Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended 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 January 21, 2022 was 325,575,225.
INDEX TO FORM 10-Q
Page
Part I.
Financial Information
Item 1.
Financial Statements
1
Condensed Consolidated Statements of Operations for the Quarters Ended December 24, 2021 and December 25, 2020 (unaudited)
Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended December 24, 2021 and December 25, 2020 (unaudited)
2
Condensed Consolidated Balance Sheets as of December 24, 2021 and September 24, 2021 (unaudited)
3
Condensed Consolidated Statements of Shareholders’ Equity for the Quarters Ended December 24, 2021 and December 25, 2020 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 24, 2021 and December 25, 2020 (unaudited)
5
Notes to Condensed Consolidated Financial Statements (unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
Item 4.
Controls and Procedures
Part II.
Other Information
Legal Proceedings
34
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
35
Signatures
36
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the
Quarters Ended
December 24,
December 25,
2021
2020
(in millions, except per share data)
Net sales
$
3,818
3,522
Cost of sales
2,588
2,376
Gross margin
1,230
1,146
Selling, general, and administrative expenses
363
361
Research, development, and engineering expenses
175
162
Acquisition and integration costs
8
Restructuring and other charges, net
12
167
Operating income
672
448
Interest income
Interest expense
(12)
(15)
Other income (expense), net
15
(1)
Income from continuing operations before income taxes
677
435
Income tax expense
(110)
(60)
Income from continuing operations
567
375
Income (loss) from discontinued operations, net of income taxes
Net income
566
381
Basic earnings per share:
1.73
1.13
Income from discontinued operations
—
0.02
1.15
Diluted earnings per share:
1.72
1.14
Weighted-average number of shares outstanding:
Basic
327
331
Diluted
330
333
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Other comprehensive income:
Currency translation
18
111
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes
Gains on cash flow hedges, net of income taxes
29
Other comprehensive income
23
146
Comprehensive income
589
527
Less: comprehensive (income) loss attributable to noncontrolling interests
(6)
Comprehensive income attributable to TE Connectivity Ltd.
595
521
CONDENSED CONSOLIDATED BALANCE SHEETS
September 24,
(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
192
181
Income taxes
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
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
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Quarter Ended December 24, 2021
Accumulated
Other
Total
Common Shares
Treasury Shares
Contributed
Comprehensive
Shareholders'
Shares
Amount
Surplus
Earnings
Loss
Equity
Balance at September 24, 2021
336
(9)
Share-based compensation expense
32
Exercise of share options
22
Restricted share award vestings and other activity
(32)
10
(17)
Repurchase of common shares
(2)
(246)
Balance at December 24, 2021
(10)
For the Quarter Ended December 25, 2020
Balance at September 25, 2020
339
149
(8)
(669)
10,348
(445)
9,383
140
75
66
(19)
(57)
(127)
Balance at December 25, 2020
(655)
10,672
(305)
9,861
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
(Income) loss from discontinued operations, net of income taxes
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization
198
187
(42)
Non-cash lease cost
31
30
Provision for losses on accounts receivable and inventories
21
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net
(299)
(264)
(145)
52
(87)
349
(285)
88
17
(24)
121
Net cash provided by operating activities
532
640
Cash flows from investing activities:
Capital expenditures
(172)
(142)
Proceeds from sale of property, plant, and equipment
54
Acquisition of businesses, net of cash acquired
(100)
(107)
Proceeds from divestiture of businesses, net of cash retained by businesses sold
16
Net cash used in investing activities
(199)
Cash flows from financing activities:
Net increase in commercial paper
479
Repayment of debt
(555)
(30)
Proceeds from exercise of share options
(304)
(119)
Payment of common share dividends to shareholders
(163)
(159)
(31)
Net cash used in financing activities
(552)
(252)
Effect of currency translation on cash
11
Net increase (decrease) in cash, cash equivalents, and restricted cash
(221)
153
Cash, cash equivalents, and restricted cash at beginning of period
945
Cash, cash equivalents, and restricted cash at end of period
1,098
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 24, 2021.
Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2022 and fiscal 2021 are to our fiscal years ending September 30, 2022 and ended September 24, 2021, respectively.
2. Restructuring and Other Charges, Net
Net restructuring and other charges consisted of the following:
Restructuring charges, net
(Gain) loss on divestitures and impairment of held for sale businesses
Other charges, net
Net restructuring and related charges by segment were as follows:
Transportation Solutions
118
Industrial Solutions
20
Communications Solutions
Plus: charges included in cost of sales(1)
Restructuring and related charges, net
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)
Activity in our restructuring reserves was as follows:
Balance at
Changes in
Cash
Non-Cash
Currency
Charges
Estimate
Payments
Items
Translation
Fiscal 2022 Actions:
Employee severance
14
Property, plant, and equipment and inventories
(18)
Fiscal 2021 Actions:
152
(29)
(5)
119
Facility and other exit costs
Property, plant, and equipment
154
Pre-Fiscal 2021 Actions:
135
(3)
150
128
Total Activity
304
39
(46)
(20)
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. In connection with this program, during the quarters ended December 24, 2021 and December 25, 2020, we recorded restructuring charges of $4 million and $142 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2021 by the end of fiscal 2023 and to incur additional charges of approximately $12 million related to employee severance and facility exit costs.
The following table summarizes expected, incurred, and remaining charges for the fiscal 2021 program by segment:
Cumulative
Remaining
Expected
Incurred
131
125
53
50
27
24
211
199
7
Pre-Fiscal 2021 Actions
During the quarters ended December 24, 2021 and December 25, 2020, we recorded net restructuring credits of $4 million and charges of $7 million, respectively, related to pre-fiscal 2021 actions. We expect additional charges related to pre-fiscal 2021 actions to be insignificant.
Total Restructuring Reserves
Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:
208
236
55
68
Restructuring reserves
3. Acquisitions
During the quarter ended December 24, 2021, we acquired one business for a cash purchase price of $125 million, net of cash acquired. The acquisition was reported as part of our Communications Solutions segment from the date of acquisition.
We acquired one 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.
4. Inventories
Inventories consisted of the following:
Raw materials
423
320
Work in progress
1,134
991
Finished goods
1,288
1,200
5. Goodwill
The changes in the carrying amount of goodwill by segment were as follows:
Transportation
Industrial
Communications
Solutions
September 24, 2021(1)
3,446
Acquisition
78
Purchase price adjustments
(103)
Currency translation and other
(36)
(62)
December 24, 2021(1)
1,529
3,307
667
During the quarter ended 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 prior year acquisitions, including two 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:
December 24, 2021
September 24, 2021
Gross
Net
Carrying
Amortization
Customer relationships
1,766
(680)
1,086
(660)
1,106
Intellectual property
1,262
(852)
410
(832)
430
13
3,047
(1,538)
(1,498)
Intangible asset amortization expense was $48 million for the quarters ended December 24, 2021 and December 25, 2020.
At December 24, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:
Remainder of fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
151
Fiscal 2026
145
Fiscal 2027
124
Thereafter
9
7. Debt
During the quarter ended December 24, 2021, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, called for the early redemption of all of its outstanding 3.50% senior notes due in February 2022, 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 no commercial paper outstanding at September 24, 2021.
The fair value of our debt, based on indicative valuations, was approximately $4,343 million and $4,465 million at December 24, 2021 and September 24, 2021, respectively.
8. Leases
The components of lease cost were as follows:
Operating lease cost
Variable lease cost
Total lease cost
43
41
Cash flow information, including significant non-cash transactions, related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)
Right-of-use assets, including modifications and extensions, obtained in exchange for operating lease liabilities
9. Commitments and Contingencies
In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.
Trade Compliance Matters
We 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.
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 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 $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 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.
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 December 24, 2021 and September 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 5.32% per annum. Upon maturity, 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:
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:
Losses recorded in other comprehensive income (loss)
(4)
Gains (losses) excluded from the hedging relationship(1)
(40)
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 $3,055 million and $3,798 million at December 24, 2021 and September 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 $1,576 million and $1,430 million at December 24, 2021 and September 24, 2021, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 1.67% per annum and pay no 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.
The impacts of our hedge of net investment programs were as follows:
Foreign currency exchange gains (losses) on intercompany loans and external borrowings(1)
Gains (losses) on cross-currency swap contracts designated as hedges of net investment(1)
37
(85)
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 December 24, 2021 and September 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:
38
The impacts of these forward starting interest rate swap contracts were as follows:
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 $545 million and $512 million at December 24, 2021 and September 24, 2021, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:
The impacts of these commodity swap contracts were as follows:
Gains reclassified from accumulated other comprehensive income (loss) into cost of sales
We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with commodity hedges will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.
11. Retirement Plans
The net periodic pension benefit cost (credit) for all non-U.S. and U.S. defined benefit pension plans was as follows:
Non-U.S. Plans
U.S. Plans
Operating expense:
Service cost
Other (income) expense:
Interest cost
Expected return on plan assets
(14)
(13)
Amortization of net actuarial loss
Amortization of prior service credit
Net periodic pension benefit cost (credit)
During the quarter ended December 24, 2021, we contributed $9 million to our non-U.S. pension plans.
12. Income Taxes
We recorded income tax expense of $110 million and $60 million for the quarters ended December 24, 2021 and December 25, 2020, respectively. The income tax expense for the quarter ended December 24, 2021 included 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 income tax audit of 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 during the quarter ended December 24, 2021. The income tax expense for the quarter ended December 25, 2020 included a $29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.
Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.
We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 24, 2021.
13. Earnings Per Share
The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:
Dilutive impact of share-based compensation arrangements
For the quarter ended December 24, 2021, one million share options were not included in the computation of diluted earnings per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive.
14. Shareholders’ Equity
Dividends
We paid cash dividends to shareholders as follows:
Dividends paid per common share
0.50
0.48
Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At December 24, 2021 and September 24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $163 million and $327 million, respectively.
Share Repurchase Program
Common shares repurchased under the share repurchase program were as follows:
Number of common shares repurchased
Repurchase value
246
127
At December 24, 2021, we had $1.3 billion of availability remaining under our share repurchase authorization.
15. Share Plans
Share-based compensation expense, which was included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows:
As of December 24, 2021, there was $214 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.2 years.
During the quarter ended December 24, 2021, we granted the following share-based awards as part of our annual incentive plan grant:
Grant-Date
Fair Value
Share options
0.8
37.67
Restricted share awards
0.3
158.00
Performance share awards
0.1
As of December 24, 2021, we had 11 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
%
Risk-free interest rate
1.1
Expected annual dividend per share
2.00
Expected life of options (in years)
5.1
16. Segment and Geographic Data
Net sales by segment(1) and industry end market(2) were as follows:
Transportation Solutions:
Automotive
1,520
1,629
Commercial transportation
365
Sensors
273
264
Total Transportation Solutions
2,158
2,224
Industrial Solutions:
Industrial equipment
462
295
Aerospace, defense, oil, and gas
242
250
Energy
188
172
Medical
156
Total Industrial Solutions
1,059
873
Communications Solutions:
Data and devices
234
Appliances
252
191
Total Communications Solutions
601
425
Net sales by geographic region(1) and segment were as follows:
Europe/Middle East/Africa (“EMEA”):
771
894
452
358
91
64
Total EMEA
1,314
1,316
Asia–Pacific:
928
876
209
163
254
Total Asia–Pacific
1,470
1,293
Americas:
459
454
398
352
177
107
Total Americas
1,034
913
Operating income by segment was as follows:
395
308
123
76
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.
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 first quarter of fiscal 2022 included the following:
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 negative impact on certain of our businesses in fiscal 2021. The 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.
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.
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 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 second quarter of fiscal 2022, we expect our net sales to be approximately $3.8 billion as compared to $3.7 billion in the second quarter of fiscal 2021. This increase reflects sales growth in the Industrial Solutions and Communications Solutions segments, partially offset by sales declines in the Transportation Solutions segment driven primarily by an approximate 5% decline in global automotive production. We expect diluted earnings per share from continuing operations to be approximately $1.52 per share in the second quarter of fiscal 2022. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $111 million and $0.03 per share, respectively, in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021. This 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 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.”
During the first quarter of fiscal 2022, we acquired one business for a cash purchase price of $125 million, net of cash acquired. The acquisition was reported as part of our Communications Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.
Results of Operations
Net Sales
The following table presents our net sales and the percentage of total net sales by segment:
($ in millions)
56
63
28
25
100
The following table provides an analysis of the change in our net sales by segment:
Change in Net Sales for the Quarter Ended December 24, 2021
versus Net Sales for the Quarter Ended December 25, 2020
Organic Net Sales
Acquisitions
Growth (Decline)
(Divestitures)
(66)
(3.0)
(1.8)
186
21.3
17.6
176
41.4
40.2
296
8.4
284
8.0
(45)
57
Net sales increased $296 million, or 8.4%, in the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021. The increase in net sales resulted from organic net sales growth of 8.0% and net sales contributions of 1.7% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 1.3% due to the weakening of certain foreign currencies. Pricing actions positively affected organic net sales by $52 million in the first quarter of fiscal 2022.
See further discussion of net sales below under “Segment Results.”
Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.
Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2022.
The following table presents our net sales and the percentage of total net sales by geographic region(1):
EMEA
Asia–Pacific
Americas
26
The following table provides an analysis of the change in our net sales by geographic region:
Growth
(0.2)
(44)
13.7
164
12.6
13.3
12.5
Cost of Sales and Gross Margin
The following table presents cost of sales and gross margin information:
Change
212
As a percentage of net sales
67.8
67.5
84
32.2
32.5
Gross margin increased $84 million in the first quarter of fiscal 2022 as compared to the same period of fiscal 2021. The increase was primarily a result of higher volume and, to a lesser degree, the positive impacts of 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 past several quarters, copper, gold, silver, and palladium prices as well as the prices of certain other raw materials have increased from prior year levels. The following table presents the average prices incurred related to copper, gold, silver, and palladium:
Measure
Copper
Lb.
3.80
2.88
Gold
Troy oz.
1,797
1,599
Silver
23.56
19.70
Palladium
2,356
2,137
We expect to purchase approximately 220 million pounds of copper, 125,000 troy ounces of gold, 2.9 million troy ounces of silver, and 15,000 troy ounces of palladium in fiscal 2022.
Operating Expenses
The following table presents operating expense information:
9.5
10.2
(155)
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased slightly in the first quarter of fiscal 2022 from the first quarter of fiscal 2021 due primarily to increased selling expenses to support higher sales levels, largely offset by a 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 2022 and 2021, we initiated restructuring programs associated with footprint consolidation and cost structure improvements across all segments. We incurred net restructuring and related charges of $33 million during the first quarter of fiscal 2022, of which $12 million was recorded in cost of sales. Annualized cost savings related to the fiscal 2022 actions commenced during the first quarter of fiscal 2022 are expected to be approximately $28 million and are expected to be realized by the end of fiscal 2024. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2022, we expect total restructuring charges to be approximately $150 million and total spending, which will be funded with cash from operations, to be approximately $190 million.
See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.
Operating Income
The following table presents operating income and operating margin information:
224
Operating margin
12.7
Operating income included the following:
Acquisition-related charges:
Charges associated with the amortization of acquisition-related fair value adjustments
Restructuring-related charges recorded in cost of sales
40
See discussion of operating income below under “Segment Results.”
Non-Operating Items
The following table presents select non-operating information:
110
60
Effective tax rate
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 first quarters of fiscal 2022 and 2021.
Segment Results
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):
70
73
The following table provides an analysis of the change in the Transportation Solutions segment’s net sales by industry end market:
(109)
(6.7)
(91)
(5.6)
10.3
10.8
3.4
4.8
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:
Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:
87
18.3
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.
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):
44
The following table provides an analysis of the change in the Industrial Solutions segment’s net sales by industry end market:
56.6
39.7
(3.2)
(2.5)
9.3
16.7
7.1
7.7
In the Industrial Solutions segment, net sales increased $186 million, or 21.3%, in the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021 due to organic net sales growth of 17.6% and net sales contributions of 6.0% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 2.3%. Our organic net sales by industry end market were as follows:
Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:
47
11.6
8.7
Operating income in the Industrial Solutions segment increased $47 million in the first quarter of fiscal 2022 as compared to the same period of fiscal 2021. Excluding the items below, operating income increased primarily as a result of higher volume.
42
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):
58
45
The following table provides an analysis of the change in the Communications Solutions segment’s net sales by industry end market:
115
49.1
47.5
61
31.9
Net sales in the Communications Solutions segment increased $176 million, or 41.4%, in the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021 due primarily to organic net sales growth of 40.2%. Our organic net sales by industry end market were as follows:
Operating Income. The following table presents the Communications Solutions segment’s operating income and operating margin information:
90
25.6
15.1
Operating income in the Communications Solutions segment increased $90 million in the first quarter of fiscal 2022 as compared to the same period of fiscal 2021. Excluding the items below, operating income increased due primarily to higher volume.
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. 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 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 quarter of fiscal 2022, net cash provided by operating activities decreased $108 million to $532 million from $640 million in the first quarter of fiscal 2021. The decrease resulted primarily from the impact of higher incentive compensation payments and increased inventory levels to meet anticipated customer demand, partially offset by higher pre-tax income. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2022 and 2021 was $71 million and $85 million, respectively.
Cash Flows from Investing Activities
Capital expenditures were $172 million and $142 million in the first quarters of fiscal 2022 and 2021, respectively. We expect fiscal 2022 capital spending levels to be approximately 5% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.
During the first quarter of fiscal 2022, we acquired one business for a cash purchase price of $125 million, net of cash acquired. We acquired one business for a cash purchase price of $106 million, net of cash acquired, during the first quarter of fiscal 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 December 24, 2021 and September 24, 2021 was $4,003 million and $4,092 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.
During the first quarter of fiscal 2022, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, called for the early redemption of all of its outstanding 3.50% senior notes due in February 2022, representing $500 million aggregate principal amount. The notes were redeemed in November 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. TEGSA had no borrowings under the Credit Facility at December 24, 2021 or September 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 Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 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.
Payments of common share dividends to shareholders were $163 million and $159 million in the first quarters of fiscal 2022 and 2021, respectively.
We repurchased approximately two million of our common shares for $246 million and approximately one million of our common shares for $127 million under the share repurchase program during the first quarters of fiscal 2022 and 2021, respectively. At December 24, 2021, we had $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
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.
Balance Sheet Data:
Total noncurrent assets(1)
3,865
1,829
815
1,144
Total noncurrent liabilities(2)
14,811
12,443
Quarter Ended
Fiscal Year Ended
Statement of Operations Data:
Loss from continuing operations
(485)
Net loss
(479)
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.
Commitments and Contingencies
Critical Accounting Policies and Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.
Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021. There were no significant changes to this information during the first quarter of fiscal 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.
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 24, 2021, and in this report, could cause our results to differ materially from those expressed in forward-looking statements:
There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposures to market risk during the first quarter of fiscal 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 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 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 December 24, 2021.
Changes in Internal Control Over Financial Reporting
During the quarter ended 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.
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 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 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 24, 2021. The risk factors described in our Annual Report on Form 10-K, in addition to other information set forth in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table presents information about our purchases of our common shares during the quarter ended December 24, 2021:
Maximum
Total Number of
Approximate
Shares Purchased
Dollar Value
as Part of
of Shares that May
Total Number
Average Price
Publicly Announced
Yet Be Purchased
of Shares
Paid Per
Plans or
Under the Plans
Period
Purchased(1)
Share(1)
Programs(2)
or Programs(2)
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
1,811,170
153.03
1,619,200
ITEM 6. EXHIBITS
Exhibit Number
Exhibit
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)
*Filed herewith
Furnished herewith
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.
By:
/s/ Heath A. Mitts
Heath A. MittsExecutive Vice President and Chief FinancialOfficer (Principal Financial Officer)
Date: January 28, 2022