What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-28 compared with 2023-04-28 · 140 added, 138 removed, 334 unchanged (45% of the section changed)

11 unchanged sentences

Summary of Performance

● Our net sales increased 3.8% and 2.2% in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022 due to sales growth in the Transportation Solutions and Industrial Solutions segments, partially offset by declines in the Communications Solutions segment.

On an organic basis, our net sales increased 7.6% and 7.7% during the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

● Our net sales decreased 2.4% in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022 due primarily to declines in the Communications Solutions segment, partially offset by sales growth in the Transportation Solutions segment.

In the first nine months of fiscal 2023, our net sales increased 0.6% as compared to the first nine months of fiscal 2022 due to sales growth in the Transportation Solutions and Industrial Solutions segments, partially offset by declines in the Communications Solutions segment.

On an organic basis, our net sales decreased 1.4% and increased 4.6% during the third quarter and first nine months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

● Our net sales by segment were as follows:

● Transportation Solutions —Our net sales increased 7.3% and 6.0% in the second quarter and first six months of fiscal 2023, respectively, due primarily to sales increases in the automotive end market.

● Industrial Solutions —Our net sales increased 11.5% and 6.2% in the second quarter and first six months of fiscal 2023, respectively, as a result of sales increases in the aerospace, defense, and marine, the energy, and the medical end markets, partially offset by declines in the industrial equipment end market.

● Communications Solutions —Our net sales decreased 22.2% and 18.2% in the second quarter and first six months of fiscal 2023, respectively, due to sales declines in the data and devices and the appliances end markets.

● Net cash provided by operating activities was $1,215 million in the first six months of fiscal 2023.

● Transportation Solutions —Our net sales increased 5.8% and 6.0% in the third quarter and first nine months of fiscal 2023, respectively, due primarily to sales increases in the automotive end market.

● Industrial Solutions —Our net sales increased 1.3% and 4.5% in the third quarter and first nine months of fiscal 2023, respectively, as a result of sales increases in the aerospace, defense, and marine, the energy, and the medical end markets, partially offset by declines in the industrial equipment end market.

● Communications Solutions —Our net sales decreased 36.8% and 24.8% in the third quarter and first nine months of fiscal 2023, respectively, due to sales declines in the data and devices and the appliances end markets.

● Net cash provided by operating activities was $1,994 million in the first nine months of fiscal 2023.

Economic Conditions

Our business and operating results have been and will continue to be affected by worldwide economic conditions.

The global economy has been impacted by supply chain disruptions and inflationary cost pressures as well as the military

conflict between Russia and Ukraine and the COVID-19 pandemic in recent years.

The global economy has been impacted in recent years by supply chain disruptions and inflationary cost pressures as well as the military conflict between Russia and Ukraine and the COVID-19 pandemic.

We are monitoring the current environment and its potential effects on our customers and the end markets we serve.

We have experienced inflationary cost pressures including increased costs for transportation, energy, and raw materials.

However, we have been able to partially mitigate increased costs and supply chain disruptions through price increases or productivity.

However, we have been able to mitigate increased costs and supply chain disruptions through price increases or productivity.

We have implemented select price increases for certain products.

2 unchanged sentences

See further discussion in “Liquidity and Capital Resources.”

We are monitoring the continuing military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated sanctions.

We continue to monitor the military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated sanctions.

We sold our business operations in Russia, and our operations in Ukraine have been reduced.

Neither Russia nor Ukraine represents a material portion of our business, and the military conflict did not have a significant impact on our business, financial condition, or results of operations during the first six months of fiscal 2023.

The extent to which the conflict may impact our business in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, and supply chain disruptions.

We will continue to actively monitor the conflict and assess the related sanctions and other effects and may take further actions if necessary.

The COVID-19 pandemic has had a global impact, most recently and significantly in China, and has resulted in business slowdowns or shutdowns.

The COVID-19 pandemic has had a global impact and has resulted in business slowdowns or shutdowns.

While the pandemic has impacted certain aspects of our business, 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 resurgence of the spread of the virus and variant strains of the virus as well as the success of public health advancements.

While certain of our operations in China were impacted in the first six months of fiscal 2023 and were shut down for a period of time in fiscal 2022, we do not expect the COVID-19 pandemic to have a significant impact on our businesses globally in fiscal 2023.

While certain of our operations in China were impacted in the first nine months of fiscal 2023 and were shut down for a period of time in fiscal 2022, we do not expect the COVID-19 pandemic to have a significant impact on our businesses globally in fiscal 2023.

However, it may have a negative impact on our financial condition and results of operations in future periods.

We will continue to actively monitor the COVID-19 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.

In the third quarter of fiscal 2023, we expect our net sales to be approximately $4.0 billion as compared to $4.1 billion in the third quarter of fiscal 2022.

This decrease reflects sales declines in the Communications Solutions segment, partially offset by growth in the Transportation Solutions segment.

We expect diluted earnings per share from continuing operations to be approximately $1.56 per share in the third quarter of fiscal 2023.

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

During the first six months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired.

In the fourth quarter of fiscal 2023, we expect our net sales to be approximately $4.0 billion as compared to $4.4 billion in the fourth quarter of fiscal 2022.

The fourth quarter of fiscal 2022 included an additional week which contributed $306 million in net sales.

We expect diluted earnings per share from continuing operations to be approximately $1.63 per share in the fourth quarter of fiscal 2023.

This outlook reflects the positive impact of foreign currency exchange rates on net sales of approximately $68 million in the fourth quarter of fiscal 2023 as compared to the same period of fiscal 2022.

Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

During the first nine months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired.

The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.

See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

During the first six months of fiscal 2023, we sold two businesses for net cash proceeds of $51 million.

In connection with the divestitures, we recorded pre-tax impairment charges and a net pre-tax gain on sales, which totaled to a net charge of $2 million.

The businesses sold were both reported in our Industrial Solutions segment.

Additionally, during the first six months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

During the first nine months of fiscal 2023, we sold three businesses for net cash proceeds of $48 million.

In connection with the divestitures, we recorded pre-tax impairment charges and a net pre-tax loss on sales, which totaled to a net charge of $12 million.

The businesses sold were reported in our Industrial Solutions segment.

Additionally, during the first nine months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding divestitures.

2 unchanged sentences

Quarters Ended

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($ in millions)

3 unchanged sentences

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

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Change in Net Sales for the Quarter Ended June 30, 2023

Change in Net Sales for the Nine Months Ended June 30, 2023

versus Net Sales for the Quarter Ended June 24, 2022

versus Net Sales for the Nine Months Ended June 24, 2022

Organic Net Sales

10 unchanged sentences

Communications Solutions

Net sales increased $153 million, or 3.8%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022.

The increase in net sales resulted primarily from organic net sales growth of 7.6%, partially offset by the negative impact of foreign currency translation of 3.9% due to the weakening of certain foreign currencies.

In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $166 million.

In the first six months of fiscal 2023, net sales increased $176 million, or 2.2%, as compared to the first six months of fiscal 2022.

Net sales decreased $99 million, or 2.4%, in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022.

The decrease in net sales resulted primarily from organic net sales declines of 1.4% and the negative impact of foreign currency translation of 1.0% due to the weakening of certain foreign currencies.

In the third quarter of fiscal 2023, pricing actions positively affected organic net sales by $173 million.

In the first nine months of fiscal 2023, net sales increased $77 million, or 0.6%, as compared to the first nine months of fiscal 2022.

The increase in net sales resulted primarily from organic net sales growth of 4.6%, partially offset by the negative impact of foreign currency translation of 4.0% due to the weakening of certain foreign currencies.

Pricing actions positively affected organic net sales by $295 million in the first six months of fiscal 2023.

Pricing actions positively affected organic net sales by $468 million in the first nine months of fiscal 2023.

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

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Approximately 60% of our net sales were invoiced in currencies other than the U.S.

dollar in the first six months of fiscal 2023.

dollar in the first nine months of fiscal 2023.

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

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

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

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Change in Net Sales for the Quarter Ended June 30, 2023

Change in Net Sales for the Nine Months Ended June 30, 2023

versus Net Sales for the Quarter Ended June 24, 2022

versus Net Sales for the Nine Months Ended June 24, 2022

Organic Net Sales

4 unchanged sentences

Growth (Decline)

(Divestiture)

3 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

As a percentage of net sales

Gross margin decreased $53 million and $96 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022 due primarily to inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions.

Gross margin decreased $29 million in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022 primarily as a result of lower volume, partially offset by the positive impacts of pricing actions.

In the first nine months of fiscal 2023, gross margin decreased $125 million from the first nine months of fiscal 2022 due primarily to higher material and operating costs, the negative impact of foreign currency translation, and lower volume, partially offset by the positive impact of pricing actions.

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.

2 unchanged sentences

however, we have

been able to initiate pricing actions which have partially offset these impacts.

been able to initiate pricing actions to offset these impacts.

The following table presents the average prices incurred related to copper, gold, silver, and palladium:

Quarters Ended

Six Months Ended

Nine Months Ended

We expect to purchase approximately 185 million pounds of copper, 115,000 troy ounces of gold, 2.4 million troy ounces of silver, and 7,000 troy ounces of palladium in fiscal 2023.

2 unchanged sentences

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($ in millions)

3 unchanged sentences

Selling, General, and Administrative Expenses.

Selling, general, and administrative expenses increased $19 million in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to the impact of cost inflation, partially offset by the positive impact of foreign currency translation.

In the first six months of fiscal 2023, selling, general, and administrative expenses increased $48 million as compared to the first six months of fiscal 2022 due primarily to a gain on the sale of real estate in the first six months of fiscal 2022 and the impact of cost inflation, partially offset by the positive impact of foreign currency translation.

Selling, general, and administrative expenses increased $38 million in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022 due primarily to a gain on the sale of real estate in the third quarter of fiscal 2022.

In the first nine months of fiscal 2023, selling, general, and administrative expenses increased $86 million as compared to the first nine months of fiscal 2022 due primarily to gains on the sale of real estate in the first nine months of fiscal 2022 and the impact of cost inflation, partially offset by the positive impact of foreign currency translation.

Restructuring and Other Charges, Net.

2 unchanged sentences

During fiscal 2023, we initiated a restructuring program associated with cost structure improvements across all segments.

We incurred net restructuring charges of $166 million during the first six months of fiscal 2023.

Annualized cost savings related to the fiscal 2023 actions commenced during the first six months of fiscal 2023 are expected to be approximately $125 million and are expected to be realized by the end of fiscal 2025.

We incurred net restructuring charges of $208 million during the first nine months of fiscal 2023.

Annualized cost savings related to the fiscal 2023 actions commenced during the first nine months of fiscal 2023 are expected to be approximately $150 million and are expected to be realized by the end of fiscal 2025.

Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses.

For fiscal 2023, we expect total restructuring charges to be approximately $250 million and total spending, which will be funded with cash from operations, to be approximately $200 million.

During the first six months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

During the first nine months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

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

2 unchanged sentences

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Nine Months Ended

($ in millions)

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(in millions)

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($ in millions)

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The Organisation for Economic Co-operation and Development (“OECD”) and participating countries continue to work towards the enactment of a 15% global minimum tax.

South Korea and Japan are the first countries to enact the global minimum tax.

European Union members must adopt the global minimum tax by the end of calendar 2023 and many other jurisdictions have also committed to implementing the global minimum tax.

Member states have begun to enact the rules.

The Swiss Parliament recently approved a constitutional amendment to implement the global minimum tax rules, and the amendment was approved by public vote in June 2023.

We anticipate that the Swiss global minimum tax will be effective as of January 1, 2024.

The global minimum tax is a significant structural change to the international taxation framework, which will affect us beginning in fiscal 2025.

9 unchanged sentences

Quarters Ended

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Nine Months Ended

($ in millions)

2 unchanged sentences

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 March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Change in Net Sales for the Quarter Ended June 30, 2023

Change in Net Sales for the Nine Months Ended June 30, 2023

versus Net Sales for the Quarter Ended June 24, 2022

versus Net Sales for the Nine Months Ended June 24, 2022

Organic Net Sales

3 unchanged sentences

Commercial transportation

Net sales in the Transportation Solutions segment increased $169 million, or 7.3%, in the second quarter of fiscal 2023 from the second quarter of fiscal 2022 due to organic net sales growth of 11.9%, partially offset by the negative impact of foreign currency translation of 4.6%.

In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $107 million.

Net sales in the Transportation Solutions segment increased $133 million, or 5.8%, in the third quarter of fiscal 2023 from the third quarter of fiscal 2022 due to organic net sales growth of 7.1%, partially offset by the negative impact of foreign currency translation of 1.3%.

In the third quarter of fiscal 2023, pricing actions positively affected organic net sales by $105 million.

Our organic net sales by industry end market were as follows:

● Automotive— Our organic net sales increased 13.6% in the second quarter of fiscal 2023 with growth of 22.7% in the EMEA region, 11.5% in the Americas region, and 6.2% in the Asia–Pacific region.

Our organic net sales growth across all regions was attributable to increased content per vehicle as well as vehicle production growth, primarily in the EMEA and Americas regions.

● Commercial transportation— Our organic net sales increased 6.5% in the second quarter of fiscal 2023 due to growth in the EMEA and Americas regions, partially offset by declines in the Asia–Pacific region.

● Sensors— Our organic net sales increased 8.8% in the second quarter of fiscal 2023 as a result of growth in transportation and industrial applications.

In the first six months of fiscal 2023, net sales in the Transportation Solutions segment increased $270 million, or 6.0%, as compared to the first six months of fiscal 2022 due to organic net sales growth of 12.8%, partially offset by the

negative impact of foreign currency translation of 6.8%.

In the first six months of fiscal 2023, pricing actions positively affected organic net sales by $198 million.

● Automotive— Our organic net sales increased 8.8% in the third quarter of fiscal 2023 with growth of 14.5% in the Americas region, 12.5% in the EMEA region, and 2.5% in the Asia–Pacific region.

Our organic net sales growth across all regions was attributable primarily to global vehicle production growth.

● Commercial transportation— Our organic net sales increased 2.1% in the third quarter of fiscal 2023 due to growth in the Asia–Pacific and EMEA regions, partially offset by declines in the Americas region.

● Sensors— Our organic net sales increased 4.1% in the third quarter of fiscal 2023 primarily as a result of growth in transportation applications.

In the first nine months of fiscal 2023, net sales in the Transportation Solutions segment increased $403 million, or 6.0%, as compared to the first nine months of fiscal 2022 due to organic net sales growth of 10.8%, partially offset by the negative impact of foreign currency translation of 4.8%.

In the first nine months of fiscal 2023, pricing actions positively affected organic net sales by $303 million.

Our organic net sales by industry end market were as follows:

● Automotive— Our organic net sales increased 16.0% in the first six months of fiscal 2023 with growth of 21.5% in the EMEA region, 14.5% in the Americas region, and 12.1% in the Asia–Pacific region.

Our organic net sales growth across all regions resulted from increased content per vehicle as well as vehicle production growth, primarily in the Americas and EMEA regions.

● Commercial transportation— Our organic net sales increased 4.4% in the first six months of fiscal 2023 as a result of growth in the EMEA and Americas regions, partially offset by declines in the Asia–Pacific region.

● Sensors— Our organic net sales increased 5.6% in the first six months of fiscal 2023 due primarily to growth in transportation applications.

● Automotive— Our organic net sales increased 13.5% in the first nine months of fiscal 2023 with growth of 18.3% in the EMEA region, 14.5% in the Americas region, and 9.0% in the Asia–Pacific region.

net sales growth across all regions resulted from global vehicle production growth as well as increased content per vehicle.

● Commercial transportation— Our organic net sales increased 3.6% in the first nine months of fiscal 2023 as a result of growth in the EMEA and Americas regions, partially offset by declines in the Asia–Pacific region.

● Sensors— Our organic net sales increased 5.1% in the first nine months of fiscal 2023 due primarily to growth in transportation applications.

Operating Income.

1 unchanged sentence

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($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Transportation Solutions segment decreased $76 million and $189 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

Excluding the items below, operating income decreased in the second quarter of fiscal 2023 primarily as a result of inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions.

Excluding the items below, operating income decreased in the first six months of fiscal 2023 primarily as a result of inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions and higher volume.

Operating income in the Transportation Solutions segment increased $42 million in the third quarter of fiscal 2023 and decreased $147 million in the first nine months of fiscal 2023, as compared to the same periods of fiscal 2022.

Excluding the items below, operating income increased in the third quarter and first nine months of fiscal 2023 primarily as a result of the positive impact of pricing actions, partially offset by higher material and operating costs and the negative impact of foreign currency translation.

Quarters Ended

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(in millions)

4 unchanged sentences

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Nine Months Ended

($ in millions)

3 unchanged sentences

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 March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Change in Net Sales for the Quarter Ended June 30, 2023

Change in Net Sales for the Nine Months Ended June 30, 2023

versus Net Sales for the Quarter Ended June 24, 2022

versus Net Sales for the Nine Months Ended June 24, 2022

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestiture)

Growth (Decline)

(Divestiture)

2 unchanged sentences

Aerospace, defense, and marine

In the Industrial Solutions segment, net sales increased $123 million, or 11.5%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to organic net sales growth of 14.6%, partially offset by the negative impact of foreign currency translation of 3.0%.

In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $58 million.

In the Industrial Solutions segment, net sales increased $15 million, or 1.3%, in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022 due primarily to organic net sales growth of 2.2%.

In the third quarter of fiscal 2023, pricing actions positively affected organic net sales by $72 million.

Our organic net sales by industry end market were as follows:

● Industrial equipment— Our organic net sales increased 3.2% in the second quarter of fiscal 2023 due to growth in the EMEA and Asia–Pacific regions, partially offset by declines in the Americas region .

● Aerospace, defense, and marine— Our organic net sales increased 18.6% in the second quarter of fiscal 2023 primarily as a result of growth in the defense and the commercial aerospace markets.

● Energy— Our organic net sales increased 27.7% in the second quarter of fiscal 2023 as a result of growth across all regions and strength in renewable energy applications.

● Medical— Our organic net sales increased 26.3% in the second quarter of fiscal 2023 due to growth in interventional medical applications as well as surgical and imaging applications.

Net sales in the Industrial Solutions segment increased $131 million, or 6.2%, in the first six months of fiscal 2023 as compared to the first six months of fiscal 2022 due primarily to organic net sales growth of 10.7%, partially offset by the

negative impact of foreign currency translation of 4.5%.

In the first six months of fiscal 2023, pricing actions positively affected organic net sales by $92 million.

● Industrial equipment— Our organic net sales decreased 9.8% in the third quarter of fiscal 2023 with declines across all regions due primarily to reduced demand resulting from inventory corrections in the supply chain.

● Aerospace, defense, and marine— Our organic net sales increased 13.2% in the third quarter of fiscal 2023 primarily as a result of growth in the defense and the commercial aerospace markets.

● Energy— Our organic net sales increased 8.0% in the third quarter of fiscal 2023 as a result of growth across all regions and strength in renewable energy applications.

● Medical— Our organic net sales increased 10.8% in the third quarter of fiscal 2023 due primarily to growth in interventional medical applications .

Net sales in the Industrial Solutions segment increased $146 million, or 4.5%, in the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022 due primarily to organic net sales growth of 7.7%, partially offset by the negative impact of foreign currency translation of 3.1%.

In the first nine months of fiscal 2023, pricing actions positively affected organic net sales by $164 million.

Our organic net sales by industry end market were as follows:

● Industrial equipment— Our organic net sales increased 3.2% in the first six months of fiscal 2023 as a result of growth in the EMEA and Asia–Pacific regions, partially offset by declines in the Americas region.

● Aerospace, defense, and marine— Our organic net sales increased 16.3% in the first six months of fiscal 2023 due primarily to growth in the defense and the commercial aerospace markets.

● Energy— Our organic net sales increased 17.6% in the first six months of fiscal 2023 due to growth across all regions and strength in renewable energy applications.

● Medical— Our organic net sales increased 15.2% in the first six months of fiscal 2023 as a result of growth in interventional medical applications as well as surgical and imaging applications.

● Industrial equipment— Our organic net sales decreased 1.2% in the first nine months of fiscal 2023 as a result of declines in the Americas region, partially offset by growth in the EMEA and Asia–Pacific regions.

● Aerospace, defense, and marine— Our organic net sales increased 15.2% in the first nine months of fiscal 2023 due primarily to growth in the defense and the commercial aerospace markets.

● Energy— Our organic net sales increased 14.2% in the first nine months of fiscal 2023 due to growth across all regions and strength in renewable energy applications.

● Medical— Our organic net sales increased 13.6% in the first nine months of fiscal 2023 primarily as a result of growth in interventional medical applications.

Operating Income.

1 unchanged sentence

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($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Industrial Solutions segment decreased $11 million in the second quarter of fiscal 2023 and increased $25 million in the first six months of fiscal 2023, as compared to the same periods of fiscal 2022.

Excluding the items below, operating income increased primarily as a result of the positive impact of pricing actions, partially offset by inflationary pressure on material and operating costs and the negative impact of foreign currency translation.

Operating income in the Industrial Solutions segment decreased $15 million in the third quarter of fiscal 2023 and increased $10 million in the first nine months of fiscal 2023, as compared to the same periods of fiscal 2022.

Excluding the items below, operating income during the third quarter of fiscal 2023 was consistent with third quarter fiscal 2022 levels as lower volume and higher material and operating costs were largely offset by the positive impact of pricing actions.

Excluding the items below, operating income increased during the first nine months of fiscal 2023 primarily as a result of the positive impact of pricing actions, partially offset by higher material and operating costs and the negative impact of foreign currency translation.

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(in millions)

7 unchanged sentences

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($ in millions)

2 unchanged sentences

The following table provides an analysis of the change in the Communications Solutions segment’s net sales by industry end market:

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Change in Net Sales for the Quarter Ended June 30, 2023

Change in Net Sales for the Nine Months Ended June 30, 2023

versus Net Sales for the Quarter Ended June 24, 2022

versus Net Sales for the Nine Months Ended June 24, 2022

Organic Net Sales

2 unchanged sentences

Data and devices

Net sales in the Communications Solutions segment decreased $139 million, or 22.2%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to organic net sales declines of 20.2% and the negative impact of foreign currency translation of 2.7%.

Net sales in the Communications Solutions segment decreased $247 million, or 36.8%, in the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022 due primarily to organic net sales declines of 36.7%.

Our organic net sales by industry end market were as follows:

● Data and devices —Our organic net sales decreased 24.9% in the second quarter of fiscal 2023 as a result of market declines and reduced demand resulting from inventory corrections in the supply chain .

● Appliances —Our organic net sales decreased 12.4% in the second quarter of fiscal 2023 due primarily to market declines across all regions.

In the first six months of fiscal 2023, net sales in the Communications Solutions segment decreased $225 million, or 18.2%, as compared to the first six months of fiscal 2022 due primarily to organic net sales declines of 15.7% and the negative impact of foreign currency translation of 3.6%.

● Data and devices —Our organic net sales decreased 41.2% in the third quarter of fiscal 2023 as a result of market declines and reduced demand resulting from inventory corrections in the supply chain .

● Appliances —Our organic net sales decreased 28.9% in the third quarter of fiscal 2023 due primarily to market declines across all regions.

In the first nine months of fiscal 2023, net sales in the Communications Solutions segment decreased $472 million, or 24.8%, as compared to the first nine months of fiscal 2022 due primarily to organic net sales declines of 23.1% and the negative impact of foreign currency translation of 2.7%.

Our organic net sales by industry end market were as follows:

● Data and devices —Our organic net sales decreased 15.9% in the first six months of fiscal 2023 due to market declines and reduced demand resulting from inventory corrections in the supply chain.

● Appliances —Our organic net sales decreased 15.3% in the first six months of fiscal 2023 primarily as a result of market declines across all regions.

● Data and devices —Our organic net sales decreased 25.1% in the first nine months of fiscal 2023 due to market declines and reduced demand resulting from inventory corrections in the supply chain.

● Appliances —Our organic net sales decreased 19.8% in the first nine months of fiscal 2023 primarily as a result of market declines across all regions.

Operating Income.

1 unchanged sentence

Quarters Ended

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Nine Months Ended

($ in millions)

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Operating margin

Operating income in the Communications Solutions segment decreased $81 million and $174 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

Operating income in the Communications Solutions segment decreased $116 million and $290 million in the third quarter and first nine months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.

Excluding the items below, operating income decreased due primarily to lower volume.

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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Cash Flows from Operating Activities

In the first six months of fiscal 2023, net cash provided by operating activities increased $270 million to $1,215 million from $945 million in the first six months of fiscal 2022.

In the first nine months of fiscal 2023, net cash provided by operating activities increased $470 million to $1,994 million from $1,524 million in the first nine months of fiscal 2022.

The increase resulted primarily from the impact of changes in working capital levels, partially offset by lower pre-tax income.

The amount of income taxes paid, net of refunds, during the first six months of fiscal 2023 and 2022 was $223 million and $177 million, respectively.

The amount of income taxes paid, net of refunds, during the first nine months of fiscal 2023 and 2022 was $354 million and $326 million, respectively.

Cash Flows from Investing Activities

Capital expenditures were $372 million and $351 million in the first six months of fiscal 2023 and 2022, respectively.

Capital expenditures were $538 million and $556 million in the first nine months of fiscal 2023 and 2022, respectively.

We expect fiscal 2023 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 six months of fiscal 2023, we received net cash proceeds of $51 million related to the sale of two businesses.

We received net cash proceeds of $16 million related to the sale of two businesses during the first six months of fiscal 2022.

During the first nine months of fiscal 2023, we received net cash proceeds of $48 million related to the sale of three businesses.

We received net cash proceeds of $16 million related to the sale of two businesses during the first nine months of fiscal 2022.

See Note 2 to the Condensed Consolidated Financial Statements for additional information.

During the first six months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired.

We acquired one business for a cash purchase price of $127 million, net of cash acquired, during the first six

months of fiscal 2022.

During the first nine months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired.

We acquired two businesses for a combined cash purchase price of $141 million, net of cash acquired, during the first nine months of fiscal 2022.

See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Cash Flows from Financing Activities and Capitalization

Total debt at March 31, 2023 and September 30, 2022 was $4,202 million and $4,206 million, respectively.

Total debt at both June 30, 2023 and September 30, 2022 was $4,206 million.

See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.

During the second quarter of fiscal 2023, Tyco Electronics Group S.A.

During the first nine months of fiscal 2023, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, issued $500 million aggregate principal amount of 4.50% senior notes due in February 2026.

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.

During the second quarter of fiscal 2023, TEGSA repaid, at maturity, €550 million of 1.10% senior notes due in March 2023.

As of March 31, 2023, TEGSA had $285 million of commercial paper outstanding at a weighted-average interest rate of 5.5%.

During the first nine months of fiscal 2023, TEGSA repaid, at maturity, €550 million of 1.10% senior notes due in March 2023.

As of June 30, 2023, TEGSA had $288 million of commercial paper outstanding at a weighted-average interest rate of 5.3%.

TEGSA had $370 million of commercial paper outstanding at a weighted-average interest rate of 3.45% at September 30, 2022.

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 March 31, 2023 or September 30, 2022.

TEGSA had no borrowings under the Credit Facility at June 30, 2023 or September 30, 2022.

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.

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None of our covenants are presently considered restrictive to our operations.

As of March 31, 2023, 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.

As of June 30, 2023, 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 $355 million and $326 million in the first six months of fiscal 2023 and 2022, respectively.

Payments of common share dividends to shareholders were $541 million and $506 million in the first nine months of fiscal 2023 and 2022, respectively.

In March 2023, our shareholders approved a dividend payment to shareholders of $2.36 per share, payable in four equal quarterly installments of $0.59 per share beginning in the third quarter of fiscal 2023 and ending in the second quarter of fiscal 2024.

We repurchased approximately four million of our common shares for $432 million and approximately five million of our common shares for $752 million under the share repurchase program during the first six months of fiscal 2023 and 2022, respectively.

At March 31, 2023, we had $1.2 billion of availability remaining under our share repurchase authorization.

We repurchased approximately five million of our common shares for $621 million and approximately eight million of our common shares for $1,072 million under the share repurchase program during the first nine months of fiscal 2023 and 2022, respectively.

At June 30, 2023, we had $1.1 billion of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

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Total noncurrent liabilities (2)

(1) Includes $2,546 million and $2,601 million as of March 31, 2023 and September 30, 2022, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $5,166 million and $12,582 million as of March 31, 2023 and September 30, 2022, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Six Months Ended

(1) Includes $2,999 million and $2,601 million as of June 30, 2023 and September 30, 2022, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $3,511 million and $12,582 million as of June 30, 2023 and September 30, 2022, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Nine Months Ended

Fiscal Year Ended

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We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

At March 31, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $171 million, excluding those related to our former Subsea Communications (“SubCom”) business which are discussed below.

At June 30, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $174 million, excluding those related to our former 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 $58 million as of March 31, 2023 and are expected to expire at various dates through fiscal 2027.

These performance guarantees and letters of credit had a combined value of approximately $58 million as of June 30, 2023 and are expected to expire at various dates through fiscal 2027.

We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees;

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Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

There were no significant changes to this information during the first six months of fiscal 2023.

There were no significant changes to this information during the first nine months of fiscal 2023.

Non-GAAP Financial Measure

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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.

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.

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● 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;

● global risks of political, economic, and military instability, including the continuing military conflict between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries, and volatile and uncertain economic conditions in China;

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis