Group 1 - TE Connectivity Ltd. shareholders approved the merger with its wholly owned subsidiary, TE Connectivity plc, expected to complete around September 30, 2024 [3] - The merger will change the company's jurisdiction from Switzerland to Ireland, with shareholders receiving one share of TE Connectivity plc for each share of TE Connectivity Ltd. held prior to the merger [3] - TE Connectivity is a global industrial technology leader focused on connectivity and sensor solutions across various sectors, including transportation, renewable energy, and medical technology [4] Group 2 - The company employs over 85,000 individuals, including 8,000 engineers, and operates in approximately 140 countries [4] - TE Connectivity aims to create a safer, sustainable, productive, and connected future through its innovative solutions [4]

A month has gone by since the last earnings report for TE Connectivity (TEL) . Shares have added about 6.8% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is TE Connectivity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. TE Connectivity Q2 Earnings Beat Estimates, ...

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and related notes for the specified periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This chapter details the company's net sales, gross margin, operating income, and net income for the reported periods Condensed Consolidated Statements of Operations Data | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Net sales | $3,967 | $4,160 | $7,798 | $8,001 | | Gross margin | $1,363 | $1,284 | $2,687 | $2,471 | | Operating income | $692 | $537 | $1,390 | $1,039 | | Net income | $541 | $433 | $2,344 | $830 | | Basic EPS (continuing operations) | $1.76 | $1.34 | $7.59 | $2.60 | | Diluted EPS (continuing operations) | $1.75 | $1.34 | $7.54 | $2.58 | | Weighted-average shares (Basic) | 308 | 316 | 309 | 317 | | Weighted-average shares (Diluted) | 310 | 318 | 311 | 319 | - Net sales decreased by **4.6%** in Q2 2024 compared to Q2 2023, and by **2.5%** in the first six months of fiscal 2024 compared to the same period in fiscal 2023[10](index=10&type=chunk) - Net income significantly increased to **$2,344 million** for the six months ended March 29, 2024, from **$830 million** in the prior year, driven by a substantial income tax benefit[10](index=10&type=chunk)[81](index=81&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This chapter presents the company's net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income Data | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :------------------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Net income | $541 | $433 | $2,344 | $830 | | Other comprehensive income (loss) | $(97) | $117 | $76 | $493 | | Comprehensive income | $444 | $550 | $2,420 | $1,323 | | Comprehensive income attributable to TE Connectivity Ltd. | $446 | $548 | $2,418 | $1,312 | - Other comprehensive income (loss) shifted from a gain of **$117 million** in Q2 2023 to a loss of **$97 million** in Q2 2024, primarily due to currency translation impacts[12](index=12&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This chapter provides a snapshot of the company's assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets Data | Metric | March 29, 2024 (millions) | September 29, 2023 (millions) | | :------------------------------------ | :------------------------- | :---------------------------- | | Total current assets | $7,504 | $7,892 | | Total assets | $22,824 | $21,712 | | Total current liabilities | $5,163 | $4,463 | | Total liabilities | $10,264 | $10,057 | | Total equity | $12,454 | $11,551 | - Total assets increased by **$1,112 million** to **$22,824 million** as of March 29, 2024, compared to September 29, 2023, primarily driven by an increase in deferred income taxes and goodwill[15](index=15&type=chunk) - Total current liabilities increased by **$700 million**, mainly due to an increase in short-term debt and accrued and other current liabilities[15](index=15&type=chunk) [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This chapter details changes in the company's shareholders' equity, including net income, dividends, and share repurchases Condensed Consolidated Statements of Equity Data | Metric | March 29, 2024 (millions) | September 29, 2023 (millions) | | :------------------------------------ | :------------------------- | :---------------------------- | | TE Connectivity Ltd. shareholders' equity | $12,449 | $11,551 | | Net income (6 months ended) | $2,344 | $830 | | Dividends (6 months ended) | $(795) | $(744) | | Repurchase of common shares (6 months ended) | $(826) | $(432) | - TE Connectivity Ltd shareholders' equity increased by **$898 million** to **$12,449 million** as of March 29, 2024, from **$11,551 million** at September 29, 2023[17](index=17&type=chunk) - The company repurchased **$826 million** of common shares during the six months ended March 29, 2024, compared to **$432 million** in the prior year period[17](index=17&type=chunk)[90](index=90&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This chapter outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Data | Metric | 6M 2024 (millions) | 6M 2023 (millions) | | :------------------------------------ | :------------------ | :------------------ | | Net cash provided by operating activities | $1,429 | $1,215 | | Net cash used in investing activities | $(627) | $(404) | | Net cash used in financing activities | $(1,284) | $(1,006) | | Net decrease in cash | $(485) | $(183) | | Cash, cash equivalents, and restricted cash at end of period | $1,176 | $905 | - Net cash provided by operating activities increased by **$214 million** to **$1,429 million** for the six months ended March 29, 2024, primarily due to higher pre-tax income[21](index=21&type=chunk)[162](index=162&type=chunk) - Net cash used in investing activities increased to **$627 million**, mainly due to higher acquisition spending (**$339 million** in 2024 vs **$108 million** in 2023)[21](index=21&type=chunk)[164](index=164&type=chunk) - Net cash used in financing activities increased to **$1,284 million**, driven by higher common share repurchases (**$885 million** in 2024 vs **$466 million** in 2023)[21](index=21&type=chunk)[172](index=172&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation and Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) This note describes the basis of financial statement preparation and significant accounting policies - The company's board of directors approved a proposed change in jurisdiction of incorporation from Switzerland to Ireland, expected to be completed in calendar year 2024, subject to shareholder approval[26](index=26&type=chunk)[105](index=105&type=chunk) - The SEC issued final climate disclosure rules in March 2024, effective for the company in fiscal 2026, but currently stayed pending judicial review The company is assessing the impact[27](index=27&type=chunk) - The FASB issued ASU No 2023-09 (Income Tax Disclosures) and ASU No 2023-07 (Segment Reporting), effective for the company in fiscal 2026 and 2025 respectively, with early adoption permitted The company is assessing their impact[28](index=28&type=chunk)[30](index=30&type=chunk) - The company adopted ASU No 2022-04 (Supplier Finance Programs) in Q1 fiscal 2024, which did not have a material impact on financial statements[31](index=31&type=chunk) [2. Restructuring and Other Charges, Net](index=12&type=section&id=2.%20Restructuring%20and%20Other%20Charges,%20Net) This note details the company's restructuring activities and other related charges Restructuring and Other Charges, Net Data | Charge Type | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Restructuring charges, net | $32 | $62 | $41 | $166 | | Impairment of held for sale businesses and (gain) loss on divestitures, net | $0 | $56 | $11 | $62 | | Costs related to change in place of incorporation | $8 | $0 | $8 | $0 | | Other charges, net | $0 | $1 | $1 | $2 | | **Total Restructuring and other charges, net** | **$40** | **$119** | **$61** | **$230** | - Net restructuring and other charges decreased significantly to **$40 million** in Q2 2024 from **$119 million** in Q2 2023, and to **$61 million** for the six months ended March 29, 2024, from **$230 million** in the prior year[32](index=32&type=chunk) - A new restructuring program was initiated in fiscal 2024 to optimize manufacturing footprint and improve cost structure, primarily in Industrial Solutions and Transportation Solutions segments, incurring **$11 million** in charges during the first six months[36](index=36&type=chunk) - The company sold one business for **$38 million** net cash proceeds, recording an **$11 million** pre-tax loss on sale in the first six months of fiscal 2024 This business was part of the Transportation Solutions segment[42](index=42&type=chunk) [3. Acquisitions](index=14&type=section&id=3.%20Acquisitions) This note provides details on business acquisitions completed during the reporting period - During the first six months of fiscal 2024, TE Connectivity acquired **98.7%** of Schaffner Holding AG for CHF **294 million** (**$339 million**), net of cash acquired Schaffner is a leader in electromagnetic solutions and is reported under the Industrial Solutions segment[45](index=45&type=chunk) - The valuation of identifiable intangible assets, assets acquired, and liabilities assumed for the Schaffner acquisition is ongoing and subject to adjustment[45](index=45&type=chunk) [4. Inventories](index=15&type=section&id=4.%20Inventories) This note presents the breakdown and changes in the company's inventory balances Inventories Data | Inventory Type | March 29, 2024 (millions) | September 29, 2023 (millions) | | :--------------- | :------------------------- | :---------------------------- | | Raw materials | $375 | $367 | | Work in progress | $1,230 | $1,185 | | Finished goods | $1,139 | $1,000 | | **Total Inventories** | **$2,744** | **$2,552** | - Total inventories increased by **$192 million** to **$2,744 million** as of March 29, 2024, from **$2,552 million** at September 29, 2023, with increases across all categories, particularly finished goods[48](index=48&type=chunk) [5. Goodwill](index=15&type=section&id=5.%20Goodwill) This note details the company's goodwill balances by segment and changes during the period Goodwill by Segment | Segment | September 29, 2023 (millions) | Acquisition (millions) | Currency translation and other (millions) | March 29, 2024 (millions) | | :------------------------ | :---------------------------- | :--------------------- | :---------------------------------------- | :------------------------ | | Transportation Solutions | $1,478 | $0 | $8 | $1,486 | | Industrial Solutions | $3,263 | $181 | $20 | $3,464 | | Communications Solutions | $722 | $0 | $6 | $728 | | **Total** | **$5,463** | **$181** | **$34** | **$5,678** | - Goodwill increased by **$215 million** to **$5,678 million** as of March 29, 2024, primarily due to **$181 million** recognized in the Industrial Solutions segment from the Schaffner acquisition[49](index=49&type=chunk)[50](index=50&type=chunk) [6. Intangible Assets, Net](index=15&type=section&id=6.%20Intangible%20Assets,%20Net) This note provides information on the company's intangible assets, including amortization expense Intangible Assets, Net Carrying Amount | Intangible Asset Type | March 29, 2024 (Net Carrying Amount, millions) | September 29, 2023 (Net Carrying Amount, millions) | | :---------------------- | :--------------------------------------------- | :------------------------------------------------- | | Customer relationships | $981 | $914 | | Intellectual property | $226 | $248 | | Other | $13 | $13 | | **Total** | **$1,220** | **$1,175** | - Net intangible assets increased by **$45 million** to **$1,220 million** as of March 29, 2024, primarily driven by an increase in customer relationships[51](index=51&type=chunk) - Amortization expense for intangible assets was **$43 million** in Q2 2024 and **$85 million** for the six months ended March 29, 2024[51](index=51&type=chunk) Expected Amortization Expense for Intangible Assets | Fiscal Year | Expected Amortization Expense (millions) | | :---------- | :--------------------------------------- | | Remainder of fiscal 2024 | $83 | | Fiscal 2025 | $159 | | Fiscal 2026 | $152 | | Fiscal 2027 | $134 | | Fiscal 2028 | $100 | | Fiscal 2029 | $93 | | Thereafter | $499 | | **Total** | **$1,220** | [7. Debt](index=16&type=section&id=7.%20Debt) This note outlines the company's debt structure, including commercial paper, senior notes, and credit facilities - Commercial paper outstanding for Tyco Electronics Group S.A (TEGSA) decreased to **$291 million** at March 29, 2024, from **$330 million** at September 29, 2023, both at a weighted-average interest rate of **5.50%**[55](index=55&type=chunk) - The company reclassified **€550 million** of **0.00%** euro-denominated senior notes due February 2025 from long-term to short-term debt[56](index=56&type=chunk) - TEGSA entered into a new **$1.5 billion** five-year unsecured senior revolving credit facility in April 2024, replacing the existing facility and maturing in April 2029[57](index=57&type=chunk) - The fair value of the company's debt was approximately **$4,074 million** at March 29, 2024, up from **$3,974 million** at September 29, 2023[59](index=59&type=chunk) [8. Leases](index=17&type=section&id=8.%20Leases) This note details the company's lease costs and cash flows related to operating leases Lease Cost Components | Lease Cost Component | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :--------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Operating lease cost | $33 | $36 | $67 | $70 | | Variable lease cost | $13 | $13 | $25 | $25 | | **Total lease cost** | **$46** | **$49** | **$92** | **$95** | - Total lease cost decreased slightly to **$46 million** in Q2 2024 from **$49 million** in Q2 2023, and to **$92 million** for the six months ended March 29, 2024, from **$95 million** in the prior year[62](index=62&type=chunk) - Cash paid for operating leases was **$69 million** for the six months ended March 29, 2024, an increase from **$64 million** in the prior year period[62](index=62&type=chunk) [9. Commitments and Contingencies](index=17&type=section&id=9.%20Commitments%20and%20Contingencies) This note describes the company's various commitments, legal proceedings, and environmental contingencies - The company is subject to various legal proceedings and claims, but does not expect their outcome to have a material effect on results of operations, financial position, or cash flows[63](index=63&type=chunk) - The company is investigating past compliance with U.S trade controls and has made voluntary disclosures of apparent violations to BIS and DDTC Investigations are ongoing, and potential fines/penalties are reserved for, but the final outcome is uncertain[64](index=64&type=chunk) - Environmental remediation costs are estimated to be in the range of **$17 million** to **$43 million**, with **$20 million** accrued as the probable loss These are not expected to have a material adverse effect[66](index=66&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$180 million** at March 29, 2024, including **$22 million** for the Subsea Communications business divestiture[68](index=68&type=chunk) - Outstanding payment obligations under the supply chain finance program were **$113 million** at March 29, 2024, included in accounts payable[69](index=69&type=chunk) [10. Financial Instruments](index=18&type=section&id=10.%20Financial%20Instruments) This note explains the company's use of financial instruments for risk management - The company uses cross-currency swap contracts and foreign currency forward contracts to manage foreign currency exchange rate risk, with a portion designated as cash flow hedges[70](index=70&type=chunk) - Net investment in foreign operations is hedged using intercompany loans and external borrowings, with an aggregate notional value of **$2,723 million** at March 29, 2024 (up from **$1,709 million** at September 29, 2023)[71](index=71&type=chunk) - Cross-currency swap contracts for hedging net investment had an aggregate notional value of **$3,522 million** at March 29, 2024 (down from **$3,806 million** at September 29, 2023)[73](index=73&type=chunk) - Commodity swap contracts, designated as cash flow hedges, had an aggregate notional value of **$422 million** at March 29, 2024, to manage commodity price fluctuations[75](index=75&type=chunk) [11. Retirement Plans](index=20&type=section&id=11.%20Retirement%20Plans) This note provides details on the company's pension and other post-retirement benefit plans Net Periodic Pension Benefit Cost | Metric | Non-U.S. Plans (6M 2024, millions) | U.S. Plans (6M 2024, millions) | | :-------------------------- | :--------------------------------- | :----------------------------- | | Service cost | $14 | $4 | | Interest cost | $30 | $19 | | Expected returns on plan assets | $(25) | $(19) | | Amortization of net actuarial loss | $2 | $2 | | Amortization of prior service credit | $(2) | $0 | | **Net periodic pension benefit cost** | **$19** | **$6** | - Net periodic pension benefit cost for non-U.S plans was **$19 million** and for U.S plans was **$6 million** for the six months ended March 29, 2024[78](index=78&type=chunk) - The company contributed **$23 million** to its non-U.S pension plans during the six months ended March 29, 2024[78](index=78&type=chunk) [12. Income Taxes](index=21&type=section&id=12.%20Income%20Taxes) This note details the company's income tax expense or benefit and effective tax rate - The company recorded an income tax benefit of **$959 million** for the six months ended March 29, 2024, compared to an expense of **$187 million** in the prior year[81](index=81&type=chunk) - The significant tax benefit for the six months ended March 29, 2024, includes an **$874 million** net income tax benefit from a ten-year tax credit in a Swiss subsidiary and a **$262 million** benefit from revaluation of deferred tax assets due to a Swiss corporate tax rate increase[81](index=81&type=chunk) - Approximately **$30 million** of unrecognized income tax benefits are estimated to be resolved within the next twelve months[82](index=82&type=chunk) [13. Earnings Per Share](index=21&type=section&id=13.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share Weighted-Average Shares Outstanding | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Basic weighted-average shares outstanding | 308 | 316 | 309 | 317 | | Diluted weighted-average shares outstanding | 310 | 318 | 311 | 319 | - Weighted-average basic shares outstanding decreased to **308 million** in Q2 2024 from **316 million** in Q2 2023, reflecting share repurchases[83](index=83&type=chunk) [14. Equity](index=22&type=section&id=14.%20Equity) This note details changes in equity, including share repurchases and dividend payments - Shareholders reapproved and extended the board's authorization to issue and/or reduce shares through March 13, 2025[86](index=86&type=chunk) - Shareholders approved the cancellation of approximately **six million** shares purchased under the share repurchase program, effective March 2024[87](index=87&type=chunk) Dividends Paid Per Common Share | Metric | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | | :-------------------------- | :------ | :------ | :------ | :------ | | Dividends paid per common share | $0.59 | $0.56 | $1.18 | $1.12 | - Shareholders approved a dividend payment of **$2.60** per share, payable in four equal quarterly installments of **$0.65** per share starting Q3 fiscal 2024[88](index=88&type=chunk) - The board authorized a **$1.5 billion** increase in the share repurchase program The company repurchased **6 million** common shares for **$826 million** in the first six months of fiscal 2024[90](index=90&type=chunk) [15. Share Plans](index=23&type=section&id=15.%20Share%20Plans) This note provides information on the company's share-based compensation plans and expenses Share-Based Compensation Expense | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :-------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Share-based compensation expense | $35 | $31 | $69 | $63 | - Share-based compensation expense increased to **$35 million** in Q2 2024 from **$31 million** in Q2 2023, and to **$69 million** for the six months ended March 29, 2024, from **$63 million** in the prior year[92](index=92&type=chunk) - As of March 29, 2024, **$180 million** of unrecognized compensation expense related to share-based awards is expected to be recognized over a weighted-average period of **1.7 years**[92](index=92&type=chunk) - The TE Connectivity Ltd 2024 Stock and Incentive Plan was approved by shareholders in March 2024, replacing the 2007 Plan, with **20 million** shares available for issuance[93](index=93&type=chunk) [16. Segment and Geographic Data](index=24&type=section&id=16.%20Segment%20and%20Geographic%20Data) This note presents financial data broken down by business segment and geographic region Net Sales by Segment | Segment | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Transportation Solutions | $2,384 | $2,483 | $4,757 | $4,742 | | Industrial Solutions | $1,143 | $1,191 | $2,168 | $2,251 | | Communications Solutions | $440 | $486 | $873 | $1,008 | | **Total** | **$3,967** | **$4,160** | **$7,798** | **$8,001** | - All three segments experienced net sales declines in Q2 2024 compared to Q2 2023 Transportation Solutions was flat for 6M 2024, while Industrial and Communications Solutions declined[96](index=96&type=chunk)[109](index=109&type=chunk) Net Sales by Geographic Region | Geographic Region | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | EMEA | $1,552 | $1,667 | $2,963 | $2,993 | | Asia–Pacific | $1,257 | $1,299 | $2,636 | $2,706 | | Americas | $1,158 | $1,194 | $2,199 | $2,302 | | **Total** | **$3,967** | **$4,160** | **$7,798** | **$8,001** | Operating Income by Segment | Segment | Q2 2024 Operating Income (millions) | Q2 2023 Operating Income (millions) | 6M 2024 Operating Income (millions) | 6M 2023 Operating Income (millions) | | :------------------------ | :--------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Transportation Solutions | $467 | $333 | $945 | $615 | | Industrial Solutions | $157 | $134 | $298 | $290 | | Communications Solutions | $68 | $70 | $147 | $134 | | **Total** | **$692** | **$537** | **$1,390** | **$1,039** | - Operating income increased across all segments for the six months ended March 29, 2024, with Transportation Solutions showing the largest increase of **$330 million**[101](index=101&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results [Change in Place of Incorporation](index=26&type=section&id=Change%20in%20Place%20of%20Incorporation) This section discusses the proposed change in the company's jurisdiction of incorporation - The board approved a proposed change in jurisdiction of incorporation from Switzerland to Ireland, with a merger into TE Connectivity plc, expected to be completed in calendar year 2024, subject to shareholder approval[105](index=105&type=chunk) - No material change in operations or financial results is anticipated from the change in incorporation[105](index=105&type=chunk) [Overview](index=26&type=section&id=Overview) This section provides a general overview of the company's business and strategic focus - TE Connectivity Ltd is a global industrial technology leader providing connectivity and sensor solutions for next-generation transportation, renewable energy, automated factories, data centers, and medical technology[107](index=107&type=chunk) [Summary of Performance](index=26&type=section&id=Summary%20of%20Performance) This section summarizes the company's key financial performance metrics for the reporting period - Net sales decreased by **4.6%** in Q2 fiscal 2024 and **2.5%** in the first six months of fiscal 2024, with declines across all three segments in Q2[109](index=109&type=chunk) - Organic net sales decreased by **3.1%** in Q2 and **2.0%** in the first six months of fiscal 2024[109](index=109&type=chunk) - Transportation Solutions net sales decreased **4.0%** in Q2 2024, while Industrial Solutions and Communications Solutions also saw declines[109](index=109&type=chunk)[114](index=114&type=chunk) - Net cash provided by operating activities was **$1,429 million** in the first six months of fiscal 2024[114](index=114&type=chunk) [Economic Conditions](index=27&type=section&id=Economic%20Conditions) This section discusses the impact of global economic conditions on the company's operations - The global economy has been impacted by supply chain disruptions, inflationary cost pressures, military conflicts, and the COVID-19 pandemic[111](index=111&type=chunk) - The company has mitigated increased costs and supply chain disruptions through productivity improvements and prior year price increases, and continues to focus on cost management initiatives[112](index=112&type=chunk) - Military conflicts and escalating tensions did not have a significant impact on the business in fiscal 2023 or the first six months of fiscal 2024[112](index=112&type=chunk) [Outlook](index=27&type=section&id=Outlook) This section provides the company's forward-looking expectations for future financial performance - For Q3 fiscal 2024, net sales are expected to be approximately **$4.0 billion**, consistent with Q3 fiscal 2023 levels, with growth in Communications and Industrial Solutions offsetting declines in Transportation Solutions[114](index=114&type=chunk) - Automotive end market sales are expected to increase in Q3 fiscal 2024, benefiting from slight growth in global vehicle production for full year fiscal 2024[115](index=115&type=chunk) - Industrial Solutions expects Q3 fiscal 2024 sales increases in aerospace, defense, marine, and medical end markets, partially offset by declines in industrial equipment due to market weakness and inventory corrections[115](index=115&type=chunk) - Communications Solutions expects Q3 fiscal 2024 sales increases in data and devices and appliances due to supply chain normalization[116](index=116&type=chunk) - Diluted EPS from continuing operations is expected to be approximately **$1.71** per share in Q3 fiscal 2024, reflecting a negative impact of **$0.06** per share from foreign currency exchange rates[116](index=116&type=chunk) [Acquisition](index=28&type=section&id=Acquisition) This section discusses significant business acquisitions completed during the period - The company acquired approximately **98.7%** of Schaffner Holding AG for **$339 million** (net of cash acquired) during the first six months of fiscal 2024, integrating it into the Industrial Solutions segment[117](index=117&type=chunk) [Divestiture](index=28&type=section&id=Divestiture) This section details the sale of a business unit during the reporting period - One business in the Transportation Solutions segment was sold for **$38 million** net cash proceeds, resulting in an **$11 million** pre-tax loss on sale in the first six months of fiscal 2024[118](index=118&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's operational performance [Net Sales](index=28&type=section&id=Net%20Sales) This section analyzes the company's net sales performance by segment and drivers of change Net Sales by Segment | Segment | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Transportation Solutions | $2,384 | $2,483 | $4,757 | $4,742 | | Industrial Solutions | $1,143 | $1,191 | $2,168 | $2,251 | | Communications Solutions | $440 | $486 | $873 | $1,008 | | **Total** | **$3,967** | **$4,160** | **$7,798** | **$8,001** | - Total net sales decreased by **$193 million** (**4.6%**) in Q2 2024 and **$203 million** (**2.5%**) in the first six months of fiscal 2024, primarily due to organic net sales declines and negative foreign currency translation[121](index=121&type=chunk)[122](index=122&type=chunk) - Pricing actions from fiscal 2023 positively affected organic net sales by **$14 million** in Q2 2024 and **$82 million** in the first six months of fiscal 2024[121](index=121&type=chunk)[122](index=122&type=chunk) - Approximately **60%** of net sales were invoiced in non-U.S dollar currencies in the first six months of fiscal 2024[124](index=124&type=chunk) [Cost of Sales and Gross Margin](index=30&type=section&id=Cost%20of%20Sales%20and%20Gross%20Margin) This section analyzes the company's cost of sales, gross margin, and commodity price impacts Cost of Sales and Gross Margin Data | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :-------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Cost of sales | $2,604 | $2,876 | $5,111 | $5,530 | | Gross margin | $1,363 | $1,284 | $2,687 | $2,471 | | Gross margin as % of net sales | 34.4% | 30.9% | 34.5% | 30.9% | - Gross margin increased by **$79 million** in Q2 2024 and **$216 million** in the first six months of fiscal 2024, primarily due to improved manufacturing productivity and positive impact of prior year pricing actions[128](index=128&type=chunk) Average Commodity Prices | Commodity | Q2 2024 Average Price | Q2 2023 Average Price | 6M 2024 Average Price | 6M 2023 Average Price | | :---------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Copper (Lb.) | $3.79 | $4.13 | $3.83 | $4.16 | | Gold (Troy oz.) | $1,966 | $1,870 | $1,955 | $1,843 | | Silver (Troy oz.) | $23.32 | $23.34 | $23.23 | $23.75 | | Palladium (Troy oz.) | $1,493 | $2,308 | $1,497 | $2,185 | - The company expects to purchase approximately **190 million pounds** of copper, **100,000 troy ounces** of gold, **2.1 million troy ounces** of silver, and **10,000 troy ounces** of palladium in fiscal 2024[129](index=129&type=chunk) [Operating Expenses](index=30&type=section&id=Operating%20Expenses) This section details the company's selling, general, administrative, and restructuring expenses Operating Expenses Data | Expense Type | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Selling, general, and administrative expenses | $444 | $435 | $868 | $827 | | Restructuring and other charges, net | $40 | $119 | $61 | $230 | - Selling, general, and administrative expenses increased by **$41 million** in the first six months of fiscal 2024 due to inflation, partially offset by savings from prior restructuring actions[130](index=130&type=chunk) - Net restructuring charges of **$41 million** were incurred in the first six months of fiscal 2024 for a new program to optimize manufacturing footprint and cost structure, primarily in Industrial and Transportation Solutions[133](index=133&type=chunk) - Annualized cost savings of approximately **$10 million** are expected from fiscal 2024 restructuring actions, fully realized by the end of fiscal 2025[133](index=133&type=chunk) - Costs of **$8 million** were incurred in the first six months of fiscal 2024 related to the proposed change in place of incorporation[134](index=134&type=chunk) [Operating Income](index=32&type=section&id=Operating%20Income) This section analyzes the company's operating income and operating margin performance Operating Income and Margin Data | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :--------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Operating income | $692 | $537 | $1,390 | $1,039 | | Operating margin | 17.4% | 12.9% | 17.8% | 13.0% | - Operating income increased by **$155 million** in Q2 2024 and **$351 million** in the first six months of fiscal 2024, driven by improved manufacturing productivity[135](index=135&type=chunk) [Non-Operating Items](index=33&type=section&id=Non-Operating%20Items) This section discusses interest income, income tax expense, and other non-operating financial items Non-Operating Items Data | Metric | Q2 2024 (millions) | Q2 2023 (millions) | 6M 2024 (millions) | 6M 2023 (millions) | | :-------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Interest income | $19 | $12 | $41 | $21 | | Income tax expense (benefit) | $146 | $100 | $(959) | $187 | | Effective tax rate | 21.3% | 19.0% | (69.2)% | 18.5% | - Interest income increased due to higher interest rates and increased cash balances[137](index=137&type=chunk) - The company recorded a significant income tax benefit of **$959 million** for the six months ended March 29, 2024, compared to an expense in the prior year, leading to a negative effective tax rate[137](index=137&type=chunk) - The OECD's **15%** global minimum corporate tax rules are expected to affect the company starting in fiscal 2025, with potential material impact on results, cash taxes, and effective tax rate[139](index=139&type=chunk) [Segment Results](index=33&type=section&id=Segment%20Results) This section provides a detailed breakdown of financial results for each business segment [Transportation Solutions](index=33&type=section&id=Transportation%20Solutions) This section analyzes the financial performance of the Transportation Solutions segment by end market Transportation Solutions Net Sales by End Market | End Market | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :-------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Automotive | $1,749 | $1,795 | $3,525 | $3,444 | | Commercial transportation | $384 | $405 | $740 | $753 | | Sensors | $251 | $283 | $492 | $545 | | **Total** | **$2,384** | **$2,483** | **$4,757** | **$4,742** | - Net sales decreased by **4.0%** in Q2 2024 due to divestiture impact (**1.8%**), foreign currency translation (**1.2%**), and organic declines (**1.0%**)[143](index=143&type=chunk) - Organic net sales in Automotive increased **1.2%** in Q2 2024, driven by **12.1%** growth in Asia–Pacific due to increased content per vehicle, offsetting declines in EMEA and Americas[144](index=144&type=chunk) - Sensors organic net sales decreased **10.3%** in Q2 2024 due to market weakness in industrial applications and strategic exit of lower margin product lines[144](index=144&type=chunk) Transportation Solutions Operating Income | Metric | Q2 2024 Operating Income (millions) | Q2 2023 Operating Income (millions) | 6M 2024 Operating Income (millions) | 6M 2023 Operating Income (millions) | | :--------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Operating income | $467 | $333 | $945 | $615 | | Operating margin | 19.6% | 13.4% | 19.9% | 13.0% | - Operating income increased by **$134 million** in Q2 2024 and **$330 million** in the first six months of fiscal 2024, primarily due to improved manufacturing productivity[145](index=145&type=chunk) [Industrial Solutions](index=35&type=section&id=Industrial%20Solutions) This section analyzes the financial performance of the Industrial Solutions segment by end market Industrial Solutions Net Sales by End Market | End Market | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :-------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Industrial equipment | $356 | $461 | $686 | $895 | | Aerospace, defense, and marine | $342 | $298 | $632 | $562 | | Energy | $234 | $233 | $439 | $422 | | Medical | $211 | $199 | $411 | $372 | | **Total** | **$1,143** | **$1,191** | **$2,168** | **$2,251** | - Net sales decreased by **4.0%** in Q2 2024 due to organic net sales declines (**5.6%**), partially offset by acquisitions and divestitures (**2.7%**)[149](index=149&type=chunk) - Industrial equipment organic net sales decreased **28.4%** in Q2 2024 due to reduced demand and inventory corrections[151](index=151&type=chunk) - Aerospace, defense, and marine organic net sales increased **17.0%** in Q2 2024 due to growth in commercial aerospace and defense markets[151](index=151&type=chunk) Industrial Solutions Operating Income | Metric | Q2 2024 Operating Income (millions) | Q2 2023 Operating Income (millions) | 6M 2024 Operating Income (millions) | 6M 2023 Operating Income (millions) | | :--------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Operating income | $157 | $134 | $298 | $290 | | Operating margin | 13.7% | 11.3% | 13.7% | 12.9% | - Operating income increased by **$23 million** in Q2 2024 and **$8 million** in the first six months of fiscal 2024, with Q2 operating income consistent with prior year levels due to pricing actions offsetting lower volume[152](index=152&type=chunk) [Communications Solutions](index=37&type=section&id=Communications%20Solutions) This section analyzes the financial performance of the Communications Solutions segment by end market Communications Solutions Net Sales by End Market | End Market | Q2 2024 Net Sales (millions) | Q2 2023 Net Sales (millions) | 6M 2024 Net Sales (millions) | 6M 2023 Net Sales (millions) | | :---------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Data and devices | $273 | $288 | $552 | $617 | | Appliances | $167 | $198 | $321 | $391 | | **Total** | **$440** | **$486** | **$873** | **$1,008** | - Net sales decreased by **9.5%** in Q2 2024 and **13.4%** in the first six months of fiscal 2024, primarily due to organic net sales declines[156](index=156&type=chunk) - Data and devices organic net sales decreased **4.4%** in Q2 2024 due to market declines and inventory corrections, partially offset by growth in cloud and AI applications[160](index=160&type=chunk) - Appliances organic net sales decreased **13.8%** in Q2 2024 due to market declines and inventory corrections across all regions[160](index=160&type=chunk) Communications Solutions Operating Income | Metric | Q2 2024 Operating Income (millions) | Q2 2023 Operating Income (millions) | 6M 2024 Operating Income (millions) | 6M 2023 Operating Income (millions) | | :--------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Operating income | $68 | $70 | $147 | $134 | | Operating margin | 15.5% | 14.4% | 16.8% | 13.3% | - Operating income decreased by **$2 million** in Q2 2024 but increased by **$13 million** in the first six months of fiscal 2024 Q2 operating income was consistent with prior year due to product mix offsetting price erosion[157](index=157&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, debt, and overall financial liquidity and capital structure - The company believes cash from operations and other funding sources will be sufficient to meet anticipated capital needs, including debt payments of **$350 million** (August 2024) and **€550 million** (February 2025)[160](index=160&type=chunk) - Excess cash may be used for share repurchases, strategic acquisitions, dividends, or debt reduction[161](index=161&type=chunk) [Cash Flows from Operating Activities](index=39&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section details cash generated from the company's primary business operations - Net cash provided by operating activities increased by **$214 million** to **$1,429 million** in the first six months of fiscal 2024, primarily due to higher pre-tax income[162](index=162&type=chunk) - Income taxes paid, net of refunds, were **$238 million** in the first six months of fiscal 2024[162](index=162&type=chunk) [Cash Flows from Investing Activities](index=39&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section details cash used for or generated from investment activities, including capital expenditures and acquisitions - Capital expenditures decreased to **$318 million** in the first six months of fiscal 2024 from **$372 million** in the prior year, with fiscal 2024 capital spending expected to be approximately **5%** of net sales[163](index=163&type=chunk) - Acquisition of businesses, net of cash acquired, totaled **$339 million** in the first six months of fiscal 2024, compared to **$108 million** in the prior year[164](index=164&type=chunk) - Proceeds from divestiture of businesses, net of cash retained, were **$38 million** in the first six months of fiscal 2024, compared to **$51 million** in the prior year[165](index=165&type=chunk) [Cash Flows from Financing Activities and Capitalization](index=39&type=section&id=Cash%20Flows%20from%20Financing%20Activities%20and%20Capitalization) This section details cash flows related to debt, equity, and dividend payments - Total debt was **$4,196 million** at March 29, 2024, a slight decrease from **$4,211 million** at September 29, 2023[166](index=166&type=chunk) - TEGSA's commercial paper outstanding was **$291 million** at March 29, 2024, at a **5.50%** weighted-average interest rate[167](index=167&type=chunk) - A new **$1.5 billion** five-year unsecured senior revolving credit facility was entered into in April 2024, maturing in April 2029[168](index=168&type=chunk) - The company was in compliance with all debt covenants as of March 29, 2024[169](index=169&type=chunk) - Payments of common share dividends to shareholders were **$365 million** in the first six months of fiscal 2024[170](index=170&type=chunk) - The board authorized a **$1.5 billion** increase in the share repurchase program, with **$1.4 billion** remaining availability at March 29, 2024[172](index=172&type=chunk) [Summarized Guarantor Financial Information](index=40&type=section&id=Summarized%20Guarantor%20Financial%20Information) This section provides summarized financial information for the guarantor and non-guarantor subsidiaries - TE Connectivity Ltd fully and unconditionally guarantees TEGSA's senior notes, commercial paper, and Credit Facility[173](index=173&type=chunk) Summarized Guarantor Balance Sheet Data | Balance Sheet Data | March 29, 2024 (millions) | September 29, 2023 (millions) | | :------------------- | :------------------------- | :---------------------------- | | Total current assets | $1,077 | $1,632 | | Total noncurrent assets | $3,625 | $2,857 | | Total current liabilities | $2,157 | $1,303 | | Total noncurrent liabilities | $13,231 | $7,592 | Summarized Guarantor Statement of Operations Data | Statement of Operations Data | 6M 2024 (millions) | FY 2023 (millions) | | :--------------------------- | :------------------ | :----------------- | | Loss from continuing operations | $(48) | $(606) | | Net loss | $(48) | $(606) | [Guarantees](index=40&type=section&id=Guarantees) This section describes the company's various guarantees and potential financial exposures - The company provides various guarantees for third-party performance, uncompleted work, and financial commitments, with potential exposure not expected to materially affect financial results[177](index=177&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$180 million** at March 29, 2024[179](index=179&type=chunk) [Commitments and Contingencies](index=41&type=section&id=Commitments%20and%20Contingencies) This note describes the company's various commitments, legal proceedings, and environmental contingencies [Legal Proceedings](index=41&type=section&id=Legal%20Proceedings) This section discusses ongoing legal proceedings and their potential impact on the company - The company is subject to various legal proceedings and claims, but does not expect their outcome to have a material effect on results of operations, financial position, or cash flows[181](index=181&type=chunk) [Trade Compliance Matters](index=41&type=section&id=Trade%20Compliance%20Matters) This section addresses investigations and disclosures related to U.S trade controls compliance - The company is investigating past compliance with U.S trade controls and has made voluntary disclosures of apparent violations to BIS and DDTC Investigations are ongoing, and potential fines/penalties are reserved for, but the final outcome is uncertain[182](index=182&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the company's most significant accounting policies and estimates - Key accounting policies and estimates include revenue recognition, goodwill and other intangible assets, income taxes, and pension plans[185](index=185&type=chunk) - No significant changes to critical accounting policies and estimates occurred during the first six months of fiscal 2024[185](index=185&type=chunk) [Accounting Pronouncements](index=41&type=section&id=Accounting%20Pronouncements) This section refers to recently issued and adopted accounting pronouncements and their impact - Refer to Note 1 for information regarding recently issued and adopted accounting pronouncements[187](index=187&type=chunk) [Non-GAAP Financial Measure](index=42&type=section&id=Non-GAAP%20Financial%20Measure) This section defines and explains the use of non-GAAP financial measures, such as organic net sales - Organic net sales growth (decline) is presented as a non-GAAP financial measure, excluding the impact of foreign currency exchange rates and acquisitions/divestitures, to provide insight into underlying business growth[189](index=189&type=chunk) - Management uses organic net sales growth (decline) to monitor and evaluate performance and in decision-making processes, and it is a significant component in incentive compensation plans[190](index=190&type=chunk) [Forward-Looking Information](index=42&type=section&id=Forward-Looking%20Information) This section provides cautionary statements regarding forward-looking information and associated risks - The report contains forward-looking statements regarding future results, business strategies, financing plans, competitive position, and potential growth opportunities[193](index=193&type=chunk) - Forward-looking statements involve risks, uncertainties, and assumptions, and actual results may differ materially[194](index=194&type=chunk) - Key risks include global economic conditions, demand in served industries (especially automotive), raw material costs, foreign currency fluctuations, and risks associated with acquisitions, divestitures, and the proposed change in incorporation to Ireland[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no significant changes in the company's exposures to market risk during the first six months of fiscal 2024 - No significant changes in market risk exposures occurred during the first six months of fiscal 2024[199](index=199&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=45&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 29, 2024[200](index=200&type=chunk) [Changes in Internal Control Over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended March 29, 2024[201](index=201&type=chunk) PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, and other miscellaneous information [ITEM 1. LEGAL PROCEEDINGS](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there have been no material developments in the company's legal proceedings since the last Annual Report on Form 10-K - No material developments in legal proceedings since the fiscal year ended September 29, 2023, Annual Report on Form 10-K[204](index=204&type=chunk) [ITEM 1A. RISK FACTORS](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, emphasizing that these and other unpredicted risks could still materially affect the business - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended September 29, 2023[205](index=205&type=chunk) - Additional unknown or currently immaterial risks may also impair business operations, financial condition, and liquidity[205](index=205&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the company's purchases of its common shares during the quarter ended March 29, 2024, under its share repurchase program Common Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :------------------------------------------------------------------------------------ | | December 30, 2023–January 26, 2024 | 893,745 | $134.57 | 893,796 | $1,695,479,687 | | January 27–March 1, 2024 | 1,109,848 | $142.67 | 1,104,599 | $1,537,893,156 | | March 2–March 29, 2024 | 908,132 | $141.94 | 908,132 | $1,408,990,414 | | **Total** | **2,911,725** | **$139.96** | **2,906,527** | | - The company repurchased **2,911,725** common shares at an average price of **$139.96** per share during the quarter ended March 29, 2024[206](index=206&type=chunk) - The share repurchase program has no expiration date, and **$1.4 billion** of availability remained at March 29, 2024[207](index=207&type=chunk) [ITEM 5. OTHER INFORMATION](index=47&type=section&id=Item%205.%20Other%20Information) This section reports on Rule 10b5-1 trading arrangements by directors and officers - No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended March 29, 2024[208](index=208&type=chunk) [ITEM 6. EXHIBITS](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the merger agreement, articles of association, credit facility agreement, stock and incentive plan, employment agreements, and certifications - Key exhibits include the Merger Agreement between TE Connectivity Ltd and TE Connectivity plc, the Second Amended and Restated Five-Year Senior Credit Agreement, and the TE Connectivity Ltd 2024 Stock and Incentive Plan[209](index=209&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[209](index=209&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the signature of the registrant, confirming the due authorization and filing of the report - The report was signed by Heath A Mitts, Executive Vice President and Chief Financial Officer, on April 26, 2024[212](index=212&type=chunk)

Financial Data and Key Metrics Changes - The company reported second quarter sales of $3.97 billion, which was in line with guidance and represented a 3% organic growth sequentially, but a 5% decline on a reported basis year-over-year [20][48] - Adjusted earnings per share (EPS) was $1.86, up 13% year-over-year, driven by a 250 basis points expansion in adjusted operating margins to 18.5% [31][76] - Free cash flow for the first half of the fiscal year reached $1.1 billion, up 32% year-over-year, with expectations to exceed 100% free cash flow conversion for the year [32][49] Business Line Data and Key Metrics Changes - In the Transportation segment, organic growth was 1%, with double-digit growth in China offset by declines in North America and Europe [68] - The Industrial segment saw a 6% organic decline overall, but three out of four businesses continued to show growth, while the Industrial Equipment business faced a 28% organic decline due to destocking [70][71] - The Communications segment is expected to return to year-over-year growth in the third quarter, driven by momentum in high-speed cloud and AI applications [17][43] Market Data and Key Metrics Changes - Global auto production is expected to be around 21 million units per quarter for the second half of the fiscal year, with EV and hybrid production projected to increase by 24% this fiscal year [40][67] - The company noted a strengthening dollar has created headwinds for growth and earnings, impacting the second quarter and expected to continue into the third quarter [18] - The company anticipates stability in most end markets served, with improved order levels across all segments, marking the first time in 1.5 years that orders exceeded $4 billion [22][86] Company Strategy and Development Direction - The company is strategically positioned around secular growth trends, including renewable energy, cloud applications, and electric vehicle production [19] - Continued investment in the auto business is aimed at supporting engineering requirements for next-generation vehicles, including electrification and high-speed data applications [25] - The long-term value creation model remains focused on margin performance, operational leverage, and strong cash generation to return capital to shareholders while pursuing bolt-on M&A opportunities [64][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit earnings growth for the fiscal year, despite a slow growth environment [15] - The company expects to see normalization in the Industrial Equipment business later this fiscal year, with early indications of stabilization in order patterns [34][71] - Management highlighted the importance of AI applications, projecting revenues from AI to double from $200 million this year to $400 million next year, with a long-term goal of reaching $1 billion [72][90] Other Important Information - The company issued its "Connecting Our World" report detailing commitments to corporate responsibility and sustainability initiatives [21] - Adjusted operating margins were up in each segment compared to the prior year, indicating strong operational performance [15][48] Q&A Session Summary Question: What underpins TE's more positive view on auto production? - Management noted that despite shifts in production strategies among OEMs, global auto production is expected to remain slightly up this year, with strong growth in EVs and hybrids, particularly in China [52][82] Question: Can you elaborate on order patterns and market health? - Management indicated that destocking in the Communications segment is over, and they expect stability and growth in other segments, with sequential order momentum indicating a positive outlook [58][86] Question: What are the growth opportunities in AI solutions? - Management highlighted a broad range of products for AI applications, with expectations to double AI revenues next year and a path to $1 billion in a few years [90][92] Question: How is the company addressing pricing and margin impacts? - Management stated that pricing is expected to be neutral at the TE level, with effective price actions to recover inflation costs [125] Question: What is the outlook for fiscal 2025? - Management expressed optimism for fiscal 2025, anticipating continued growth in electric vehicles and a return to normalcy in the Industrial Equipment business, with expectations of 4% to 6% growth [116][118]

Exhibit 99.1 NEWS RELEASE te.com TE Connectivity announces second quarter results for fiscal year 2024 Year-over-year EPS growth driven by significant margin expansion; record cash flow generation SCHAFFHAUSEN, Switzerland – April 24, 2024 – TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 29, 2024. Second Quarter Highlights "Our teams delivered EPS above our guidance this quarter with double-digit earnings growth driven by margin expansion in all three of ou ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the company's unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net sales | $3,831 | $3,841 | | Gross margin | $1,324 | $1,187 | | Operating income | $698 | $502 | | Income tax (expense) benefit | $1,105 | $(87) | | Net income | $1,803 | $397 | | Basic earnings per share | $5.80 | $1.26 | | Diluted earnings per share | $5.76 | $1.24 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net income | $1,803 | $397 | | Other comprehensive income | $173 | $376 | | Comprehensive income attributable to TE Connectivity Ltd. | $1,972 | $764 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Dec 29, 2023 vs Sep 29, 2023) | Metric | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Total current assets | $7,441 | $7,892 | | Property, plant, and equipment, net | $3,854 | $3,754 | | Goodwill | $5,836 | $5,463 | | Intangible assets, net | $1,278 | $1,175 | | Deferred income taxes (assets) | $3,852 | $2,600 | | Total assets | $23,071 | $21,712 | | Total current liabilities | $4,011 | $4,463 | | Total liabilities | $9,822 | $10,057 | | Total equity | $13,141 | $11,551 | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Condensed Consolidated Statements of Equity (Q1 FY24) | Metric | Balance at Sep 29, 2023 (in millions) | Net Income (in millions) | Other Comprehensive Income (in millions) | Repurchase of Common Shares (in millions) | Balance at Dec 29, 2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total TE Connectivity Ltd. shareholders' equity | $11,551 | $1,803 | $174 | $(420) | $13,136 | | Total equity | $11,551 | $1,803 | $174 | $(420) | $13,141 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $719 | $581 | | Net cash used in investing activities | $(468) | $(265) | | Net cash used in financing activities | $(745) | $(621) | | Net decrease in cash, cash equivalents, and restricted cash | $(491) | $(295) | | Cash, cash equivalents, and restricted cash at end of period | $1,170 | $793 | - Acquisition of businesses, net of cash acquired, increased to **$349 million** in Q1 FY24 from $109 million in Q1 FY23[20](index=20&type=chunk) - Repurchase of common shares increased to **$476 million** in Q1 FY24 from $287 million in Q1 FY23[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [1. Basis of Presentation and Accounting Policies](index=9&type=section&id=1.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) - The unaudited Condensed Consolidated Financial Statements are prepared in U.S. dollars, in accordance with GAAP[22](index=22&type=chunk) - The company adopted ASU No 2022-04 (Supplier Finance Programs) in the first quarter of fiscal 2024, which did not have a material impact on the financial statements[27](index=27&type=chunk) - The company is currently assessing the impact of ASU No 2023-07 (Segment Reporting) and ASU No 2023-09 (Income Tax Disclosures), effective for fiscal 2025 and 2026, respectively[25](index=25&type=chunk)[26](index=26&type=chunk) [2. Restructuring and Other Charges, Net](index=10&type=section&id=2.%20Restructuring%20and%20Other%20Charges%2C%20Net) Net Restructuring and Other Charges (Q1 FY24 vs Q1 FY23) | Charge Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Restructuring charges, net | $9 | $104 | | Loss on divestiture and impairment of held for sale business | $11 | $6 | | Other charges, net | $1 | $1 | | **Total Restructuring and other charges, net** | **$21** | **$111** | - Initiated a fiscal 2024 restructuring program to optimize manufacturing footprint and improve cost structure, primarily in Industrial Solutions and Transportation Solutions segments, with **$5 million recorded in Q1 FY24**[33](index=33&type=chunk) - Sold one business for net cash proceeds of **$38 million**, recording a pre-tax loss on sale of **$11 million**, reported in the Transportation Solutions segment[38](index=38&type=chunk) [3. Acquisitions](index=12&type=section&id=3.%20Acquisitions) - Acquired approximately **98.7% of Schaffner Holding AG for $349 million** (net of cash acquired) in Q1 FY24, reported as part of the Industrial Solutions segment[40](index=40&type=chunk) - Acquired one business for **$109 million** (net of cash acquired) in Q1 FY23, reported as part of the Industrial Solutions segment[41](index=41&type=chunk) [4. Inventories](index=12&type=section&id=4.%20Inventories) Inventories (Dec 29, 2023 vs Sep 29, 2023) | Inventory Type | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Raw materials | $394 | $367 | | Work in progress | $1,284 | $1,185 | | Finished goods | $1,105 | $1,000 | | **Total Inventories** | **$2,783** | **$2,552** | [5. Goodwill](index=12&type=section&id=5.%20Goodwill) Goodwill by Segment (Dec 29, 2023 vs Sep 29, 2023) | Segment | Sep 29, 2023 (in millions) | Acquisition (in millions) | Currency translation and other (in millions) | Dec 29, 2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $1,478 | — | $29 | $1,507 | | Industrial Solutions | $3,263 | $257 | $71 | $3,591 | | Communications Solutions | $722 | — | $16 | $738 | | **Total** | **$5,463** | **$257** | **$116** | **$5,836** | - Goodwill in the Industrial Solutions segment increased by **$257 million** due to an acquisition in Q1 FY24[43](index=43&type=chunk)[44](index=44&type=chunk) [6. Intangible Assets, Net](index=13&type=section&id=6.%20Intangible%20Assets%2C%20Net) Intangible Assets, Net (Dec 29, 2023 vs Sep 29, 2023) | Asset Type | Dec 29, 2023 (Net, in millions) | Sep 29, 2023 (Net, in millions) | | :--- | :--- | :--- | | Customer relationships | $1,020 | $914 | | Intellectual property | $245 | $248 | | Other | $13 | $13 | | **Total** | **$1,278** | **$1,175** | - Intangible asset amortization expense was **$42 million** for Q1 FY24, down from $46 million in Q1 FY23[46](index=46&type=chunk) - Aggregate amortization expense on intangible assets is expected to be **$128 million** for the remainder of fiscal 2024[47](index=47&type=chunk) [7. Debt](index=13&type=section&id=7.%20Debt) - Commercial paper outstanding decreased to **$261 million** at December 29, 2023, from $330 million at September 29, 2023, with a weighted-average interest rate of **5.50%**[48](index=48&type=chunk) - The fair value of debt was approximately **$4,103 million** at December 29, 2023, up from $3,974 million at September 29, 2023[48](index=48&type=chunk) [8. Leases](index=13&type=section&id=8.%20Leases) Lease Cost (Q1 FY24 vs Q1 FY23) | Lease Cost Component | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Operating lease cost | $34 | $34 | | Variable lease cost | $12 | $12 | | **Total lease cost** | **$46** | **$46** | - Cash paid for operating leases was **$34 million** in Q1 FY24, compared to $32 million in Q1 FY23[51](index=51&type=chunk) [9. Commitments and Contingencies](index=14&type=section&id=9.%20Commitments%20and%20Contingencies) - The company is subject to various legal proceedings, trade compliance matters, and environmental remediation, but does not expect a material effect on financial results[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Environmental remediation costs are estimated in the range of **$17 million to $44 million**, with a probable loss of **$20 million** accrued as of December 29, 2023[54](index=54&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$196 million** at December 29, 2023[57](index=57&type=chunk) - Obligations under the supply chain finance program were **$122 million** at December 29, 2023, up from $109 million at September 29, 2023[58](index=58&type=chunk) [10. Financial Instruments](index=15&type=section&id=10.%20Financial%20Instruments) - The company uses cross-currency swap contracts and foreign currency forward contracts to manage foreign currency exchange rate risk[59](index=59&type=chunk) - Net investment in foreign operations is hedged using intercompany loans, external borrowings (aggregate notional value **$2,792 million** at Dec 29, 2023), and cross-currency swap contracts (aggregate notional value **$3,599 million** at Dec 29, 2023)[60](index=60&type=chunk)[61](index=61&type=chunk) - Commodity swap contracts, designated as cash flow hedges, had an aggregate notional value of **$431 million** at December 29, 2023, to manage commodity price fluctuations[64](index=64&type=chunk) [11. Retirement Plans](index=17&type=section&id=11.%20Retirement%20Plans) Net Periodic Pension Benefit Cost (Q1 FY24 vs Q1 FY23) | Plan Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Non-U.S. Plans | $10 | $10 | | U.S. Plans | $3 | $3 | | **Total** | **$13** | **$13** | - The company contributed **$12 million** to its non-U.S. pension plans during Q1 FY24[66](index=66&type=chunk) [12. Income Taxes](index=17&type=section&id=12.%20Income%20Taxes) - The company recorded an income tax benefit of **$1,105 million** for Q1 FY24, compared to an expense of $87 million for Q1 FY23[67](index=67&type=chunk) - The Q1 FY24 benefit includes an **$874 million** net income tax benefit from a Swiss tax credit and a **$262 million** benefit from the revaluation of deferred tax assets due to a Swiss corporate tax rate increase[67](index=67&type=chunk) - Approximately **$30 million** of unrecognized income tax benefits could be resolved within the next twelve months[68](index=68&type=chunk) [13. Earnings Per Share](index=17&type=section&id=13.%20Earnings%20Per%20Share) Weighted-Average Number of Shares Outstanding (Q1 FY24 vs Q1 FY23) | Share Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Basic | 311 | 317 | | Dilutive impact of share-based compensation arrangements | 2 | 2 | | **Diluted** | **313** | **319** | - Antidilutive share options not included in diluted EPS computation totaled **2 million** for both Q1 FY24 and Q1 FY23[72](index=72&type=chunk) [14. Equity](index=18&type=section&id=14.%20Equity) - Dividends paid per common share increased to **$0.59** in Q1 FY24 from $0.56 in Q1 FY23[73](index=73&type=chunk) - The board of directors authorized a **$1.5 billion** increase in the share repurchase program during Q1 FY24[74](index=74&type=chunk) - Repurchased **3 million** common shares for **$420 million** in Q1 FY24, compared to 2 million shares for $233 million in Q1 FY23[74](index=74&type=chunk) - As of December 29, 2023, **$1.8 billion** remained available under the share repurchase authorization[74](index=74&type=chunk) [15. Share Plans](index=18&type=section&id=15.%20Share%20Plans) - Share-based compensation expense was **$34 million** in Q1 FY24, up from $32 million in Q1 FY23[75](index=75&type=chunk) - Unrecognized compensation expense related to share-based awards totaled **$211 million**, expected to be recognized over a weighted-average period of **1.9 years**[77](index=77&type=chunk) Share-Based Awards Granted (Q1 FY24) | Award Type | Shares Granted (in millions) | Grant-Date Fair Value | | :--- | :--- | :--- | | Share options | 0.9 | $39.77 | | Restricted share awards | 0.4 | $131.77 | | Performance share awards | 0.2 | $131.77 | [16. Segment and Geographic Data](index=20&type=section&id=16.%20Segment%20and%20Geographic%20Data) Net Sales by Segment (Q1 FY24 vs Q1 FY23) | Segment | Q1 FY24 (in millions) | % of Total Q1 FY24 | Q1 FY23 (in millions) | % of Total Q1 FY23 | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $2,373 | 62 % | $2,259 | 58 % | | Industrial Solutions | $1,025 | 27 % | $1,060 | 28 % | | Communications Solutions | $433 | 11 % | $522 | 14 % | | **Total** | **$3,831** | **100 %** | **$3,841** | **100 %** | Net Sales by Geographic Region (Q1 FY24 vs Q1 FY23) | Region | Q1 FY24 (in millions) | % of Total Q1 FY24 | Q1 FY23 (in millions) | % of Total Q1 FY23 | | :--- | :--- | :--- | :--- | :--- | | EMEA | $1,411 | 37 % | $1,326 | 34 % | | Asia–Pacific | $1,379 | 36 % | $1,407 | 37 % | | Americas | $1,041 | 27 % | $1,108 | 29 % | | **Total** | **$3,831** | **100 %** | **$3,841** | **100 %** | Operating Income by Segment (Q1 FY24 vs Q1 FY23) | Segment | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Transportation Solutions | $478 | $282 | | Industrial Solutions | $141 | $156 | | Communications Solutions | $79 | $64 | | **Total** | **$698** | **$502** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition, operational results, segment performance, and liquidity for the first quarter of fiscal 2024 [Overview](index=22&type=section&id=Overview) - TE Connectivity Ltd is a global industrial technology leader providing connectivity and sensor solutions[89](index=89&type=chunk) - Solutions enable distribution of power, signal, and data for next-generation transportation, renewable energy, automated factories, data centers, and medical technology[89](index=89&type=chunk) [Summary of Performance](index=22&type=section&id=Summary%20of%20Performance) - Net sales were essentially flat in Q1 FY24 compared to Q1 FY23, with an **organic net sales decrease of 0.7%**[91](index=91&type=chunk) - Transportation Solutions net sales increased **5.0%** due to automotive market growth, while Industrial Solutions decreased **3.3%** and Communications Solutions decreased **17.0%**[91](index=91&type=chunk) - Net cash provided by operating activities was **$719 million** in Q1 FY24[91](index=91&type=chunk) - The company mitigated inflationary cost pressures through productivity and prior pricing actions and is managing costs through restructuring and other initiatives[92](index=92&type=chunk) [Outlook](index=23&type=section&id=Outlook) - Expected net sales for Q2 FY24 are approximately **$3.95 billion**, a decline from $4.16 billion in Q2 FY23, with sales declines across all segments[94](index=94&type=chunk) - Expected diluted earnings per share from continuing operations for Q2 FY24 is approximately **$1.75 per share**[94](index=94&type=chunk) - The outlook reflects a negative impact of foreign currency exchange rates on net sales of approximately **$13 million** and on EPS of **$0.05 per share** in Q2 FY24[94](index=94&type=chunk) [Acquisition](index=23&type=section&id=Acquisition) - In Q1 FY24, TE Connectivity acquired approximately **98.7% of Schaffner Holding AG for CHF 302 million ($349 million, net of cash acquired)**, integrating it into the Industrial Solutions segment[95](index=95&type=chunk) [Divestiture](index=23&type=section&id=Divestiture) - In Q1 FY24, the company sold one business for net cash proceeds of **$38 million**, resulting in a pre-tax loss on sale of **$11 million**, reported in the Transportation Solutions segment[96](index=96&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) [Net Sales](index=24&type=section&id=Net%20Sales) - Net sales slightly decreased by **$10 million, or 0.3%**, in Q1 FY24 compared to Q1 FY23, driven by a **0.7% organic net sales decline** and a **0.7% negative impact from acquisitions/divestitures**, partially offset by a **1.1% positive impact from foreign currency translation**[99](index=99&type=chunk) - Pricing actions initiated in fiscal 2023 positively affected organic net sales by **$68 million** in Q1 FY24[99](index=99&type=chunk) Change in Net Sales by Segment (Q1 FY24 vs Q1 FY23) | Segment | Net Sales Growth (Decline) ($M) | Net Sales Growth (Decline) (%) | Organic Net Sales Growth (Decline) (%) | | :--- | :--- | :--- | :--- | | Transportation Solutions | $114 | 5.0 % | 5.0 % | | Industrial Solutions | $(35) | (3.3)% | (4.9)% | | Communications Solutions | $(89) | (17.0)% | (17.0)% | | **Total** | **$(10)** | **(0.3)%** | **(0.7)%** | Change in Net Sales by Geographic Region (Q1 FY24 vs Q1 FY23) | Region | Net Sales Growth (Decline) ($M) | Net Sales Growth (Decline) (%) | Organic Net Sales Growth (Decline) (%) | | :--- | :--- | :--- | :--- | | EMEA | $85 | 6.4 % | 2.5 % | | Asia–Pacific | $(28) | (2.0)% | (0.4)% | | Americas | $(67) | (6.0)% | (5.0)% | | **Total** | **$(10)** | **(0.3)%** | **(0.7)%** | [Cost of Sales and Gross Margin](index=26&type=section&id=Cost%20of%20Sales%20and%20Gross%20Margin) - Gross margin increased by **$137 million** in Q1 FY24 compared to Q1 FY23, primarily due to improved manufacturing productivity and positive impact of prior year pricing actions, partially offset by lower volume[105](index=105&type=chunk) Cost of Sales and Gross Margin (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Cost of sales | $2,507 | $2,654 | $(147) | | As a percentage of net sales | 65.4 % | 69.1 % | | | Gross margin | $1,324 | $1,187 | $137 | | As a percentage of net sales | 34.6 % | 30.9 % | | Average Raw Material Prices (Q1 FY24 vs Q1 FY23) | Material | Q1 FY24 Price | Q1 FY23 Price | | :--- | :--- | :--- | | Copper | $3.87/Lb. | $4.18/Lb. | | Gold | $1,943/Troy oz. | $1,821/Troy oz. | | Silver | $23.15/Troy oz. | $24.26/Troy oz. | | Palladium | $1,500/Troy oz. | $2,083/Troy oz. | [Operating Expenses](index=27&type=section&id=Operating%20Expenses) - Selling, general, and administrative expenses increased by **$32 million** in Q1 FY24, primarily due to inflation, partially offset by savings from prior restructuring actions[108](index=108&type=chunk) - Net restructuring and other charges decreased by **$90 million to $21 million** in Q1 FY24 from $111 million in Q1 FY23[108](index=108&type=chunk) - A new restructuring program was initiated in fiscal 2024 to optimize manufacturing footprint and cost structure, primarily in Industrial Solutions and Transportation Solutions segments, with expected annualized cost savings of approximately **$3 million** from Q1 FY24 actions[110](index=110&type=chunk) [Operating Income](index=27&type=section&id=Operating%20Income) Operating Income and Margin (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Operating income | $698 | $502 | $196 | | Operating margin | 18.2 % | 13.1 % | | - Operating income increased by **$196 million**, primarily due to improved gross margin and lower restructuring and other charges[112](index=112&type=chunk)[113](index=113&type=chunk) [Non-Operating Items](index=28&type=section&id=Non-Operating%20Items) - The company recorded an income tax benefit of **$1,105 million** in Q1 FY24, a significant change from an $87 million expense in Q1 FY23, resulting in an effective tax rate of **(158.1)%**[114](index=114&type=chunk) - The income tax benefit was primarily driven by an **$874 million** net income tax benefit from a Swiss tax credit and a **$262 million** benefit from the revaluation of deferred tax assets due to a Swiss corporate tax rate increase[67](index=67&type=chunk) - The OECD's **15% global minimum corporate tax** rules are expected to affect the company starting in fiscal 2025[115](index=115&type=chunk) [Segment Results](index=28&type=section&id=Segment%20Results) [Transportation Solutions](index=28&type=section&id=Transportation%20Solutions) - Net sales increased by **$114 million, or 5.0%**, in Q1 FY24, driven by **5.0% organic net sales growth**[118](index=118&type=chunk) - Automotive organic net sales increased **8.1%**, with strong growth in Asia-Pacific (**13.4%**) and EMEA (**7.4%**), partially offset by declines in the Americas (**4.0%**)[120](index=120&type=chunk) - Sensors organic net sales decreased **9.2%** due to market weakness and strategic exits of lower margin product lines[120](index=120&type=chunk) - Operating income increased by **$196 million** in Q1 FY24, with operating margin improving to **20.1%** from 12.5%, primarily due to improved manufacturing productivity and prior year pricing actions[119](index=119&type=chunk) [Industrial Solutions](index=31&type=section&id=Industrial%20Solutions) - Net sales decreased by **$35 million, or 3.3%**, in Q1 FY24, primarily due to a **4.9% organic net sales decline**[122](index=122&type=chunk) - Industrial equipment organic net sales decreased **26.3%** due to reduced demand and inventory corrections, while Aerospace, defense, and marine (**12.5% growth**) and Medical (**15.6% growth**) showed strength[123](index=123&type=chunk) - Operating income decreased by **$15 million** in Q1 FY24, with operating margin at **13.8%** (vs 14.7%), primarily due to lower volume, partially offset by prior year pricing actions[124](index=124&type=chunk) [Communications Solutions](index=32&type=section&id=Communications%20Solutions) - Net sales decreased by **$89 million, or 17.0%**, in Q1 FY24, entirely due to a **17.0% organic net sales decline**[128](index=128&type=chunk) - Data and devices organic net sales decreased **15.2%**, and Appliances organic net sales decreased **20.2%**, both impacted by market declines and inventory corrections[132](index=132&type=chunk) - Operating income increased by **$15 million** in Q1 FY24, with operating margin improving to **18.2%** from 12.3%, largely due to improved manufacturing productivity and lower restructuring charges, offsetting lower volume[128](index=128&type=chunk)[129](index=129&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes cash generated from operations and other funding sources will be sufficient to meet anticipated capital needs, including the payment of **$350 million** of senior notes due in August 2024[131](index=131&type=chunk) [Cash Flows from Operating Activities](index=33&type=section&id=Cash%20Flows%20from%20Operating%20Activities) - Net cash provided by operating activities increased by **$138 million to $719 million** in Q1 FY24 from $581 million in Q1 FY23, primarily due to higher pre-tax income[132](index=132&type=chunk) - Income taxes paid, net of refunds, were **$100 million** in Q1 FY24, compared to $98 million in Q1 FY23[132](index=132&type=chunk) [Cash Flows from Investing Activities](index=34&type=section&id=Cash%20Flows%20from%20Investing%20Activities) - Capital expenditures were **$151 million** in Q1 FY24, down from $183 million in Q1 FY23, with fiscal 2024 capital spending expected to be approximately **5% of net sales**[133](index=133&type=chunk) - Acquisition of businesses, net of cash acquired, increased to **$349 million** in Q1 FY24 from $109 million in Q1 FY23[135](index=135&type=chunk) - Received net cash proceeds of **$38 million** from the sale of one business in Q1 FY24[134](index=134&type=chunk) [Cash Flows from Financing Activities and Capitalization](index=34&type=section&id=Cash%20Flows%20from%20Financing%20Activities%20and%20Capitalization) - Total debt was **$4,198 million** at December 29, 2023, slightly down from $4,211 million at September 29, 2023[136](index=136&type=chunk) - Commercial paper outstanding decreased to **$261 million** at December 29, 2023, from $330 million at September 29, 2023, at a **5.50% weighted-average interest rate**[137](index=137&type=chunk) - The company has a **$1.5 billion** unsecured senior revolving credit facility with no borrowings outstanding and is in compliance with all debt covenants[138](index=138&type=chunk)[139](index=139&type=chunk) - Repurchased approximately **3 million** common shares for **$420 million** in Q1 FY24, compared to 2 million shares for $233 million in Q1 FY23, with **$1.8 billion** remaining under authorization[141](index=141&type=chunk) [Summarized Guarantor Financial Information](index=34&type=section&id=Summarized%20Guarantor%20Financial%20Information) - TEGSA's payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd[142](index=142&type=chunk) Summarized Guarantor Balance Sheet Data (Dec 29, 2023 vs Sep 29, 2023) | Metric | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Total current assets | $1,117 | $1,632 | | Total noncurrent assets | $3,485 | $2,857 | | Total current liabilities | $940 | $1,303 | | Total noncurrent liabilities | $8,710 | $7,592 | - Total noncurrent assets include **$3,454 million** of intercompany loans receivable from non-guarantor subsidiaries, and total noncurrent liabilities include **$5,070 million** of intercompany loans payable to non-guarantor subsidiaries as of December 29, 2023[144](index=144&type=chunk)[149](index=149&type=chunk) [Guarantees](index=35&type=section&id=Guarantees) - The company provides various guarantees for third-party performance, asset dispositions, and financial commitments, which are not expected to have a material adverse effect on financial results[145](index=145&type=chunk)[146](index=146&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$196 million** at December 29, 2023[147](index=147&type=chunk) [Commitments and Contingencies](index=35&type=section&id=Commitments%20and%20Contingencies) - This section refers to Note 9 of the Condensed Consolidated Financial Statements for detailed information on legal proceedings, trade compliance matters, and environmental matters[148](index=148&type=chunk) [Legal Proceedings](index=35&type=section&id=Legal%20Proceedings) - The company is subject to various legal proceedings and claims, including patent infringement, product liability, and environmental matters, but does not expect a material effect on its financial position or results[149](index=149&type=chunk)[150](index=150&type=chunk) [Trade Compliance Matters](index=37&type=section&id=Trade%20Compliance%20Matters) - The company has made voluntary disclosures of apparent U.S. trade controls violations to BIS and DDTC and is cooperating with ongoing investigations, including contact from the U.S. Department of Justice[151](index=151&type=chunk) - The timing and final outcome of these investigations are unpredictable, and while potential fines and penalties are reserved for, the final amounts may differ[151](index=151&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The preparation of financial statements requires management to make estimates and assumptions, particularly for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans[153](index=153&type=chunk)[154](index=154&type=chunk) - There were no significant changes to critical accounting policies and estimates during Q1 FY24[154](index=154&type=chunk) [Accounting Pronouncements](index=37&type=section&id=Accounting%20Pronouncements) - Refer to Note 1 to the Condensed Consolidated Financial Statements for additional information regarding recently issued and adopted accounting pronouncements[156](index=156&type=chunk) [Non-GAAP Financial Measure](index=37&type=section&id=Non-GAAP%20Financial%20Measure) - The company presents 'organic net sales growth (decline)' as a non-GAAP financial measure, excluding the impact of foreign currency exchange rates and acquisitions/divestitures, to provide useful information about underlying business trends[158](index=158&type=chunk) - Management uses this measure to monitor and evaluate performance and in decision-making processes, and it is a significant component in incentive compensation plans[159](index=159&type=chunk) [Forward-Looking Information](index=38&type=section&id=Forward-Looking%20Information) - The report contains forward-looking statements based on management's beliefs and assumptions, which involve risks, uncertainties, and assumptions that could cause actual results to differ materially[162](index=162&type=chunk)[163](index=163&type=chunk) - Key risks include global economic conditions, demand in the automotive industry, goodwill impairment, competition, raw material costs, foreign currency fluctuations, and geopolitical instability[164](index=164&type=chunk)[167](index=167&type=chunk) - The company does not have any intention or obligation to update forward-looking statements after filing this report, except as required by law[163](index=163&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no significant changes in TE Connectivity's exposures to market risk during the first quarter of fiscal 2024 - No significant changes in exposures to market risk during Q1 FY24[166](index=166&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 29, 2023[167](index=167&type=chunk) [Changes in Internal Control Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during Q1 FY24[168](index=168&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) There have been no material developments in the company's legal proceedings since the filing of its Annual Report on Form 10-K for fiscal year 2023 - No material developments in legal proceedings since the Annual Report on Form 10-K for FY23[171](index=171&type=chunk) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year 2023 - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for FY23[172](index=172&type=chunk) - Additional risks and uncertainties not currently known or believed to be immaterial may also impair business operations, financial condition, and liquidity[172](index=172&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased approximately 3.4 million common shares for $446 million during the first quarter of fiscal 2024 Issuer Purchases of Equity Securities (Q1 FY24) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | September 30–October 27, 2023 | 813,638 | $121.46 | | October 28–December 1, 2023 | 1,490,417 | $128.43 | | December 2–December 29, 2023 | 1,135,361 | $137.42 | | **Total** | **3,439,416** | **$129.75** | - Total purchases include **3,239,941** common shares through open market purchases under the share repurchase program and **199,475** shares to satisfy tax withholding requirements[174](index=174&type=chunk) - At December 29, 2023, **$1.8 billion** of availability remained under the share repurchase authorization[174](index=174&type=chunk) [ITEM 5. OTHER INFORMATION](index=43&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section details the adoption of a Rule 10b5-1 trading arrangement by an executive officer during the first quarter of fiscal 2024 [Rule 10b5-1 Trading Arrangements](index=43&type=section&id=Rule%2010b5-1%20Trading%20Arrangements) - Shad Kroeger, President, Industrial Solutions, adopted a Rule 10b5-1 trading plan on November 17, 2023, for the potential exercise and related sale of up to **18,750** common shares via stock options across three dates in 2024[175](index=175&type=chunk) [ITEM 6. EXHIBITS](index=43&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications and Inline XBRL documents - Exhibits include the TE Connectivity Ltd 2007 Stock and Incentive Plan (amended and restated as of December 12, 2023)[176](index=176&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[176](index=176&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are furnished[176](index=176&type=chunk) [SIGNATURES](index=44&type=section&id=Signatures) - The report was signed on behalf of TE Connectivity Ltd by Heath A Mitts, Executive Vice President and Chief Financial Officer, on January 26, 2024[180](index=180&type=chunk)

Financial Data and Key Metrics - Q1 sales were $3.83 billion, in-line with guidance, with flat revenue growth [105] - Adjusted operating margins expanded to 19.1%, up 290 basis points year-over-year, driven by strong operational performance [98][109] - Adjusted EPS was $1.84, up 20% year-over-year, ahead of guidance [109] - Free cash flow reached a record $570 million in Q1, building on strong cash performance from the previous year [91][119] Business Line Data and Key Metrics - Transportation segment sales grew 5% organically, driven by 8% growth in the auto business, with 13% growth in Asia and 7% in Europe [100] - Industrial segment sales were down 5% organically, with growth in Aerospace, Defense & Marine (AD&M), Medical, and Energy, but weakness in Industrial Equipment [118] - Communications segment sales were down 17% organically, with destocking now occurring only in pockets, and growth expected in the second half driven by AI applications [107][125] Market Data and Key Metrics - Global auto production was slightly over 22 million units in Q1, with stronger production in China offsetting weakness in Europe and North America [96] - EV production is expected to grow 25% this year, with two-thirds of EVs produced in Asia, where the company has a strong position [129][139] - Industrial Equipment destocking is expected to continue into the second half of the fiscal year, impacting organic growth [86][123] Company Strategy and Industry Competition - The company is focused on secular growth trends, including EV adoption, renewable energy, and AI applications [93][101] - Portfolio optimization and footprint consolidation have contributed to margin expansion, particularly in the Transportation segment [89][113] - The Schaffner acquisition expands the company's product portfolio in factory automation, with expected revenue of $40 million per quarter [152][168] Management Commentary on Operating Environment and Future Outlook - The company expects a slow global economic environment but remains confident in its ability to deliver strong margin expansion and earnings growth [84][120] - Q2 sales are expected to increase to $3.95 billion, driven by growth in the Industrial segment, partially offset by a slight decline in Transportation [94] - The company anticipates adjusted operating margins to remain in the high-teens for the Communications segment and mid-teens for the Industrial segment [133][149] Other Important Information - The company was included in the Dow Jones Sustainability Index for the 12th consecutive year, reflecting its commitment to sustainable business practices [95] - Restructuring charges for FY2024 are expected to be approximately $100 million, well below prior years, with future charges driven by bolt-on acquisitions [127] Q&A Summary Question: Can you elaborate on the factors driving the strong margin performance this quarter? [124] - Answer: Margin expansion was driven by operational execution, footprint consolidation, portfolio optimization, and price actions to offset higher input costs, particularly in the Transportation and Communications segments [124][132] Question: How is the company managing pricing in the Transportation segment, especially in automotive? [67] - Answer: The company has maintained neutral pricing by focusing on input costs and has successfully implemented price actions to offset inflationary pressures [67][68] Question: What is the outlook for EV adoption and its impact on the auto business? [144] - Answer: EV production is expected to grow 25% this year, with two-thirds of EVs produced in Asia, where the company has a strong position. The company expects 4-6% content outperformance in the auto business [129][139] Question: Can you provide more details on the Schaffner acquisition? [157] - Answer: Schaffner expands the company's product portfolio in factory automation, with expected revenue of $40 million per quarter. The acquisition is expected to improve profitability over time [152][168] Question: How is the company managing destocking in the Industrial Equipment business? [123] - Answer: Destocking in Industrial Equipment is expected to continue into the second half of the fiscal year, impacting organic growth. The company is focusing on direct customer relationships to mitigate the impact [123][128] Question: What is the outlook for AI-related revenue in the Communications segment? [165] - Answer: The company expects $200 million in AI-related revenue in FY2024, with growth expected in the second half of the year. AI applications are expected to drive higher content and revenue in the Communications segment [165][169]

Q1 2024 Financial Performance - Net sales were $3831 million, a slight decrease compared to $3841 million in Q1 2023 [20] - Adjusted EPS increased by 20% year-over-year to $184 [39] - Adjusted operating margin increased by 290 basis points year-over-year to 191% [39] - Free cash flow reached a record $570 million in Q1 [39] Segment Performance - Transportation Solutions net sales increased to $2373 million, up 5% organically [7, 48] - Industrial Solutions net sales decreased to $1025 million, down 5% organically [7, 62] - Communications Solutions net sales decreased to $433 million, down 17% organically [7, 89] Orders and Backlog - Total orders were $38 billion, up 4% year-over-year [29] - Transportation orders reflect stable global production and a strong backlog position [57] Q2 2024 Guidance - Expect sales of approximately $395 billion [29] - Expect adjusted EPS of approximately $182, up 10% year-over-year [56] Balance Sheet and Cash Flow - Ending cash balance was $1170 million [82] - Free cash flow was $570 million [100] - $600 million was returned to shareholders [73] - $350 million was used for the Schaffner acquisition [73]

Part I [Business](index=5&type=section&id=Item%201.%20Business) TE Connectivity is a global industrial technology leader providing a wide range of connectivity and sensor solutions across its Transportation, Industrial, and Communications segments - TE Connectivity is a global industrial technology leader specializing in connectivity and sensor solutions for harsh environments, serving markets like transportation, industrial applications, medical technology, energy, data communications, and home appliances[17](index=17&type=chunk) - The company operates through three reportable segments: Transportation Solutions, Industrial Solutions, and Communications Solutions[20](index=20&type=chunk) **Net Sales by Segment (% of Total Net Sales)** | Segment | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Transportation Solutions | 60% | 56% | 60% | | Industrial Solutions | 28% | 28% | 26% | | Communications Solutions | 12% | 16% | 14% | | **Total** | **100%** | **100%** | **100%** | - The Transportation Solutions segment is a leader in connectivity and sensor technologies for automotive, commercial transportation, and sensor applications[22](index=22&type=chunk)[24](index=24&type=chunk) - The Industrial Solutions segment supplies products for connecting and distributing power, data, and signals across markets like industrial equipment, aerospace, defense, marine, energy, and medical[25](index=25&type=chunk)[27](index=27&type=chunk) - The Communications Solutions segment provides electronic components for data and devices (e.g., data centers, smartphones) and appliances[26](index=26&type=chunk)[28](index=28&type=chunk) **Net Sales by Geographic Region (% of Total Net Sales)** | Region | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Europe/Middle East/Africa (EMEA) | 39% | 35% | 37% | | Asia–Pacific | 32% | 35% | 36% | | Americas | 29% | 30% | 27% | | **Total** | **100%** | **100%** | **100%** | - Sales are conducted primarily through direct selling, which accounted for **approximately 80% of total net sales** in fiscal 2023, and also via third-party distributors[34](index=34&type=chunk) **Backlog by Reportable Segment (Fiscal Year End)** | Segment | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | Transportation Solutions | $2,981 | $3,179 | | Industrial Solutions | $2,448 | $2,432 | | Communications Solutions | $617 | $885 | | **Total** | **$6,046** | **$6,496** | - As of fiscal year-end 2023, the company employed approximately 90,000 people worldwide and has set a goal to have **30% of leadership roles filled by women** by fiscal 2026[44](index=44&type=chunk)[45](index=45&type=chunk) **Key Sustainability Goals** | Goal | Baseline Fiscal Year | Targeted Fiscal Year of Achievement | | :--- | :--- | :--- | | 70%+ reduction in absolute GHG emissions (Scopes 1 & 2) | 2020 | 2030 | | 15% reduction in water withdrawals at high-stress sites | 2021 | 2025 | | 15% reduction in hazardous waste disposed | 2021 | 2025 | | 80% renewable electricity use in operations | n/a | 2025 | [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from macroeconomic conditions, industry cyclicality, operational challenges, and complex global regulatory environments - **Macroeconomic Risks:** The business is affected by global economic conditions, trade tensions (U.S., China, EU), inflation, and higher interest rates, which could lead to customer order delays or cancellations and potential goodwill impairment charges[62](index=62&type=chunk)[63](index=63&type=chunk) - **Foreign Currency Risk:** Approximately **60% of fiscal 2023 net sales** were in non-U.S. dollar currencies, and a stronger U.S. dollar adversely affects reported results as this exposure is not hedged[65](index=65&type=chunk) - **Geopolitical and China-Specific Risks:** The company has 17 manufacturing sites in China, and **approximately 20% of fiscal 2023 net sales** were to customers in China, making it vulnerable to volatile economic conditions and trade policies[71](index=71&type=chunk) - **Industry-Specific Risks:** The company is highly dependent on the cyclical automotive industry (**43% of FY2023 net sales**), which is subject to significant price pressure and market downturns[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - **Operational Risks:** The company is sensitive to raw material availability and cost, particularly for metals like copper, gold, and silver, and faces risks from product liability, cybersecurity, and supplier reliance[88](index=88&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) - **Regulatory and Legal Risks:** The company is investigating past compliance with U.S. trade controls and has made voluntary disclosures to the BIS and DDTC, which could result in fines or penalties[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - **Swiss Jurisdiction Risks:** As a Swiss corporation, TE Connectivity faces less flexibility in capital management, and distributions to shareholders may be subject to Swiss withholding tax[115](index=115&type=chunk)[118](index=118&type=chunk)[121](index=121&type=chunk)[128](index=128&type=chunk) - **Tax Risks:** The OECD's 15% global minimum corporate tax, effective in Switzerland on January 1, 2024, is expected to materially increase the company's cash taxes and effective tax rate starting in fiscal 2025[129](index=129&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - None[132](index=132&type=chunk) [Cybersecurity](index=35&type=section&id=Item%201C.%20Cybersecurity) This item is reported as not applicable - Not applicable[133](index=133&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company operates 104 principal manufacturing facilities globally, occupying approximately 27 million square feet of owned and leased space - As of fiscal year-end 2023, the company owned approximately **17 million sq. ft.** and leased **10 million sq. ft.** of floor space worldwide[134](index=134&type=chunk) **Principal Manufacturing Facilities by Segment and Region (FY2023)** | Region | Transportation Solutions | Industrial Solutions | Communications Solutions | Total | | :--- | :--- | :--- | :--- | :--- | | EMEA | 20 | 20 | 2 | 42 | | Asia–Pacific | 9 | 6 | 9 | 24 | | Americas | 10 | 26 | 2 | 38 | | **Total** | **39** | **52** | **13** | **104** | [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings that are not expected to materially affect its financial condition - The company is subject to various legal proceedings and claims in the normal course of business but does not expect the outcomes to have a material effect on its results, financial position, or cash flows[136](index=136&type=chunk)[137](index=137&type=chunk) - An environmental matter at the Silicon Microstructures, Inc. (SMI) site in California is being addressed with authorities and is not anticipated to have a material adverse effect[138](index=138&type=chunk)[139](index=139&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable - Not applicable[140](index=140&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on the NYSE, and it actively repurchased shares during the fourth quarter of fiscal 2023 - The company's common shares are listed on the New York Stock Exchange (NYSE) under the trading symbol 'TEL'[143](index=143&type=chunk) **Cumulative Total Shareholder Return Comparison (FY2018-2023)** | | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | TE Connectivity Ltd. | $100.00 | $107.73 | $113.20 | $173.60 | $135.02 | $153.89 | | S&P 500 Index | $100.00 | $103.72 | $117.72 | $161.39 | $131.92 | $160.44 | | Dow Jones U.S. Electrical Components and Equipment Index | $100.00 | $96.28 | $100.92 | $146.51 | $121.47 | $153.94 | **Issuer Purchases of Equity Securities (Quarter Ended Sep 29, 2023)** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans | | :--- | :--- | :--- | :--- | :--- | | Jul 1–Jul 28, 2023 | 428,261 | $142.15 | 428,200 | $999,101,703 | | Jul 29–Sep 1, 2023 | 1,067,083 | $133.55 | 1,060,900 | $857,423,534 | | Sep 2–Sep 29, 2023 | 964,156 | $126.54 | 963,800 | $735,467,902 | | **Total** | **2,459,500** | **$132.30** | **2,452,900** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 saw a slight sales decrease to $16.03 billion but organic growth of 1.0%, while operating income declined due to higher costs and restructuring charges [Overview](index=40&type=section&id=7.1%20Overview) Fiscal 2023 net sales decreased 1.5% to $16.034 billion, though organic sales grew 1.0% driven by pricing actions and cost controls - Fiscal 2023 net sales decreased 1.5% from fiscal 2022, but **increased 1.0% on an organic basis**, driven by a decline in Communications Solutions offset by growth in Transportation Solutions[156](index=156&type=chunk) - The company has been mitigating inflationary cost pressures for transportation, energy, and raw materials through price increases and productivity measures[155](index=155&type=chunk) - In August 2023, the company agreed to acquire Schaffner Holding AG, a Swiss-based leader in electromagnetic solutions, for approximately **$350 million**, with the deal expected to close in Q1 fiscal 2024[160](index=160&type=chunk) - For the first quarter of fiscal 2024, the company expects net sales of approximately **$3.85 billion** and diluted EPS from continuing operations of approximately **$1.59**[157](index=157&type=chunk) [Results of Operations](index=42&type=section&id=7.2%20Results%20of%20Operations) Net sales fell 1.5% to $16.034 billion due to negative currency translation, while operating margin contracted to 14.4% from 16.9% **Fiscal 2023 vs. 2022 Net Sales Change Analysis (in millions)** | Segment | Net Sales Growth (Decline) | Organic Net Sales Growth (Decline) | Translation | Acquisitions (Divestiture) | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $369 | $665 | $(296) | $— | | Industrial Solutions | $61 | $153 | $(78) | $(14) | | Communications Solutions | $(677) | $(648) | $(48) | $19 | | **Total** | **$(247)** | **$170** | **$(422)** | **$5** | - Net sales decrease of 1.5% in fiscal 2023 was primarily due to a **2.6% negative impact from foreign currency translation**, partially offset by 1.0% organic growth driven by **$607 million in pricing actions**[165](index=165&type=chunk) **Key Financial Metrics (FY2023 vs FY2022)** | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $16,034M | $16,281M | $(247)M | | Gross Margin | 31.5% | 32.2% | -0.7 p.p. | | Operating Income | $2,304M | $2,756M | $(452)M | | Operating Margin | 14.4% | 16.9% | -2.5 p.p. | | Effective Tax Rate | 16.0% | 11.2% | +4.8 p.p. | - Restructuring and other charges increased significantly to **$340 million** in fiscal 2023 from $141 million in fiscal 2022, contributing to the decline in operating income[169](index=169&type=chunk) - The company is monitoring the OECD's 15% global minimum corporate tax, which is expected to be effective in Switzerland on Jan 1, 2024 and impact the company in fiscal 2025, potentially materially affecting its tax rate and cash taxes[180](index=180&type=chunk) [Segment Results](index=48&type=section&id=7.3%20Segment%20Results) Transportation and Industrial segments grew organically, while the Communications segment experienced a significant sales decline due to market weakness **Transportation Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Automotive | $6,951 | $6,527 | | Commercial transportation | $1,525 | $1,582 | | Sensors | $1,112 | $1,110 | | **Total** | **$9,588** | **$9,219** | - Transportation Solutions **organic net sales grew 7.2%**, led by a 10.2% increase in the automotive market due to global vehicle production growth and increased content per vehicle[186](index=186&type=chunk)[188](index=188&type=chunk) **Industrial Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Industrial equipment | $1,706 | $1,904 | | Aerospace, defense, and marine | $1,178 | $1,087 | | Energy | $883 | $804 | | Medical | $784 | $695 | | **Total** | **$4,551** | **$4,490** | - Industrial Solutions **organic net sales grew 3.4%**, with strong performance in aerospace (up 12.8%), medical (up 13.1%), and energy (up 9.6%) offsetting an 8.1% decline in industrial equipment[193](index=193&type=chunk) **Communications Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Data and devices | $1,162 | $1,606 | | Appliances | $733 | $966 | | **Total** | **$1,895** | **$2,572** | - Communications Solutions **organic net sales decreased 25.2%**, with a 27.2% decline in data and devices and a 21.8% decline in appliances, both due to reduced demand from inventory corrections and market declines[200](index=200&type=chunk)[202](index=202&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=7.4%20Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position, with operating cash flow increasing to $3.13 billion and $1.67 billion returned to shareholders - Net cash provided by operating activities increased to **$3,132 million** in FY2023 from $2,468 million in FY2022, primarily due to changes in working capital levels[208](index=208&type=chunk) - Capital expenditures were **$732 million** in FY2023, and are expected to be approximately 5% of net sales in fiscal 2024[210](index=210&type=chunk) - Total debt was **$4.21 billion** at fiscal year-end 2023, stable with the prior year, following the issuance of $500 million of 4.50% senior notes[213](index=213&type=chunk)[214](index=214&type=chunk) - The company has a **$1.5 billion revolving credit facility** maturing in June 2026, which was undrawn at year-end, and was in compliance with all debt covenants[215](index=215&type=chunk)[217](index=217&type=chunk) - In fiscal 2023, the company returned significant capital to shareholders, paying **$725 million in dividends** and repurchasing 8 million common shares for **$946 million**[219](index=219&type=chunk)[222](index=222&type=chunk) - As of fiscal year-end 2023, approximately **$2.6 billion of cash**, cash equivalents, and intercompany deposits held by foreign subsidiaries are considered permanently reinvested[207](index=207&type=chunk) [Critical Accounting Policies and Estimates](index=62&type=section&id=7.5%20Critical%20Accounting%20Policies%20and%20Estimates) Key accounting estimates involve revenue recognition, goodwill impairment, income taxes, and pension plan assumptions - **Revenue Recognition:** Revenue is recognized when control of products transfers to customers, with estimates for variable consideration like rebates based on expected values and historical data[237](index=237&type=chunk)[239](index=239&type=chunk) - **Goodwill and Intangibles:** Goodwill is tested for impairment annually at the reporting unit level using a discounted cash flow approach, and the Q4 2023 test found no impairment[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - **Income Taxes:** The company has significant deferred tax assets, against which a **valuation allowance of $7.4 billion** was recorded at year-end 2023 due to uncertainty about their realization[248](index=248&type=chunk)[249](index=249&type=chunk)[458](index=458&type=chunk) - **Pension Plans:** Pension obligations and expenses are determined using actuarial assumptions, with a 25-basis-point change in the discount rate estimated to impact pension obligations by approximately **$57-60 million**[252](index=252&type=chunk)[254](index=254&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company uses derivative instruments to manage exposure to foreign currency, interest rate, and commodity price risks - The company uses derivative financial instruments, including cross-currency swaps and forward contracts, to manage exposure to foreign currency, interest rate, and commodity price risks[268](index=268&type=chunk) - **Foreign Currency Exposure:** A hypothetical 10% change in underlying currencies would alter the unrealized value of foreign currency derivative contracts by **$368 million**, which would generally be offset by gains or losses on the underlying transactions[270](index=270&type=chunk) - **Commodity Exposure:** The company uses commodity swap contracts to hedge expected purchases of key metals, with hedges having a notional value of **$459 million** at fiscal year-end 2023[273](index=273&type=chunk) [Financial Statements and Supplementary Data](index=70&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section references the consolidated financial statements, related notes, and the independent auditor's report - This item references the location of the company's Consolidated Financial Statements, related notes, and the report of the independent registered public accounting firm, Deloitte & Touche LLP[275](index=275&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 29, 2023 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 29, 2023[277](index=277&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of September 29, 2023, based on the COSO framework (2013)[278](index=278&type=chunk) - Deloitte & Touche LLP issued an unqualified attestation report on the company's internal control over financial reporting as of September 29, 2023[280](index=280&type=chunk) [Other Information](index=71&type=section&id=Item%209B.%20Other%20Information) Two executive officers adopted Rule 10b5-1(c) trading plans during the fourth quarter of fiscal 2023 - In the quarter ended September 29, 2023, CEO Terrence R. Curtin and President of Communications Solutions Aaron K. Stucki each adopted a Rule 10b5-1(c) trading plan for the sale of company securities[282](index=282&type=chunk)[285](index=285&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=72&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information is incorporated by reference from the 2024 Proxy Statement, and the company has adopted a Guide to Ethical Conduct - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting of Shareholders[287](index=287&type=chunk) - The company has adopted a Guide to Ethical Conduct that applies to all employees, officers, and directors, and meets the requirements of a 'code of ethics' as defined by SEC and NYSE rules[288](index=288&type=chunk) [Executive Compensation](index=72&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement[289](index=289&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=72&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference, with details provided on equity compensation plans **Equity Compensation Plan Information as of Fiscal Year End 2023** | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 7,223,872 | $107.36 | 12,555,452 | | Equity compensation plans not approved by security holders | 415,435 | $82.54 | — | | **Total** | **7,639,307** | | **12,555,452** | [Certain Relationships and Related Transactions, and Director Independence](index=73&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2024 Proxy Statement - Information for this item is incorporated by reference from the 2024 Proxy Statement[293](index=293&type=chunk) [Principal Accountant Fees and Services](index=73&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information for this item is incorporated by reference from the 2024 Proxy Statement[294](index=294&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-K - This section lists the financial statements, financial statement schedules, and exhibits filed as part of the annual report, including governance documents, debt agreements, and management compensation plans[297](index=297&type=chunk) [Form 10-K Summary](index=80&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[302](index=302&type=chunk) Financial Statements [Reports of Independent Registered Public Accounting Firm](index=84&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued unqualified opinions on the financial statements and internal controls, identifying the realizability of deferred tax assets as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion, stating the financial statements are fairly presented in conformity with U.S. GAAP[313](index=313&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of September 29, 2023[314](index=314&type=chunk)[323](index=323&type=chunk) - A **critical audit matter** was identified concerning the realizability of deferred tax assets, due to significant management judgment required to estimate future taxable income needed to realize a portion of the company's **$10.2 billion in gross deferred tax assets**, which have a **valuation allowance of $7.4 billion**[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) [Consolidated Financial Statements](index=88&type=section&id=Consolidated%20Financial%20Statements) Fiscal 2023 net sales were $16.034 billion with net income of $1.910 billion, and the company generated $3.132 billion in cash from operations **Consolidated Statement of Operations Highlights (in millions, except per share data)** | | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Net sales | $16,034 | $16,281 | $14,923 | | Gross margin | $5,055 | $5,244 | $4,887 | | Operating income | $2,304 | $2,756 | $2,434 | | Net income | $1,910 | $2,428 | $2,261 | | Diluted earnings per share | $6.03 | $7.47 | $6.79 | **Consolidated Balance Sheet Highlights (in millions)** | | Fiscal Year End 2023 | Fiscal Year End 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,661 | $1,088 | | Total current assets | $7,892 | $7,268 | | Total assets | $21,712 | $20,782 | | Total current liabilities | $4,463 | $4,632 | | Total liabilities | $10,057 | $9,885 | | Total shareholders' equity | $11,551 | $10,802 | **Consolidated Statement of Cash Flows Highlights (in millions)** | | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,132 | $2,468 | $2,676 | | Net cash used in investing activities | $(768) | $(878) | $(1,037) | | Net cash used in financing activities | $(1,793) | $(1,684) | $(1,386) | [Notes to Consolidated Financial Statements](index=94&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key financial activities, including restructuring charges, acquisitions, debt, and significant tax considerations - **Restructuring:** In fiscal 2023, the company recorded **net restructuring charges of $260 million**, primarily for cost structure improvements across all segments, with total restructuring reserves at year-end of $320 million[381](index=381&type=chunk)[382](index=382&type=chunk)[390](index=390&type=chunk) - **Acquisitions & Divestitures:** During fiscal 2023, one business was acquired for $110 million and three were sold for $48 million, while a pre-tax impairment charge of $68 million was recorded for a business held for sale[391](index=391&type=chunk)[394](index=394&type=chunk) - **Goodwill:** The carrying amount of goodwill was **$5.463 billion** at fiscal year-end 2023, and the annual impairment test in the fourth quarter determined that no impairment existed[399](index=399&type=chunk)[401](index=401&type=chunk) - **Debt:** Total debt was **$4.211 billion** at year-end 2023, and the company's $1.5 billion revolving credit facility was undrawn[406](index=406&type=chunk)[407](index=407&type=chunk) - **Income Taxes:** The company has gross deferred tax assets of **$10.2 billion**, primarily from $8.5 billion in tax loss and credit carryforwards, against which a **valuation allowance of $7.4 billion** has been recorded[457](index=457&type=chunk)[458](index=458&type=chunk) - **Shareholder Returns:** In fiscal 2023, the company paid **$725 million in dividends** and repurchased 8 million shares for **$946 million**, with $735 million remaining under the share repurchase authorization at year-end[474](index=474&type=chunk)[476](index=476&type=chunk) - **Share-Based Compensation:** Total share-based compensation expense was **$123 million** in fiscal 2023, with **$135 million** of unrecognized compensation expense related to nonvested awards at year-end[481](index=481&type=chunk)[484](index=484&type=chunk)[487](index=487&type=chunk)[491](index=491&type=chunk)

TE Connectivity Fourth Quarter 2023 Earnings Non-GAAP Financial Measures Q4 Sales in line with Expectations & Adjusted EPS Exceeded Guidance • Generated record quarterly Free Cash Flow of $945M • Sales of $16.0B, ~flat on a reported basis Y/Y despite FX headwinds of ~$430M • 3% organic growth Y/Y driven by the Transportation and Industrial segments November 1, 2023 EVERY CONNECTION COUNTS Forward-Looking Statements and Non-GAAP Financial Measures Forward-Looking Statements Where we have used non-GAAP financ ...