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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 29, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

Graphic

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland
(Jurisdiction of Incorporation)

98-0518048
(I.R.S. Employer Identification No.)

Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland

(Address of principal executive offices)

+41 (0)52 633 66 61

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Shares, Par Value CHF 0.57

TEL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of common shares outstanding as of January 19, 2024 was 308,798,987.

Table of Contents

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q

   

   

   

Page

Part I.

Financial Information

Item 1.

Financial Statements

1

Condensed Consolidated Statements of Operations for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)

1

Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)

2

Condensed Consolidated Balance Sheets as of December 29, 2023 and September 29, 2023 (unaudited)

3

Condensed Consolidated Statements of Equity for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)

5

Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

Part II.

Other Information

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 5.

Other Information

36

Item 6.

Exhibits

36

Signatures

37

i

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions, except per share data)

Net sales

$

3,831

$

3,841

Cost of sales

 

2,507

 

2,654

Gross margin

 

1,324

 

1,187

Selling, general, and administrative expenses

 

424

392

Research, development, and engineering expenses

 

173

173

Acquisition and integration costs

 

8

9

Restructuring and other charges, net

 

21

111

Operating income

698

502

Interest income

22

9

Interest expense

 

(18)

(21)

Other expense, net

 

(3)

(5)

Income from continuing operations before income taxes

 

699

 

485

Income tax (expense) benefit

 

1,105

(87)

Income from continuing operations

 

1,804

 

398

Loss from discontinued operations, net of income taxes

 

(1)

(1)

Net income

$

1,803

$

397

Basic earnings per share:

Income from continuing operations

$

5.80

$

1.26

Loss from discontinued operations

 

 

Net income

 

5.80

 

1.25

Diluted earnings per share:

Income from continuing operations

$

5.76

$

1.25

Loss from discontinued operations

 

 

Net income

 

5.76

 

1.24

Weighted-average number of shares outstanding:

Basic

 

311

317

Diluted

 

313

319

See Notes to Condensed Consolidated Financial Statements.

1

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Net income

$

1,803

$

397

Other comprehensive income:

Currency translation

 

163

305

Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes

 

(18)

2

Gains on cash flow hedges, net of income taxes

 

28

69

Other comprehensive income

 

173

 

376

Comprehensive income

1,976

773

Less: comprehensive income attributable to noncontrolling interests

(4)

(9)

Comprehensive income attributable to TE Connectivity Ltd.

$

1,972

$

764

See Notes to Condensed Consolidated Financial Statements.

2

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 29,

September 29,

    

2023

    

2023

    

(in millions, except share

data)

Assets

Current assets:

Cash and cash equivalents

$

1,170

$

1,661

Accounts receivable, net of allowance for doubtful accounts of $37 and $30, respectively

 

2,828

 

2,967

Inventories

 

2,783

 

2,552

Prepaid expenses and other current assets

 

660

 

712

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

 

3,852

 

2,600

Other assets

 

810

 

828

Total assets

$

23,071

$

21,712

Liabilities, redeemable noncontrolling interests, and equity

Current liabilities:

Short-term debt

$

613

$

682

Accounts payable

 

1,690

 

1,563

Accrued and other current liabilities

 

1,708

 

2,218

Total current liabilities

 

4,011

 

4,463

Long-term debt

 

3,585

 

3,529

Long-term pension and postretirement liabilities

 

744

 

728

Deferred income taxes

 

188

 

185

Income taxes

 

380

 

365

Other liabilities

 

914

 

787

Total liabilities

 

9,822

 

10,057

Commitments and contingencies (Note 9)

Redeemable noncontrolling interests

108

104

Equity:

TE Connectivity Ltd. shareholders' equity:

Common shares, CHF 0.57 par value, 322,470,281 shares authorized and issued

 

142

142

Accumulated earnings

 

14,678

 

12,947

Treasury shares, at cost, 13,050,787 and 10,487,742 shares, respectively

 

(1,695)

 

(1,380)

Accumulated other comprehensive income (loss)

 

11

 

(158)

Total TE Connectivity Ltd. shareholders' equity

13,136

11,551

Noncontrolling interests

5

Total equity

 

13,141

 

11,551

Total liabilities, redeemable noncontrolling interests, and equity

$

23,071

$

21,712

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

For the Quarter Ended December 29, 2023

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Income (Loss)

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at September 29, 2023

 

322

$

142

 

(10)

$

(1,380)

$

$

12,947

$

(158)

$

11,551

$

$

11,551

Acquisition

5

5

Net income

 

 

 

 

 

 

1,803

 

 

1,803

 

 

1,803

Other comprehensive income

 

 

 

 

 

 

 

169

 

169

 

 

169

Share-based compensation expense

 

 

 

 

 

34

 

 

 

34

 

 

34

Exercise of share options

 

 

 

 

11

 

 

 

 

11

 

 

11

Restricted share award vestings and other activity

 

 

 

 

94

 

(34)

 

(72)

 

 

(12)

 

 

(12)

Repurchase of common shares

 

 

 

(3)

 

(420)

 

 

 

 

(420)

 

 

(420)

Balance at December 29, 2023

322

$

142

 

(13)

$

(1,695)

$

$

14,678

$

11

$

13,136

$

5

$

13,141

For the Quarter Ended December 30, 2022

Accumulated

TE Connectivity

Other

Ltd.

Non-

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

controlling

Total

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

Interests

   

Equity

   

(in millions)

Balance at September 30, 2022

 

331

$

146

 

(13)

$

(1,681)

$

$

12,832

$

(495)

$

10,802

$

$

10,802

Net income

 

 

 

 

 

397

 

 

397

 

 

397

Other comprehensive income

 

 

 

 

 

 

 

367

 

367

 

 

367

Share-based compensation expense

 

 

 

 

 

32

 

 

 

32

 

 

32

Exercise of share options

 

 

 

 

11

 

 

 

 

11

 

 

11

Restricted share award vestings and other activity

 

 

 

1

 

49

 

(32)

 

(29)

 

 

(12)

 

 

(12)

Repurchase of common shares

 

 

 

(2)

 

(233)

 

 

 

 

(233)

 

 

(233)

Balance at December 30, 2022

331

$

146

 

(14)

$

(1,854)

$

$

13,200

$

(128)

$

11,364

$

$

11,364

See Notes to Condensed Consolidated Financial Statements.

4

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Cash flows from operating activities:

Net income

$

1,803

$

397

Loss from discontinued operations, net of income taxes

 

1

 

1

Income from continuing operations

 

1,804

 

398

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

Depreciation and amortization

 

194

 

187

Deferred income taxes

 

(1,217)

 

(35)

Non-cash lease cost

34

34

Provision for losses on accounts receivable and inventories

 

42

 

51

Share-based compensation expense

 

34

 

32

Other

 

40

 

49

Changes in assets and liabilities, net of the effects of acquisitions and divestitures:

Accounts receivable, net

 

127

 

(54)

Inventories

 

(282)

 

(324)

Prepaid expenses and other current assets

 

(48)

 

(86)

Accounts payable

 

128

 

149

Accrued and other current liabilities

 

(239)

 

(39)

Income taxes

 

12

 

25

Other

 

90

 

194

Net cash provided by operating activities

 

719

 

581

Cash flows from investing activities:

Capital expenditures

 

(151)

 

(183)

Proceeds from sale of property, plant, and equipment

 

2

 

1

Acquisition of businesses, net of cash acquired

 

(349)

 

(109)

Proceeds from divestiture of business, net of cash retained by business sold

38

Other

 

(8)

 

26

Net cash used in investing activities

 

(468)

 

(265)

Cash flows from financing activities:

Net decrease in commercial paper

 

(69)

 

(139)

Repayment of debt

 

(1)

 

(4)

Proceeds from exercise of share options

 

11

 

11

Repurchase of common shares

 

(476)

 

(287)

Payment of common share dividends to shareholders

 

(183)

 

(178)

Other

 

(27)

 

(24)

Net cash used in financing activities

 

(745)

 

(621)

Effect of currency translation on cash

 

3

 

10

Net decrease in cash, cash equivalents, and restricted cash

 

(491)

 

(295)

Cash, cash equivalents, and restricted cash at beginning of period

 

1,661

 

1,088

Cash, cash equivalents, and restricted cash at end of period

$

1,170

$

793

See Notes to Condensed Consolidated Financial Statements.

5

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation and Accounting Policies

The unaudited Condensed Consolidated Financial Statements of TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and the instructions to Form 10-Q under the Securities Exchange Act of 1934. In management’s opinion, the unaudited Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period.

The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2024 and fiscal 2023 are to our fiscal years ending September 27, 2024 and ended September 29, 2023, respectively.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for our fiscal 2025 Annual Report and subsequent interim periods; however, early adoption is permitted. The amendments should be applied retrospectively to all periods presented in the financial statements. We are currently assessing the impact that adoption will have on our Condensed Consolidated Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures through improvements to disclosures related primarily to the rate reconciliation and income taxes paid information. The amendments are effective for us in fiscal 2026; however, early adoption is permitted. We are currently assessing the impact that adoption will have on our Condensed Consolidated Financial Statements.

Recently Adopted Accounting Pronouncement

In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50)—Disclosure of Supplier Finance Program Obligations, to enhance transparency and introduce new disclosures related to an entity’s use of supplier finance programs in connection with the purchase of goods and services. The ASU requires us, as a buyer in a supplier finance program, to disclose the key terms of the program, the amount of obligations outstanding, the balance sheet presentation of such amounts, and a rollforward of the obligation activity during the annual period. We adopted this update in the first quarter of fiscal 2024. Adoption did not have a material impact on our Condensed Consolidated Financial Statements. See Note 9 for additional information regarding our supply chain finance program.

6

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

2. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Restructuring charges, net

$

9

$

104

Loss on divestiture and impairment of held for sale business

11

6

Other charges, net

 

1

 

1

Restructuring and other charges, net

$

21

$

111

Restructuring Charges, Net

Net restructuring and charges by segment were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Transportation Solutions

$

2

$

74

Industrial Solutions

 

6

 

6

Communications Solutions

 

1

 

24

Restructuring charges, net

$

9

$

104

Activity in our restructuring reserves was as follows:

Balance at

Balance at

  

September 29,

Changes in

Cash

Non-Cash

Currency

December 29,

    

2023

    

Charges

    

Estimate

    

Payments

    

Items

    

Translation

    

2023

    

(in millions)

Fiscal 2024 Actions:

Employee severance

$

$

5

$

$

$

$

$

5

Fiscal 2023 Actions:

Employee severance

187

(8)

(20)

8

167

Facility and other exit costs

2

1

(3)

Property, plant, and equipment

4

(4)

Total

189

5

(8)

(23)

(4)

8

167

Pre-Fiscal 2023 Actions:

Employee severance

127

5

(23)

4

113

Facility and other exit costs

4

2

(2)

4

Total

131

2

5

(25)

4

117

Total Activity

$

320

$

12

$

(3)

$

(48)

$

(4)

$

12

$

289

7

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Fiscal 2024 Actions

During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization, primarily in the Industrial Solutions and Transportation Solutions segments. During the quarter ended December 29, 2023, we recorded restructuring charges of $5 million in connection with this program. We expect to complete all restructuring actions commenced during the quarter ended December 29, 2023 by the end of fiscal 2025, and we expect additional charges related to actions commenced during the quarter ended December 29, 2023 will be insignificant.

Fiscal 2023 Actions

During fiscal 2023, we initiated a restructuring program associated with cost structure improvements across all segments. In connection with this program, during the quarters ended December 29, 2023 and December 30, 2022, we recorded net restructuring credits of $3 million and charges of $105 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2023 by the end of fiscal 2025, and to incur additional charges of approximately $24 million related primarily to employee severance and facility exit costs.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2023 program by segment as of December 29, 2023:

Total

Cumulative

Remaining

Expected

Charges

Expected

    

Charges

    

Incurred

    

Charges

    

(in millions)

Transportation Solutions

$

153

$

138

$

15

Industrial Solutions

 

80

 

73

 

7

Communications Solutions

 

35

 

33

 

2

Total

$

268

$

244

$

24

Pre-Fiscal 2023 Actions

During the quarters ended December 29, 2023 and December 30, 2022, we recorded net restructuring charges of $7 million and credits of $1 million, respectively, related to pre-fiscal 2023 actions. We expect that any additional charges related to restructuring actions commenced prior to fiscal 2023 will be insignificant.

Total Restructuring Reserves

Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Accrued and other current liabilities

$

204

$

240

Other liabilities

 

85

 

80

Restructuring reserves

$

289

$

320

Divestiture

During the quarter ended December 29, 2023, we sold one business for net cash proceeds of $38 million. In connection with the divestiture, we recorded a pre-tax loss on sale of $11 million. The business sold was reported in our Transportation Solutions segment.

8

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

3. Acquisitions

During the quarter ended December 29, 2023, we acquired approximately 98.7% of the outstanding shares of Schaffner Holding AG (“Schaffner”), a leader in electromagnetic solutions based in Switzerland, for CHF 505.00 per share in cash for a purchase price of CHF 302 million (equivalent to $349 million), net of cash acquired. As a result of the transaction, we recognized a noncontrolling interest with a fair value of $5 million as of the acquisition date. Due to the timing of the transaction, which was reported as part of our Industrial Solutions segment, we preliminarily allocated the purchase price to goodwill and identifiable intangible assets. Our valuation of identifiable intangible assets, assets acquired, and liabilities assumed is currently in process; therefore, the current allocation is subject to adjustment upon finalization of the valuations. The amount of these potential adjustments could be significant. We intend to initiate a squeeze-out procedure and delist the remaining Schaffner shares from SIX Swiss Exchange during fiscal 2024.

We acquired one business for a cash purchase price of $109 million, net of cash acquired, during the quarter ended December 30, 2022. The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.

4. Inventories

Inventories consisted of the following:

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Raw materials

$

394

$

367

Work in progress

 

1,284

 

1,185

Finished goods

 

1,105

 

1,000

Inventories

$

2,783

$

2,552

5. Goodwill

The changes in the carrying amount of goodwill by segment were as follows:

    

Transportation

    

Industrial

    

Communications

    

    

Solutions

Solutions

Solutions

Total

(in millions)

September 29, 2023(1)

$

1,478

$

3,263

$

722

$

5,463

Acquisition

257

257

Currency translation and other

 

29

 

71

 

16

 

116

December 29, 2023(1)

$

1,507

$

3,591

$

738

$

5,836

(1)At December 29, 2023 and September 29, 2023, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $3,091 million, $669 million, and $489 million, respectively.

During the quarter ended December 29, 2023, we recognized goodwill in the Industrial Solutions segment in connection with an acquisition. See Note 3 for additional information regarding acquisitions.

9

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

6. Intangible Assets, Net

Intangible assets consisted of the following:

December 29, 2023

September 29, 2023

    

Gross

    

    

Net

    

Gross

    

    

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

    

(in millions)

Customer relationships

$

1,876

$

(856)

$

1,020

$

1,720

$

(806)

$

914

Intellectual property

1,129

(884)

245

1,186

(938)

248

Other

 

19

 

(6)

 

13

 

19

 

(6)

 

13

Total

$

3,024

$

(1,746)

$

1,278

$

2,925

$

(1,750)

$

1,175

Intangible asset amortization expense was $42 million and $46 million for the quarters ended December 29, 2023 and December 30, 2022, respectively.

At December 29, 2023, the aggregate amortization expense on intangible assets is expected to be as follows:

    

(in millions)

  

Remainder of fiscal 2024

$

128

Fiscal 2025

161

Fiscal 2026

 

154

Fiscal 2027

 

135

Fiscal 2028

 

102

Fiscal 2029

 

95

Thereafter

 

503

Total

$

1,278

7. Debt

As of December 29, 2023, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $261 million of commercial paper outstanding at a weighted-average interest rate of 5.50%. TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 5.50% at September 29, 2023.

The fair value of our debt, based on indicative valuations, was approximately $4,103 million and $3,974 million at December 29, 2023 and September 29, 2023, respectively.

8. Leases

The components of lease cost were as follows:

For the

Quarters Ended

    

December 29,

December 30,

    

2023

    

2022

    

    

(in millions)

Operating lease cost

$

34

$

34

Variable lease cost

12

12

Total lease cost

$

46

$

46

10

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Cash flow information, including significant non-cash transactions, related to leases was as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

    

(in millions)

    

Cash paid for amounts included in the measurement of lease liabilities:

Payments for operating leases(1)

$

34

$

32

Right-of-use assets, including modifications of existing leases, obtained in exchange for operating lease liabilities

70

35

(1)These payments are included in cash flows from operating activities, primarily in changes in accrued and other current liabilities.

9. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

Trade Compliance Matters

We have been investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and the resulting investigations are ongoing. We have also been contacted by the U.S. Department of Justice concerning aspects of these matters. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Environmental Matters

We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of December 29, 2023, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $17 million to $44 million, and we accrued $20 million as the probable loss, which was the best estimate within this range. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

11

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Guarantees

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

At December 29, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $196 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business. In addition, as of December 29, 2023, we had $26 million of performance guarantees associated with the divestiture. We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale; however, based on historical experience, we do not anticipate having to perform on these guarantees.

Supply Chain Finance Program

We have an agreement with a financial institution that allows participating suppliers the ability to finance payment obligations. The financial institution has separate arrangements with the suppliers and provides them with the option to request early payment for invoices. We do not determine the terms or conditions of the arrangement between the financial institution and suppliers. Our obligation to suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to finance amounts under the arrangement and we are not required to post collateral with the financial institution. The outstanding payment obligations under our supply chain finance program, which are included in accounts payable on our Condensed Consolidated Balance Sheets, were $122 million and $109 million at December 29, 2023 and September 29, 2023, respectively.

10. Financial Instruments

Foreign Currency Exchange Rate Risk

As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-currency swap contracts and foreign currency forward contracts, a portion of which are designated as cash flow hedges. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in foreign currency exchange rates on intercompany and other cash transactions. We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with the cash flow hedge-designated instruments addressing foreign exchange risks will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.

Hedge of Net Investment

We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies. The aggregate notional value of these hedges was $2,792 million and $1,709 million at December 29, 2023 and September 29, 2023, respectively.

We also use a cross-currency swap program to hedge our net investment in certain foreign operations. The aggregate notional value of the contracts under this program was $3,599 million and $3,806 million at December 29, 2023 and September 29, 2023, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 1.6% per annum and pay no interest. Upon the maturity of these contracts at various dates through fiscal 2028, we will pay the notional value of the contracts in the designated foreign currency and receive U.S. dollars from our counterparties. We are not required to provide collateral for these contracts.

12

Table of Contents

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Prepaid expenses and other current assets

$

60

$

109

Other assets

 

35

 

79

Accrued and other current liabilities

9

4

Other liabilities

59

10

The impacts of our hedge of net investment programs were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Foreign currency exchange losses on intercompany loans and external borrowings(1)

$

(107)

$

(165)

Losses on cross-currency swap contracts designated as hedges of net investment(1)

 

(125)

 

(137)

(1)Recorded as currency translation, a component of accumulated other comprehensive income (loss), and offset by changes attributable to the translation of the net investment.

Commodity Hedges

As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in prices of commodities used in production. These contracts had an aggregate notional value of $431 million and $459 million at December 29, 2023 and September 29, 2023, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Prepaid expenses and other current assets

$

11

$

3

Accrued and other current liabilities

6

21

Other liabilities

1

5

The impacts of our commodity swap contracts were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Gains recorded in other comprehensive income (loss)

$

26

$

47

Losses reclassified from accumulated other comprehensive income (loss) into cost of sales

(4)

(29)

We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with commodity hedges will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.

13

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

11. Retirement Plans

The net periodic pension benefit cost for all non-U.S. and U.S. defined benefit pension plans was as follows:

Non-U.S. Plans

U.S. Plans

For the

For the

Quarters Ended

Quarters Ended

December 29,

December 30,

December 29,

December 30,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Operating expense:

Service cost

$

7

$

7

$

2

$

2

Other (income) expense:

Interest cost

 

15

 

14

 

10

 

9

Expected returns on plan assets

 

(12)

 

(11)

 

(10)

 

(9)

Amortization of net actuarial loss

 

1

 

1

 

1

 

1

Amortization of prior service credit

 

(1)

 

(1)

 

 

Net periodic pension benefit cost

$

10

$

10

$

3

$

3

During the quarter ended December 29, 2023, we contributed $12 million to our non-U.S. pension plans.

12. Income Taxes

We recorded an income tax benefit of $1,105 million and expense of $87 million for the quarters ended December 29, 2023 and December 30, 2022, respectively. The income tax benefit for the quarter ended December 29, 2023 included an $874 million net income tax benefit associated with a ten-year tax credit obtained by a Swiss subsidiary and a $262 million income tax benefit related to the revaluation of deferred tax assets as a result of a corporate tax rate increase in Switzerland. In addition, the income tax benefit for the quarter ended December 29, 2023 included a $118 million income tax benefit associated with the tax impacts of a legal entity restructuring with related costs of $4 million recorded in selling, general, and administrative expenses for other non-income taxes.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of December 29, 2023, approximately $30 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 29, 2023.

13. Earnings Per Share

The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Basic

311

317

Dilutive impact of share-based compensation arrangements

2

2

Diluted

313

319

14

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The following share options were not included in the computation of diluted earnings per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Antidilutive share options

 

2

2

14. Equity

Dividends

We paid cash dividends to shareholders as follows:

For the

 

Quarters Ended

 

    

December 29,

    

December 30,

 

    

2023

    

2022

    

Dividends paid per common share

$

0.59

$

0.56

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to equity. At December 29, 2023 and September 29, 2023, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $183 million and $368 million, respectively.

Share Repurchase Program

During the quarter ended December 29, 2023, our board of directors authorized an increase of $1.5 billion in our share repurchase program. Common shares repurchased under the share repurchase program were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Number of common shares repurchased

 

3

 

2

Repurchase value

 

$

420

 

$

233

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

15. Share Plans

Share-based compensation expense, which was included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Share-based compensation expense

 

$

34

 

$

32

15

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

As of December 29, 2023, there was $211 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 1.9 years.

During the quarter ended December 29, 2023, we granted the following share-based awards as part of our annual incentive plan grant:

Grant-Date

    

Shares

    

Fair Value

    

(in millions)

Share options

0.9

$

39.77

Restricted share awards

0.4

 

131.77

Performance share awards

0.2

131.77

As of December 29, 2023, we had six million shares available for issuance under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of December 12, 2023.

Share-Based Compensation Assumptions

The assumptions we used in the Black-Scholes-Merton option pricing model for the options granted as part of our annual incentive plan grant were as follows:

Expected share price volatility

    

 

31

%

    

Risk-free interest rate

 

4.6

%

Expected annual dividend per share

$

2.36

Expected life of options (in years)

 

5.3

16

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

16. Segment and Geographic Data

Net sales by segment(1) and industry end market(2) were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Transportation Solutions:

Automotive

$

1,776

$

1,649

Commercial transportation

 

356

 

348

Sensors

 

241

 

262

Total Transportation Solutions

2,373

2,259

Industrial Solutions:

Industrial equipment

330

434

Aerospace, defense, and marine

 

290

 

264

Energy

 

205

 

189

Medical

200

173

Total Industrial Solutions

1,025

1,060

Communications Solutions:

Data and devices

279

329

Appliances

 

154

 

193

Total Communications Solutions

433

522

Total

$

3,831

$

3,841

(1)Intersegment sales were not material.
(2)Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary.

17

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Net sales by geographic region(1) and segment were as follows:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

$

867

$

812

Industrial Solutions

 

477

 

444

Communications Solutions

 

67

 

70

Total EMEA

 

1,411

 

1,326

Asia–Pacific:

Transportation Solutions

1,012

924

Industrial Solutions

 

147

 

189

Communications Solutions

220

294

Total Asia–Pacific

 

1,379

 

1,407

Americas:

Transportation Solutions

494

523

Industrial Solutions

 

401

 

427

Communications Solutions

146

158

Total Americas

 

1,041

 

1,108

Total

$

3,831

$

3,841

(1)Net sales to external customers are attributed to individual countries based on the legal entity that records the sale.

Operating income by segment was as follows:

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Transportation Solutions

$

478

$

282

Industrial Solutions

141

156

Communications Solutions

79

64

Total

$

698

$

502

18

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including but not limited to those under the heading “Forward-Looking Information” and “Part II. Item 1A. Risk Factors.”

Our Condensed Consolidated Financial Statements have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure. See “Non-GAAP Financial Measure” for additional information regarding this measure.

Overview

TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more.

Summary of Performance

Our net sales were essentially flat in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 with declines in the Communications Solutions and Industrial Solutions segments offset by sales growth in the Transportation Solutions segment. On an organic basis, our net sales decreased 0.7% during the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.
Our net sales by segment were as follows:
Transportation Solutions—Our net sales increased 5.0% in the first quarter of fiscal 2024 due primarily to sales increases in the automotive end market.
Industrial Solutions—Our net sales decreased 3.3% in the first quarter of fiscal 2024 as a result of sales declines in the industrial equipment end market, partially offset by sales increases in the medical; the aerospace, defense, and marine; and the energy end markets.
Communications Solutions—Our net sales decreased 17.0% in the first quarter of fiscal 2024 due to sales declines in both the data and devices and the appliances end markets.
Net cash provided by operating activities was $719 million in the first quarter of fiscal 2024.

Economic Conditions

Our business and operating results have been and will continue to be affected by worldwide economic conditions. The global economy has been impacted in recent years by supply chain disruptions and inflationary cost pressures as well as military conflict in certain parts of the world and the COVID-19 pandemic. We are monitoring the current environment and its potential effects on our customers and the end markets we serve.

19

Table of Contents

In recent years, we have experienced inflationary cost pressures including increased costs for transportation, energy, and raw materials. However, we have been able to mitigate increased costs and supply chain disruptions through productivity or price increases which were initiated in prior years. Also, we have taken and continue to focus on actions to manage costs, including restructuring and other cost reduction initiatives such as reducing discretionary spending and travel. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund our future capital needs. See further discussion in “Liquidity and Capital Resources.”

We continue to monitor military conflict in certain parts of the world as well as escalating tensions in surrounding countries and associated sanctions. These did not have a significant impact on our business, financial condition, or results of operations during fiscal 2023 or the first quarter of fiscal 2024.

The COVID-19 pandemic had a global impact and resulted in business slowdowns or shutdowns, including systemic disruptions of global supply chains. The pandemic impacted certain aspects of our business, including certain of our operations in China in early fiscal 2023; however, we do not expect the pandemic to have a significant impact on our businesses globally in fiscal 2024.

Outlook

In the second quarter of fiscal 2024, we expect our net sales to be approximately $3.95 billion as compared to $4.16 billion in the second quarter of fiscal 2023, with sales declines in all segments. As compared to the first quarter of fiscal 2024, we expect net sales in the second quarter of fiscal 2024 to increase with sales growth in the Industrial Solutions segment partially offset by a slight decline in the Transportation Solutions segment. We expect diluted earnings per share from continuing operations to be approximately $1.75 per share in the second quarter of fiscal 2024. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $13 million and $0.05 per share, respectively, in the second quarter of fiscal 2024 as compared to the same period of fiscal 2023. Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

Acquisition

During the first quarter of fiscal 2024, we acquired approximately 98.7% of the outstanding shares of Schaffner Holding AG (“Schaffner”), a leader in electromagnetic solutions based in Switzerland, for CHF 505.00 per share in cash for a purchase price of CHF 302 million (equivalent to $349 million), net of cash acquired. The Schaffner business has been reported as part of our Industrial Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Divestiture

During the first quarter of fiscal 2024, we sold one business for net cash proceeds of $38 million. In connection with the divestiture, we recorded a pre-tax loss on sale of $11 million. The business sold was reported in our Transportation Solutions segment. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding divestitures.

20

Table of Contents

Results of Operations

Net Sales

The following table presents our net sales and the percentage of total net sales by segment:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

 

($ in millions)

 

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

%  

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

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

versus Net Sales for the Quarter Ended December 30, 2022

Net Sales

Organic Net Sales

Acquisition

    

Growth (Decline)

Growth (Decline)

Translation

(Divestitures)

    

($ in millions)

 

Transportation Solutions

$

114

 

5.0

%  

$

113

 

5.0

%  

$

26

$

(25)

Industrial Solutions

 

(35)

 

(3.3)

 

(52)

 

(4.9)

 

18

 

(1)

Communications Solutions

 

(89)

 

(17.0)

 

(89)

 

(17.0)

 

 

Total

$

(10)

 

(0.3)

%  

$

(28)

 

(0.7)

%  

$

44

$

(26)

Net sales slightly decreased by $10 million, or 0.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. The decrease in net sales resulted from organic net sales declines of 0.7% and the net negative impact of 0.7% from an acquisition and divestitures, largely offset by the positive impact of foreign currency translation of 1.1% due to the strengthening of certain foreign currencies. Pricing actions initiated during fiscal 2023 positively affected organic net sales by $68 million in the first quarter of fiscal 2024.

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

Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.

Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2024.

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

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

($ in millions)

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

%  

(1)Net sales to external customers are attributed to individual countries based on the legal entity that records the sale.

21

Table of Contents

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

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

versus Net Sales for the Quarter Ended December 30, 2022

Net Sales

Organic Net Sales

Acquisition

    

Growth (Decline)

    

Growth (Decline)

    

Translation

    

(Divestitures)

    

($ in millions)

 

EMEA

$

85

 

6.4

%  

$

33

 

2.5

%  

$

60

$

(8)

Asia–Pacific

(28)

(2.0)

(6)

(0.4)

(18)

(4)

Americas

 

(67)

 

(6.0)

 

(55)

 

(5.0)

 

2

 

(14)

Total

$

(10)

 

(0.3)

%  

$

(28)

 

(0.7)

%  

$

44

$

(26)

Cost of Sales and Gross Margin

The following table presents cost of sales and gross margin information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

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

%

 

  

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

We use a wide variety of raw materials in the manufacture of our products, and cost of sales and gross margin are subject to variability in raw material prices. In recent years, raw material prices and availability have been affected by worldwide economic conditions, including supply chain disruptions and inflationary cost pressures. The following table presents the average prices incurred related to copper, gold, silver, and palladium:

For the

 

Quarters Ended

December 29,

December 30,

    

Measure

    

2023

    

2022

    

Copper

 

Lb.

$

3.87

$

4.18

Gold

 

Troy oz.

 

1,943

 

1,821

Silver

Troy oz.

23.15

24.26

Palladium

 

Troy oz.

 

1,500

 

2,083

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

22

Table of Contents

Operating Expenses

The following table presents operating expense information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

Change

    

($ in millions)

Selling, general, and administrative expenses

$

424

$

392

$

32

As a percentage of net sales

 

11.1

%

 

10.2

%

 

  

Restructuring and other charges, net

$

21

$

111

$

(90)

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

Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.

During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization, primarily in the Industrial Solutions and Transportation Solutions segments. We incurred net restructuring charges of $9 million during the first quarter of fiscal 2024. Annualized cost savings related to the fiscal 2024 actions commenced during the first quarter of fiscal 2024 are expected to be approximately $3 million and are expected to be fully realized by the end of fiscal 2025. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2024, we expect total restructuring charges to be approximately $100 million and total spending, which will be funded with cash from operations, to be approximately $175 million.

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

Operating Income

The following table presents operating income and operating margin information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

Change

    

($ in millions)

Operating income

$

698

$

502

$

196

Operating margin

 

18.2

%

 

13.1

%

 

  

23

Table of Contents

Operating income included the following:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Acquisition and integration costs

$

8

$

9

Restructuring and other charges, net

 

21

 

111

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

4

Total

$

33

$

120

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

Non-Operating Items

The following table presents select non-operating information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

Change

    

($ in millions)

Income tax expense (benefit)

$

(1,105)

$

87

$

(1,192)

Effective tax rate

 

(158.1)

%

 

17.9

%

 

  

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

The Organisation for Economic Co-operation and Development (“OECD”) and participating countries continue to work toward the enactment of a 15% global minimum corporate tax. Member states have begun to enact the rules, with some countries accelerating the impact of these rules by proposing immediate statutory rate increases. In 2023, Swiss Parliament approved a constitutional amendment to implement the rules and the Swiss Federal Council acted in December to implement elements of the OECD’s global minimum tax rules, effective as of January 1, 2024. The global minimum tax is a significant structural change to the international taxation framework, which is expected to affect us beginning in fiscal 2025. Although global enactment has begun, the OECD and participating countries continue to work on defining the underlying rules and administrative procedures. We are currently monitoring these developments and evaluating the impact, which could be material to our results of operations, cash taxes, and worldwide corporate effective tax rate.

Segment Results

Transportation Solutions

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

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

($ in millions)

Automotive

$

1,776

    

75

%  

$

1,649

    

73

%  

Commercial transportation

 

356

 

15

 

348

 

15

Sensors

 

241

 

10

 

262

 

12

Total

$

2,373

 

100

%  

$

2,259

 

100

%  

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

24

Table of Contents

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

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

versus Net Sales for the Quarter Ended December 30, 2022

    

Net Sales

    

Organic Net Sales

    

    

    

Growth (Decline)

Growth (Decline)

Translation

Divestiture

 

($ in millions)

 

Automotive

$

127

7.7

%  

$

135

8.1

%  

$

17

    

$

(25)

Commercial transportation

 

8

 

2.3

 

2

 

0.7

 

6

 

Sensors

 

(21)

 

(8.0)

 

(24)

 

(9.2)

 

3

 

Total

$

114

 

5.0

%  

$

113

 

5.0

%  

$

26

$

(25)

Net sales in the Transportation Solutions segment increased $114 million, or 5.0%, in the first quarter of fiscal 2024 from the first quarter of fiscal 2023 due primarily to organic net sales growth of 5.0%. Our organic net sales by industry end market were as follows:

Automotive—Our organic net sales increased 8.1% in the first quarter of fiscal 2024 with growth of 13.4% in the Asia–Pacific region and 7.4% in the EMEA region, partially offset by declines of 4.0% in the Americas region. Our organic net sales growth in the Asia–Pacific and EMEA regions was attributable primarily to vehicle production growth as well as increased content per vehicle. In the Americas region, our organic net sales declined primarily as a result of declines in vehicle production. For full year fiscal 2024, we expect slight growth in global vehicle production from fiscal 2023 levels.
Commercial transportation—Our organic net sales increased 0.7% in the first quarter of fiscal 2024 due to growth in the Asia–Pacific region, partially offset by declines in the Americas region.
Sensors—Our organic net sales decreased 9.2% in the first quarter of fiscal 2024 as a result of market weakness in both industrial and transportation applications and the strategic exit of certain lower margin and lower growth product lines.

Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

478

$

282

$

196

Operating margin

 

20.1

%

 

12.5

%

 

Operating income in the Transportation Solutions segment increased $196 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income increased in the first quarter of fiscal 2024 primarily as a result of improved manufacturing productivity and the positive impact of prior year pricing actions.

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Acquisition and integration costs

$

$

2

Restructuring and other charges, net

14

74

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

3

Total

$

17

$

76

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Table of Contents

Industrial Solutions

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

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

($ in millions)

Industrial equipment

$

330

 

32

%  

$

434

 

41

%  

Aerospace, defense, and marine

290

28

264

25

Energy

 

205

 

20

 

189

 

18

Medical

200

 

20

173

16

Total

$

1,025

 

100

%  

$

1,060

 

100

%  

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

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

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

versus Net Sales for the Quarter Ended December 30, 2022

Net Sales

Organic Net Sales

Acquisition

    

Growth (Decline)

    

Growth (Decline)

    

Translation

    

(Divestiture)

    

($ in millions)

 

Industrial equipment

$

(104)

 

(24.0)

%  

$

(115)

 

(26.3)

%  

$

11

$

Aerospace, defense, and marine

 

26

9.8

33

12.5

4

(11)

Energy

16

 

8.5

 

3

 

1.4

 

3

 

10

Medical

 

27

 

15.6

 

27

 

15.6

 

 

Total

$

(35)

 

(3.3)

%  

$

(52)

 

(4.9)

%  

$

18

$

(1)

In the Industrial Solutions segment, net sales decreased $35 million, or 3.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due primarily to organic net sales declines of 4.9%. Pricing actions initiated in fiscal 2023 positively affected organic net sales by $50 million in the first quarter of fiscal 2024. Our organic net sales by industry end market were as follows:

Industrial equipment—Our organic net sales decreased 26.3% in the first quarter of fiscal 2024 with declines across all regions and reduced demand resulting from inventory corrections in the supply chain.
Aerospace, defense, and marine—Our organic net sales increased 12.5% in the first quarter of fiscal 2024 as a result of growth in all markets.
Energy—Our organic net sales increased 1.4% in the first quarter of fiscal 2024 primarily as a result of growth in the Americas region and strength in renewable energy applications, partially offset by declines in the EMEA region.
Medical—Our organic net sales increased 15.6% in the first quarter of fiscal 2024 due primarily to growth in interventional medical applications.

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Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

141

$

156

$

(15)

Operating margin

 

13.8

%

 

14.7

%

 

  

Operating income in the Industrial Solutions segment decreased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income decreased during the first quarter of fiscal 2024 primarily as a result of lower volume, partially offset by the positive impact of prior year pricing actions.

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

(in millions)

Acquisition and integration costs

$

7

$

6

Restructuring and other charges, net

 

6

 

13

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

1

Total

$

14

$

19

Communications Solutions

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

For the

Quarters Ended

December 29,

December 30,

    

2023

    

    

2022

    

    

($ in millions)

Data and devices

$

279

64

%  

$

329

63

%  

Appliances

 

154

 

36

 

193

 

37

Total

$

433

 

100

%  

$

522

 

100

%  

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

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

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

versus Net Sales for the Quarter Ended December 30, 2022

    

Net Sales

    

Organic Net Sales

    

    

Decline

Decline

($ in millions)

Data and devices

$

(50)

(15.2)

%  

$

(50)

(15.2)

%  

Appliances

 

(39)

 

(20.2)

 

(39)

 

(20.2)

Total

$

(89)

 

(17.0)

%  

$

(89)

 

(17.0)

%  

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Net sales in the Communications Solutions segment decreased $89 million, or 17.0%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due to organic net sales declines of 17.0%. Our organic net sales by industry end market were as follows:

Data and devices—Our organic net sales decreased 15.2% in the first quarter of fiscal 2024 as a result of market declines in the Asia–Pacific region and reduced demand resulting from inventory corrections in the supply chain.
Appliances—Our organic net sales decreased 20.2% in the first quarter of fiscal 2024 due to market declines across all regions and reduced demand resulting from inventory corrections in the supply chain.

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

For the

Quarters Ended

December 29,

December 30,

    

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

79

$

64

$

15

Operating margin

 

18.2

%

 

12.3

%

 

Operating income in the Communications Solutions segment increased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income decreased slightly due primarily to lower volume, largely offset by improved manufacturing productivity.

For the

Quarters Ended

December 29,

December 30,

    

    

2023

    

2022

(in millions)

Acquisition and integration costs

$

1

$

1

Restructuring and other charges, net

1

24

Total

$

2

$

25

Liquidity and Capital Resources

Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of $350 million of 3.45% senior notes due in August 2024. We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions. We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs.

Cash Flows from Operating Activities

In the first quarter of fiscal 2024, net cash provided by operating activities increased $138 million to $719 million from $581 million in the first quarter of fiscal 2023. The increase resulted primarily from higher pre-tax income, partially offset by the impact of changes in working capital levels. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2024 and 2023 was $100 million and $98 million, respectively.

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Cash Flows from Investing Activities

Capital expenditures were $151 million and $183 million in the first quarters of fiscal 2024 and 2023, respectively. We expect fiscal 2024 capital spending levels to be approximately 5% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.

During the first quarter of fiscal 2024, we received net cash proceeds of $38 million related to the sale of one business. See Note 2 to the Condensed Consolidated Financial Statements for additional information.

During the first quarter of fiscal 2024, we acquired one business for a cash purchase price of $349 million, net of cash acquired. We acquired one business for a cash purchase price of $109 million, net of cash acquired, during the first quarter of fiscal 2023. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Cash Flows from Financing Activities and Capitalization

Total debt at December 29, 2023 and September 29, 2023 was $4,198 million and $4,211 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.

As of December 29, 2023, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $261 million of commercial paper outstanding at a weighted-average interest rate of 5.50%. TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 5.50% at September 29, 2023.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of June 2026 and total commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at December 29, 2023 or September 29, 2023.

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 29, 2023, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future.

In addition to the Credit Facility, TEGSA is the borrower under our senior notes and commercial paper. TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by its parent, TE Connectivity Ltd.

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

During the first quarter of fiscal 2024, our board of directors authorized an increase of $1.5 billion in our share repurchase program. We repurchased approximately three million of our common shares for $420 million and approximately two million of our common shares for $233 million under the share repurchase program during the first quarters of fiscal 2024 and 2023, respectively. At December 29, 2023, we had $1.8 billion of availability remaining under our share repurchase authorization.

Summarized Guarantor Financial Information

As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Ltd. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present

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

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Balance Sheet Data:

Total current assets

$

1,117

$

1,632

Total noncurrent assets(1)

 

3,485

 

2,857

Total current liabilities

 

940

 

1,303

Total noncurrent liabilities(2)

8,710

7,592

(1)Includes $3,454 million and $2,783 million as of December 29, 2023 and September 29, 2023, respectively, of intercompany loans receivable from non-guarantor subsidiaries.
(2)Includes $5,070 million and $4,056 million as of December 29, 2023 and September 29, 2023, respectively, of intercompany loans payable to non-guarantor subsidiaries.

For the

For the

Quarter Ended

Fiscal Year Ended

December 29,

September 29,

    

2023

    

2023

    

(in millions)

Statement of Operations Data:

Loss from continuing operations

$

(153)

$

(606)

Net loss

 

(153)

 

(606)

Guarantees

In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2024 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows.

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

At December 29, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $196 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business. In addition, as of December 29, 2023, we had $26 million of performance guarantees associated with the divestiture. We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale; however, based on historical experience, we do not anticipate having to perform on these guarantees.

Commitments and Contingencies

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon

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

Trade Compliance Matters

We have been investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and the resulting investigations are ongoing. We have also been contacted by the U.S. Department of Justice concerning aspects of these matters. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

Critical Accounting Policies and Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.

Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. There were no significant changes to this information during the first quarter of fiscal 2024.

Accounting Pronouncements

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

Non-GAAP Financial Measure

Organic Net Sales Growth (Decline)

We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity.

Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The tables presented in “Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP.

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Table of Contents

Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts.

Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law.

The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023, and in this report, could cause our results to differ materially from those expressed in forward-looking statements:

conditions in the global or regional economies and global capital markets, and cyclical industry conditions, including recession, inflation, and higher interest rates;
conditions affecting demand for products in the industries we serve, particularly the automotive industry;
risk of future goodwill impairment;
pricing pressure and competition, including competitive risks associated with the pace of technological change;
market acceptance of our new product introductions and product innovations and product life cycles;
raw material availability, quality, and cost;
product liability, warranty, and product recall claims and our ability to defend such claims;
fluctuations in foreign currency exchange rates and impacts of offsetting hedges;
financial condition and consolidation of customers and vendors;
reliance on third-party suppliers;
risks associated with current and future acquisitions and divestitures;
global risks of business interruptions due to natural disasters or other disasters which have impacted and could continue to negatively impact our results of operations as well as customer behaviors, business, and

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manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business;
global risks of political, economic, and military instability, including the continuing military conflict in certain parts of the world, and volatile and uncertain economic conditions and the evolving regulatory system in China;
risks associated with cybersecurity incidents and other disruptions to our information technology infrastructure;
risks related to compliance with current and future environmental and other laws and regulations, including those related to climate change;
risks related to the increasing scrutiny and expectations regarding environmental, social, and governance matters;
risks associated with compliance with applicable antitrust or competition laws or applicable trade regulations;
our ability to protect our intellectual property rights;
risks of litigation, regulatory actions, and compliance issues;
our ability to operate within the limitations imposed by our debt instruments;
the possible effects on us of various non-U.S. and U.S. legislative proposals and other initiatives that, if adopted, could materially increase our worldwide corporate effective tax rate, increase global cash taxes, and negatively impact our U.S. government contracts business;
requirements related to chemical usage, hazardous material content, recycling, and other circular economy initiatives;
various risks associated with being a Swiss corporation;
the impact of fluctuations in the market price of our shares; and
the impact of certain provisions of our articles of association on unsolicited takeover proposals.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposures to market risk during the first quarter of fiscal 2024. For further discussion of our exposures to market risk, refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of December 29, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 29, 2023.

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Table of Contents

Changes in Internal Control Over Financial Reporting

During the quarter ended December 29, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023 for additional information regarding legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. The risk factors described in our Annual Report on Form 10-K, in addition to other information in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information about our purchases of our common shares during the quarter ended December 29, 2023:

Maximum

Total Number of

Approximate

Shares Purchased

Dollar Value

as Part of

of Shares that May

Total Number

Average Price

Publicly Announced

Yet Be Purchased

of Shares

Paid Per

Plans or

Under the Plans

Period

    

Purchased(1)

    

Share(1)

    

Programs(2)

    

or Programs(2)

    

September 30–October 27, 2023

813,638

$

121.46

813,400

$

636,647,983

October 28–December 1, 2023

 

1,490,417

 

128.43

 

1,374,573

 

460,520,746

December 2–December 29, 2023

 

1,135,361

 

137.42

 

1,051,968

 

1,815,756,314

Total

 

3,439,416

129.75

 

3,239,941

 

  

(1)These columns include the following transactions which occurred during the quarter ended December 29, 2023:
(i)the acquisition of 199,475 common shares from individuals in order to satisfy tax withholding requirements in connection with the vesting of restricted share awards issued under equity compensation plans; and
(ii)open market purchases totaling 3,239,941 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007.
(2)During the quarter ended December 29, 2023, our board of directors authorized an increase of $1.5 billion in our share repurchase program. Our share repurchase program authorizes us to purchase a portion of our outstanding common shares from time to time through open market or private transactions, depending on business and market conditions. The share repurchase program does not have an expiration date.

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Table of Contents

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

In the quarter ended December 29, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K, except the following:

In the quarter ended December 29, 2023, Shad Kroeger, President, Industrial Solutions, adopted a plan for the sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Mr. Kroeger’s plan was adopted November 17, 2023 and expires October 31, 2024, and provides for the potential exercise and related sale of (i) stock options representing up to 5,000 common shares, with such sale to occur no earlier than March 1, 2024, (ii) stock options representing up to 5,000 common shares, with such sale to occur no earlier than June 3, 2024, and (iii) stock options representing up to 8,750 common shares, with such sale to occur no earlier than September 3, 2024.

The trading plan described above was entered into during an open insider trading window and was in compliance with our insider trading policies and procedures. Actual sale transactions will be disclosed publicly in filings with the SEC in accordance with applicable securities laws, rules, and regulations.

ITEM 6. EXHIBITS

Exhibit Number

Exhibit

10.1

*

TE Connectivity Ltd. 2007 Stock and Incentive Plan (amended and restated as of December 12, 2023)

22.1

*

Guaranteed Securities

31.1

*

Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

*

Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

**

Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document(1)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File(2)

Management contract or compensatory plan or arrangement

*Filed herewith

**

Furnished herewith

(1)The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
(2)Formatted in Inline XBRL and contained in exhibit 101

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TE CONNECTIVITY LTD.

By:

/s/ Heath A. Mitts

Heath A. Mitts
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)

Date: January 26, 2024

37