01—Abstract
Summary
Summary of the 10-K filed November 9, 2021. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity's fiscal 2021 (ended September 24, 2021) was a strong rebound year.
Net sales rose 22.6% to $14.9 billiona (18.2% organic), with Transportation Solutions up 31.1%, Communications Solutions up 30.4%, and Industrial Solutions up 3.5%. Operating income recovered to $2.43 billion (16.3% margin) from $537 million in fiscal 2020, which had included a $900 million goodwill impairment. Gross margin expanded to 32.7% from 30.7%, and diluted EPS from continuing operations was $6.77 versus a loss of $0.78 a year earlier.
Net cash from continuing operations increased to $2.68 billionb. The effective tax rate fell to 5.2%, helped by a $353 million valuation allowance release. The balance sheet and capital return picture is solid.
Total debt was $4.09 billionc, and the company held $1.2 billion of cash. The board authorized a $1.5 billion increase to the buyback program, with $1.6 billion remaining, and the company repurchased about $904 million of stock. Shareholders approved a $2.00 annual dividend for fiscal 2021–22, and total dividend payments were $647 million.
Management expects fiscal 2022 Q1 net sales of about $3.7 billiond and diluted EPS from continuing operations of roughly $1.50, while backlog rose to $5.8 billion from $3.5 billion. Investors should weigh several items. Automotive exposure is about 43% of total sales, and the filing discloses ongoing U.S. trade-controls investigations (BIS and DDTC) with penalties not yet estimable.
Approximately 22% of sales go to China, and roughly 60% of sales are invoiced in non-U.S. dollar currencies, with no hedging of that revenue exposure. Raw material costs for copper, gold, and silver are rising, and the company is also restructuring its manufacturing footprint with about $211 million in fiscal 2021 program charges.
02—Key points
Key Highlights
- Net sales grew 22.6% to $14.9 billion, with 18.2% organic growth, led by Transportation Solutions (+31.1%) and Communications Solutions (+30.4%).
- Operating income rebounded to $2.43 billion (16.3% margin) from $537 million, which had included a $900 million goodwill impairment in fiscal 2020.
- Diluted EPS from continuing operations was $6.77, compared with a loss of $0.78 in fiscal 2020, aided by a $353 million net valuation allowance benefit that pushed the effective tax rate to 5.2%.
- Net cash from continuing operating activities rose to $2.68 billion, and the company ended the year with $1.2 billion in cash and total debt of $4.09 billion.
- Shareholder returns were significant: $904 million in buybacks, $647 million in dividends, a $2.00 annual dividend rate, and $1.6 billion of remaining repurchase authorization.
- Backlog nearly doubled to $5.8 billion from $3.5 billion, and management guided fiscal 2022 Q1 net sales to about $3.7 billion and diluted EPS to about $1.50.
- Key risks include automotive concentration (43% of sales), about 22% of sales to China, ongoing U.S. trade-controls investigations with undetermined penalties, and about 60% of revenue in non-U.S. dollar currencies that is not hedged.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, TE Connectivity plc kept $0.15.
- Revenue$14.92B100.0%
- Cost of revenue−$10.04B67.3%
- Gross profit$4.89B32.7%
- Operating costs−$2.45B16.4%
- Operating income$2.43B16.3%
- Interest, other & tax−$173.0M1.2%
- Net income$2.26B15.2%
Where FY2021 revenue went
$14.92B- Cost of revenue: $10.04B, 67% of revenue
- Net income: $2.26B, 15% of revenue
- R&D: $612.0M, 4.1% of revenue
- SG&A: $1.51B, 10% of revenue
- Other operating costs: $329.0M, 2.2% of revenue
- Interest, other & tax: $173.0M, 1.2% of revenue
Kept 15% as net incomeOther operating costs $329.0M · 2.2%Interest, other & tax $173.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed November 9, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $14.92B$12.17B | +22.6% |
| Cost of Revenue | $10.04B$8.44B | +19.0% |
| Gross Profit | $4.89B$3.73B | +30.8% |
| R&D Expenses | $612.00M$539.00M | +13.5% |
| SG&A Expenses | $1.51B$1.39B | +8.6% |
| Operating Income | $2.43B$537.00M | +353.3% |
| Interest Expense | $56.00M$48.00M | +16.7% |
| Net Income | $2.26B-$241.00M | +1038.2% |
| EPS (Basic) | $6.85$-0.73 | +1038.4% |
| EPS (Diluted) | $6.79$-0.73 | +1030.1% |
| Shares Outstanding (Basic) | 330.00M332.00M | −0.6% |
| Shares Outstanding (Diluted) | 333.00M332.00M | +0.3% |
05—Questions
Frequently Asked Questions
How did TE Connectivity perform financially in fiscal 2021 compared with fiscal 2020?
Fiscal 2021 net sales rose 22.6% to $14.9 billion, and operating income increased to $2.43 billion from $537 million. Fiscal 2020 had been hurt by COVID-19 and a $900 million goodwill impairment. Diluted EPS from continuing operations swung to $6.77 from a $0.78 loss.
What is driving the sales growth, and which segments performed best?
Transportation Solutions grew 31.1%, led by automotive (+30.1%) and commercial transportation (+39.6%). Communications Solutions grew 30.4%, driven by appliances (+41.5%) and data and devices (+23.1%). Industrial Solutions grew only 3.5%, as industrial equipment strength offset declines in aerospace, defense, oil, and gas.
How strong is the balance sheet and how is the company returning capital?
Total debt was $4.09 billion against $1.2 billion of cash at year-end. The company repurchased about $904 million of shares, paid $647 million in dividends, and holds a $2.00 per share annual dividend rate. The board added $1.5 billion to the buyback authorization, leaving $1.6 billion available.
What are the main risks investors should monitor?
Automotive makes up about 43% of sales, and about 22% of sales go to China. About 60% of revenue is invoiced in non-U.S. dollar currencies and is not hedged. The company is cooperating with U.S. BIS and DDTC investigations into past trade-controls compliance, and fines are not yet estimable. Raw material costs for copper, gold, and silver are also rising.
What is the outlook for fiscal 2022?
Management expects first-quarter fiscal 2022 net sales of about $3.7 billion, up from $3.5 billion a year earlier, and diluted EPS from continuing operations of about $1.50. Automotive sales are expected to decline with lower global production, while industrial equipment, data and devices, and appliances are expected to grow. Restructuring charges of about $150 million are planned for fiscal 2022.
06—Continue