What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-11-13 compared with 2022-11-15 · 142 added, 124 removed, 417 unchanged (39% of the section changed)

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Summary of Fiscal 2023 Performance

● Our fiscal 2022 net sales increased 9.1% from fiscal 2021 levels due to sales increases in the Communications Solutions and Industrial Solutions segments and, to a lesser degree, the Transportation Solutions segment.

● Our fiscal 2023 net sales decreased 1.5% from fiscal 2022 levels due to sales declines in the Communications Solutions segment, partially offset by sales increases in the Transportation Solutions segment and, to a lesser degree, the Industrial Solutions segment.

On an organic basis, our net sales increased 1.0% in fiscal 2023 as compared to fiscal 2022.

● Our net sales by segment were as follows:

● Transportation Solutions —Our net sales increased 2.7% with sales increases in the automotive and commercial transportation end markets, partially offset by sales declines in the sensors end market.

● Industrial Solutions —Our net sales increased 17.6% primarily as a result of sales increases in the industrial equipment end market.

● Communications Solutions —Our net sales increased 20.8% due primarily to sales increases in the data and devices end market.

Fiscal 2022 included an additional week which contributed $306 million in net sales.

● Our net sales by segment were as follows:

● Transportation Solutions —Our net sales increased 4.0% due primarily to sales increases in the automotive end market.

● Industrial Solutions —Our net sales increased 1.4% 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 26.3% due to sales declines in both the data and devices and the appliances end markets.

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

● Net cash provided by continuing operating activities was $2,468 million in fiscal 2022.

● Net cash provided by operating activities was $3,132 million in 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 the COVID-19 pandemic and the military conflict between Russia and Ukraine as well as supply chain disruptions and inflationary cost pressures.

See “Russia-Ukraine Military Conflict” and “COVID-19 Pandemic” for additional information.

Our business operates globally and changes in foreign currency exchange rates may have a significant impact on our results.

Foreign currency translation negatively impacted our net sales by $723 million in fiscal 2022 as compared to fiscal 2021.

We expect translation to continue to have a negative impact on our operating results in fiscal 2023.

We expect translation to negatively impact our net sales by approximately $1 billion in fiscal 2023 as compared to fiscal 2022 as a result of continued strength of the U.S.

dollar against other currencies.

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.

As a result of inflationary pressure, we have implemented price increases for a number of our products.

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

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.

Also, we have taken and continue to focus on actions to manage costs, including restructuring and other cost reduction initiatives such as reducing discretionary spending and travel.

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See further discussion in “Liquidity and Capital Resources.”

Russia-Ukraine Military Conflict

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

We suspended our business operations in Russia, and our operations in Ukraine have been reduced to focus on the safety of our employees.

We have experienced increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine military conflict on the global economy.

The increased costs and

supply chain disruptions resulting from the conflict have not been material to our business, and we have been able to partially mitigate them through price increases or productivity.

Neither Russia nor Ukraine represents a material portion of our business, and the military conflict has not had a significant impact on our business, financial condition, or result of operations during fiscal 2022.

The full impact of the military conflict on our business operations and financial performance remains uncertain.

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.

COVID-19 Pandemic

A novel strain of coronavirus (“COVID-19”) was first identified in China in December 2019 and subsequently declared a pandemic by the World Health Organization.

COVID-19 has surfaced in 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 and continued to impact certain of our operations in China for a period of time in fiscal 2022.

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 globally 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.

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.

While certain of our operations were shut down in China 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 the near term.

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 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.

For further discussion of the risks and uncertainties associated with the COVID-19 pandemic, see “Part I.

Risk Factors.”

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 fiscal 2023 and 2022.

The COVID-19 pandemic had a global impact and resulted in business slowdowns or shutdowns, including systemic disruptions of global supply chains.

While the pandemic 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.

Certain of our operations in China were impacted in early fiscal 2023 and were shut down for a period of time in fiscal 2022;

however, we do not expect the pandemic to have a significant impact on our businesses globally in the near term.

In the first quarter of fiscal 2024, we expect our net sales to be approximately $3.85 billion as compared to $3.84 billion in the first quarter of fiscal 2023.

Net sales increases in the Transportation Solutions and Industrial Solutions segments are expected to be largely offset by sales declines in the Communications Solutions segment.

We expect diluted earnings per share from continuing operations to be approximately $1.59 per share in the first quarter of fiscal 2024.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $400 million and $0.19 per share, respectively, in the first quarter of fiscal 2023 as compared to the same period of fiscal 2022.

This outlook reflects the impact of foreign currency exchange rates which is a positive impact of approximately $17 million on net sales and a negative impact of approximately $0.02 per share on earnings per share in the first quarter of fiscal 2024 as compared to the same period of fiscal 2023.

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

During fiscal 2022, we acquired three businesses for a combined cash purchase price of $245 million, net of cash acquired.

During fiscal 2023, we acquired one business for a cash purchase price of $110 million, net of cash acquired.

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

We acquired three businesses for a combined cash purchase price of $245 million, net of cash acquired, during fiscal 2022.

The acquisitions were reported as part of our Communications Solutions segment from the date of acquisition.

We acquired four businesses for a combined cash purchase price of $422 million, net of cash acquired, during fiscal 2021.

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

See Note 4 to the Consolidated Financial Statements for additional information regarding acquisitions.

Pending Acquisition

In August 2023, we entered into a definitive agreement under which we agreed to launch a public tender offer to acquire all outstanding shares of Schaffner Holding AG (“Schaffner”), a leader in electromagnetic solutions based in Switzerland, for CHF 505.00 per share in cash for a fair value of approximately CHF 320 million (equivalent to approximately $350 million).

The tender offer commenced in September 2023.

As of November 10, 2023, the completion of the initial offer period, the offer has been accepted for approximately 89% of Schaffner’s outstanding shares.

The offer is subject to customary closing conditions, including regulatory approvals, and is expected to be settled in the first quarter of fiscal 2024.

During 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 $9 million.

The businesses sold were reported in our Industrial Solutions segment.

Additionally, during fiscal 2023, we recorded a pre-tax impairment charge of $68 million in connection with a held for sale business in our Transportation Solutions segment.

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

Results of Operations

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Organic Net Sales

(Divestitures)

Growth (Decline)

(Divestiture)

($ in millions)

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Communications Solutions

Net sales increased $1,358 million, or 9.1%, in fiscal 2022 as compared to fiscal 2021.

The increase in net sales resulted from organic net sales growth of 12.1% and net sales contributions of 1.9% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 4.9% due to the weakening of certain foreign currencies.

Net sales decreased $247 million, or 1.5%, in fiscal 2023 as compared to fiscal 2022.

The decrease in net sales resulted primarily from the negative impact of foreign currency translation of 2.6% due to the weakening of certain foreign currencies, partially offset by organic net sales growth of 1.0%.

In fiscal 2023, pricing actions positively affected organic net sales by $607 million.

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Net Sales by Geographic Region.

Our business operates in three geographic regions—Asia–Pacific, EMEA, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates.

Our business operates in three geographic regions—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.

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Organic Net Sales

(Divestitures)

Growth (Decline)

(Divestiture)

($ in millions)

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(1) Fiscal 2022 included an additional week.

In fiscal 2022, gross margin increased $357 million as compared to fiscal 2021 primarily as a result of higher volume and the positive impact of pricing actions, partially offset by inflationary pressure on material and operating costs and the negative impact of foreign currency translation.

In fiscal 2023, gross margin decreased $189 million as compared to fiscal 2022 due primarily to higher material and operating costs, lower volume, and the negative impact of foreign currency translation, 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.

In recent years, raw material prices and availability have been affected by worldwide economic conditions, including the impacts of the COVID-19 pandemic, supply chain disruptions, and inflationary cost pressures.

As a result, we have experienced shortages and price increases in some of our input materials—including copper, gold, silver, and palladium—however, we have been able to initiate pricing actions which have partially offset these impacts.

In recent years, raw material prices and availability have been affected by worldwide economic conditions, including supply chain disruptions and inflationary cost pressures.

As a result, we have experienced shortages and price increases in some of our input materials—including certain metals—however, we have 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:

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Selling, General, and Administrative Expenses.

In fiscal 2022, selling, general, and administrative expenses increased $72 million as compared to fiscal 2021 due primarily to increased selling expenses to support higher sales levels, the impact of inflation, and incremental expenses attributable to recent acquisitions, partially offset by the positive impact of foreign currency translation.

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

Restructuring and Other Charges, Net.

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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 $153 million, of which $16 million was recorded in cost of sales, in fiscal 2022 and $208 million in fiscal 2021.

Annualized cost savings related to actions initiated in fiscal 2022 are expected to be approximately $120 million and are expected to be realized by the end of fiscal 2025.

During fiscal 2023 and 2022, we initiated restructuring programs associated with cost structure improvements across all segments.

We incurred net restructuring charges of $260 million in fiscal 2023 and net restructuring and related charges of $153 million, of which $16 million was recorded in cost of sales, in fiscal 2022.

Annualized cost savings related to actions initiated in fiscal 2023 are expected to be approximately $200 million and are expected to be fully realized by the end of fiscal 2026.

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

For fiscal 2024, we expect total restructuring charges to be approximately $100 million and total spending, which will be funded with cash from operations, to be approximately $175 million.

During fiscal 2023 and 2022, we recorded net charges of $77 million and $4 million, respectively, related to pre-tax impairment of held for sale businesses and loss (gain) on divestitures.

See Note 3 to the Consolidated Financial Statements for additional information regarding net restructuring and other charges.

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($ in millions)

Interest income

Interest expense

Other income (expense), net

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Effective tax rate

Interest Income and Expense.

Interest income increased $45 million in fiscal 2023 from fiscal 2022 due to higher interest rates as well as an increase in our cash balances held and invested.

In fiscal 2023, interest expense increased $14 million as compared to fiscal 2022 primarily as a result of a higher average cost of debt due to rising interest rates, partially offset by the expansion of our cross-currency swap program that hedges our net investment in certain foreign operations.

The aggregate notional value of the contracts under this program was $3,806 million at fiscal year end 2023.

Under the terms of these contracts, we receive interest in U.S.

dollars at a weighted-average rate of 1.6% per annum and pay no interest.

See Note 13 to the Consolidated Financial Statements for additional information regarding our cross-currency swap program.

Other Income (Expense).

We recorded net periodic pension benefit credit of $25 million and cost of $12 million in net other income (expense) in fiscal 2022 and 2021, respectively.

We recorded net periodic pension benefit cost of $16 million and credit of $25 million in net other income (expense) in fiscal 2023 and 2022, respectively.

See Note 14 to the Consolidated Financial Statements for additional information regarding our retirement plans.

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See Note 15 to the Consolidated Financial Statements for discussion of items impacting income tax expense and the effective tax rate.

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

Member states have begun to enact the rules.

Swiss Parliament recently approved a constitutional amendment to implement the 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 is expected to affect us beginning in fiscal 2025.

Although global enactment has begun, the OECD and participating countries continue to work on defining the underlying rules and administrative procedures.

We are currently monitoring these developments and evaluating the impact, which could be material to our results of operations, cash taxes, and worldwide corporate effective tax rate.

The valuation allowance for deferred tax assets was $7,416 million and $7,112 million at fiscal year end 2023 and 2022, respectively.

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Segment Results

Effective for fiscal 2023, we realigned certain product lines from the Industrial Solutions segment to the Communications Solutions segment.

Prior period segment results have been restated to conform to the current segment reporting structure.

See Note 20 to the Consolidated Financial Statements for additional information regarding our segments.

Transportation Solutions

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Growth (Decline)

($ in millions)

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Net sales in the Transportation Solutions segment increased $369 million, or 4.0%, in fiscal 2023 from fiscal 2022 as a result of organic net sales growth of 7.2%, partially offset by the negative impact of foreign currency translation of 3.2%.

Fiscal 2022 included an additional week which contributed $180 million in net sales.

In fiscal 2023, pricing actions positively affected organic net sales by $375 million.

Fiscal 2022 included an additional week which contributed $180 million in net sales.

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

● Automotive —Our organic net sales increased 8.1% in fiscal 2022 with increases of 9.8% in the Americas region, 9.7% in the Asia–Pacific region, and 5.7% in the EMEA region.

Our organic net sales growth across all regions was attributable primarily to increased content per vehicle.

Global automotive production was consistent with fiscal 2021 levels.

● Commercial transportation —Our organic net sales increased 12.1% in fiscal 2022 due primarily to growth in the Americas and EMEA regions driven by content and share gains.

● Sensors —Our organic net sales increased 3.0% in fiscal 2022 as a result of growth in industrial applications, partially offset by declines in transportation applications.

● Automotive —Our organic net sales increased 10.2% in fiscal 2023 with increases of 13.5% in the EMEA region, 11.9% in the Americas region, and 6.5% in the Asia–Pacific region.

Our organic 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 decreased 1.1% in fiscal 2023 due to d eclines in the Asia–Pacific and Americas regions, partially offset by growth in the EMEA region .

● Sensors —Our organic net sales increased 1.8% in fiscal 2023 due to growth in transportation applications, partially offset by declines in industrial applications .

Operating Income.

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(1) Fiscal 2022 included an additional week.

Operating income in the Transportation Solutions segment increased $8 million in fiscal 2022 as compared to fiscal 2021.

Excluding the items below, operating income decreased in fiscal 2022 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 decreased $83 million in fiscal 2023 as compared to fiscal 2022.

Excluding the items below, operating income increased in 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.

(in millions)

Acquisition-related charges:

Acquisition and integration costs

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

Restructuring and other charges, net

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Organic Net Sales

(Divestitures)

Growth (Decline)

(Divestiture)

($ in millions)

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Aerospace, defense, and marine

In the Industrial Solutions segment, net sales increased $676 million, or 17.6%, in fiscal 2022 from fiscal 2021 due to organic net sales growth of 16.6% and net sales contributions of 5.9% from acquisitions and divestitures, partially offset by the negative impact of foreign currency translation of 4.9%.

Fiscal 2022 included an additional week which contributed $84 million in net sales.

In the Industrial Solutions segment, net sales increased $61 million, or 1.4%, in fiscal 2023 from fiscal 2022 due primarily to organic net sales growth of 3.4%, partially offset by the negative impact of foreign currency translation of 1.7%.

In fiscal 2023, pricing actions positively affected organic net sales by $242 million.

Fiscal 2022 included an additional week which contributed $84 million in net sales.

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

● Industrial equipment —Our organic net sales increased 28.5% in fiscal 2022 as a result of growth in all regions and continued strength in factory automation and controls applications .

● Aerospace, defense, and marine —Our organic net sales increased 8.7% in fiscal 2022 due primarily to growth in the commercial aerospace market and, to a lesser degree, the defense market .

● Energy —Our organic net sales increased 16.0% in fiscal 2022 due to growth across all regions and continued strength in renewable energy applications .

● Medical —Our organic net sales increased 4.2% in fiscal 2022 as a result of market growth in surgical and imaging as well as interventional medical applications .

● Industrial equipment —Our organic net sales decreased 8.1% in fiscal 2023 as a result of declines across all regions with reduced demand resulting from inventory corrections in the supply chain .

● Aerospace, defense, and marine —Our organic net sales increased 12.8% in fiscal 2023 due primarily to growth in the defense market and, to a lesser degree, the commercial aerospace market .

● Energy —Our organic net sales increased 9.6% in fiscal 2023 due to growth across all regions and strength in renewable energy applications .

● Medical —Our organic net sales increased 13.1% in fiscal 2023 primarily as a result of growth in interventional medical applications .

Operating Income.

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(1) Fiscal 2022 included an additional week.

Operating income in the Industrial Solutions segment increased $151 million in fiscal 2022 from fiscal 2021.

Excluding the items below, operating income increased in fiscal 2022 primarily as a result of higher volume and the positive impact of pricing actions, partially offset by inflationary pressure on material and operating costs.

Operating income in the Industrial Solutions segment decreased $5 million in fiscal 2023 from fiscal 2022.

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

(in millions)

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Data and devices

Net sales in the Communications Solutions segment increased $437 million, or 20.8%, in fiscal 2022 as compared to fiscal 2021 due primarily to organic net sales growth of 20.8%.

Net sales in the Communications Solutions segment decreased $677 million, or 26.3%, in fiscal 2023 as compared to fiscal 2022 due primarily to organic net sales declines of 25.2%.

Fiscal 2022 included an additional week which contributed $42 million in net sales.

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

● Data and devices —Our organic net sales increased 29.6% in fiscal 2022 as a result of market strength in all regions and content and share gains .

● Appliances —Our organic net sales increased 9.2% in fiscal 2022 due to sales growth in the Americas and EMEA regions resulting primarily from share gains, partially offset by declines in the Asia–Pacific region .

● Data and devices —Our organic net sales decreased 27.2% in fiscal 2023 due to reduced demand resulting from inventory corrections in the supply chain and market declines .

● Appliances —Our organic net sales decreased 21.8% in fiscal 2023 as a result of reduced demand resulting from inventory corrections in the supply chain and market declines across all regions, partially offset by share gains .

Operating Income.

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(1) Fiscal 2022 included an additional week.

In the Communications Solutions segment, operating income increased $163 million in fiscal 2022 as compared to fiscal 2021.

Excluding the items below, operating income increased due primarily to higher volume, partially offset by inflationary pressure on material and operating costs.

In the Communications Solutions segment, operating income decreased $364 million in fiscal 2023 as compared to fiscal 2022.

Excluding the items below, operating income decreased in fiscal 2023 due primarily to lower volume.

(in millions)

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Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements.

We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of €550 million of 1.10% senior notes due in March 2023.

We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the pending acquisition of Schaffner and payment of $350 million of 3.45% senior notes due in August 2024.

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.

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Cash Flows from Operating Activities

Net cash provided by continuing operating activities decreased $208 million to $2,468 million in fiscal 2022 as compared to $2,676 million in fiscal 2021.

The decrease resulted primarily from the impact of increased working capital

levels, partially offset by higher pre-tax income.

Net cash provided by operating activities increased $664 million to $3,132 million in fiscal 2023 as compared to $2,468 million in 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 fiscal 2023 and 2022 was $425 million and $421 million, respectively.

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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 fiscal 2022, we acquired three businesses for a combined cash purchase price of $245 million, net of cash acquired.

We acquired four businesses for a combined cash purchase price of $422 million, net of cash acquired, during fiscal 2021.

During fiscal 2023, we acquired one business for a cash purchase price of $110 million, net of cash acquired.

We acquired three businesses for a combined cash purchase price of $245 million, net of cash acquired, during fiscal 2022.

See Note 4 to the Consolidated Financial Statements for additional information regarding acquisitions.

During 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 fiscal 2022.

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

Cash Flows from Financing Activities and Capitalization

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At fiscal year end 2023, TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 5.50%.

TEGSA had no commercial paper outstanding at fiscal year end 2021.

TEGSA had $370 million of commercial paper outstanding at a weighted-average interest rate of 3.45% at fiscal year end 2022.

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.

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In exercising their discretion to recommend to the shareholders that such dividends be approved, our board of directors will consider our results of operations, cash requirements and surplus, financial condition, statutory requirements of applicable law, contractual restrictions, and other factors that they may deem relevant.

In fiscal 2022, our board of directors authorized an increase of $1.5 billion in our share repurchase program.

We repurchased approximately ten million of our common shares for $1,409 million and approximately seven million of our common shares for $904 million under the share repurchase program during fiscal 2022 and 2021, respectively.

At fiscal year end 2022, we had $1.7 billion of availability remaining under our share repurchase authorization.

We repurchased approximately 8 million of our common shares for $946 million and approximately 10 million of our common shares for $1,409 million under the share repurchase program during fiscal 2023 and 2022, respectively.

At fiscal year end 2023, we had $735 million of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

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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.

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.

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 fiscal year end 2022, we had outstanding letters of credit, letters of guarantee, and surety bonds of $127 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 $115 million as of fiscal year end 2022 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;

however, based on historical experience, we do not anticipate having to perform.

At fiscal year end 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $198 million, including letters of credit of $29 million associated with our divesture of the Subsea Communications business.

In addition, at fiscal year end 2023, we had $27 million of performance guarantees associated with that divestiture.

We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale;

however, based on historical experience, we do not anticipate having to perform on these guarantees.

Commitments and Contingencies

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See Note 14 to the Consolidated Financial Statements for additional information regarding these plans and our estimates of future contributions and benefit payments.

(7) The above table does not reflect redeemable noncontrolling interests of $104 million associated with our First Sensor AG (“First Sensor”) subsidiary.

Noncontrolling interest holders can elect either (1) to remain First Sensor noncontrolling interest shareholders and receive recurring annual compensation of €0.56 per First Sensor share or (2) to put their First Sensor shares in exchange for compensation of €33.27 per First Sensor share.

The ultimate amount and timing of any future cash payments is uncertain.

See Note 17 to the Consolidated Financial Statements for additional information regarding redeemable noncontrolling interests .

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax.

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.

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State Department’s Directorate of Defense Trade Controls (“DDTC”).

We are cooperating with the BIS and DDTC on these matters, and the resulting investigations by the agencies remain ongoing.

We are cooperating with the BIS and DDTC on these matters, and the resulting investigations are ongoing.

We have also been contacted by the U.S.

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Since our performance obligations to deliver products are part of contracts that generally have original durations of one year or less, we have elected to use the optional exemption to not disclose the aggregate amount of transaction prices associated with unsatisfied or partially satisfied performance obligations.

We generally warrant that our products will conform to our, or mutually agreed to, specifications and that our products will be free from material defects in materials and workmanship for a limited time.

We limit our warranty to the replacement or repair of defective parts, or a refund or credit of the price of the defective product.

We do not account for these warranties as separate performance obligations.

Our standard terms of sale generally warrant that our products will conform to our, or mutually agreed to, specifications and that our products will be free from material defects in materials and workmanship for a limited time.

In certain instances, we may sell products to customers under terms other than our standard terms.

We do not account for warranties as separate performance obligations.

Although products are generally sold at fixed prices, certain distributors and customers receive incentives or awards, such as sales rebates, return allowances, scrap allowances, and other rights, which are accounted for as variable consideration.

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Intangible assets include both indeterminable-lived residual goodwill and determinable-lived identifiable intangible assets.

Intangible assets with determinable lives primarily include intellectual property, consisting of patents, trademarks, and

unpatented technology, and customer relationships.

Intangible assets with determinable lives primarily include intellectual property, consisting of patents, trademarks, and unpatented technology, and customer relationships.

Recoverability estimates range from 1 to 50 years and costs are generally amortized on a straight-line basis.

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Any reduction in future taxable income including any future restructuring activities may require that we record an additional valuation allowance against our deferred tax assets.

An increase in the valuation allowance would result in additional income tax expense in such period and could have a significant impact on our future earnings.

An increase in the

valuation allowance would result in additional income tax expense in such period and could have a significant impact on our future earnings.

Changes in tax laws and rates also could affect recorded deferred tax assets and liabilities in the future.

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Based on the funded status of the plans as of fiscal year end 2023, our target asset allocation is 67% return-seeking and 33% liability-hedging.

Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements for information regarding recently issued accounting pronouncements.

Accounting Pronouncement

See Note 2 to the Consolidated Financial Statements for information regarding a recently issued accounting pronouncement.

Non-GAAP Financial Measure

Organic Net Sales Growth

We present organic net sales growth 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 represents net sales growth (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 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 provides useful information about our results and the trends of our business.

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.

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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 to net sales growth calculated in accordance with GAAP.

Organic net sales growth is a non-GAAP financial measure and should not be considered a replacement for results 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.

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 in combination with net sales growth to better understand the amounts, character, and impact of any increase or decrease in reported amounts.

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

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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 also include statements addressing our environmental, social, governance, and sustainability plans and goals.

Forward-looking statements also include statements addressing our ESG, and sustainability plans and goals.

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,” “aspire,” “estimate,” “predict,” “potential,” “goal,” “target,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.

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● risk of future goodwill impairment;

● competition and pricing pressure;

● pricing pressure and competition, including competitive risks associated with the pace of technological change;

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

● raw material availability, quality, and cost;

● product liability, warranty, and product recall claims and our ability to defend such claims;

● fluctuations in foreign currency exchange rates and impacts of offsetting hedges;

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● risks associated with current and future acquisitions and divestitures;

● global risks of business interruptions due to natural disasters or other disasters such as the COVID-19 pandemic, which have impacted and could continue to negatively impact our results of operations as well as customer behaviors, business, and manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business;

● 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;

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

● global risks of business interruptions due to natural disasters or other disasters 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;

● risks associated with cybersecurity incidents and other disruptions to our information technology infrastructure;

● risks related to compliance with current and future environmental and other laws and regulations, including those related to climate change;

● risks related to the increasing scrutiny and expectations regarding ESG matters;

● risks associated with compliance with applicable antitrust or competition laws or applicable trade regulations;

● our ability to protect our intellectual property rights;

● risks of litigation;

● risks of litigation, regulatory actions, and compliance issues;

● our ability to operate within the limitations imposed by our debt instruments;

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government contracts business;

● requirements related to chemical usage, hazardous material content, recycling, and other circular economy initiatives;

● various risks associated with being a Swiss corporation;

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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-K

Item 7. Management’s Discussion and Analysis