01—Abstract
Summary
Summary of the 10-K filed November 15, 2022. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity's fiscal 2022 (53 weeks ended September 30, 2022) was a strong year on the top line and operating line.
Net sales rose 9.1% to $16.3 billiona, with 12.1% organic growth, pricing actions adding $509 million, and an extra week contributing $306 million. Operating income increased 13.2% to $2.76 billion, with operating margin expanding to 16.9% from 16.3%. Net income attributable to the company was $2.43 billion, or $7.47 per diluted share, versus $6.79 a year earlier.
Results were driven by Industrial Solutions (+17.6% sales) and Communications Solutions (+20.8% sales, 23.7% segment margin), while Transportation Solutions grew a more modest 2.7% and faced a 5.4-point currency headwind. Gross margin was 32.2%, slightly down from 32.7%, as inflation and currency offset pricing and volume. Cash generation and capital returns remained substantial but cash from operations declined to $2.47 billionb from $2.68 billion on working capital build.
Capital expenditures were $768 millionc. The company returned about $2.1 billion to shareholders through $685 million in dividends and $1.41 billion in buybacks, and ended the year with $1.7 billion of remaining repurchase authorization. Total debt rose modestly to $4.2 billion.
Management guided fiscal 2023 Q1 sales to about $3.75 billiond and expects currency translation to reduce fiscal 2023 sales by roughly $1 billion. Investors should weigh several risks. The company disclosed voluntary disclosures of apparent U.S. trade-controls violations to the Commerce and State Departments, with the Justice Department also in contact, and fines or penalties remain unestimated.
The valuation allowance on deferred tax assets jumped to $7.1 billion from $2.7 billion, largely due to $4.5 billion of write-downs of investments in subsidiaries, which is a non-cash item but signals structural tax complexity. Roughly 40% of sales depend on the automotive industry, about 21% of sales are to China, and approximately 60% of sales are invoiced in non-dollar currencies without hedging of that revenue exposure.
02—Key points
Key Highlights
- Net sales rose 9.1% to $16.3 billion, with 12.1% organic growth; pricing contributed $509 million and the 53rd week added $306 million.
- Operating income grew 13.2% to $2.76 billion, lifting operating margin to 16.9% from 16.3%.
- Diluted EPS from net income was $7.47 versus $6.79, with net income of $2.43 billion.
- Communications Solutions delivered 20.8% sales growth and a 23.7% operating margin, while Industrial Solutions grew 17.6%; Transportation Solutions grew only 2.7% amid currency headwinds.
- Returned about $2.1 billion to shareholders via $1.41 billion of buybacks and $685 million of dividends; $1.7 billion of repurchase authorization remains.
- Operating cash flow fell to $2.47 billion from $2.68 billion due to working capital; capex rose to $768 million.
- Open U.S. trade-controls investigations (BIS, DDTC, and DOJ contact) carry unquantified fine and penalty exposure; the valuation allowance on deferred tax assets rose to $7.1 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, TE Connectivity plc kept $0.15.
- Revenue$16.28B100.0%
- Cost of revenue−$11.04B67.8%
- Gross profit$5.24B32.2%
- Operating costs−$2.49B15.3%
- Operating income$2.76B16.9%
- Interest, other & tax−$328.0M2.0%
- Net income$2.43B14.9%
Where FY2022 revenue went
$16.28B- Cost of revenue: $11.04B, 68% of revenue
- Net income: $2.43B, 15% of revenue
- R&D: $610.0M, 3.7% of revenue
- SG&A: $1.58B, 9.7% of revenue
- Other operating costs: $294.0M, 1.8% of revenue
- Interest, other & tax: $328.0M, 2.0% of revenue
Kept 15% as net incomeOther operating costs $294.0M · 1.8%Interest, other & tax $328.0M · 2.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 15, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $16.28B$14.92B | +9.1% |
| Cost of Revenue | $11.04B$10.04B | +10.0% |
| Gross Profit | $5.24B$4.89B | +7.3% |
| R&D Expenses | $610.00M$612.00M | −0.3% |
| SG&A Expenses | $1.58B$1.51B | +4.8% |
| Operating Income | $2.76B$2.43B | +13.2% |
| Interest Expense | $66.00M$56.00M | +17.9% |
| Net Income | $2.43B$2.26B | +7.4% |
| EPS (Basic) | $7.52$6.85 | +9.8% |
| EPS (Diluted) | $7.47$6.79 | +10.0% |
| Shares Outstanding (Basic) | 323.00M330.00M | −2.1% |
| Shares Outstanding (Diluted) | 325.00M333.00M | −2.4% |
05—Questions
Frequently Asked Questions
How did TE Connectivity perform in fiscal 2022?
The company grew net sales 9.1% to $16.3 billion and operating income 13.2% to $2.76 billion, with margins expanding to 16.9%. Growth was led by Communications and Industrial Solutions, and pricing actions and the extra fiscal week also contributed, though currency translation reduced sales by $723 million.
What is the outlook for fiscal 2023?
For fiscal Q1 2023, management expects net sales of about $3.75 billion (versus $3.8 billion a year earlier) and diluted EPS from continuing operations of about $1.31. Currency is a headwind of roughly $1 billion to full-year sales and about $0.19 to Q1 EPS. The company expects restructuring charges of about $150 million in fiscal 2023.
What are the most significant legal or regulatory risks?
TE has voluntarily disclosed apparent violations of U.S. trade controls to the Bureau of Industry and Security and the State Department's DDTC, and is cooperating with investigations that remain ongoing. The Justice Department has also made contact. The company has reserved for potential penalties but says it cannot yet reasonably estimate the final amount. Environmental remediation accruals are $20 million against a reasonably possible range of $17 million to $44 million.
How is the company returning capital to shareholders?
In fiscal 2022 TE paid $2.24 per share in dividends (declared in March 2022, paid quarterly), totaling about $685 million in cash, and repurchased about 10 million shares for $1.41 billion. The board increased the repurchase authorization by $1.5 billion, leaving $1.7 billion available at year end. Future dividends require shareholder approval, and Swiss law constrains repurchases and distributions.
What balance sheet and tax issues should investors understand?
Total debt was $4.2 billion at year end, with $914 million due in fiscal 2023 including a €550 million note. The company was in compliance with its covenants, and its $1.5 billion revolver was undrawn. The deferred tax asset valuation allowance grew to $7.1 billion, mainly from $4.5 billion of non-cash write-downs of investments in subsidiaries, and the company's effective tax rate was 11.2%.
06—Continue