What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-29 compared with 2024-04-26 · 155 added, 150 removed, 334 unchanged (48% of the section changed)

11 unchanged sentences

Under the merger agreement, we will be merged with and into TE Connectivity plc, which will be the surviving entity.

Completion of the merger is subject to shareholder approval at a special general meeting which we expect to be held in June 2024 and certain other customary closing conditions.

If approved, we expect to implement the change in calendar year 2024 and our shareholders will receive one ordinary share of TE Connectivity plc for each common share of TE Connectivity Ltd.

The merger was approved by shareholders at a special general meeting in June 2024 and is subject to certain closing conditions.

We expect to implement the change on or about September 30, 2024.

Our shareholders will receive one ordinary share of TE Connectivity plc for each common share of TE Connectivity Ltd.

held immediately prior to the merger.

5 unchanged sentences

Summary of Performance

● Our net sales decreased 4.6% in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 with declines across all three segments.

In the first six months of fiscal 2024, our net sales decreased 2.5% as compared to the first six months of fiscal 2023 due to declines in the Communications Solutions and Industrial Solutions segments.

On an organic basis, our net sales decreased 3.1% and 2.0% during the second quarter and first six months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

● Our net sales decreased 0.5% in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 with sales declines in the Transportation Solutions segment largely offset by sales increases in the Communications Solutions segment.

In the first nine months of fiscal 2024, our net sales decreased 1.9% as compared to the first nine months of fiscal 2023 with declines across all three segments.

On an organic basis, our net sales increased 1.7% and decreased 0.7% during the third quarter and first nine months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

● Our net sales by segment were as follows:

● Transportation Solutions —Our net sales decreased 4.0% in the second quarter of fiscal 2024 as a result of declines across all end markets.

In the first six months of fiscal 2024, our net sales were flat compared to the same period of fiscal 2023 with sales increases in the automotive end market largely offset by sales declines in the sensors and the commercial transportation end markets.

● Industrial Solutions —Our net sales decreased 4.0% and 3.7% in the second quarter and first six months of fiscal 2024, respectively, as a result of sales declines in the industrial equipment end market,

partially offset by sales increases in the aerospace, defense, and marine;

and the energy end markets.

● Communications Solutions —Our net sales decreased 9.5% and 13.4% in the second quarter and first six months of fiscal 2024, respectively, due to sales declines in both the appliances and the data and devices end markets.

● Net cash provided by operating activities was $1,429 million in the first six months of fiscal 2024.

● Transportation Solutions —Our net sales decreased 4.2% in the third quarter of fiscal 2024 as a result of sales declines in all end markets.

In the first nine months of fiscal 2024, our net sales decreased 1.2% with sales declines in the sensors and commercial transportation end markets, partially offset by increases in the automotive end market.

● Industrial Solutions —Our net sales decreased 0.7% and 2.7% in the third quarter and first nine months of fiscal 2024, respectively, primarily as a result of sales declines in the industrial equipment end

market, partially offset by sales increases in the aerospace, defense, and marine and the medical end markets.

● Communications Solutions —Our net sales increased 21.7% in the third quarter of fiscal 2024 as a results of sales increases across all end markets.

In the first nine months of fiscal 2024, our net sales decreased 3.0% due to sales declines in the appliances end market, partially offset by sales increases in the data and devices end market.

● Net cash provided by operating activities was $2,435 million in the first nine months of fiscal 2024.

Economic Conditions

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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.

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

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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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 six months of fiscal 2024.

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

1 unchanged sentence

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

In the third quarter of fiscal 2024, we expect our net sales to be approximately $4.0 billion, consistent with third quarter fiscal 2023 levels.

Sales growth in the Communications Solutions and Industrial Solutions segments is expected to be offset by declines in the Transportation Solutions segment.

Additional information regarding expectations for our reportable segments is as follow:

● Transportation Solutions —We expect our net sales to increase in the automotive end market in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023.

For full year fiscal 2024, we expect sales in the automotive end market to benefit from slight growth in global vehicle production from fiscal 2023 levels.

In the third quarter of fiscal 2024, we expect our net sales to decrease from the same period of fiscal 2023 in the commercial transportation end market as result of market declines.

● Industrial Solutions— In the third quarter of fiscal 2024, we expect our net sales to increase from the same period of fiscal 2023 in the aerospace, defense, and marine end market due to ongoing market improvement.

Also, we expect our net sales in the medical end market to increase as a result of continued growth in interventional medical applications.

These increases are expected to be partially offset by sales declines in the industrial equipment end market which continues to be negatively impacted by market weakness and inventory corrections in the supply chain.

● Communications Solutions— In the third quarter of fiscal 2024, we expect our net sales to increase from the same period of fiscal 2023 in both the data and devices and the appliances end markets as a result of supply chain normalization.

We expect diluted earnings per share from continuing operations to be approximately $1.71 per share in the third quarter of fiscal 2024.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $63 million and $0.06 per share, respectively, in the third quarter of fiscal 2024 as compared to the same period of fiscal 2023.

In the fourth quarter of fiscal 2024, we expect our net sales to be approximately $4.0 billion, down slightly from fourth quarter fiscal 2023 levels.

Sales declines in the Transportation Solutions segment are expected to be largely offset by sales growth in the Communications Solutions segment.

Additional information regarding expectations for our reportable segments is as follows:

● Transportation Solutions —We expect our net sales in the automotive end market to decrease in the fourth quarter of fiscal 2024 as compared to the fourth quarter of fiscal 2023, primarily as a result of a divestiture.

For full year fiscal 2024, we expect our sales in the automotive end market to benefit from slight growth in global vehicle production from fiscal 2023 levels.

In the fourth quarter of fiscal 2024, we expect our net sales to decrease from the same period of fiscal 2023 in the commercial transportation end market as result of market declines.

● Industrial Solutions— In the fourth quarter of fiscal 2024, we expect our net sales to increase from the same period of fiscal 2023 in the aerospace, defense, and marine end market due to ongoing market improvement.

Also, we expect our net sales to decline in the fourth quarter of fiscal 2024 from the same period of fiscal 2023 in the industrial equipment end market which continues to be negatively impacted by market weakness and inventory corrections in the supply chain.

● Communications Solutions— In the fourth quarter of fiscal 2024, we expect our net sales to increase from the same period of fiscal 2023 in both the data and devices and the appliances end markets.

We expect our sales in the data and devices end market to benefit from continuing momentum in artificial intelligence applications.

We expect diluted earnings per share from continuing operations to be approximately $1.80 per share in the fourth quarter of fiscal 2024.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $56 million and $0.03 per share, respectively, in the fourth 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 six months 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 294 million (equivalent to $339 million), net of cash acquired.

The Schaffner business has been 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 294 million (equivalent to $339 million), net of cash acquired.

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

During the third quarter of fiscal 2024, we completed a squeeze-out of the remaining minority shareholders for $5 million and the Schaffner shares were delisted from the SIX Swiss Exchange.

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

During the first six months 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 in the first six months of fiscal 2024.

Additionally, during the first six months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million when the business was reclassified to held for sale.

During the first nine months of fiscal 2024, we sold one business for net cash proceeds of $59 million.

In connection with the divestiture, we recorded a pre-tax gain on sale of $10 million in the first nine months of fiscal 2024.

Additionally, during the first nine months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million when the business was reclassified to held for sale.

The business sold was reported in our Transportation Solutions segment.

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Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

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

Change in Net Sales for the Quarter Ended March 29, 2024

Change in Net Sales for the Six Months Ended March 29, 2024

versus Net Sales for the Quarter Ended March 31, 2023

versus Net Sales for the Six Months Ended March 31, 2023

Change in Net Sales for the Quarter Ended June 28, 2024

Change in Net Sales for the Nine Months Ended June 28, 2024

versus Net Sales for the Quarter Ended June 30, 2023

versus Net Sales for the Nine Months Ended June 30, 2023

Organic Net Sales

(Divestitures)

Growth (Decline)

(Divestiture)

Growth (Decline)

(Divestitures)

3 unchanged sentences

Communications Solutions

Net sales decreased $193 million, or 4.6%, in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

The decrease in net sales resulted primarily from organic net sales declines of 3.1% and the negative impact of foreign currency translation of 1.2% due to the weakening of certain foreign currencies.

Pricing actions initiated during fiscal 2023 positively affected organic net sales by $14 million in the second quarter of fiscal 2024.

In the first six months of fiscal 2024, net sales decreased $203 million, or 2.5%, as compared to the first six months of fiscal 2023 due primarily to organic net sales declines of 2.0%.

Pricing actions initiated during fiscal 2023 positively affected organic net sales by $82 million in the first six months of fiscal 2024.

Net sales decreased $19 million, or 0.5%, in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023.

The decrease in net sales resulted primarily from the negative impact of foreign currency translation of 2.0% due to the

weakening of certain foreign currencies, partially offset by organic net sales growth of 1.7%.

Pricing actions positively affected organic net sales by $10 million in the third quarter of fiscal 2024.

In the first nine months of fiscal 2024, net sales decreased $222 million, or 1.9%, as compared to the first nine months of fiscal 2023 due primarily to organic net sales declines of 0.7% and the negative impact of foreign currency translation of 0.7% due to the weakening of certain foreign currencies.

Pricing actions positively affected organic net sales by $91 million in the first nine months of fiscal 2024.

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

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

dollar in the first six months of fiscal 2024.

dollar in the first nine months of fiscal 2024.

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

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

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

Change in Net Sales for the Quarter Ended March 29, 2024

Change in Net Sales for the Six Months Ended March 29, 2024

versus Net Sales for the Quarter Ended March 31, 2023

versus Net Sales for the Six Months Ended March 31, 2023

Change in Net Sales for the Quarter Ended June 28, 2024

Change in Net Sales for the Nine Months Ended June 28, 2024

versus Net Sales for the Quarter Ended June 30, 2023

versus Net Sales for the Nine Months Ended June 30, 2023

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestitures)

Growth (Decline)

(Divestiture)

Growth (Decline)

(Divestitures)

3 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

2 unchanged sentences

As a percentage of net sales

Gross margin increased $79 million in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 due primarily to improved manufacturing productivity, partially offset by the negative impact of foreign currency translation.

In the first six months of fiscal 2024, gross margin increased $216 million as compared to the same period 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.

Gross margin increased $87 million in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 due primarily to improved manufacturing productivity and the favorable impact of product mix.

In the first nine months of fiscal 2024, gross margin increased $303 million as compared to the same period of fiscal 2023 primarily as a result of improved manufacturing productivity and the positive impact of 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.

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Quarters Ended

Six Months Ended

Nine Months Ended

We expect to purchase approximately 185 million pounds of copper, 100,000 troy ounces of gold, 2.1 million troy ounces of silver, and 10,000 troy ounces of palladium in fiscal 2024.

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Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

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Selling, General, and Administrative Expenses.

Selling, general, and administrative expenses increased $41 million in the first six months of fiscal 2024 as compared to the first six months of fiscal 2023 due primarily to the impact of inflation, partially offset by savings attributable to prior restructuring actions.

Selling, general, and administrative expenses increased $41 million in the first nine months of fiscal 2024 as compared to the first nine months of fiscal 2023 due primarily to the impact of inflation, partially offset by savings attributable to prior restructuring actions.

Restructuring and Other Charges, Net.

We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed

costs, and eliminate excess capacity.

We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity.

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 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 $41 million during the first six months of fiscal 2024.

Annualized cost savings related to the fiscal 2024 actions commenced during the first six months of fiscal 2024 are expected to be approximately $10 million and are expected to be fully realized by the end of fiscal 2025.

We incurred net restructuring charges of $57 million during the first nine months of fiscal 2024.

Annualized cost savings related to the fiscal 2024 actions commenced during the first nine months of fiscal 2024 are expected to be approximately $30 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 $200 million.

During the first six months of fiscal 2024, we incurred costs of $8 million related to our proposed change in place of incorporation from Switzerland to Ireland.

See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding the proposed change.

During the first nine months of fiscal 2024, we incurred costs of $11 million related to our change in place of incorporation from Switzerland to Ireland.

See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding the change.

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

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Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

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Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

3 unchanged sentences

Interest Income.

Interest income increased $7 million and $20 million in the second quarter and first six months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023 due to higher interest rates as well as an increase in our cash balances held and invested.

Interest income increased $22 million in the first nine months of fiscal 2024 as compared to the same period of fiscal 2023 due to higher interest rates as well as an increase in our cash balances held and invested.

Income Taxes.

10 unchanged sentences

Quarters Ended

Six Months 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 March 29, 2024

Change in Net Sales for the Six Months Ended March 29, 2024

versus Net Sales for the Quarter Ended March 31, 2023

versus Net Sales for the Six Months Ended March 31, 2023

Change in Net Sales for the Quarter Ended June 28, 2024

Change in Net Sales for the Nine Months Ended June 28, 2024

versus Net Sales for the Quarter Ended June 30, 2023

versus Net Sales for the Nine Months Ended June 30, 2023

Organic Net Sales

5 unchanged sentences

Commercial transportation

Net sales in the Transportation Solutions segment decreased $99 million, or 4.0%, in the second quarter of fiscal 2024 from the second quarter of fiscal 2023 due to the negative impact of 1.8% from a divestiture, the negative impact of foreign currency translation of 1.2%, and organic net sales declines of 1.0%.

Net sales in the Transportation Solutions segment decreased $103 million, or 4.2%, in the third quarter of fiscal 2024 from the third quarter of fiscal 2023 due primarily to the negative impact of foreign currency translation of 2.1% and the negative impact of 1.8% from a divestiture.

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

● Automotive— Our organic net sales increased 1.2% in the second quarter of fiscal 2024 as a result of growth of 12.1% in the Asia–Pacific region, partially offset by declines of 7.2% in the EMEA region and 2.2% in the Americas region.

Our organic net sales growth in the Asia–Pacific region was attributable primarily to increased content per vehicle.

● Automotive— Our organic net sales increased 3.6% in the third quarter of fiscal 2024 as a result of growth of 21.4% in the Asia–Pacific region, partially offset by declines of 7.8% in the EMEA region and 5.2% in the Americas region.

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

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

● Commercial transportation— Our organic net sales decreased 4.2% in the second quarter of fiscal 2024 due to declines in the Americas and EMEA regions, partially offset by growth in the Asia–Pacific region.

● Sensors— Our organic net sales decreased 10.3% in the second quarter of fiscal 2024 as a result of market weakness in industrial applications and our strategic exit of certain lower margin and lower growth product lines.

In the first six months of fiscal 2024, net sales in the Transportation Solutions segment were flat as compared to the first six months of fiscal 2023 with organic net sales growth of 1.9% largely offset by the negative impact of 1.5% from a divestiture.

● Commercial transportation— Our organic net sales decreased 8.4% in the third quarter of fiscal 2024 due primarily to market weakness in the EMEA region.

● Sensors— Our organic net sales decreased 13.1% in the third quarter of fiscal 2024 as a result of market weakness in industrial applications and our strategic exit of certain lower margin and lower growth product lines.

In the first nine months of fiscal 2024, net sales in the Transportation Solutions segment decreased $88 million, or 1.2%, as compared to the first nine months of fiscal 2023 due to the negative impact of 1.5% from a divestiture and the negative impact of foreign currency translation of 0.8%, partially offset by organic net sales growth of 1.1%.

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

● Automotive— Our organic net sales increased 4.5% in the first six months of fiscal 2024 with growth of 12.8% in the Asia–Pacific region, partially offset by declines of 3.1% in the Americas region and 0.9% in the EMEA region.

● Automotive— Our organic net sales increased 4.2% in the first nine months of fiscal 2024 with growth of 15.4% in the Asia–Pacific region, partially offset by declines of 3.8% in the Americas region and 3.4% in the EMEA region.

Our organic net sales growth in the Asia–Pacific region resulted from vehicle production growth as well as increased content per vehicle.

In the Americas and EMEA regions, our organic net sales were impacted by essentially flat vehicle production levels compared to prior year and a shift in consumer demand to lower content vehicles.

● Commercial transportation— Our organic net sales decreased 2.0% in the first six months of fiscal 2024 as a result of declines in the Americas and EMEA regions, partially offset by growth in the Asia–Pacific region.

● Sensors— Our organic net sales decreased 9.7% in the first six months of fiscal 2024 due to market weakness in industrial applications and our strategic exit of certain lower margin and lower growth product lines.

In the Americas and EMEA regions, our organic net sales were impacted by essentially flat vehicle production levels compared to prior year and a shift in platform mix consistent with consumer demand.

● Commercial transportation— Our organic net sales decreased 4.2% in the first nine months of fiscal 2024 as a result of declines in the EMEA and Americas regions, partially offset by growth in the Asia–Pacific region.

● Sensors— Our organic net sales decreased 10.9% in the first nine months of fiscal 2024 due to market weakness in industrial applications and our strategic exit of certain lower margin and lower growth product lines .

Operating Income.

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Transportation Solutions segment increased $134 million and $330 million in the second quarter and first six months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income increased in the second quarter and first six months of fiscal 2024 primarily as a result of improved manufacturing productivity.

Operating income in the Transportation Solutions segment increased $73 million and $403 million in the third quarter and first nine months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income increased in the third quarter and first nine months of fiscal 2024 primarily as a result of improved manufacturing productivity.

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

Acquisition and integration costs

Restructuring and other charges, net

Restructuring and other charges (credits), net

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

2 unchanged sentences

Quarters Ended

Six Months 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 March 29, 2024

Change in Net Sales for the Six Months Ended March 29, 2024

versus Net Sales for the Quarter Ended March 31, 2023

versus Net Sales for the Six Months Ended March 31, 2023

Change in Net Sales for the Quarter Ended June 28, 2024

Change in Net Sales for the Nine Months Ended June 28, 2024

versus Net Sales for the Quarter Ended June 30, 2023

versus Net Sales for the Nine Months Ended June 30, 2023

Organic Net Sales

2 unchanged sentences

Growth (Decline)

(Divestiture)

Growth (Decline)

4 unchanged sentences

Aerospace, defense, and marine

In the Industrial Solutions segment, net sales decreased $48 million, or 4.0%, in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 due primarily to organic net sales declines of 5.6%, partially offset by the net positive impact of 2.7% from acquisitions and a divestiture.

Pricing actions initiated in fiscal 2023 positively affected organic net sales by $45 million in the second quarter of fiscal 2024.

In the Industrial Solutions segment, net sales decreased $8 million, or 0.7%, in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 due to organic net sales declines of 2.1% and the negative impact of foreign currency translation of 1.8%, partially offset by the positive impact of 3.2% from an acquisition.

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

● Industrial equipment— Our organic net sales decreased 28.4% in the second 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 17.0% in the second quarter of fiscal 2024 primarily as a result of growth in the commercial aerospace and defense markets.

● Energy— Our organic net sales increased 0.6% in the second quarter of fiscal 2024 as a result of growth in the Americas region, partially offset by declines in the Asia–Pacific and EMEA regions.

● Medical— Our organic net sales increased 6.0% in the second quarter of fiscal 2024 due primarily to growth in interventional medical applications .

Net sales in the Industrial Solutions segment decreased $83 million, or 3.7%, in the first six months of fiscal 2024 as compared to the first six months of fiscal 2023 due primarily to organic net sales declines of 5.3%, partially offset by the net positive impact of 1.4% from acquisitions and a divestiture.

In the first six months of fiscal 2024, pricing actions initiated in fiscal 2023 positively affected organic net sales by $95 million.

● Industrial equipment— Our organic net sales decreased 23.6% in the third 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 18.7% in the third quarter of fiscal 2024 as a result of growth in all markets.

● Energy— Our organic net sales increased 3.4% in the third quarter of fiscal 2024 as a result of growth in the Americas and EMEA regions, partially offset by declines in the Asia–Pacific region.

● Medical— Our organic net sales increased 7.0% in the third quarter of fiscal 2024 due primarily to growth in interventional medical applications .

Net sales in the Industrial Solutions segment decreased $91 million, or 2.7%, in the first nine months of fiscal 2024 as compared to the first nine months of fiscal 2023 due primarily to organic net sales declines of 4.2%, partially offset by the

net positive impact of 2.0% from acquisitions and a divestiture.

In the first nine months of fiscal 2024, pricing actions positively affected organic net sales by $131 million.

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

● Industrial equipment— Our organic net sales decreased 27.4% in the first six months of fiscal 2024 as a result of declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

● Aerospace, defense, and marine— Our organic net sales increased 14.9% in the first six months of fiscal 2024 due to growth in all markets.

● Energy— Our organic net sales increased 1.0% in the first six months of fiscal 2024 due to growth in the Americas region, partially offset by declines in the EMEA and Asia–Pacific regions.

● Medical— Our organic net sales increased 10.5% in the first six months of fiscal 2024 as a result of growth in interventional medical applications.

● Industrial equipment— Our organic net sales decreased 26.2% in the first nine months of fiscal 2024 as a result of declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

● Aerospace, defense, and marine— Our organic net sales increased 16.2% in the first nine months of fiscal 2024 due to growth in all markets.

● Energy— Our organic net sales increased 1.8% in the first nine months of fiscal 2024 due to growth in the Americas region, partially offset by declines in the Asia–Pacific and EMEA regions.

● Medical— Our organic net sales increased 9.4% in the first nine months of fiscal 2024 primarily as a result of growth in interventional medical applications.

Operating Income.

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

Operating margin

Operating income in the Industrial Solutions segment increased $23 million and $8 million in the second quarter and first six months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income in the second quarter of fiscal 2024 was consistent with fiscal 2023 levels as lower volume was largely offset by the positive impact of prior year pricing actions.

Excluding the items below, operating income decreased in the first six months of fiscal 2024 primarily as a result of lower volume and higher operating costs, partially offset by the positive impact of prior year pricing actions.

Operating income in the Industrial Solutions segment increased $3 million and $11 million in the third quarter and first nine months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income decreased in the third quarter and first nine months of fiscal 2024 primarily as a result of lower volume and higher operating costs, partially offset by the positive impact of pricing actions.

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

5 unchanged sentences

Quarters Ended

Six Months 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 March 29, 2024

Change in Net Sales for the Six Months Ended March 29, 2024

versus Net Sales for the Quarter Ended March 31, 2023

versus Net Sales for the Six Months Ended March 31, 2023

Change in Net Sales for the Quarter Ended June 28, 2024

Change in Net Sales for the Nine Months Ended June 28, 2024

versus Net Sales for the Quarter Ended June 30, 2023

versus Net Sales for the Nine Months Ended June 30, 2023

Organic Net Sales

Growth (Decline)

($ in millions)

Data and devices

Net sales in the Communications Solutions segment decreased $46 million, or 9.5%, in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 due primarily to organic net sales declines of 8.2%.

Net sales in the Communications Solutions segment increased $92 million, or 21.7%, in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023 due primarily to organic net sales growth of 23.7%.

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

● Data and devices —Our organic net sales decreased 4.4% in the second quarter of fiscal 2024 as a result of market declines and reduced demand resulting from inventory corrections in the supply chain , partially offset by growth in cloud and artificial intelligence applications.

● Appliances —Our organic net sales decreased 13.8% in the second quarter of fiscal 2024 due to market declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

In the first six months of fiscal 2024, net sales in the Communications Solutions segment decreased $135 million, or 13.4%, as compared to the first six months of fiscal 2023 due primarily to organic net sales declines of 12.8%.

● Data and devices —Our organic net sales increased 31.8% in the third quarter of fiscal 2024 primarily as a result of growth in cloud and artificial intelligence applications and market improvements.

● Appliances —Our organic net sales increased 11.7% in the third quarter of fiscal 2024 due primarily to growth in the Americas and Asia–Pacific regions.

In the first nine months of fiscal 2024, net sales in the Communications Solutions segment decreased $43 million, or 3.0%, as compared to the first nine months of fiscal 2023 due primarily to organic net sales declines of 2.0%.

In the first nine months of fiscal 2024, price erosion negatively affected organic net sales by $41 million.

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

● Data and devices —Our organic net sales decreased 10.2% in the first six months of fiscal 2024 due to market declines and reduced demand resulting from inventory corrections in the supply chain, partially offset by growth in artificial intelligence applications.

● Appliances —Our organic net sales decreased 16.9% in the first six months of fiscal 2024 as a result of market declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

● Data and devices —Our organic net sales increased 2.0% in the first nine months of fiscal 2024 due to growth in cloud and artificial intelligence applications, partially offset by market declines and reduced demand resulting from inventory corrections in the supply chain in the first half of the year.

● Appliances —Our organic net sales decreased 8.2% in the first nine months of fiscal 2024 as a result of market declines across all regions and reduced demand resulting from inventory corrections in the supply chain in the first half of the year.

Operating Income.

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Quarters Ended

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Nine Months Ended

($ in millions)

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Operating margin

Operating income in the Communications Solutions segment decreased $2 million and increased $13 million in the second quarter and first six months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income in the second quarter of fiscal 2024 was consistent with fiscal 2023 levels as price erosion was largely offset by the favorable impact of product mix.

Operating income decreased in the first six months of fiscal 2024 due primarily to price erosion and lower volume, partially offset by improved manufacturing productivity.

Operating income in the Communications Solutions segment increased $49 million and $62 million in the third quarter and first nine months of fiscal 2024, respectively, as compared to the same periods of fiscal 2023.

Excluding the items below, operating income increased in the third quarter of fiscal 2024 primarily as a result of higher volume.

the items below, operating income increased in the first nine months of fiscal 2024 due primarily to improved manufacturing productivity and the favorable impact of product mix, partially offset by price erosion.

Quarters Ended

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(in millions)

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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 payments of $350 million of 3.45% senior notes due in August 2024 and €550 million of 0.00% euro-denominated senior notes due in February 2025.

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.

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.

The cost or availability of future funding may be impacted by financial market conditions.

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Cash Flows from Operating Activities

In the first six months of fiscal 2024, net cash provided by operating activities increased $214 million to $1,429 million from $1,215 million in the first six months 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 six months of fiscal 2024 and 2023 was $238 million and $223 million, respectively.

In the first nine months of fiscal 2024, net cash provided by operating activities increased $441 million to $2,435 million from $1,994 million in the first nine months of fiscal 2023.

The increase resulted primarily from higher pre-tax income and the impact of changes in working capital levels.

The amount of income taxes paid, net of refunds, during the first nine months of fiscal 2024 and 2023 was $384 million and $354 million, respectively.

Cash Flows from Investing Activities

Capital expenditures were $318 million and $372 million in the first six months of fiscal 2024 and 2023, respectively.

We expect fiscal 2024 capital spending levels to be approximately 5% of net sales.

Capital expenditures were $467 million and $538 million in the first nine months of fiscal 2024 and 2023, respectively.

We expect fiscal 2024 capital spending levels to be approximately 4% to 5% of net sales.

We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.

During the first six months of fiscal 2024, we acquired one business for a cash purchase price of $339 million, net of cash acquired.

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

During the first nine months of fiscal 2024, we acquired one business for a cash purchase price of $339 million, net of cash acquired.

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

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

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

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

During the first nine months of fiscal 2024, we received net cash proceeds of $59 million related to the sale of one business.

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

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

Cash Flows from Financing Activities and Capitalization

Total debt at March 29, 2024 and September 29, 2023 was $4,196 million and $4,211 million, respectively.

Total debt at June 28, 2024 and September 29, 2023 was $4,202 million and $4,211 million, respectively.

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

As of March 29, 2024, Tyco Electronics Group S.A.

As of June 28, 2024, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, had $309 million of commercial paper outstanding at a weighted-average interest rate of 5.48%.

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See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding the merger and change in our jurisdiction of incorporation.

TEGSA had no borrowings under the Replaced Credit Facility at March 29, 2024 or September 29, 2023.

TEGSA had no borrowings under the Credit Facility at June 28, 2024 or the Replaced Credit Facility at 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 March 29, 2024, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future.

As of June 28, 2024, 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 $365 million and $355 million in the first six months of fiscal 2024 and 2023, respectively.

Payments of common share dividends to shareholders were $564 million and $541 million in the first nine months of fiscal 2024 and 2023, respectively.

In March 2024, our shareholders approved a dividend payment to shareholders of $2.60 per share, payable in four equal quarterly installments of $0.65 per share beginning in the third quarter of fiscal 2024 and ending in the second quarter of fiscal 2025.

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

We repurchased approximately six million of our common shares for $826 million and approximately four million of our common shares for $432 million under the share repurchase program during the first six months of fiscal 2024 and 2023, respectively.

At March 29, 2024, we had $1.4 billion of availability remaining under our share repurchase authorization.

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

We repurchased approximately nine million of our common shares for $1,235 million and approximately five million of our common shares for $621 million under the share repurchase program during the first nine months of fiscal 2024 and 2023, respectively.

At June 28, 2024, we had $1.0 billion of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

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Total noncurrent liabilities (2)

(1) Includes $3,588 million and $2,783 million as of March 29, 2024 and September 29, 2023, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $10,241 million and $4,056 million as of March 29, 2024 and September 29, 2023, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Six Months Ended

(1) Includes $2,336 million and $2,783 million as of June 28, 2024 and September 29, 2023, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $4,208 million and $4,056 million as of June 28, 2024 and September 29, 2023, respectively, of intercompany loans payable to non-guarantor subsidiaries.

Nine Months Ended

Fiscal Year Ended

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

At March 29, 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $180 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business.

In addition, as of March 29, 2024, we had $25 million of performance guarantees associated with the divestiture.

At June 28, 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $185 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business.

In addition, as of June 28, 2024, we had $24 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;

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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 six months of fiscal 2024.

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

Accounting Pronouncements

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● the impact of certain provisions of our articles of association on unsolicited takeover proposals;

● risks associated with the proposed change in our jurisdiction of incorporation to Ireland.

● risks associated with the change in our jurisdiction of incorporation to Ireland.

There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.

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