What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-01-26 compared with 2023-07-28 · 122 added, 201 removed, 273 unchanged (54% of the section changed)

9 unchanged sentences

(“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future.

Our broad range of connectivity and sensor solutions, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.

Our broad range of connectivity and sensor solutions enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more.

Summary of Performance

● 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 were essentially flat in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 with declines in the Communications Solutions and Industrial Solutions segments offset by sales growth in the Transportation Solutions segment.

On an organic basis, our net sales decreased 0.7% during the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

● Our net sales by segment were as follows:

● 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.

● Transportation Solutions —Our net sales increased 5.0% in the first quarter of fiscal 2024 due primarily to sales increases in the automotive end market.

● Industrial Solutions —Our net sales decreased 3.3% in the first quarter of fiscal 2024 as a result of sales declines in the industrial equipment end market, partially offset by sales increases in the medical;

the aerospace, defense, and marine;

and the energy end markets.

● Communications Solutions —Our net sales decreased 17.0% in the first quarter of fiscal 2024 due to sales declines in both the data and devices and the appliances end markets.

● Net cash provided by operating activities was $719 million in the first quarter of fiscal 2024.

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 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.

The global economy has been impacted in recent years by supply chain disruptions and inflationary cost pressures as well as military conflict in certain parts of the world 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 mitigate increased costs and supply chain disruptions through price increases or productivity.

We have implemented select price increases for certain products.

In recent years, 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 productivity or price increases which were initiated in prior years.

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.

1 unchanged sentence

See further discussion in “Liquidity and Capital Resources.”

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 nine 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 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 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 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.

We continue to monitor military conflict in certain parts of the world as well as escalating tensions in surrounding countries and associated sanctions.

These did not have a significant impact on our business, financial condition, or results of operations during fiscal 2023 or the first quarter of fiscal 2024.

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

The pandemic impacted certain aspects of our business, including certain of our operations in China in early fiscal 2023;

however, we do not expect the pandemic to have a significant impact on our businesses globally in fiscal 2024.

In the second quarter of fiscal 2024, we expect our net sales to be approximately $3.95 billion as compared to $4.16 billion in the second quarter of fiscal 2023, with sales declines in all segments.

As compared to the first quarter of fiscal 2024, we expect net sales in the second quarter of fiscal 2024 to increase with sales growth in the Industrial Solutions segment partially offset by a slight decline in the Transportation Solutions segment.

We expect diluted earnings per share from continuing operations to be approximately $1.75 per share in the second quarter of fiscal 2024.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $13 million and $0.05 per share, respectively, in the second 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 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.

During the first quarter of fiscal 2024, we acquired approximately 98.7% of the 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 purchase price of CHF 302 million (equivalent to $349 million), net of cash acquired.

The Schaffner business has been 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 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.

During the first quarter of fiscal 2024, we sold one business for net cash proceeds of $38 million.

In connection with the divestiture, we recorded a pre-tax loss on sale of $11 million.

The business sold was reported in our Transportation Solutions segment.

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

2 unchanged sentences

Quarters Ended

Nine Months Ended

($ 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 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

Change in Net Sales for the Quarter Ended December 29, 2023

versus Net Sales for the Quarter Ended December 30, 2022

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestiture)

Growth (Decline)

(Divestiture)

(Divestitures)

($ in millions)

2 unchanged sentences

Communications Solutions

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 $468 million in the first nine months of fiscal 2023.

Net sales slightly decreased by $10 million, or 0.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

The decrease in net sales resulted from organic net sales declines of 0.7% and the net negative impact of 0.7% from an acquisition and divestitures, largely offset by the positive impact of foreign currency translation of 1.1% due to the strengthening of certain foreign currencies.

Pricing actions initiated during fiscal 2023 positively affected organic net sales by $68 million in the first quarter of fiscal 2024.

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

Net Sales by Geographic Region.

Our business operates in three geographic regions—Asia–Pacific, Europe/Middle East/Africa (“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—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates.

Increases or decreases in the value of the U.S.

2 unchanged sentences

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

dollar in the first nine months of fiscal 2023.

dollar in the first quarter of fiscal 2024.

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

Quarters 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 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

Change in Net Sales for the Quarter Ended December 29, 2023

versus Net Sales for the Quarter Ended December 30, 2022

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestiture)

Growth (Decline)

(Divestiture)

(Divestitures)

($ in millions)

2 unchanged sentences

Quarters Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

As a percentage of net sales

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.

Gross margin increased $137 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily as a result of improved manufacturing productivity and the positive impact of prior year pricing actions, partially offset by lower volume.

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 impacted by worldwide economic conditions, including supply chain disruptions, inflationary cost pressures, and the COVID-19 pandemic.

As a result, we have experienced shortages and price increases in some of our input materials;

however, we have

been able to initiate pricing actions to 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.

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

Quarters Ended

Nine Months Ended

We expect to purchase approximately 185 million pounds of copper, 110,000 troy ounces of gold, 2.0 million troy ounces of silver, and 10,000 troy ounces of palladium in fiscal 2024.

2 unchanged sentences

Quarters Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

Selling, General, and Administrative Expenses.

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.

Selling, general, and administrative expenses increased $32 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due primarily to the impact of inflation, partially offset by savings attributable to prior restructuring actions.

Restructuring and Other Charges, Net.

1 unchanged sentence

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

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.

During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization, primarily in the Industrial Solutions and Transportation Solutions segments.

We incurred net restructuring charges of $9 million during the first quarter of fiscal 2024.

Annualized cost savings related to the fiscal 2024 actions commenced during the first quarter of fiscal 2024 are expected to be approximately $3 million and are expected to be fully 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 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 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

Quarters Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

Quarters Ended

Nine Months Ended

(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

Restructuring-related charges recorded in cost of sales

Taxes (non-income tax) recorded in selling, general, and administrative expenses

See discussion of operating income below under “Segment Results.”

2 unchanged sentences

Quarters Ended

Nine Months Ended

($ in millions)

Income tax expense

Income tax expense (benefit)

Effective tax rate

1 unchanged sentence

See Note 12 to the Condensed Consolidated Financial Statements for discussion of income taxes.

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

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, with some countries accelerating the impact of these rules by proposing immediate statutory rate increases.

In 2023, Swiss Parliament approved a constitutional amendment to implement the rules and the Swiss Federal Council acted in December to implement elements of the OECD’s global minimum tax rules, 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 potential impact on our results of operations, cash taxes, and worldwide corporate effective tax rate.

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.

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 16 to the Condensed Consolidated Financial Statements for additional information regarding our segments.

Transportation Solutions

1 unchanged sentence

Quarters Ended

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 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

Change in Net Sales for the Quarter Ended December 29, 2023

versus Net Sales for the Quarter Ended December 30, 2022

Organic Net Sales

Growth (Decline)

($ in millions)

Commercial transportation

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 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.

Net sales in the Transportation Solutions segment increased $114 million, or 5.0%, in the first quarter of fiscal 2024 from the first quarter of fiscal 2023 due primarily to organic net sales growth of 5.0%.

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

● 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.

● Automotive— Our organic net sales increased 8.1% in the first quarter of fiscal 2024 with growth of 13.4% in the Asia–Pacific region and 7.4% in the EMEA region, partially offset by declines of 4.0% in the Americas region.

Our organic net sales growth in the Asia–Pacific and EMEA regions was attributable primarily to vehicle production growth as well as increased content per vehicle.

In the Americas region, our organic net sales declined primarily as a result of declines in vehicle production.

For full year fiscal 2024, we expect slight growth in global vehicle production from fiscal 2023 levels.

● Commercial transportation— Our organic net sales increased 0.7% in the first quarter of fiscal 2024 due to growth in the Asia–Pacific region, partially offset by declines in the Americas region.

● Sensors— Our organic net sales decreased 9.2% in the first quarter of fiscal 2024 as a result of market weakness in both industrial and transportation applications and the strategic exit of certain lower margin and lower growth product lines.

Operating Income.

1 unchanged sentence

Quarters Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

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.

Operating income in the Transportation Solutions segment increased $196 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Excluding the items below, operating income increased in the first quarter of fiscal 2024 primarily as a result of improved manufacturing productivity and the positive impact of prior year pricing actions.

Quarters Ended

Nine Months Ended

(in millions)

1 unchanged sentence

Restructuring and other charges, net

Taxes (non-income tax) recorded in selling, general, and administrative expenses

Industrial Solutions

1 unchanged sentence

Quarters Ended

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 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

Change in Net Sales for the Quarter Ended December 29, 2023

versus Net Sales for the Quarter Ended December 30, 2022

Organic Net Sales

2 unchanged sentences

(Divestiture)

Growth (Decline)

(Divestiture)

($ in millions)

1 unchanged sentence

Aerospace, defense, and marine

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 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.

In the Industrial Solutions segment, net sales decreased $35 million, or 3.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due primarily to organic net sales declines of 4.9%.

Pricing actions initiated in fiscal 2023 positively affected organic net sales by $50 million in the first quarter of fiscal 2024.

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

● 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.

● Industrial equipment— Our organic net sales decreased 26.3% in the first quarter of fiscal 2024 with declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

● Aerospace, defense, and marine— Our organic net sales increased 12.5% in the first quarter of fiscal 2024 as a result of growth in all markets.

● Energy— Our organic net sales increased 1.4% in the first quarter of fiscal 2024 primarily as a result of growth in the Americas region and strength in renewable energy applications, partially offset by declines in the EMEA region.

● Medical— Our organic net sales increased 15.6% in the first quarter of fiscal 2024 due primarily to growth in interventional medical applications .

Operating Income.

1 unchanged sentence

Quarters Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

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.

Operating income in the Industrial Solutions segment decreased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Excluding the items below, operating income decreased during the first quarter of fiscal 2024 primarily as a result of lower volume, partially offset by the positive impact of prior year pricing actions.

Quarters Ended

Nine Months Ended

(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

Restructuring-related charges recorded in cost of sales

Taxes (non-income tax) recorded in selling, general, and administrative expenses

Communications Solutions

1 unchanged sentence

Quarters Ended

Nine Months Ended

($ 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 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

Change in Net Sales for the Quarter Ended December 29, 2023

versus Net Sales for the Quarter Ended December 30, 2022

Organic Net Sales

1 unchanged sentence

Data and devices

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 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%.

Net sales in the Communications Solutions segment decreased $89 million, or 17.0%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due to organic net sales declines of 17.0%.

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

● 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.

● Data and devices —Our organic net sales decreased 15.2% in the first quarter of fiscal 2024 as a result of market declines in the Asia–Pacific region and reduced demand resulting from inventory corrections in the supply chain .

● Appliances —Our organic net sales decreased 20.2% in the first quarter of fiscal 2024 due to market declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

Operating Income.

1 unchanged sentence

Quarters Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

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.

Operating income in the Communications Solutions segment increased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Excluding the items below, operating income decreased slightly due primarily to lower volume, largely offset by improved manufacturing productivity.

Quarters Ended

Nine Months Ended

(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.

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

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 nine months of fiscal 2023 and 2022 was $354 million and $326 million, respectively.

In the first quarter of fiscal 2024, net cash provided by operating activities increased $138 million to $719 million from $581 million in the first quarter of fiscal 2023.

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

The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2024 and 2023 was $100 million and $98 million, respectively.

Cash Flows from Investing Activities

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

Capital expenditures were $151 million and $183 million in the first quarters of fiscal 2024 and 2023, respectively.

We expect fiscal 2024 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 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.

During the first quarter of fiscal 2024, we received net cash proceeds of $38 million related to the sale of one business.

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

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.

During the first quarter of fiscal 2024, we acquired one business for a cash purchase price of $349 million, net of cash acquired.

We acquired one business for a cash purchase price of $109 million, net of cash acquired, during the first quarter of fiscal 2023.

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

Cash Flows from Financing Activities and Capitalization

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

Total debt at December 29, 2023 and September 29, 2023 was $4,198 million and $4,211 million, respectively.

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

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 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%.

As of December 29, 2023, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, had $261 million of commercial paper outstanding at a weighted-average interest rate of 5.50%.

TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 5.50% at September 29, 2023.

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 June 30, 2023 or September 30, 2022.

TEGSA had no borrowings under the Credit Facility at December 29, 2023 or September 29, 2023.

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 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.

As of December 29, 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 $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 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.

Payments of common share dividends to shareholders were $183 million and $178 million in the first quarters of fiscal 2024 and 2023, respectively.

During the first quarter of fiscal 2024, our board of directors authorized an increase of $1.5 billion in our share repurchase program.

We repurchased approximately three million of our common shares for $420 million and approximately two million of our common shares for $233 million under the share repurchase program during the first quarters of fiscal 2024 and 2023, respectively.

At December 29, 2023, we had $1.8 billion of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

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In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries.

The following tables present summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd.

The following tables present

summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd.

and TEGSA on a combined basis.

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Total noncurrent liabilities (2)

(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

(1) Includes $3,454 million and $2,783 million as of December 29, 2023 and September 29, 2023, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $5,070 million and $4,056 million as of December 29, 2023 and September 29, 2023, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Quarter 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 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 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;

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

At December 29, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $196 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business.

In addition, as of December 29, 2023, we had $26 million of performance guarantees associated with the 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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In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax.

Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

Although it is not feasible to predict the outcome of these proceedings, based upon

our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

Trade Compliance Matters

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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 29, 2023.

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

There were no significant changes to this information during the first quarter of fiscal 2024.

Accounting Pronouncements

See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding recently issued and adopted accounting pronouncements.

Non-GAAP Financial Measure

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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 and regulatory 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;

● global risks of political, economic, and military instability, including the continuing military conflict in certain parts of the world, and volatile and uncertain economic conditions and the evolving regulatory system in China;

● 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 environmental, social, and governance 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-Q

Item 2. Management’s Discussion and Analysis