What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-01-24 compared with 2024-07-29 · 106 added, 256 removed, 233 unchanged (61% of the section changed)

7 unchanged sentences

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

Change in Place of Incorporation

In March 2024, our board of directors approved a proposed change in our jurisdiction of incorporation from Switzerland to Ireland.

In connection with the proposed 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 will be merged with and into TE Connectivity plc, which will be the surviving entity.

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.

Upon completion of the merger, we will be organized under the laws of Ireland.

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

TE Connectivity Ltd.

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

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

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

Change in Place of Incorporation

During the first quarter of fiscal 2025, our jurisdiction of incorporation changed from Switzerland to Ireland.

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

See additional information in Note 1 to the Condensed Consolidated Financial Statements.

New Segment Structure

Effective for fiscal 2025, we reorganized our management and segments to align the organization around our fiscal 2025 strategy.

We now operate through two reportable segments:

Transportation Solutions and Industrial Solutions.

Prior period segment results have been recast to conform to the new segment structure.

See additional information in Note 1 to the Condensed Consolidated Financial Statements.

Summary of Performance

● 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 in the first quarter of fiscal 2025 were consistent with sales levels in the first quarter of fiscal 2024 as sales growth in the Industrial Solutions segment was offset by sales declines in the Transportation Solutions segment.

Also, on an organic basis, our net sales were flat in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024.

● Our net sales by segment were as follows:

● 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

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 military conflict in certain parts of the world and the COVID-19 pandemic.

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

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.

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.

Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund our future capital needs.

See further discussion in “Liquidity and Capital Resources.”

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 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.

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

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

In the 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.

● Transportation Solutions —Our net sales decreased 6.3% in the first quarter of fiscal 2025 as a result of sales declines in all end markets.

● Industrial Solutions —Our net sales increased 10.8% in the first quarter of fiscal 2025 primarily as a result of sales growth in the digital data networks and the aerospace, defense, and marine end markets, partially offset by sales declines in the medical end market.

● Net cash provided by operating activities was $878 million in the first quarter of fiscal 2025.

In the second quarter of fiscal 2025, we expect our net sales to be approximately $3.95 billion, as compared to $3.97 billion in the second quarter of fiscal 2024.

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

In the second quarter of fiscal 2025, we expect diluted loss per share from continuing operations to be approximately $0.05 per share, which includes an approximate $1.87 per share impact associated with the tax matter discussed below.

This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $112 million and $0.01 per share, respectively, in the second 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 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.

In January 2025, the Organisation for Economic Co-operation and Development released new guidance for the 15% global minimum corporate tax.

We are reviewing the new guidance and related interpretations and, while our assessment is not complete, it is probable that we will need to reduce certain net deferred tax assets associated with a ten-year tax credit obtained by a Swiss subsidiary by approximately $600 million during the second quarter of fiscal 2025.

See Note 17 to the Condensed Consolidated Financial Statements for additional information regarding the new guidance.

During the first quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired.

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

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

During the first nine months of fiscal 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.

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

Results of Operations

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Quarters Ended

Nine Months Ended

($ in millions)

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Industrial Solutions

Communications Solutions

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

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

Change in Net Sales for the Quarter Ended December 27, 2024

versus Net Sales for the Quarter Ended December 29, 2023

Organic Net Sales

2 unchanged sentences

(Divestiture)

Growth (Decline)

(Divestitures)

($ in millions)

1 unchanged sentence

Industrial Solutions

Communications Solutions

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.

Net sales were flat in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 as the net positive impact of 0.6% from acquisitions and a divestiture was largely offset by the negative impact of foreign currency translation of 0.5% due to the weakening of certain foreign currencies.

Price erosion adversely affected organic net sales by $12 million in the first quarter of fiscal 2025.

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 nine months of fiscal 2024.

dollar in the first quarter of fiscal 2025.

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

Quarters Ended

Nine Months Ended

($ in millions)

1 unchanged sentence

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

Change in Net Sales for the Quarter Ended June 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

Change in Net Sales for the Quarter Ended December 27, 2024

versus Net Sales for the Quarter Ended December 29, 2023

Organic Net Sales

2 unchanged sentences

(Divestiture)

Growth (Decline)

(Divestitures)

($ in millions)

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Quarters Ended

Nine Months Ended

($ in millions)

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As a percentage of net sales

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.

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

Gross margin increased $36 million in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to higher volume partially offset by price erosion.

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:

Quarters Ended

Nine Months Ended

We expect to purchase approximately 185 million pounds of copper, 95,000 troy ounces of gold, 2.0 million troy ounces of silver, and 9,000 troy ounces of palladium in fiscal 2025.

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Nine Months Ended

($ in millions)

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Restructuring and other charges, net

Selling, General, and Administrative Expenses.

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.

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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 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 $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.

During fiscal 2025, we initiated a restructuring program associated with footprint consolidation and cost structure improvements in both of our segments.

We incurred net restructuring charges of $43 million during the first quarter of fiscal 2025.

Annualized cost savings related to the fiscal 2025 actions commenced during the first quarter of fiscal 2025 are expected to be approximately $35 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 nine months of fiscal 2024, we incurred costs of $11 million related to our change in place of incorporation from Switzerland to Ireland.

For fiscal 2025, we expect total restructuring charges to be approximately $100 million and total cash spend, which will be funded with cash from operations, to be approximately $200 million.

During the first quarter of fiscal 2025, we incurred costs of $10 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.

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Quarters Ended

Nine Months Ended

($ in millions)

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(in millions)

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Nine Months Ended

($ in millions)

Interest income

Income tax expense (benefit)

Effective tax rate

Interest Income.

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.

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

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

Member states have begun to enact the rules, with some countries accelerating the impact of these rules by proposing immediate statutory rate increases.

Both Switzerland and Ireland have implemented elements of the OECD’s global minimum tax rules, effective as of January 1, 2024.

The OECD and participating countries continue to work on defining the underlying rules and administrative procedures.

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

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

See Notes 12 and 17 to the Condensed Consolidated Financial Statements for discussion of income taxes.

Segment Results

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Nine Months Ended

($ in millions)

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

Change in Net Sales for the Quarter Ended June 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

Change in Net Sales for the Quarter Ended December 27, 2024

versus Net Sales for the Quarter Ended December 29, 2023

Organic Net Sales

Growth (Decline)

($ in millions)

Commercial transportation

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 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 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%.

Net sales in the Transportation Solutions segment decreased $150 million, or 6.3%, in the first quarter of fiscal 2025 from the first quarter of fiscal 2024 due primarily to organic net sales declines of 5.2%.

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

● 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 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 .

● Automotive— Our organic net sales decreased 3.0% in the first quarter of fiscal 2025 as a result of declines of 17.2% in the EMEA region and 8.0% in the Americas region, partially offset by growth of 9.2% in the Asia–Pacific region.

In the EMEA and Americas regions, our organic net sales were impacted by declines in vehicle production and a shift in platform mix consistent with consumer demand .

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

● Commercial transportation— Our organic net sales decreased 11.6% in the first quarter of fiscal 2025 due primarily to declines in the EMEA and Americas regions.

● Sensors— Our organic net sales decreased 12.6% in the first quarter of fiscal 2025 as a result of market weakness in both industrial and transportation applications .

Operating Income.

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($ in millions)

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Operating margin

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.

Operating income in the Transportation Solutions segment decreased $41 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024.

Excluding the items below, operating income decreased in the first quarter of fiscal 2025 primarily as a result of lower volume and price erosion, partially offset by improved manufacturing productivity.

Quarters Ended

Nine Months Ended

(in millions)

Acquisition and integration costs

Restructuring and other charges (credits), net

Restructuring and other charges, net

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

2 unchanged sentences

Quarters Ended

Nine Months Ended

($ in millions)

Industrial equipment

Automation and connected living

Aerospace, defense, and marine

Digital data networks

(1) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

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

Change in Net Sales for the Quarter Ended June 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

Change in Net Sales for the Quarter Ended December 27, 2024

versus Net Sales for the Quarter Ended December 29, 2023

Organic Net Sales

1 unchanged sentence

Growth (Decline)

(Divestiture)

($ in millions)

Industrial equipment

Automation and connected living

Aerospace, defense, and marine

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 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.

Digital data networks

In the Industrial Solutions segment, net sales increased $155 million, or 10.8%, in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to organic net sales growth of 8.6% and the positive impact of 2.6% from acquisitions.

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

● 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.

● Automation and connected living— Our organic net sales decreased 4.5% in the first quarter of fiscal 2025 due to continued weakness in factory automation applications, partially offset by strength in the appliances market .

● Aerospace, defense, and marine— Our organic net sales increased 15.4% in the first quarter of fiscal 2025 as a result of growth in all markets.

● Digital data networks —Our organic net sales increased 48.0% in the first quarter of fiscal 2025 primarily as a result of growth in artificial intelligence and cloud applications.

● Energy— Our organic net sales increased 6.8% in the first quarter of fiscal 2025 as a result of growth across all regions and strength in renewable energy applications.

● Medical— Our organic net sales decreased 24.5% in the first quarter of fiscal 2025 due primarily to reduced demand resulting from inventory corrections in the supply chain.

Operating Income.

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($ in millions)

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Operating margin

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.

Operating income in the Industrial Solutions segment increased $33 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024.

Excluding the items below, operating income increased in the first quarter of fiscal 2025 primarily as a result of higher volume.

Quarters Ended

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(in millions)

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

Communications Solutions

The following table presents the Communications Solutions segment’s net sales and the percentage of total net sales by industry end market (1) :

Quarters Ended

Nine Months Ended

($ in millions)

Data and devices

(1) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

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

Change in Net Sales for the Quarter Ended June 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 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 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 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.

The following table presents the Communications Solutions segment’s operating income and operating margin information:

Quarters Ended

Nine Months Ended

($ in millions)

Operating income

Operating margin

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

Nine Months Ended

(in millions)

Acquisition and integration costs

Restructuring and other charges, net

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 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 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 product lines, to pay dividends on our ordinary shares, or to reduce our outstanding debt.

We may also use excess cash and other funding to make strategic acquisitions.

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 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.

In the first quarter of fiscal 2025, net cash provided by operating activities increased $159 million to $878 million from $719 million in the first quarter of fiscal 2024.

The increase resulted primarily from the impact of changes in working capital levels.

The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2025 and 2024 was $49 million and $100 million, respectively.

Cash Flows from Investing Activities

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.

Capital expenditures were $205 million and $151 million in the first quarters of fiscal 2025 and 2024, respectively.

We expect fiscal 2025 capital spending levels to be approximately 5% of net sales.

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

During the first nine months of fiscal 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.

During the first quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired.

We acquired one business for a cash purchase price of $349 million, net of cash acquired,

during the first quarter of fiscal 2024.

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

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.

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

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

Cash Flows from Financing Activities and Capitalization

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

Total debt at December 27, 2024 and September 27, 2024 was $4,205 million and $4,203 million, respectively.

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

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

As of December 27, 2024, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, had $345 million of commercial paper outstanding at a weighted-average interest rate of 4.50%.

TEGSA had $255 million of commercial paper outstanding at a weighted-average interest rate of 4.95% at September 27, 2024.

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 and permits, subject to conditions set forth therein, our contemplated merger and change in jurisdiction of incorporation.

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 Credit Facility at June 28, 2024 or the Replaced Credit Facility at September 29, 2023.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of April 2029 and aggregate commitments of $1.5 billion.

TEGSA had no borrowings under the Credit Facility at December 27, 2024 or September 27, 2024.

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered.

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

As of June 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.

As of December 27, 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 $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 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.

Payment obligations under TEGSA’s senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Switzerland Ltd., and its parent, TE Connectivity plc.

Payments of ordinary/common share dividends to shareholders were $189 million and $183 million in the first quarters of fiscal 2025 and 2024, respectively.

During the first quarter of fiscal 2025, our board of directors authorized an increase of $2.5 billion in our share repurchase program.

We repurchased approximately two million of our ordinary shares for $310 million and approximately three million of our common shares for $420 million under the share repurchase program during the first quarters of fiscal 2025 and 2024, respectively.

At December 27, 2024, we had $2.4 billion of availability remaining under our share repurchase authorization.

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.

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.

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

September 27,

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Total noncurrent liabilities (2)

(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

(1) Includes $2,596 million and $2,368 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans receivable from non-guarantor subsidiaries.

(2) Includes $4,144 million and $7,309 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans payable to non-guarantor subsidiaries.

September 27,

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Statement of Operations Data:

Loss from continuing operations

Income (loss) from continuing operations

Net income (loss)

In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments.

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

At June 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.

At December 27, 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 December 27, 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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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.

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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trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S.

Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S.

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.

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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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 27, 2024.

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

Accounting Pronouncements

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

There were no significant changes to this information during the first quarter of fiscal 2025.

Non-GAAP Financial Measure

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Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024, and in this report, could cause our results to differ materially from those expressed in forward-looking statements:

● conditions in the global or regional economies and global capital markets, and cyclical industry conditions, including recession, inflation, and higher interest rates;

● conditions in the global or regional economies and global capital markets, and cyclical industry conditions, including recession, inflation, tariffs, and higher interest rates;

● conditions affecting demand for products in the industries we serve, particularly the automotive industry;

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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 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;

● 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 artificial intelligence;

● 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;

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

● 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