What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-11-12 compared with 2023-11-13 · 135 added, 145 removed, 414 unchanged (40% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023.

The following discussion includes organic net sales growth which is a non-GAAP financial measure.

The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure.

See “Non-GAAP Financial Measure” for additional information regarding this measure.

Change in Place of Incorporation

During fiscal 2024, our board of directors and shareholders approved a change in our jurisdiction of incorporation from Switzerland to Ireland.

In connection with the change, we entered into a merger agreement with our wholly-owned subsidiary, TE Connectivity plc, a public limited company incorporated under Irish law.

Under the merger agreement, we were merged with and into TE Connectivity plc, which was the surviving entity, in order to effect our change in jurisdiction of incorporation from Switzerland to Ireland.

The merger and change in jurisdiction of incorporation were completed on September 30, 2024.

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

held immediately prior to the merger.

Effective for fiscal 2025, we are organized under the laws of Ireland.

We do not anticipate any material changes in our operations or financial results as a result of the merger and change in place of incorporation.

See Notes 1 and 21 to the Consolidated Financial Statements for additional information regarding the change in place of incorporation .

We are 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 Fiscal 2024 Performance

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

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

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

● Our fiscal 2024 net sales decreased 1.2% from fiscal 2023 levels due to sales declines in the Transportation Solutions and Industrial Solutions segments, partially offset by sales growth in the Communications Solutions segment.

On an organic basis, our net sales were flat in fiscal 2024 as compared to fiscal 2023.

● Our net sales by segment were as follows:

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

● Industrial Solutions —Our net sales increased 1.4% as a result of sales increases in the aerospace, defense, and marine, the energy, and the medical end markets, partially offset by declines in the industrial equipment end market.

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

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

● Transportation Solutions —Our net sales decreased 2.0% due primarily to sales declines in the sensors end market and, to a lesser degree, the commercial transportation end market.

● Industrial Solutions —Our net sales decreased 1.5% as a result of sales declines in the industrial equipment end market, partially offset by sales growth in all other end markets.

● Communications Solutions —Our net sales increased 3.7% due to sales growth in the data and devices end market, partially offset by sales declines in the appliances end market.

● During fiscal 2024, our shareholders approved a dividend payment 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.

● Net cash provided by operating activities was $3,477 million in fiscal 2024.

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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.

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 and/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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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 fiscal 2023 and 2022.

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

While the pandemic impacted certain aspects of our business, the extent to which the pandemic will continue to impact our business and the markets we serve will depend on future developments which may include the resurgence of the spread of the virus and variant strains of the virus as well as the success of public health advancements.

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

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

We continue to monitor military conflicts 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 2024 and 2023.

In the first quarter of fiscal 2025, we expect our net sales to be approximately $3.9 billion as compared to $3.8 billion in the first quarter of fiscal 2024.

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

As discussed below, we will have a new segment structure effective for fiscal 2025.

Under the new structure, net sales increases in the Industrial Solutions segment are expected to be partially offset by sales declines in the Transportation Solutions segment.

We expect diluted earnings per share from continuing operations to be approximately $1.64 per share in the first quarter of fiscal 2025.

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

This outlook reflects the positive impact of foreign currency exchange rates on net sales and earnings per share of approximately $32 million and $0.04 per share, respectively, in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024.

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

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

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

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

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

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 acquired business has been 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.

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

The acquired business has been reported as part of our Industrial Solutions segment from the date of acquisition.

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

Pending Acquisition

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

The tender offer commenced in September 2023.

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

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

During fiscal 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.

Additionally, during fiscal 2023, we recorded a pre-tax impairment charge of $68 million when the business was reclassified to held for sale.

The business sold was reported in our Transportation Solutions segment.

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

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The businesses sold were reported in our Industrial Solutions segment.

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

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

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Growth (Decline)

(Divestiture)

(Divestitures)

($ in millions)

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Net sales decreased $189 million, or 1.2%, in fiscal 2024 as compared to fiscal 2023.

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

The decrease in net sales resulted primarily from the negative impact of foreign currency translation of 0.7% due to the weakening of certain foreign currencies and the net negative impact of 0.3% from divestitures and acquisitions.

In fiscal 2024, pricing actions positively affected organic net sales by $105 million.

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

The impact of the additional week was estimated using an average sales figure for the fourth quarter of the fiscal year.

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

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Growth (Decline)

(Divestiture)

(Divestitures)

($ in millions)

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As a percentage of net sales

(1) Fiscal 2022 included an additional week.

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

We use a wide variety of raw materials in the manufacture of our products, and cost of sales and gross margin are subject to variability in raw material prices.

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

As a result, we have experienced shortages and price increases in some of our input materials—including certain metals—however, we have been able to initiate pricing actions to offset these impacts.

In fiscal 2024, gross margin increased $401 million as compared to fiscal 2023 primarily as a result of improved manufacturing productivity and the positive impact of pricing actions.

We use a wide variety of raw materials in the manufacture of our products.

Cost of sales and gross margin are subject to variability in raw material prices, which continue to fluctuate for many of the raw materials we use.

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

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Restructuring and other charges, net

(1) Fiscal 2022 included an additional week.

Selling, General, and Administrative Expenses.

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

In fiscal 2024, selling, general, and administrative expenses increased $62 million as compared to fiscal 2023 due primarily to the impact of inflation, partially offset by savings attributable to prior restructuring actions.

Restructuring and Other Charges, Net.

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These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.

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

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

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

During fiscal 2024 and 2023, we initiated restructuring programs to optimize our manufacturing footprint and improve the cost structure of the organization.

We incurred net restructuring charges of $144 million and $260 million in fiscal 2024 and 2023, respectively.

Annualized cost savings related to actions initiated in fiscal 2024 are expected to be approximately $85 million and we expect the majority of these savings will be realized by the end of fiscal 2027.

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

For fiscal 2025, 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 fiscal 2023 and 2022, we recorded net charges of $77 million and $4 million, respectively, related to pre-tax impairment of held for sale businesses and loss (gain) on divestitures.

During fiscal 2024, we recorded a gain on divestiture of $10 million.

We recorded net charges of $77 million related to pre-tax impairment of held for sale businesses and loss (gain) on divestitures in fiscal 2023.

During fiscal 2024, we incurred costs of $20 million related to our change in place of incorporation from Switzerland to Ireland.

See Notes 1 and 21 to the Consolidated Financial Statements for additional information regarding the change.

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

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Operating margin

(1) Fiscal 2022 included an additional week.

Operating income included the following:

(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.”

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Interest income

Interest expense

Other income (expense), net

Income tax expense

Income tax expense (benefit)

Effective tax rate

Interest Income and Expense.

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

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

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

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

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

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

Other Income (Expense).

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

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

Also, in fiscal 2022, we recorded other income of $11 million related to an indemnification receivable associated with an income tax audit.

See Note 15 to the Consolidated Financial Statements for further information regarding income taxes.

Interest Income.

Interest income increased $27 million in fiscal 2024 from fiscal 2023 due to higher interest rates as well as an increase in our average cash balances held and invested.

Income Taxes.

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

Member states have begun to enact the rules.

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

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

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

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

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

More than 30 countries have thus far enacted global minimum tax legislation.

Both Ireland and Switzerland have implemented 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 will affect us beginning in fiscal 2025.

We anticipate further legislative activity and administrative guidance throughout fiscal 2025.

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

The valuation allowance for deferred tax assets was $8,285 million and $7,416 million at fiscal year end 2024 and 2023, respectively.

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Segment Results

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

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

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

Transportation Solutions

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Commercial transportation

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

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

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

Net sales in the Transportation Solutions segment decreased $190 million, or 2.0%, in fiscal 2024 from fiscal 2023 primarily as a result of the negative impact of a divestiture of 1.7% and the negative impact of foreign currency translation of 0.6%.

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

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

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

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

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

● Automotive —Our organic net sales increased 3.0% in fiscal 2024 as a result of growth of 14.2% in the Asia–Pacific region, partially offset by declines of 4.8% in the Americas region and 4.5% in the EMEA region.

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

In the Americas and EMEA regions, our organic net sales were impacted by slight declines

in vehicle production levels compared to prior year and a shift in platform mix consistent with consumer demand .

● Commercial transportation —Our organic net sales decreased 4.1% in fiscal 2024 as a result of d eclines in the EMEA and Americas regions, partially offset by growth in the Asia–Pacific region .

● Sensors —Our organic net sales decreased 10.8% in fiscal 2024 due primarily to market weakness in industrial applications and our strategic exit of certain lower margin and lower growth product lines .

Operating Income.

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Operating margin

(1) Fiscal 2022 included an additional week.

Operating income in the Transportation Solutions segment decreased $83 million in fiscal 2023 as compared to fiscal 2022.

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

Operating income in the Transportation Solutions segment increased $396 million in fiscal 2024 as compared to fiscal 2023.

Excluding the items below, operating income increased in fiscal 2024 primarily as a result of improved manufacturing productivity.

(in millions)

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Restructuring and other charges, net

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

Industrial Solutions

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Aerospace, defense, and marine

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

In the Industrial Solutions segment, net sales decreased $70 million, or 1.5%, in fiscal 2024 from fiscal 2023 due primarily to organic net sales declines of 3.3%, partially offset by the net positive impact of 2.3% from acquisitions and a divestiture.

In fiscal 2024, pricing actions positively affected organic net sales by $179 million.

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

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

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

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

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

● Industrial equipment —Our organic net sales decreased 24.9% in 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 15.4% in fiscal 2024 due to growth in all markets .

● Energy —Our organic net sales increased 4.9% in fiscal 2024 due to growth in the Americas and EMEA regions, partially offset by declines in the Asia–Pacific region .

● Medical —Our organic net sales increased 6.5% in fiscal 2024 primarily as a result of growth in interventional medical applications .

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Operating margin

(1) Fiscal 2022 included an additional week.

Operating income in the Industrial Solutions segment decreased $14 million in fiscal 2024 from fiscal 2023.

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

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

(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

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Organic Net Sales

Growth (Declines)

($ in millions)

Data and devices

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

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

Net sales in the Communications Solutions segment increased $71 million, or 3.7%, in fiscal 2024 as compared to fiscal 2023 due primarily to organic net sales growth of 4.8%.

In fiscal 2024, price erosion negatively affected organic net sales by $62 million.

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

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

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

● Data and devices —Our organic net sales increased 10.2% in fiscal 2024 due to growth in AI applications, partially offset by reduced demand resulting from inventory corrections in the supply chain in the first half of the year .

● Appliances —Our organic net sales decreased 3.7% in fiscal 2024 primarily as a result of reduced demand resulting from inventory corrections in the supply chain in the first half of the year and our strategic exit of certain product lines, partially offset by share gains .

Operating Income.

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Operating margin

(1) Fiscal 2022 included an additional week.

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

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

In the Communications Solutions segment, operating income increased $110 million in fiscal 2024 as compared to fiscal 2023.

Excluding the items below, operating income increased in fiscal 2024 due primarily to higher volume and improved manufacturing productivity, partially offset by price erosion.

(in millions)

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Restructuring and other charges, net

New Segment Structure Effective for Fiscal 2025

Effective for the first quarter of fiscal 2025, we will reorganize our management and segments to align the organization around our fiscal 2025 strategy.

In this Annual Report, results for fiscal 2024 and prior periods are reported on the basis under which we managed our business in fiscal 2024 and do not reflect the fiscal 2025 segment reorganization.

See Note 21 to the Consolidated Financial Statements for additional information regarding our new segment structure.

Liquidity and Capital Resources

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

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

We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt.

We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of €550 million of 0.00% euro-denominated senior notes due in February 2025.

We may use excess cash to purchase a portion of our ordinary shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our ordinary shares, or to reduce our outstanding debt.

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

We will continue to monitor financial markets and respond as necessary to changing conditions.

We will continue to monitor financial markets and respond as

necessary to changing conditions.

We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs.

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Under current applicable laws, substantially all of these amounts can be repatriated to Tyco Electronics Group S.A.

(“TEGSA”), our Luxembourg subsidiary, which is the obligor of substantially all of our debt, and to TE Connectivity Ltd., our Swiss parent company;

(“TEGSA”), our Luxembourg subsidiary, which is the obligor of substantially all of our debt, and to TE Connectivity plc, our now parent company;

however, the repatriation of these amounts could subject us to additional tax expense.

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however, no tax liabilities are recorded for amounts that we consider to be retained indefinitely and reinvested in our global manufacturing operations.

As of fiscal year end 2023, we had approximately $2.6 billion of cash, cash equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to distribute to TEGSA and TE Connectivity Ltd.

but we consider to be permanently reinvested.

As of fiscal year end 2024, we had approximately $4.7 billion of cash, cash equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to distribute to TEGSA and now to TE Connectivity plc but we consider to be permanently reinvested.

We estimate that an immaterial amount of tax expense would be recognized on the Consolidated Financial Statements if our intention to permanently reinvest these amounts were to change.

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Net cash provided by operating activities increased $345 million to $3,477 million in fiscal 2024 as compared to $3,132 million in fiscal 2023.

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

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 fiscal 2024 and 2023 was $475 million and $425 million, respectively.

Pension contributions were $69 million and $71 million in fiscal 2024 and 2023, respectively.

We expect pension contributions to be $70 million in fiscal 2024, before consideration of any voluntary contributions.

We expect pension contributions to be approximately $70 million in fiscal 2025, before consideration of any voluntary contributions.

For additional information regarding pensions, see Note 14 to the Consolidated Financial Statements.

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

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

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

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

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

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

During 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 fiscal 2023.

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

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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.

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.

The Credit Facility contains provisions that allow for incremental commitments of up to $500 million, an option to temporarily increase the financial ratio covenant following a qualified acquisition, and borrowings in designated currencies.

TEGSA had no borrowings under the Credit Facility at fiscal year end 2023 or 2022.

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) the term secured overnight financing rate (“Term SOFR”) (as defined in the Credit Facility), (2) an alternate base rate equal to the highest of (i) Bank of America, N.A.’s base rate, (ii) the federal funds effective rate plus 1 / 2 of 1%, and (iii) the Term SOFR for a one-month interest period plus 1%, (3) an alternative currency daily rate, or (4) an alternative currency term rate, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA.

TEGSA entered into a new five-year unsecured senior revolving credit facility (“Credit Facility”) in April 2024 with aggregate commitments of $1.5 billion, which refinanced and replaced in full TEGSA’s existing $1.5 billion five-year unsecured senior revolving credit facility (the “Replaced Credit Facility”).

The Credit Facility matures in April 2029.

TEGSA had no borrowings under the Credit Facility at fiscal year end 2024 or the Replaced Credit Facility at fiscal year end 2023.

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) with respect to revolving loans denominated in U.S.

dollars, (a) the term secured overnight financing rate (“Term SOFR”) (as defined in the Credit Facility) or (b) an alternate base rate equal to the highest of (i) Bank of America, N.A.’s base rate, (ii) the federal funds effective rate plus 1 / 2 of 1%, (iii) the Term SOFR for a one-month interest period plus 1%, and (iv) 1%, and (2) with respect to revolving loans determined in an alternative currency, (a) an alternative currency daily rate or (b) an alternative currency term rate, as applicable, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA.

TEGSA is required to pay an annual facility fee.

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

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.

During fiscal 2024, TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility were fully and unconditionally guaranteed on an unsecured basis by its then parent, TE Connectivity Ltd., and, as of September 24, 2024, also by TE Connectivity Ltd.’s wholly-owned subsidiary, TE Connectivity Switzerland Ltd.

As a result of our change in place of incorporation, such guarantees are provided by TE Connectivity plc and its wholly-owned subsidiary, TE Connectivity Switzerland Ltd., in fiscal 2025.

Payments of common share dividends to shareholders were $760 million and $725 million in fiscal 2024 and 2023, respectively.

See Note 17 to the Consolidated Financial Statements for additional information regarding dividends on our common shares.

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.

Future dividends on our common shares, if any, must be approved by our shareholders.

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

See Note 17 to the Consolidated Financial Statements for additional information regarding dividends.

In March 2024, our shareholders approved a dividend payment 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.

As a result of our change in place of incorporation, beginning in our third quarter of fiscal 2025, future dividends on our ordinary shares, if any, will be declared on a quarterly basis by our board of directors as provided by Irish law.

Shareholder approval is no longer required.

In exercising their discretion to approve such dividends, our board of directors will consider our results of operations, financial condition, cash requirements, future business prospects, statutory requirements of applicable law, contractual restrictions, restrictions imposed by Irish law, and other factors that they may deem relevant.

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

We repurchased approximately 14 million of our common shares for $1,991 million and approximately 8 million of our common shares for $946 million under the share repurchase program during fiscal 2024 and 2023, respectively.

At fiscal year end 2024, we had $245 million of availability remaining under our share repurchase authorization.

On October 30, 2024, our board of directors authorized an additional increase of $2.5 billion in our share repurchase program.

Summarized Guarantor Financial Information

As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Ltd.

As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and were fully and unconditionally guaranteed on an unsecured basis by TEGSA’s then parent, TE Connectivity Ltd.

during fiscal 2024 and, as of September 24, 2024, also by TE Connectivity Ltd.’s wholly-owned subsidiary, TE Connectivity Switzerland Ltd.

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.

and TEGSA on a combined basis.

following tables present summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd., TE Connectivity Switzerland Ltd., and TEGSA on a combined basis.

Fiscal Year End

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

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

At fiscal year end 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $186 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business.

In addition, at fiscal year end 2024, we had $23 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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(1) See Note 10 to the Consolidated Financial Statements for additional information regarding debt.

(2) Interest payments exclude the impact of interest rate swap and cross-currency swap contracts.

(2) Interest payments exclude the impact of any interest rate swap and cross-currency swap contracts.

Interest payments on debt are projected for future periods using rates in effect as of fiscal year end 2024 and are subject to change in future periods.

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however, we are unable to determine the amount of plan contributions due to the inherent uncertainties of obligations of this type, including timing, interest rate charges, investment performance, and amounts of benefit payments.

We expect to contribute $70 million to pension plans in fiscal 2024, before consideration of any voluntary contributions.

We expect to contribute approximately $70 million to pension plans in fiscal 2025, before consideration of any voluntary contributions.

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

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Legal Proceedings

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

use tax, real estate tax, and transfer tax.

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

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

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

We have also been contacted by the U.S.

Department of Justice concerning aspects of these matters.

We are unable to predict the timing and final outcome of the agencies’ investigations.

Department of Justice concerning certain aspects of the BIS matters.

During the fourth quarter of fiscal 2024, we concluded our open matters with BIS, with our settlement including the payment of a penalty of approximately $6 million.

We are cooperating with the DDTC in its ongoing investigation.

We are unable to predict the timing and final outcome of the

agency’s investigation.

An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties.

Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigation into these matters has yet to be completed and the final outcome of such investigation and related fines and penalties may differ from amounts currently reserved.

Critical Accounting Policies and Estimates

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A reporting unit is generally an operating segment or one level below an operating segment (a “component”) if the component constitutes a business for which discrete financial information is available and regularly reviewed by segment management.

At fiscal year end 2023, we had five reporting units, all of which contained goodwill.

At fiscal year end 2024, we had five reporting

units, all of which contained goodwill.

There were two reporting units in both the Transportation Solutions and Industrial Solutions segments and one reporting unit in the Communications Solutions segment.

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

An increase in the

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

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

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

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These tax liabilities and related interest are reflected net of the impact of related tax loss carryforwards, as such tax loss carryforwards will be applied against these tax liabilities and will reduce the amount of cash tax payments due upon the eventual settlement with the tax authorities.

These estimates may change due to changing facts and circumstances.

estimates may change due to changing facts and circumstances.

Due to the complexity of these uncertainties, the ultimate resolution may result in a settlement that differs from our current estimate of the tax liabilities and related interest.

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Accounting Pronouncement

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

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

Non-GAAP Financial Measure

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Management uses this measure to monitor and evaluate performance.

Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company.

Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our

overall company.

It is also a significant component in our incentive compensation plans.

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● 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 between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries, 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;

● global risks of political, economic, and military instability, including the continuing military conflicts 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, including as a result of AI;

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

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

● various risks associated with being a Swiss corporation;

● various risks associated with being an Irish corporation;

● the impact of fluctuations in the market price of our shares;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis