restructuring credits of ~~$10~~$4 million and charges of $6$7 million, respectively, related to pre-fiscal ~~2020~~2021 actions. We expect additional charges related to pre-fiscal ~~2020~~2021 actions to be insignificant.

Total Restructuring Reserves

Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Accrued and other current liabilities	$	236	$	229	$	208	$	236
Other liabilities		69		56		55		68
Restructuring reserves	$	305	$	285	$	263	$	304

3. Acquisitions

During the ~~nine months~~quarter ended ~~June 25,~~December 24, 2021, we acquired ~~2 businesses~~1 business for a ~~combined~~ cash purchase price of $125 million, net of cash acquired. The ~~acquisitions were~~acquisition was reported as part of our Communications Solutions segment from the date of acquisition.

We acquired 1 business for a cash purchase price of $106 million, net of cash acquired, during the quarter ended December 25, 2020. The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.

We acquired 4 businesses, including First Sensor AG (“First Sensor”), for a combined cash purchase price of $325 million, net of cash acquired, during the nine months ended June 26, 2020. The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

In connection with the acquisition of First Sensor, we and First Sensor entered into a Domination and Profit and Loss Transfer Agreement (“DPLTA”). Under the terms of the DPLTA, upon its effectiveness in July 2020, First Sensor minority shareholders can elect either (1) to remain First Sensor minority shareholders and receive recurring annual compensation of €0.56 per First Sensor share or (2) to put their First Sensor shares in exchange for compensation of €33.27 per First Sensor share. The ultimate amount and timing of any future cash payments related to the DPLTA is uncertain. Our First Sensor noncontrolling interest balance, which was originally recorded at a fair value of €96 million (equivalent to $107 million), is recorded as redeemable noncontrolling interest outside of equity on the Condensed Consolidated Balance Sheets as of June 25, 2021 and September 25, 2020 as the exercise of the put right by First Sensor minority shareholders is not within our control.

~~Table of Contents~~

~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

4. Inventories

Inventories consisted of the following:


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Raw materials	$	315	$	251	$	423	$	320
Work in progress		1,000		851		1,134		991
Finished goods		1,077		848		1,288		1,200
Inventories	$	2,392	$	1,950	$	2,845	$	2,511

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

5. Goodwill

The changes in the carrying amount of goodwill by segment were as follows:


	Transportation		Industrial		Communications				Transportation		Industrial		Communications
	Solutions		Solutions		Solutions		Total		Solutions		Solutions		Solutions		Total

	(in millions)								(in millions)
September 25, 2020⁽¹⁾	$	1,527	$	3,110	$	587	$	5,224
Acquisitions		—		73		—		73
September 24, 2021⁽¹⁾									$	1,549	$	3,446	$	595	$	5,590
Acquisition										—		—		78		78
Purchase price adjustments		10		(1)		—		9		—		(103)		—		(103)
Currency translation and other		29		54		12		95		(20)		(36)		(6)		(62)
June 25, 2021⁽¹⁾	$	1,566	$	3,236	$	599	$	5,401
December 24, 2021⁽¹⁾									$	1,529	$	3,307	$	667	$	5,503

(1)	At ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $3,091 million, $669 million, and $489 million, respectively.

During the ~~nine months~~quarter ended ~~June 25,~~December 24, 2021, we recognized goodwill in the Communications Solutions segment in connection with a recent acquisition. Also during the quarter ended December 24, 2021, we recognized purchase price adjustments in the Industrial Solutions segment in connection with ~~recent acquisitions.~~prior year acquisitions, including 2 acquisitions that closed late in the fourth quarter of fiscal 2021. See Note 3 for additional information regarding acquisitions.

6. Intangible Assets, Net

Intangible assets consisted of the following:


	June 25, 2021						September 25, 2020						December 24, 2021						September 24, 2021
	Gross				Net		Gross				Net		Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount

	(in millions)												(in millions)
Customer relationships	$	1,714	$	(637)	$	1,077	$	1,648	$	(554)	$	1,094	$	1,766	$	(680)	$	1,086	$	1,766	$	(660)	$	1,106
Intellectual property		1,237		(812)		425		1,225		(739)		486		1,262		(852)		410		1,262		(832)		430
Other		20		(6)		14		19		(6)		13		19		(6)		13		19		(6)		13
Total	$	2,971	$	(1,455)	$	1,516	$	2,892	$	(1,299)	$	1,593	$	3,047	$	(1,538)	$	1,509	$	3,047	$	(1,498)	$	1,549

Intangible asset amortization expense was $48 million ~~and $46 million~~ for the quarters ended ~~June 25,~~December 24, 2021 and ~~June 26, 2020, respectively, and $144 million and $137 million for~~December 25, 2020.

At December 24, 2021, the ~~nine months ended June 25, 2021 and June 26, 2020, respectively.~~aggregate amortization expense on intangible assets is expected to be as follows:


	(in millions)
Remainder of fiscal 2022	$	150
Fiscal 2023		199
Fiscal 2024		167
Fiscal 2025		151
Fiscal 2026		145
Fiscal 2027		124
Thereafter		573
Total	$	1,509

109

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

~~At June 25, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:~~

(in millions)

Remainder of fiscal 2021

$
48

Fiscal 2022

194

Fiscal 2023

192

Fiscal 2024

160

Fiscal 2025

145

Fiscal 2026

138

Thereafter

639

Total

$
1,516

7. Debt

During the ~~nine months~~quarter ended ~~June 25,~~December 24, 2021, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, ~~repaid, at maturity, $250 million of 4.875% senior notes due in January 2021 and €350 million of fixed-to-floating rate senior notes due in June 2021.~~

During the nine months ended June 25, 2021, TEGSA issued €550 million aggregate principal amount of 0.00% senior notes due in February 2029. The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur. The notes are fully and unconditionally guaranteed as to payment on an unsecured basis by TE Connectivity Ltd.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with total commitments of $1.5 billion. The Credit Facility was amended in June 2021 primarily to extend the maturity date from November 2023 to June 2026. The amended Credit Facility contains customary provisionscalled for the ~~replacement~~early redemption of London Interbank Offered Rate (“LIBOR”) with successor rates and amends certain representations, warranties, and covenants applicable to us and TEGSA as obligors under the credit agreement. TEGSA had 0 borrowings under the Credit Facility at June 25, 2021 or September 25, 2020.

~~Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option~~all of ~~TEGSA, (1)~~ ~~LIBOR~~ ~~or, upon a phase-out of LIBOR, an alternative benchmark rate, (2) an alternate base rate equal to the highest of (i)~~ ~~Bank of America, N.A.’s base rate, (ii) the~~ ~~federal funds effective~~ ~~rate plus~~ ¹/₂ ~~of 1%, and (iii)~~ ~~one-month LIBOR, or an alternative benchmark rate, plus 1%, (3) an~~ ~~alternative currency daily rate, or (4) an~~ ~~alternative currency term rate~~, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA. TEGSA is required to pay an annual facility fee. Based on the applicable credit ratings of TEGSA, this fee ranges from 5.0 to 12.5 basis points of the lenders’ commitments under the Credit Facility.

~~During the nine months ended June 25, 2021, we reclassified $500 million of~~its outstanding 3.50% senior notes due in February 2022, ~~from long-term debt to~~ ~~short-term~~ ~~debt on the Condensed Consolidated Balance Sheet.~~representing $500 million aggregate principal amount. The notes were redeemed in November 2021.

As of December 24, 2021, TEGSA had $479 million of commercial paper outstanding at a weighted-average interest rate of 0.25%. TEGSA had 0 commercial paper outstanding at September 24, 2021.

The fair value of our debt, based on indicative valuations, was approximately ~~$4,510~~$4,343 million and ~~$4,550~~$4,465 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively.

~~Table of Contents~~

~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

8. Leases

The components of lease cost were as follows:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Operating lease cost	$	31	$	27	$	90	$	79	$	31	$	30
Variable lease cost		13		12		37		38		12		11
Total lease cost	$	44	$	39	$	127	$	117	$	43	$	41

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


	For the				For the
	Nine Months Ended				Quarters Ended
	June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020

	(in millions)				(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases⁽¹⁾	$	90	$	78	$	34	$	30

Right-of-use assets obtained in exchange for new operating lease liabilities		65		17
Right-of-use assets, including modifications and extensions, obtained in exchange for operating lease liabilities						36		22

(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.

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Trade Compliance Matters

We are investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and both our internal assessment and the resulting investigations by the agencies remain ongoing. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

~~Table of Contents~~

~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

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 required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of ~~June 25,~~December 24, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $18 million to ~~$47~~$46 million, and we accrued $21 million as the probable loss, which was the best estimate within this range. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

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 ~~June 25,~~December 24, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of ~~$135~~$132 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately ~~$129~~$118 million as of ~~June 25,~~December 24, 2021 and are expected to expire at various dates through fiscal 2025. ~~During the nine months ended June 25, 2021, we amended our agreement with SubCom and removed the requirement to issue new performance guarantees.~~ We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

10. Financial Instruments

Foreign Currency Exchange Rate Risk

We utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. The aggregate notional value of these contracts was €500 million and €700 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020.~~24, 2021, respectively. Certain contracts were terminated in the quarter ended December 24, 2021; the remaining contracts mature in the fourth quarter of fiscal 2022. Under the terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros at 3.50% per annum and receive interest in U.S. dollars at a weighted-average rate of ~~5.34%~~5.32% per annum. Upon maturity, ~~in fiscal 2022,~~ we will pay the notional value of the contracts in ~~euros and receive U.S. dollars from our counterparties. In connection with the cross-currency swap contracts, both counterparties to each contract are required to provide cash collateral.~~

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

June 25,

September 25,


2021

2020


(in millions)

Other assets

$
—

$
1

Other liabilities

36

9

At June 25, 2021 and September 25, 2020, collateral received from or paid to our counterparties approximated the net derivative position. Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset

1311

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

euros and receive U.S. dollars from our counterparties. In connection with the cross-currency swap contracts, both counterparties to each contract are required to provide cash collateral.

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


	December 24,		September 24,
	2021		2021

	(in millions)
Prepaid expenses and other current assets	$	4	$	—
Other liabilities		—		20

At December 24, 2021 and September 24, 2021, collateral received from or paid to our counterparties approximated the net derivative position. Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset position, or prepaid expenses and other current assets when the contracts are in a net liability position on the Condensed Consolidated Balance Sheets. The impacts of these cross-currency swap contracts were as follows:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Gains (losses) recorded in other comprehensive income (loss)	$	(1)	$	—	$	(5)	$	32
Losses excluded from the hedging relationship⁽¹⁾		(11)		(14)		(23)		(19)
Losses recorded in other comprehensive income (loss)									$	(3)	$	(4)
Gains (losses) excluded from the hedging relationship⁽¹⁾										29		(40)

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

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 ~~$4,216~~$3,055 million and ~~$3,511~~$3,798 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively.

We also use a cross-currency swap program to hedge our net investment in certain foreign operations. The aggregate notional value of the contracts under this program was ~~$1,509~~$1,576 million and ~~$1,664~~$1,430 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of ~~1.98%~~1.67% per annum and pay 0 interest. Upon the maturity of these contracts at various dates through fiscal 2025, 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:


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Prepaid expenses and other current assets	$	2	$	1	$	6	$	3
Other assets		15		3		29		18
Accrued and other current liabilities		19		6		—		13
Other liabilities		30		16		9		18

~~The impacts of our hedge of net investment programs were as follows:~~

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Foreign currency exchange losses on intercompany loans and external borrowings⁽¹⁾

$
(46)

$
(52)

$
(81)

$
(60)

Losses on cross-currency swap contracts designated as hedges of net investment⁽¹⁾

(14)

(25)

(41)

(3)

~~(1)~~

~~Recorded as currency translation, a component of accumulated other comprehensive income (loss).~~

1412

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The impacts of our hedge of net investment programs were as follows:


		For the
		Quarters Ended
	December 24,		December 25,
	2021		2020

	(in millions)
Foreign currency exchange gains (losses) on intercompany loans and external borrowings⁽¹⁾	$	108	$	(168)
Gains (losses) on cross-currency swap contracts designated as hedges of net investment⁽¹⁾		37		(85)

(1)	Recorded as currency translation, a component of accumulated other comprehensive income (loss).

Interest Rate Risk Management

We utilize forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated issuance of fixed rate debt. These contracts had an aggregate notional value of $450 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020~~24, 2021 and were designated as cash flow hedges. These forward starting interest rate swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Prepaid expenses and other current assets	$	8	$	—	$	8	$	7
Accrued and other current liabilities		36		—		37		38
Other liabilities		—		64

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

For the

Quarters Ended

Nine Months Ended

Quarters Ended

June 25,

June 26,

June 25,

June 26,

December 24,

December 25,

2021

2020

2021

2020

2021

2020

(in millions)

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

(11)

—

(32)

Gains recorded in other comprehensive income (loss)

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 ~~$478~~$545 million and ~~$312~~$512 million at ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Prepaid expenses and other current assets	$	49	$	41	$	18	$	23
Other assets		1		3		1		—
Accrued and other current liabilities		8		2		13		18
Other liabilities		2		1		1		4

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The impacts of these commodity swap contracts were as follows:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Gains recorded in other comprehensive income (loss)	$	24	$	40	$	78	$	22	$	15	$	37
Gains reclassified from accumulated other comprehensive income (loss) into cost of sales		27		—		66		3		15		15

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.

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~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

11. Retirement Plans

The net periodic pension benefit cost (credit) 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

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Operating expense:

Service cost

$
10

$
13

$
3

$
2

Other (income) expense:

Interest cost

7

6

7

9

Expected return on plan assets

(13)

(15)

(13)

(15)

Amortization of net actuarial loss

8

10

3

3

Amortization of prior service credit and other

(3)

(1)

—

—

Net periodic pension benefit cost (credit)

$
9

$
13

$
—

$
(1)


	Non-U.S. Plans				U.S. Plans				Non-U.S. Plans				U.S. Plans
	For the				For the				For the				For the
	Nine Months Ended				Nine Months Ended				Quarters Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Operating expense:
Service cost	$	34	$	38	$	9	$	7	$	10	$	12	$	2	$	3
Other (income) expense:
Interest cost		21		18		23		27		9		7		7		8
Expected return on plan assets		(40)		(45)		(39)		(44)		(15)		(14)		(12)		(13)
Amortization of net actuarial loss		23		30		7		7		6		8		1		2
Amortization of prior service credit and other		(6)		(4)		—		—
Amortization of prior service credit										(1)		(1)		—		—
Net periodic pension benefit cost (credit)	$	32	$	37	$	—	$	(3)	$	9	$	12	$	(2)	$	—

During the ~~nine months~~quarter ended ~~June 25,~~December 24, 2021, we contributed ~~$31 million and $18~~$9 million to our non-U.S. ~~and U.S.~~ pension ~~plans, respectively.~~plans.

12. Income Taxes

We recorded income tax expense of ~~$124~~$110 million and ~~$185~~$60 million for the quarters ended ~~June 25,~~December 24, 2021 and ~~June 26,~~December 25, 2020, respectively. The income tax expense for the quarter ended ~~June 26, 2020~~December 24, 2021 included ~~$170~~a $17 million income tax benefit related to the tax impacts of an intercompany transaction. Our estimated annual effective tax rate for fiscal 2022 includes a total income tax benefit of approximately $75 million related to this transaction, with a portion recognized in the quarter ended December 24, 2021 and the remainder to be recognized in the remaining quarters of fiscal 2022. In addition, the income tax expense for the quarter ended December 24, 2021 included $12 million of income tax expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets. Due to the COVID-19 pandemic and its negative impact on our current and expected future operating profit and taxable income, we believed it was more likely than not that a portion of our deferred tax assets would not be realized. Depending on business conditions, additional adjustments to our valuation allowance may be required in future periods as we continue to assess the realizability of our deferred tax assets.

~~We recorded~~ income tax ~~expense~~audit of ~~$290~~an acquired entity. As we are entitled to indemnification of pre-acquisition period tax obligations under the terms of the purchase agreement, we recorded an associated indemnification receivable and other income of $11 million ~~and $674 million for~~during the ~~nine months~~quarter ended ~~June 25, 2021 and June 26, 2020, respectively.~~December 24, 2021. The income tax expense for the ~~nine months~~quarter ended ~~June~~December 25, ~~2021~~2020 included a ~~$29~~$29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets. The income tax expense for the nine months ended June 26, 2020 included $355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”)assets. ~~See “Swiss Tax Reform” below for additional information. In addition, the income tax expense included $170~~

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~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

million of income tax expense related to an increase to the valuation allowance for certain non-U.S. deferred tax assets, partially offset by an income tax benefit of $31 million related to pre-separation tax matters and the termination of the Tax Sharing Agreement with Tyco International plc (now part of Johnson Controls International plc) and Covidien plc (now part of Medtronic plc). The pre-tax goodwill impairment charge of $900 million recorded during the nine months ended June 26, 2020 resulted in a tax benefit of $4 million as the associated goodwill was primarily not deductible for income tax purposes.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately ~~$90~~$100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

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TE CONNECTIVITY LTD.

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 ~~June 25,~~December 24, 2021.

~~Swiss Tax Reform~~

The Federal Act on Tax Reform and AHV Financing eliminated certain preferential tax items and implemented new tax rates at both the federal and cantonal levels. During fiscal 2019, Switzerland enacted the federal provisions of Swiss Tax Reform and the federal tax authority issued guidance abolishing certain interest deductions. The impacts of these measures were reflected in our fiscal 2019 Consolidated Financial Statements.

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law, including reductions in tax rates. During the nine months ended June 26, 2020, we recognized $355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

13. Earnings ~~(Loss)~~ Per Share

The weighted-average number of shares outstanding used in the computations of basic and diluted earnings ~~(loss)~~ per share were as follows:


	For the		For the		For the
	Quarters Ended		Nine Months Ended		Quarters Ended
	June 25,	June 26,	June 25,	June 26,	December 24,	December 25,
	2021	2020	2021	2020	2021	2020

	(in millions)				(in millions)
Basic	330	330	331	333	327	331
Dilutive impact of share-based compensation arrangements	3	—	2	—	3	2
Diluted	333	330	333	333	330	333

For ~~both~~ the quarter ~~and nine months~~ ended ~~June 26, 2020, there were~~December 24, 2021, 1 million nonvested share awards and options outstanding with underlying exercise prices less than the average market prices of our common shares; however, these were excluded from the calculation of diluted loss per share as inclusion would be antidilutive as a result of our loss during the period.

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~~TE CONNECTIVITY LTD.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

~~The following~~ share options were not included in the computation of diluted earnings ~~(loss)~~ per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be ~~antidilutive:~~antidilutive.

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Antidilutive share options

—

4

—

3

14. Shareholders’ Equity

~~Common Shares Held in Treasury~~

In March 2021, our shareholders approved the cancellation of approximately 3 million shares purchased under our share repurchase program during the period beginning September 28, 2019 and ending September 25, 2020. The capital reduction by cancellation of these shares was subject to a notice period and filing with the commercial register in Switzerland and became effective in May 2021.

Dividends

We paid cash dividends to shareholders as follows:

For the

Quarters Ended

Nine Months Ended

Quarters Ended

June 25,

June 26,

June 25,

June 26,

December 24,

December 25,

2021

2020

2021

2020

2021

2020

Dividends paid per common share

0.50

0.48

1.46

1.40

0.50

0.48

In March 2021, our shareholders approved a dividend payment to shareholders of $2.00 per share, payable in 4 equal quarterly installments of $0.50 per share beginning in the third quarter of fiscal 2021 and ending in the second quarter of fiscal 2022.

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled ~~$493~~$163 million and ~~$317~~$327 million, respectively.

Share Repurchase Program

~~During the quarter ended June 25, 2021, our board of directors authorized an increase of $1.5 billion in the share repurchase program.~~ Common shares repurchased under the share repurchase program were as follows:


	For the				For the
	Nine Months Ended				Quarters Ended
	June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020

	(in millions)				(in millions)
Number of common shares repurchased		5		6		2		1
Repurchase value	$	591	$	505	$	246	$	127

At ~~June 25,~~December 24, 2021, we had ~~$1.9~~$1.3 billion of availability remaining under our share repurchase authorization.

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

15. Share Plans

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

For the

Quarters Ended

Nine Months Ended

Quarters Ended

June 25,

June 26,

June 25,

June 26,

December 24,

December 25,

2021

2020

2021

2020

2021

2020

(in millions)

Share-based compensation expense

As of ~~June 25,~~December 24, 2021, there was ~~$140~~$214 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of ~~1.8~~2.2 years.

During the quarter ended December ~~25, 2020,~~24, 2021, we granted the following share-based awards as part of our annual incentive plan grant:


		Grant-Date			Grant-Date
	Shares	Fair Value		Shares	Fair Value
	(in millions)			(in millions)
Share options	1.3	$	22.03	0.8	$	37.67
Restricted share awards	0.4		105.86	0.3		158.00
Performance share awards	0.2		105.86	0.1		158.00

As of ~~June 25,~~December 24, 2021, we had 1311 million shares available for issuance under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of September 17, 2020.

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		28	%		29	%
Risk-free interest rate		0.5	%		1.1	%
Expected annual dividend per share	$	1.92		$	2.00
Expected life of options (in years)		5.4			5.1

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

16. Segment and Geographic Data

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


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Transportation Solutions:
Automotive	$	1,600	$	797	$	4,859	$	3,567	$	1,520	$	1,629
Commercial transportation		382		233		1,095		785		365		331
Sensors		283		225		822		628		273		264
Total Transportation Solutions		2,265		1,255		6,776		4,980		2,158		2,224
Industrial Solutions:
Industrial equipment										462		295
Aerospace, defense, oil, and gas		260		265		777		892		242		250
Industrial equipment		377		265		1,011		808
Energy										188		172
Medical		178		161		495		526		167		156
Energy		187		174		544		528
Total Industrial Solutions		1,002		865		2,827		2,754		1,059		873
Communications Solutions:
Data and devices		329		276		841		713		349		234
Appliances		249		152		661		464		252		191
Total Communications Solutions		578		428		1,502		1,177		601		425
Total	$	3,845	$	2,548	$	11,105	$	8,911	$	3,818	$	3,522

(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.

2017

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Net sales by geographic region⁽¹⁾ and segment were as follows:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Europe/Middle East/Africa (“EMEA”):
Transportation Solutions									$	771	$	894
Industrial Solutions										452		358
Communications Solutions										91		64
Total EMEA										1,314		1,316
Asia–Pacific:
Transportation Solutions	$	868	$	606	$	2,619	$	1,979		928		876
Industrial Solutions		183		153		517		436		209		163
Communications Solutions		333		273		877		721		333		254
Total Asia–Pacific		1,384		1,032		4,013		3,136		1,470		1,293
Europe/Middle East/Africa (“EMEA”):
Transportation Solutions		913		410		2,729		1,878
Industrial Solutions		417		313		1,168		1,014
Communications Solutions		83		54		222		170
Total EMEA		1,413		777		4,119		3,062
Americas:
Transportation Solutions		484		239		1,428		1,123		459		454
Industrial Solutions		402		399		1,142		1,304		398		352
Communications Solutions		162		101		403		286		177		107
Total Americas		1,048		739		2,973		2,713		1,034		913
Total	$	3,845	$	2,548	$	11,105	$	8,911	$	3,818	$	3,522

(1)

Net sales to external customers are attributed to individual countries based on the legal entity that records the sale.

Operating income ~~(loss)~~ by segment was as follows:

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Transportation Solutions

$
433

$
(1)

$
1,139

$
(291)
⁽¹⁾
Industrial Solutions

148

70

335

327

Communications Solutions

133

65

300

154

Total

$
714

$
134

$
1,774

$
190

~~(1)~~

~~Includes goodwill impairment charge of $900 million.~~


	For the
	Quarters Ended
	December 24,		December 25,
	2021		2020

	(in millions)
Transportation Solutions	$	395	$	308
Industrial Solutions		123		76
Communications Solutions		154		64
Total	$	672	$	448

17. Subsequent Event

On December 27, 2021, the canton of Schaffhausen in Switzerland enacted a reduction to its corporate income tax rate. We expect to recognize approximately $25 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate in the quarter ending March 25, 2022, the period of enactment.

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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.

Overview

TE Connectivity Ltd. (“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, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.

The ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021~~2022 included the following:

●

Our net sales increased ~~50.9% and 24.6%~~8.4% in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 as compared to the same ~~periods~~period of fiscal ~~2020~~2021 due to sales growth in the Industrial Solutions and Communications Solutions segments, partially offset by sales declines in the Transportation Solutions ~~segment and, to a lesser degree, the Communications Solutions and Industrial Solutions segments.~~segment. On an organic basis, our net sales increased ~~45.0% and 19.0%~~8.0% during the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 as compared to the same ~~periods~~period of fiscal ~~2020.~~2021.

●

Our net sales by segment were as follows:

●

Transportation Solutions—Our net sales ~~increased 80.5% and 36.1%~~decreased 3.0% in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively, with~~2022 due primarily to sales ~~increases~~declines in ~~all~~the automotive end ~~markets.~~market.

●

Industrial Solutions—Our net sales increased ~~15.8%~~21.3% in the ~~third~~first quarter of fiscal ~~2021~~2022 primarily as a result of sales increases in the industrial equipment end market. In the first nine months of fiscal 2021, our net sales increased 2.7% due primarily to sales increases in the industrial equipment end market, partially offset by declines in the aerospace, defense, oil, and gas end market.

●

Communications Solutions—Our net sales increased ~~35.0% and 27.6%~~41.4% in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 due to sales increases in both the ~~appliances~~data and devices and the ~~data and devices~~appliances end markets.

●

Net cash provided by operating activities was ~~$1,902~~$532 million in the first ~~nine months~~quarter of fiscal ~~2021.~~2022.

COVID-19 Pandemic

The COVID-19 pandemic has affected nearly all regions around the world and resulted in business slowdowns or shutdowns and travel restrictions in affected areas. The pandemic had a ~~significant,~~ negative impact on ~~our sales and~~

~~Table of Contents~~

~~operating results during fiscal 2020 and continued to negatively affect~~ certain of our businesses in fiscal 2021. WeThe pandemic has not had a significant impact on our ability to staff our operations, and we do not expect that it will continue to have a significant impact on our businesses in the near term. Throughout our operations, we implemented additional health and safety measures for the protection of our employees, including providing personal protective equipment, enhanced cleaning and sanitizing of our facilities, and remote working arrangements.

Table of Contents

The COVID-19 pandemic has impacted and continues to impact our business operations globally, causing disruption in our suppliers’ and customers’ supply chains, some of our business locations to reduce or suspend operations, and a reduction in demand for certain products from direct customers or end markets. In addition, the pandemic had far-reaching impacts on many additional aspects of our operations, both directly and indirectly, including with respect to its impacts on customer behaviors, business and manufacturing operations, inventory, our employees, and the market generally. We assessed the impact of the COVID-19 pandemic and adjusted our operations and businesses, a number of which are operating as essential businesses, and will continue to do so if necessary. Throughout our operations, we implemented additional health and safety measures for the protection of our employees, including providing personal protective equipment, enhanced cleaning and sanitizing of our facilities, and remote working arrangements.

The extent to which the pandemic will continue to impact our business and the markets we serve will depend on future developments which may include the further spread of the virus, variant strains of the virus, and the resumption of high levels of infections and hospitalizations as well as the success of public health advancements, including vaccine production and distribution. Although we do not expect the COVID-19 pandemic to have a significant impact on our businesses in the near term, it may have a negative impact on our financial condition, liquidity, and results of operations in future periods.

In response to the pandemic and resulting economic environment, we have taken and continue to focus on actions to manage costs. These include restructuring and other cost reduction initiatives, such as reducing discretionary spending ~~capital expenditures,~~ and travel. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, shareholders, and the communities in which we operate.

Outlook

In the ~~fourth~~second quarter of fiscal ~~2021,~~2022, we expect our net sales to be approximately $3.8 billion as compared to ~~$3.26~~$3.7 billion in the ~~fourth~~second quarter of fiscal ~~2020.~~2021. This increase reflects sales growth in the ~~Transportation~~Industrial Solutions and Communications Solutions segments, ~~and, to a lesser degree,~~partially offset by sales declines in the ~~Industrial~~Transportation Solutions ~~segment.~~ segment driven primarily by an approximate 5% decline in global automotive production. We expect diluted earnings per share from continuing operations to be approximately ~~$1.55~~$1.52 per share in the ~~fourth~~second quarter of fiscal ~~2021.~~2022. This outlook reflects the ~~positive~~negative impact of foreign currency exchange rates on net sales and earnings per share of approximately ~~$82~~$111 million and $0.03 per share, respectively, in the ~~fourth~~second quarter of fiscal ~~2021~~2022 as compared to the ~~fourth~~second quarter of fiscal ~~2020.~~

For fiscal 2021, we expect our net sales to be approximately $14.9 billion as compared to $12.17 billion in fiscal 2020. This increase reflects sales growth in the Transportation Solutions segment and, to a lesser degree, the Communications Solutions and Industrial Solutions segments relative to fiscal 2020. We expect diluted earnings per share from continuing operations to be approximately $5.94 per share in fiscal 2021. This outlook reflects the positive impact of foreign currency exchange rates on net sales and earnings per share of approximately $473 million and $0.18 per share, respectively, in fiscal 2021 as compared to fiscal 2020.

~~The above~~ outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

On December 27, 2021, the canton of Schaffhausen in Switzerland enacted a reduction to its corporate income tax rate. We expect to recognize approximately $25 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate in the second quarter of fiscal 2022, the period of enactment. This income tax charge is reflected in the above outlook.

We are monitoring the current macroeconomic environment, including any ~~developments related to~~continued impacts from the COVID-19 pandemic, and its potential effects on our customers and the end markets we serve. We have taken actions to manage costs and will continue to closely manage our costs in line with economic conditions. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund future capital needs. See further discussion in “Liquidity and Capital Resources.”

~~Table of Contents~~

~~Acquisitions~~Acquisition

During the first ~~nine months~~quarter of fiscal ~~2021,~~2022, we acquired ~~two businesses~~one business for a ~~combined~~ cash purchase price of $125 million, net of cash acquired. The ~~acquisitions were~~acquisition was reported as part of our ~~Industrial~~Communications Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

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Results of Operations

Net Sales

The following table presents our net sales and the percentage of total net sales by segment:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,				June 26,				June 25,				June 26,				December 24,				December 25,
	2021				2020				2021				2020				2021				2020

	($ in millions)																($ in millions)
Transportation Solutions	$	2,265	59	%	$	1,255	49	%	$	6,776	61	%	$	4,980	56	%	$	2,158	56	%	$	2,224	63	%
Industrial Solutions		1,002	26			865	34			2,827	25			2,754	31			1,059	28			873	25
Communications Solutions		578	15			428	17			1,502	14			1,177	13			601	16			425	12
Total	$	3,845	100	%	$	2,548	100	%	$	11,105	100	%	$	8,911	100	%	$	3,818	100	%	$	3,522	100	%

The following table provides an analysis of the change in our net sales by segment:


	Change in Net Sales for the Quarter Ended June 25, 2021												Change in Net Sales for the Nine Months Ended June 25, 2021												Change in Net Sales for the Quarter Ended December 24, 2021
	versus Net Sales for the Quarter Ended June 26, 2020												versus Net Sales for the Nine Months Ended June 26, 2020												versus Net Sales for the Quarter Ended December 25, 2020
	Net Sales				Organic Net Sales						Acquisition		Net Sales				Organic Net Sales						Acquisitions		Net Sales				Organic Net Sales						Acquisitions
	Growth				Growth				Translation		(Divestitures)		Growth				Growth (Decline)				Translation		(Divestitures)		Growth (Decline)				Growth (Decline)				Translation		(Divestitures)

	($ in millions)																								($ in millions)
Transportation Solutions	$	1,010	80.5	%	$	921	71.6	%	$	89	$	—	$	1,796	36.1	%	$	1,438	28.4	%	$	269	$	89	$	(66)	(3.0)	%	$	(42)	(1.8)	%	$	(24)	$	—
Industrial Solutions		137	15.8			109	12.6			33		(5)		73	2.7			(8)	(0.4)			84		(3)		186	21.3			154	17.6			(20)		52
Communications Solutions		150	35.0			134	30.8			16		—		325	27.6			285	24.1			40		—		176	41.4			172	40.2			(1)		5
Total	$	1,297	50.9	%	$	1,164	45.0	%	$	138	$	(5)	$	2,194	24.6	%	$	1,715	19.0	%	$	393	$	86	$	296	8.4	%	$	284	8.0	%	$	(45)	$	57

Net sales increased ~~$1,297~~$296 million, or ~~50.9%~~8.4%, in the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to the ~~third~~first quarter of fiscal ~~2020.~~2021. The increase in net sales resulted ~~primarily~~ from organic net sales growth of ~~45.0%~~8.0% and net sales contributions of 1.7% from acquisitions and divestitures, partially offset by the ~~positive~~negative impact of foreign currency translation of ~~5.4%~~1.3% due to the ~~strengthening~~weakening of certain foreign currencies. ~~In the third quarter of fiscal 2020, our net sales included significant, unfavorable impacts from the COVID-19 pandemic.~~

In the first nine months of fiscal 2021, net sales increased $2,194 million, or 24.6%, as compared to the first nine months of fiscal 2020 due to organic net sales growth of 19.0%, the positive impact of foreign currency translation of 4.5% due to the strengthening of certain foreign currencies, and net sales contributions of 1.1% from acquisitions and divestitures. The significant, unfavorable impacts of the COVID-19 pandemic were included in our net sales in the first nine months of fiscal 2020. Price erosion adverselyPricing actions positively affected organic net sales by ~~$47~~$52 million in the first ~~nine months~~quarter of fiscal ~~2021.~~2022.

See further discussion of net sales below under “Segment Results.”

Net Sales by Geographic Region. Our business operates in three geographic regions—~~Asia–Pacific,~~ 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 ~~nine months~~quarter of fiscal ~~2021.~~2022.

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The following table presents our net sales and the percentage of total net sales by geographic region⁽¹⁾:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,				June 26,				June 25,				June 26,				December 24,				December 25,
	2021				2020				2021				2020				2021				2020

	($ in millions)																($ in millions)
EMEA																	$	1,314	34	%	$	1,316	37	%
Asia–Pacific	$	1,384	36	%	$	1,032	41	%	$	4,013	36	%	$	3,136	35	%		1,470	39			1,293	37
EMEA		1,413	37			777	30			4,119	37			3,062	34
Americas		1,048	27			739	29			2,973	27			2,713	31			1,034	27			913	26
Total	$	3,845	100	%	$	2,548	100	%	$	11,105	100	%	$	8,911	100	%	$	3,818	100	%	$	3,522	100	%

(1)	Net sales to external customers are attributed to individual countries based on the legal entity that records the sale.

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The following table provides an analysis of the change in our net sales by geographic region:

Change in Net Sales for the Quarter Ended June 25, 2021

Change in Net Sales for the Nine Months Ended June 25, 2021

versus Net Sales for the Quarter Ended June 26, 2020

versus Net Sales for the Nine Months Ended June 26, 2020

Net Sales

Organic Net Sales

Acquisition

Net Sales

Organic Net Sales

Acquisitions


Growth

Growth

Translation

(Divestitures)

Growth

Growth

Translation

(Divestitures)


($ in millions)

Asia–Pacific

$
352

34.1
%
$
294

27.9
%
$
61

$
(3)

$
877

28.0
%
$
705

22.3
%
$
178

$
(6)

EMEA

636

81.9

552

69.3

89

(5)

1,057

34.5

715

22.8

264

78

Americas

309

41.8

318

42.9

(12)

3

260

9.6

295

10.8

(49)

14

Total

$
1,297

50.9
%
$
1,164

45.0
%
$
138

$
(5)

$
2,194

24.6
%
$
1,715

19.0
%
$
393

$
86


	Change in Net Sales for the Quarter Ended December 24, 2021
	versus Net Sales for the Quarter Ended December 25, 2020
	Net Sales				Organic Net Sales						Acquisitions
	Growth (Decline)				Growth				Translation		(Divestitures)

	($ in millions)
EMEA	$	(2)	(0.2)	%	$	6	0.3	%	$	(44)	$	36
Asia–Pacific		177	13.7			164	12.6			—		13
Americas		121	13.3			114	12.5			(1)		8
Total	$	296	8.4	%	$	284	8.0	%	$	(45)	$	57

Cost of Sales and Gross Margin

The following table presents cost of sales and gross margin information:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,			June 26,					June 25,			June 26,					December 24,			December 25,
	2021			2020			Change		2021			2020			Change		2021			2020			Change

	($ in millions)																($ in millions)
Cost of sales	$	2,577		$	1,841		$	736	$	7,481		$	6,145		$	1,336	$	2,588		$	2,376		$	212
As a percentage of net sales		67.0	%		72.3	%				67.4	%		69.0	%				67.8	%		67.5	%

Gross margin	$	1,268		$	707		$	561	$	3,624		$	2,766		$	858	$	1,230		$	1,146		$	84
As a percentage of net sales		33.0	%		27.7	%				32.6	%		31.0	%				32.2	%		32.5	%

Gross margin increased ~~$561 million and $858~~$84 million in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 as compared to the same ~~periods~~period of fiscal ~~2020.~~2021. The ~~increases were~~increase was primarily as a result of higher volume and, to a lesser degree, ~~improved manufacturing productivity and~~ the positive ~~impact~~impacts of ~~foreign currency translation.~~pricing actions, partially offset by higher material costs.

We use a wide variety of raw materials in the manufacture of our products and cost of sales and gross margin are subject to variability in raw material prices. As markets recover from the COVID-19 pandemic, increases in consumer demand have led to shortages and price increases in some of our input materials. During the ~~third quarter and first nine months of fiscal 2021,~~past several quarters, copper, gold, silver, and palladium prices as well as the prices of certain other raw materials have

~~Table of Contents~~

increased from prior year levels. The following table presents the average prices incurred related to copper, gold, silver, and palladium:


		For the				For the					For the
		Quarters Ended				Nine Months Ended					Quarters Ended
		June 25,		June 26,		June 25,		June 26,			December 24,		December 25,
	Measure	2021		2020		2021		2020		Measure	2021		2020
Copper	Lb.	$	3.41	$	2.78	$	3.07	$	2.80	Lb.	$	3.80	$	2.88
Gold	Troy oz.		1,735		1,411		1,664		1,380	Troy oz.		1,797		1,599
Silver	Troy oz.		22.92		15.97		21.11		16.13	Troy oz.		23.56		19.70
Palladium	Troy oz.		2,438		1,998		2,229		2,020	Troy oz.		2,356		2,137

We expect to purchase approximately ~~200~~220 million pounds of copper, 125,000 troy ounces of gold, ~~2.7~~2.9 million troy ounces of silver, and 15,000 troy ounces of palladium in fiscal ~~2021.~~2022.

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Operating Expenses

The following table presents operating expense information:

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

Change

2021

2020

Change


($ in millions)

Selling, general, and administrative expenses

$
366

$
321

$
45

$
1,128

$
1,040

$
88

As a percentage of net sales

9.5
%

12.6
%



10.2
%

11.7
%



Restructuring and other charges, net

$
11

$
98

$
(87)

$
195

$
144

$
51

Impairment of goodwill

—

—

—

—

900

(900)


	For the
	Quarters Ended
	December 24,			December 25,
	2021			2020			Change

	($ in millions)
Selling, general, and administrative expenses	$	363		$	361		$	2
As a percentage of net sales		9.5	%		10.2	%

Restructuring and other charges, net	$	12		$	167		$	(155)

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased ~~$45 million~~slightly in the ~~third~~first quarter of fiscal ~~2021~~2022 from the ~~third~~first quarter of fiscal ~~2020~~2021 due primarily to increased selling expenses to support higher sales levels, ~~higher incentive compensation costs due to improved operational performance, and the negative impact of foreign currency translation, partially~~largely offset by savings attributable to restructuring actions and gains on the sale of real estate. In the first nine months of fiscal 2021, selling, general, and administrative expenses increased $88 million from the same period of fiscal 2020 due primarily to higher incentive compensation costs, the negative impact of foreign currency translation, and increased selling expenses, partially offset by savings attributable to cost control measures and restructuring actions and gainsa gain on the sale of real estate.

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 ~~2021~~2022 and ~~2020,~~2021, we initiated restructuring programs associated with footprint consolidation and cost structure improvements across all ~~segments to optimize our manufacturing footprint and improve the cost structure of the organization.~~segments. We incurred net restructuring and related charges of ~~$170~~$33 million during the first ~~nine months~~quarter of fiscal ~~2021,~~2022, of which ~~$162~~$12 million ~~related to the fiscal 2021 restructuring program.~~was recorded in cost of sales. Annualized cost savings related to the fiscal ~~2021~~2022 actions commenced during the first ~~nine months~~quarter of fiscal ~~2021~~2022 are expected to be approximately ~~$75~~$28 million and are expected to be realized by the end of fiscal ~~2023.~~2024. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal ~~2021,~~2022, we expect total restructuring charges to be approximately ~~$200~~$150 million and total spending, which will be funded with cash from operations, to be approximately ~~$200~~$190 million.

See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.

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~~Impairment of Goodwill.~~ ~~During the first nine months of fiscal 2020, we recorded a goodwill impairment charge of $900 million related to the Sensors reporting unit in our Transportation Solutions segment.~~

Operating Income

The following table presents operating income and operating margin information:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,			June 26,					June 25,			June 26,					December 24,			December 25,
	2021			2020			Change		2021			2020			Change		2021			2020			Change

	($ in millions)																($ in millions)
Operating income	$	714		$	134		$	580	$	1,774		$	190		$	1,584	$	672		$	448		$	224
Operating margin		18.6	%		5.3	%				16.0	%		2.1	%				17.6	%		12.7	%

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Operating income included the following:


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Acquisition-related charges:
Acquisition and integration costs	$	9	$	8	$	23	$	27	$	8	$	8
Charges associated with the amortization of acquisition-related fair value adjustments		—		—		3		—		8		1
		9		8		26		27		16		9
Restructuring and other charges, net		11		98		195		144		12		167
Impairment of goodwill		—		—		—		900
Restructuring-related charges recorded in cost of sales										12		—
Total	$	20	$	106	$	221	$	1,071	$	40	$	176

See discussion of operating income below under “Segment Results.”

Non-Operating Items

The following table presents select non-operating information:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,			June 26,					June 25,			June 26,					December 24,			December 25,
	2021			2020			Change		2021			2020			Change		2021			2020			Change

	($ in millions)																($ in millions)
Income tax expense	$	124		$	185		$	(61)	$	290		$	674		$	(384)	$	110		$	60		$	50
Effective tax rate		17.6	%		145.7	%				16.6	%		360.4	%				16.2	%		13.8	%

Income Taxes. See Note 12 to the Condensed Consolidated Financial Statements for discussion of items impacting income tax expense and the effective tax rate for the ~~third~~first quarters ~~and first nine months~~ of fiscal ~~2021~~2022 and ~~2020, including the Switzerland Federal Act on Tax Reform and AHV Financing and an increase to the valuation allowance for certain non-U.S. deferred tax assets in fiscal 2020.~~2021.

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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

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021


2020


2021


2020




($ in millions)

Automotive

$
1,600

71
%

$
797

63
%

$
4,859

72
%

$
3,567

71
%

Commercial transportation

382

17

233

19

1,095

16

785

16

Sensors

283

12

225

18

822

12

628

13

Total

$
2,265

100
%

$
1,255

100
%

$
6,776

100
%

$
4,980

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 Transportation Solutions segment’s net sales by industry end market:~~

Change in Net Sales for the Quarter Ended June 25, 2021

Change in Net Sales for the Nine Months Ended June 25, 2021

versus Net Sales for the Quarter Ended June 26, 2020

versus Net Sales for the Nine Months Ended June 26, 2020


Net Sales

Organic Net Sales



Net Sales

Organic Net Sales






Growth

Growth

Translation

Growth

Growth

Translation

Acquisition

($ in millions)

Automotive

$
803

100.8
%
$
738

90.2
%
$
65

$
1,292

36.2
%
$
1,083

29.9
%
$
209

$
—

Commercial transportation

149

63.9

136

56.3

13

310

39.5

274

34.3

36

—

Sensors

58

25.8

47

20.3

11

194

30.9

81

12.5

24

89

Total

$
1,010

80.5
%
$
921

71.6
%
$
89

$
1,796

36.1
%
$
1,438

28.4
%
$
269

$
89

Net sales in the Transportation Solutions segment increased $1,010 million, or 80.5%, in the third quarter of fiscal 2021 from the third quarter of fiscal 2020 due primarily to organic net sales growth of 71.6%. In the third quarter of fiscal 2020, our net sales included significant, unfavorable impacts from the COVID-19 pandemic. Our organic net sales by industry end market were as follows:

●

~~Automotive—~~Our organic net sales increased 90.2% in the third quarter of fiscal 2021 with increases of 194.4% in the Americas region, 133.4% in the EMEA region, and 41.7% in the Asia–Pacific region. Our growth across all regions resulted primarily from increases in global automotive production and content gains.

●

~~Commercial transportation—~~~~Our organic net sales increased 56.3% in the third quarter of fiscal 2021 with growth across all regions as a result of market growth and content gains.~~

●

~~Sensors—~~~~Our organic net sales increased 20.3% in the third quarter of fiscal 2021 due primarily to strength in transportation applications.~~

In the first nine months of fiscal 2021, net sales in the Transportation Solutions segment increased $1,796 million, or 36.1%, as compared to the first nine months of fiscal 2020 primarily as a result of organic net sales growth of 28.4%. Net sales in the first nine months of fiscal 2020 included the significant, unfavorable impacts of the COVID-19 pandemic. Our organic net sales by industry end market were as follows:

●

~~Automotive—~~Our organic net sales increased 29.9% in the first nine months of fiscal 2021 with increases of 35.8% in the Americas region, 32.0% in the EMEA region, and 25.4% in the Asia–Pacific region. Our overall

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~~organic net sales growth was attributable primarily to increases in global automotive production and content gains.~~

●

~~Commercial transportation—~~~~Our organic net sales increased 34.3% in the first nine months of fiscal 2021 due to growth across all regions resulting from market growth and content gains.~~

●

~~Sensors—~~~~Our organic net sales increased 12.5% in the first nine months of fiscal 2021 as a result of strength across all markets.~~

~~Operating Income (Loss).~~ ~~The following table presents the Transportation Solutions segment’s operating income (loss) and operating margin information:~~

Operating income (loss) in the Transportation Solutions segment increased $434 million and $1,430 million in the third quarter and first nine months of fiscal 2021, respectively, as compared to the same periods of fiscal 2020. Excluding the items below, operating income (loss) increased primarily as a result of higher volume and, to a lesser degree, improved manufacturing productivity.

For the

For the

Quarters Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,


2021

2020

2021

2020


(in millions)

Acquisition-related charges:









Acquisition and integration costs

$
5

$
6

$
12

$
21

Charges associated with the amortization of acquisition-related fair value adjustments

—

—

3

—

5

6

15

21

Restructuring and other charges, net

2

55

130

77

Impairment of goodwill

—

—

—

900

Total

$
7

$
61

$
145

$
998

~~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								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,				June 26,				June 25,				June 26,				December 24,				December 25,
	2021				2020				2021				2020				2021				2020

	($ in millions)																($ in millions)
Aerospace, defense, oil, and gas	$	260	26	%	$	265	31	%	$	777	27	%	$	892	32	%
Industrial equipment		377	37			265	31			1,011	36			808	30
Medical		178	18			161	19			495	18			526	19
Energy		187	19			174	19			544	19			528	19
Automotive																	$	1,520	70	%	$	1,629	73	%
Commercial transportation																		365	17			331	15
Sensors																		273	13			264	12
Total	$	1,002	100	%	$	865	100	%	$	2,827	100	%	$	2,754	100	%	$	2,158	100	%	$	2,224	100	%

(1)	Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

2924

Table of Contents

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 24, 2021
	versus Net Sales for the Quarter Ended December 25, 2020
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation

	($ in millions)
Automotive	$	(109)	(6.7)	%	$	(91)	(5.6)	%	$	(18)
Commercial transportation		34	10.3			36	10.8			(2)
Sensors		9	3.4			13	4.8			(4)
Total	$	(66)	(3.0)	%	$	(42)	(1.8)	%	$	(24)

Net sales in the Transportation Solutions segment decreased $66 million, or 3.0%, in the first quarter of fiscal 2022 from the first quarter of fiscal 2021 due to organic net sales declines of 1.8% and the negative impact of foreign currency translation of 1.2%. Our organic net sales by industry end market were as follows:

●

Automotive—Our organic net sales decreased 5.6% in the first quarter of fiscal 2022 with declines of 17.4% in the EMEA region and 5.4% in the Americas region, partially offset by growth of 5.6% in the Asia–Pacific region. Our overall net sales decreased due to declines in global automotive production; however, our sales decreased at a lesser rate than automotive production as a result of increased content per vehicle.

●

Commercial transportation—Our organic net sales increased 10.8% in the first quarter of fiscal 2022 primarily as a result of market growth in the EMEA and Americas regions and content gains.

●

Sensors—Our organic net sales increased 4.8% in the first quarter of fiscal 2022 due primarily to growth in industrial applications.

Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:


	For the
	Quarters Ended
	December 24,			December 25,
	2021			2020			Change

	($ in millions)
Operating income	$	395		$	308		$	87
Operating margin		18.3	%		13.8	%

Operating income in the Transportation Solutions segment increased $87 million in the first quarter of fiscal 2022 as compared to the same period of fiscal 2021. Excluding the items below, operating income decreased primarily as a result of higher material costs and lower volume, partially offset by the positive impacts of pricing actions.


	For the
	Quarters Ended
	December 24,		December 25,
	2021		2020

	(in millions)
Acquisition-related charges:
Acquisition and integration costs	$	3	$	4
Charges associated with the amortization of acquisition-related fair value adjustments		—		1
		3		5
Restructuring and other charges, net		(6)		118
Total	$	(3)	$	123

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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 24,				December 25,
	2021				2020

	($ in millions)
Industrial equipment	$	462	44	%	$	295	34	%
Aerospace, defense, oil, and gas		242	22			250	28
Energy		188	18			172	20
Medical		167	16			156	18
Total	$	1,059	100	%	$	873	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 June 25, 2021

Change in Net Sales for the Nine Months Ended June 25, 2021

versus Net Sales for the Quarter Ended June 26, 2020

versus Net Sales for the Nine Months Ended June 26, 2020

Net Sales

Organic Net Sales

Acquisition

Net Sales

Organic Net Sales

Acquisition


Growth (Decline)

Growth (Decline)

Translation

(Divestitures)

Growth (Decline)

Growth (Decline)

Translation

(Divestitures)


($ in millions)

Aerospace, defense, oil, and gas

$
(5)

(1.9)
%
$
(18)

(6.9)
%
$
8

$
5

$
(115)

(12.9)
%
$
(152)

(17.1)
%
$
21

$
16

Industrial equipment

112

42.3

96

35.5

16

—

203

25.1

162

19.6

41

—

Medical

17

10.6

16

9.9

1

—

(31)

(5.9)

(33)

(6.3)

2

—

Energy

13

7.5

15

8.7

8

(10)

16

3.0

15

2.9

20

(19)

Total

$
137

15.8
%
$
109

12.6
%
$
33

$
(5)

$
73

2.7
%
$
(8)

(0.4)
%
$
84

$
(3)


	Change in Net Sales for the Quarter Ended December 24, 2021
	versus Net Sales for the Quarter Ended December 25, 2020
	Net Sales				Organic Net Sales						Acquisitions
	Growth (Decline)				Growth (Decline)				Translation		(Divestitures)

	($ in millions)
Industrial equipment	$	167	56.6	%	$	119	39.7	%	$	(12)	$	60
Aerospace, defense, oil, and gas		(8)	(3.2)			(6)	(2.5)			(3)		1
Energy		16	9.3			29	16.7			(4)		(9)
Medical		11	7.1			12	7.7			(1)		—
Total	$	186	21.3	%	$	154	17.6	%	$	(20)	$	52

In the Industrial Solutions segment, net sales increased ~~$137~~$186 million, or ~~15.8%~~21.3%, in the ~~third~~first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021 ~~as compared to the third quarter of fiscal 2020~~ due ~~primarily~~ to organic net sales growth of ~~12.6%~~17.6% and net sales contributions of 6.0% from acquisitions and divestitures, partially offset by the ~~positive~~negative impact of foreign currency translation of ~~3.8%~~2.3%. ~~Net sales in the third quarter of fiscal 2020 included significant, unfavorable impacts from the COVID-19 pandemic.~~ Our organic net sales by industry end market were as follows:

●

~~Aerospace, defense, oil, and gas—~~~~Our organic net sales decreased 6.9% in the third quarter of fiscal 2021 due primarily to declines in the commercial aerospace market, partially offset by strength in the defense market.~~

●

Industrial equipment—Our organic net sales increased ~~35.5%~~39.7% in the ~~third~~first quarter of fiscal ~~2021~~2022 due to growth in all regions primarily as a result of strength in factory automation and controls applications.

●

~~Medical—~~~~Our organic net sales increased 9.9% in the third quarter of fiscal 2021 primarily as a result of market growth attributable to increases in interventional medical procedures.~~

●

~~Energy—~~~~Our organic net sales increased 8.7% in the third quarter of fiscal 2021 due primarily to growth in the Americas region driven by growth in solar applications.~~

In the first nine months of fiscal 2021, net sales in the Industrial Solutions segment increased $73 million, or 2.7%, as compared to the first nine months of fiscal 2020 primarily as a result of the positive impact of foreign currency translation of 3.1%. In the first nine months of fiscal 2020, our net sales included significant, unfavorable impacts of the COVID-19 pandemic. Our organic net sales by industry end market were as follows:

●

Aerospace, defense, oil, and gas—Our organic net sales decreased ~~17.1%~~2.5% in the first ~~nine months~~quarter of fiscal ~~2021 primarily as a result of~~2022 due to declines in the oil and gas and the defense markets, partially offset by growth in the commercial aerospace ~~market, partially offset by strength in the defense~~ market.

●

~~Industrial equipment—~~Energy—Our organic net sales increased ~~19.6%~~16.7% in the first ~~nine months~~quarter of fiscal ~~2021~~2022 with growth inacross all regions ~~due primarily to~~and continued strength in ~~factory automation and controls~~renewable energy applications.

●

Medical—Our organic net sales ~~decreased 6.3%~~increased 7.7% in the first ~~nine months~~quarter of fiscal ~~2021 due primarily to delays in elective procedures during the first six months of fiscal 2021.~~

●

~~Energy—~~~~Our organic net sales increased 2.9% in the first nine months of fiscal 2021~~2022 primarily as a result of market growth ~~in the Americas region~~ attributable to ~~strength~~increases in ~~solar~~interventional medical applications.

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Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,			June 26,					June 25,			June 26,					December 24,			December 25,
	2021			2020			Change		2021			2020			Change		2021			2020			Change

	($ in millions)																($ in millions)
Operating income	$	148		$	70		$	78	$	335		$	327		$	8	$	123		$	76		$	47
Operating margin		14.8	%		8.1	%				11.9	%		11.9	%				11.6	%		8.7	%

Operating income in the Industrial Solutions segment increased ~~$78 million and $8~~$47 million in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 as compared to the same ~~periods~~period of fiscal ~~2020.~~2021. Excluding the items below, operating income increased ~~in the third quarter of fiscal 2021~~ primarily as a result of higher volume. ~~Excluding the items below, operating income increased slightly in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020.~~


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Acquisition-related charges:
Acquisition and integration costs	$	4	$	2	$	11	$	6	$	4	$	4
Charges associated with the amortization of acquisition-related fair value adjustments										8		—
										12		4
Restructuring and other charges, net		6		40		49		56		10		38
Restructuring-related charges recorded in cost of sales										12		—
Total	$	10	$	42	$	60	$	62	$	34	$	42

Communications Solutions

Net Sales. The following table presents the Communications Solutions segment’s net sales and the percentage of total net sales by industry end market⁽¹⁾:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,				June 26,				June 25,				June 26,				December 24,				December 25,
	2021				2020				2021				2020				2021				2020

	($ in millions)																($ in millions)
Data and devices	$	329	57	%	$	276	64	%	$	841	56	%	$	713	61	%	$	349	58	%	$	234	55	%
Appliances		249	43			152	36			661	44			464	39			252	42			191	45
Total	$	578	100	%	$	428	100	%	$	1,502	100	%	$	1,177	100	%	$	601	100	%	$	425	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 Communications Solutions segment’s net sales by industry end market:

Net sales in the Communications Solutions segment increased $150 million, or 35.0%, in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020 due primarily to organic net sales growth of 30.8%. In the third quarter


	Change in Net Sales for the Quarter Ended December 24, 2021
	versus Net Sales for the Quarter Ended December 25, 2020
	Net Sales				Organic Net Sales
	Growth				Growth				Translation		Acquisition

	($ in millions)
Data and devices	$	115	49.1	%	$	111	47.5	%	$	(1)	$	5
Appliances		61	31.9			61	31.9			—		—
Total	$	176	41.4	%	$	172	40.2	%	$	(1)	$	5

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Net sales in the Communications Solutions segment increased $176 million, or 41.4%, in the first quarter of fiscal ~~2020, our~~2022 as compared to the first quarter of fiscal 2021 due primarily to organic net sales ~~included the unfavorable impacts~~growth of ~~the COVID-19 pandemic.~~40.2%. Our organic net sales by industry end market were as follows:

●

Data and devices—Our organic net sales increased ~~16.1%~~47.5% in the ~~third~~first quarter of fiscal ~~2021~~2022 primarily as a result of market strength ~~in all regions as well as content~~and growth ~~and market share gains~~ in high-speed cloud applications.

●

Appliances—Our organic net sales increased ~~56.9%~~31.9% in the ~~third~~first quarter of fiscal ~~2021~~2022 due to sales growth in all regions attributable primarily to market improvements and ~~market share gains.~~

In the first nine months of fiscal 2021, net sales in the Communications Solutions segment increased $325 million, or 27.6%, as compared to the first nine months of fiscal 2020 primarily as a result of organic net sales growth of 24.1%. Net sales in the first nine months of fiscal 2020 included the unfavorable impacts of the COVID-19 pandemic. Our organic net sales by industry end market were as follows:

●

~~Data and devices~~—Our organic net sales increased 15.0% in the first nine months of fiscal 2021 due primarily to market strength in all regions as well as content growth and market share gains in high-speed cloud applications.

●

~~Appliances—~~~~Our organic net sales increased 37.7% in the first nine months of fiscal 2021 as a result of sales growth in all regions due primarily to market improvements and market~~ share gains.

Operating Income. The following table presents the Communications Solutions segment’s operating income and operating margin information:


	For the								For the								For the
	Quarters Ended								Nine Months Ended								Quarters Ended
	June 25,			June 26,					June 25,			June 26,					December 24,			December 25,
	2021			2020			Change		2021			2020			Change		2021			2020			Change

	($ in millions)																($ in millions)
Operating income	$	133		$	65		$	68	$	300		$	154		$	146	$	154		$	64		$	90
Operating margin		23.0	%		15.2	%				20.0	%		13.1	%				25.6	%		15.1	%

Operating income in the Communications Solutions segment increased ~~$68 million and $146~~$90 million in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021, respectively,~~2022 as compared to the same ~~periods~~period of fiscal ~~2020.~~2021. Excluding the ~~item~~items below, operating income increased due primarily to higher ~~volume and, to a lesser degree, improved manufacturing productivity.~~volume.


	For the				For the				For the
	Quarters Ended				Nine Months Ended				Quarters Ended
	June 25,		June 26,		June 25,		June 26,		December 24,		December 25,
	2021		2020		2021		2020		2021		2020

	(in millions)								(in millions)
Acquisition and integration costs									$	1	$	—
Restructuring and other charges, net	$	3	$	3	$	16	$	11		8		11
Total									$	9	$	11

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 $500 million of 3.50% senior notes due in February 2022.~~future. We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt. 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

~~Table of Contents~~

conditions, including any further developments related to the COVID-19 pandemic. 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 ~~nine months~~quarter of fiscal ~~2021,~~2022, net cash provided by operating activities ~~increased $630~~decreased $108 million to ~~$1,902~~$532 million from ~~$1,272~~$640 million in the first ~~nine months~~quarter of fiscal ~~2020.~~2021. The ~~increase~~decrease resulted primarily from the impact of higher ~~pre-tax income~~incentive compensation payments and increased ~~accounts payable~~inventory levels ~~driven by higher production volumes,~~to meet anticipated customer demand, partially offset by ~~the impact of increased sales on accounts receivable levels.~~higher pre-tax income. The amount of income taxes paid, net of refunds, during the first ~~nine months~~quarters of fiscal 2022 and 2021 ~~and 2020~~ was ~~$291~~$71 million and ~~$195~~$85 million, respectively.

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Cash Flows from Investing Activities

Capital expenditures were ~~$454~~$172 million and ~~$439~~$142 million in the first ~~nine months~~quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. We expect fiscal ~~2021~~2022 capital spending levels to be approximately ~~4-5%~~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 ~~nine months~~quarter of fiscal ~~2021,~~2022, we acquired ~~two businesses~~one business for a ~~combined~~ cash purchase price of $125 million, net of cash acquired. We acquired ~~four businesses, including First Sensor AG,~~one business for a ~~combined~~ cash purchase price of ~~$325~~$106 million, net of cash acquired, during the first ~~nine months~~quarter of fiscal ~~2020.~~2021. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Cash Flows from Financing Activities and Capitalization

Total debt at ~~June 25,~~December 24, 2021 and September ~~25, 2020~~24, 2021 was ~~$4,134~~$4,003 million and ~~$4,146~~$4,092 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.

During the first ~~nine months~~quarter of fiscal ~~2021,~~2022, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, ~~repaid, at maturity, $250 million~~called for the early redemption of ~~4.875% senior notes due in January 2021 and €350 million~~all of ~~fixed-to-floating rate senior notes due in June 2021.~~

~~During the first nine months of fiscal 2021, TEGSA issued €550 million aggregate principal amount of 0.00%~~its outstanding 3.50% senior notes due in February ~~2029.~~2022, representing $500 million aggregate principal amount. The notes ~~are TEGSA’s unsecured senior obligations and rank equally~~were redeemed in ~~right~~November 2021.

As of ~~payment with all existing and any future senior indebtedness~~December 24, 2021, TEGSA had $479 million of commercial paper outstanding at a weighted-average interest rate of 0.25%. TEGSA ~~and senior to any subordinated indebtedness that TEGSA may incur.~~had no commercial paper outstanding at September 24, 2021.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of June 2026 and total commitments of $1.5 billion. The Credit Facility was amended in June 2021 primarily to extend the maturity date from November 2023 to June 2026. The amended Credit Facility contains customary provisions for the replacement of London Interbank Offered Rate (“LIBOR”) with successor rates and amends certain representations, warranties, and covenants applicable to us and TEGSA as obligors under the credit agreement. TEGSA had no borrowings under the Credit Facility at ~~June 25,~~December 24, 2021 or September ~~25, 2020.~~

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) LIBOR or, upon a phase-out of LIBOR, an alternative benchmark rate, (2) an alternate base rate equal to the highest of (i) Bank of America, N.A.’s base rate, (ii) the federal funds effective rate plus ¹/₂ of 1%, and (iii) one-month LIBOR, or an alternative benchmark rate, plus 1%, (3) an alternative currency daily rate, or (4) an alternative currency term rate, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA. TEGSA is required to pay an annual facility fee. Based on the applicable credit ratings of TEGSA, this fee ranges from 5.0 to 12.5 basis points of the lenders’ commitments under the Credit Facility.24, 2021.

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

~~Table of Contents~~

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 ~~June 25,~~December 24, 2021, 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. TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by its parent, TE Connectivity Ltd.

In March 2021, our shareholders approved a dividend payment to shareholders of $2.00 per share, payable in four equal quarterly installments of $0.50 per share beginning in the third quarter of fiscal 2021 and ending in the second quarter of fiscal 2022.

Payments of common share dividends to shareholders were ~~$483~~$163 million and ~~$466~~$159 million in the first ~~nine months~~quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively.

~~During the third quarter of fiscal 2021, our board of directors authorized an increase of $1.5 billion in the share repurchase program.~~ We repurchased approximately 5two million of our common shares for ~~$591~~$246 million and approximately 6one million of our common shares for ~~$505~~$127 million under the share repurchase program during the first ~~nine months~~quarters of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively. At ~~June 25,~~December 24, 2021, we had ~~$1.9~~$1.3 billion of availability remaining under our share repurchase authorization.

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 Ltd. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present

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summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd. and TEGSA on a combined basis.


	June 25,		September 25,		December 24,		September 24,
	2021		2020		2021		2021

	(in millions)				(in millions)
Balance Sheet Data:
Total current assets	$	107	$	134	$	135	$	452
Total noncurrent assets⁽¹⁾		2,533		3,282		3,865		1,829

Total current liabilities		1,225		1,237		815		1,144
Total noncurrent liabilities⁽²⁾		24,024		23,549		14,811		12,443

(1)

Includes ~~$2,517~~$3,835 million and ~~$3,275~~$1,810 million as of ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2)

Includes ~~$20,348~~$11,298 million and ~~$20,016~~$8,832 million as of ~~June 25,~~December 24, 2021 and September ~~25, 2020,~~24, 2021, respectively, of intercompany loans payable to non-guarantor subsidiaries.

For the

Nine Months Ended

Fiscal Year Ended

Quarter Ended

Fiscal Year Ended

June 25,

September 25,

December 24,

September 24,

2021

2020

2021

(in millions)

Statement of Operations Data:

Loss from continuing operations

(295)

(206)

(20)

(485)

Net loss

(288)

(202)

(20)

(479)

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 2022 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.

At December 24, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $132 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $118 million as of December 24, 2021 and are expected to expire at various dates through fiscal 2025. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

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Commitments and Contingencies

Legal Proceedings

Trade Compliance Matters

~~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 2021 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.

At June 25, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $135 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $129 million as of June 25, 2021 and are expected to expire at various dates through fiscal 2025. During the first nine months of fiscal 2021, we amended our agreement with SubCom and removed the requirement to issue new performance guarantees. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

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.

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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 the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September ~~25, 2020.~~24, 2021. There were no significant changes to this information during the first ~~nine months~~quarter of fiscal ~~2021.~~2022.

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.

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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.

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. 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 ~~25, 2020,~~24, 2021, 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;

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●

conditions affecting demand for products in the industries we serve, particularly the automotive industry;

●

risk of future goodwill impairment;

●

competition and pricing pressure;

●

market acceptance of our new product introductions and product innovations and product life cycles;

●

raw material availability, quality, and cost;

●

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 such as the COVID-19 pandemic, 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;

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●

global risks of political, economic, and military instability, including volatile and uncertain economic conditions in China;

●

risks associated with security breaches and other disruptions to our information technology infrastructure;

●

risks related to compliance with current and future environmental and other laws and regulations;

●

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;

●

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;

●

various risks associated with being a Swiss 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposures to market risk during the first ~~nine months~~quarter of fiscal ~~2021.~~2022. 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 ~~25, 2020.~~24, 2021.

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 ~~June 25,~~December 24, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 25,~~December 24, 2021.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~June 25,~~December 24, 2021, 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 ~~25, 2020.~~24, 2021, except as set forth below. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September ~~25, 2020~~24, 2021 for additional information regarding legal proceedings.

During fiscal 2021, we determined that the Silicon Microstructures, Inc. (“SMI”) manufacturing site in Milpitas, California historically miscalculated and inaccurately reported its sulfur hexafluoride (SF₆) emissions prior to our acquisition of SMI. This was the result of using insufficient air emissions control equipment. The site voluntarily disclosed the matter to the applicable state and local authorities in March 2021. We continue to fully cooperate with the authorities to ensure a satisfactory resolution of the matter. We may face monetary sanctions, although we do not anticipate such claims will have a material adverse effect on our results of operations, financial position, or cash flows.

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 ~~25, 2020 except as set forth in “Part II. Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 26, 2021 and as described below.~~24, 2021. The risk factors described in our Annual Report on Form 10-K, ~~and subsequent Quarterly Report on Form 10-Q,~~ in addition to other information set forth ~~below and~~ 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.

~~We have suffered and could continue to suffer significant business interruptions, including impacts resulting from the COVID-19 pandemic.~~

Our operations and those of our suppliers and customers, and the supply chains that support their operations, may be vulnerable to interruption by natural disasters such as earthquakes, tsunamis, typhoons, tornados, or floods; other disasters such as fires, explosions, acts of terrorism or war, or disease or other adverse health developments, including impacts resulting from the COVID-19 pandemic; or failures of management information or other systems due to internal or external causes. In addition, such interruptions could result in a widespread crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our end customers’ products. If a business interruption occurs and we are unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations, financial position, and cash flows could be materially adversely affected. The COVID-19 pandemic impacted and continues to impact countries, communities, workforces, supply chains, and markets around the world, and as a result, we have experienced disruptions and restrictions on our employees’ ability to travel, as well as temporary closures of our facilities and the facilities of our customers, suppliers, and other vendors in our supply chain. As a result of the COVID-19 pandemic, some of our employees have transitioned to working from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks. The COVID-19 pandemic had a significant, negative impact on our sales and operating results during fiscal 2020 and continued to negatively affect certain of our businesses in fiscal 2021. The COVID-19 pandemic may have a negative impact on our financial condition and results of operations in future periods. The extent to which the COVID-19 pandemic will further impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the further spread of the virus to additional persons and geographic regions; the severity of the virus; variant strains of the virus; the duration of the pandemic; resumption of high levels of infections and hospitalizations; the resulting impact on our suppliers’ and customers’ supply chains and financial positions, including their ability to pay us; the actions that may be taken by various governmental authorities in response to the outbreak in jurisdictions in which we operate; and the possible impact on the global economy and local economies in which we operate. Further, to the extent the COVID-19 pandemic adversely affects our business, results of operations, or financial condition, it may also have the effect of heightening many of the other risks described in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 25, 2020 and subsequent quarterly reports on Form 10-Q.

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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 common shares during the quarter ended ~~June 25,~~December 24, 2021:


					Maximum						Maximum
				Total Number of	Approximate					Total Number of	Approximate
				Shares Purchased	Dollar Value					Shares Purchased	Dollar Value
				as Part of	of Shares that May					as Part of	of Shares that May
	Total Number	Average Price		Publicly Announced	Yet Be Purchased		Total Number	Average Price		Publicly Announced	Yet Be Purchased
	of Shares	Paid Per		Plans or	Under the Plans		of Shares	Paid Per		Plans or	Under the Plans
Period	Purchased⁽¹⁾	Share⁽¹⁾		Programs⁽²⁾	or Programs⁽²⁾		Purchased⁽¹⁾	Share⁽¹⁾		Programs⁽²⁾	or Programs⁽²⁾
March 27–April 23, 2021	322,038	$	131.06	321,800	$	643,625,276
April 24–May 28, 2021	836,053		133.90	832,500		532,161,897
May 29–June 25, 2021	946,537		135.25	946,400		1,904,159,643
September 25–October 22, 2021							606,466	$	143.95	605,800	$	1,503,530,133
October 23–November 26, 2021							696,004		157.99	576,000		1,413,296,836
November 27–December 24, 2021							508,700		157.08	437,400		1,344,652,772
Total	2,104,628	$	134.07	2,100,700			1,811,170	$	153.03	1,619,200

(1)	These columns include the following transactions which occurred during the quarter ended ~~June 25,~~December 24, 2021:

(i)

the acquisition of ~~3,928~~191,970 common shares from individuals in order to satisfy tax withholding requirements in connection with the vesting of restricted share awards issued under equity compensation plans; and

(ii)

open market purchases totaling ~~2,100,700~~1,619,200 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007.

(2)

~~During the quarter ended June 25, 2021, our board of directors authorized an increase of $1.5 billion in the share repurchase program.~~ Our share repurchase program authorizes us to purchase a portion of our outstanding common 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.

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ITEM 6. EXHIBITS


Exhibit Number		Exhibit
~~3.1~~		~~Articles of Association of TE Connectivity Ltd., as amended and restated (incorporated by reference to Exhibit 3.1 to TE Connectivity’s Current Report on Form 8-K, filed May 20, 2021)~~
~~10.1~~		First Amendment to Amended and Restated Credit Agreement, dated as of June 1, 2021, by and among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as parent guarantor, the lenders party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to TE Connectivity’s Current Report on Form 8-K, filed June 1, 2021)
~~10.2~~	‡*	~~TE Connectivity Ltd. Employee Stock Purchase Plan (amended and restated as of June 18, 2021)~~
22.1	*	Guaranteed Securities
31.1	*	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	**	Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document⁽¹⁾⁽²⁾
101.SCH		Inline XBRL Taxonomy Extension Schema Document⁽²⁾
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document⁽²⁾
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document⁽²⁾
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document⁽²⁾
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document⁽²⁾
104		Cover Page Interactive Data File⁽³⁾

‡~~Management contract or compensatory plan or arrangement~~

*Filed herewith

**	Furnished herewith

(1)Submitted electronically with this report in accordance with the provisions of Regulation S-T

(2)	The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

(3)	Formatted in Inline XBRL and contained in exhibit 101

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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 LTD.

	By:	/s/ Heath A. Mitts Heath A. Mitts Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: ~~July 29, 2021~~January 28, 2022

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	For the Quarter Ended June 26, 2020
											Accumulated		TE Connectivity
											Other		Ltd.		Non-
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'		controlling		Total
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity		Interests		Equity

	(in millions)
Balance at March 27, 2020	351	$	154	(20)	$	(1,639)	$	—	$	11,122	$	(571)	$	9,066	$	105	$	9,171
Net loss	—		—	—		—		—		(41)		—		(41)		—		(41)
Other comprehensive income	—		—	—		—		—		—		62		62		3		65
Share-based compensation expense	—		—	—		—		17		—		—		17		—		17
Dividends	—		—	—		—		—		2		—		2		—		2
Exercise of share options	—		—	—		2		—		—		—		2		—		2
Restricted share award vestings and other activity	—		—	—		15		(17)		12		—		10		—		10
Repurchase of common shares	—		—	(1)		(82)		—		—		—		(82)		—		(82)
Cancellation of treasury shares	(12)		(5)	12		975		—		(970)		—		—		—		—
Balance at June 26, 2020	339	$	149	(9)	$	(729)	$	—	$	10,125	$	(509)	$	9,036	$	108	$	9,144


	(in millions)
Remainder of fiscal 2021	$	48
Fiscal 2022		194
Fiscal 2023		192
Fiscal 2024		160
Fiscal 2025		145
Fiscal 2026		138
Thereafter		639
Total	$	1,516