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TE Connectivity Ltd. - Quarter Report: 2023 March (Form 10-Q)

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 March 31, 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 April 21, 2023 was 315,115,072.

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 and Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)

1

Condensed Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)

2

Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 (unaudited)

3

Condensed Consolidated Statements of Shareholders’ Equity for the Quarters and Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2023 and March 25, 2022 (unaudited)

6

Notes to Condensed Consolidated Financial Statements (unaudited)

7

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

37

Part II.

Other Information

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6.

Exhibits

39

Signatures

40

i

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions, except per share data)

Net sales

$

4,160

$

4,007

$

8,001

$

7,825

Cost of sales

 

2,876

 

2,670

 

5,530

 

5,258

Gross margin

 

1,284

 

1,337

 

2,471

 

2,567

Selling, general, and administrative expenses

 

435

416

 

827

779

Research, development, and engineering expenses

 

185

185

 

358

360

Acquisition and integration costs

 

8

10

 

17

18

Restructuring and other charges, net

 

119

21

 

230

33

Operating income

537

705

1,039

1,377

Interest income

12

4

21

6

Interest expense

 

(20)

(18)

 

(41)

(30)

Other income (expense), net

 

(4)

5

 

(9)

20

Income from continuing operations before income taxes

 

525

 

696

 

1,010

 

1,373

Income tax expense

 

(100)

(136)

 

(187)

(246)

Income from continuing operations

 

425

 

560

 

823

 

1,127

Income (loss) from discontinued operations, net of income taxes

 

8

 

7

(1)

Net income

$

433

$

560

$

830

$

1,126

Basic earnings per share:

Income from continuing operations

$

1.34

$

1.72

$

2.60

$

3.46

Income (loss) from discontinued operations

 

0.03

 

 

0.02

 

Net income

 

1.37

 

1.72

 

2.62

 

3.45

Diluted earnings per share:

Income from continuing operations

$

1.34

$

1.71

$

2.58

$

3.44

Income (loss) from discontinued operations

 

0.03

 

 

0.02

 

Net income

 

1.36

 

1.71

 

2.60

 

3.43

Weighted-average number of shares outstanding:

Basic

 

316

325

 

317

326

Diluted

 

318

327

 

319

328

See Notes to Condensed Consolidated Financial Statements.

1

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Net income

$

433

$

560

$

830

$

1,126

Other comprehensive income:

Currency translation

 

78

(9)

383

9

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

 

1

4

3

8

Gains on cash flow hedges, net of income taxes

 

38

46

107

47

Other comprehensive income

 

117

 

41

 

493

 

64

Comprehensive income

550

601

1,323

1,190

Less: comprehensive (income) loss attributable to noncontrolling interests

(2)

1

(11)

7

Comprehensive income attributable to TE Connectivity Ltd.

$

548

$

602

$

1,312

$

1,197

See Notes to Condensed Consolidated Financial Statements.

2

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

March 31,

September 30,

    

2023

    

2022

    

(in millions, except share

data)

Assets

Current assets:

Cash and cash equivalents

$

905

$

1,088

Accounts receivable, net of allowance for doubtful accounts of $46 and $45, respectively

 

3,048

 

2,865

Inventories

 

2,811

 

2,676

Prepaid expenses and other current assets

 

675

 

639

Total current assets

 

7,439

 

7,268

Property, plant, and equipment, net

 

3,818

 

3,567

Goodwill

 

5,527

 

5,258

Intangible assets, net

 

1,286

 

1,288

Deferred income taxes

 

2,634

 

2,498

Other assets

 

786

 

903

Total assets

$

21,490

$

20,782

Liabilities, redeemable noncontrolling interests, and shareholders' equity

Current liabilities:

Short-term debt

$

286

$

914

Accounts payable

 

1,678

 

1,593

Accrued and other current liabilities

 

2,429

 

2,125

Total current liabilities

 

4,393

 

4,632

Long-term debt

 

3,916

 

3,292

Long-term pension and postretirement liabilities

 

731

 

695

Deferred income taxes

 

216

 

244

Income taxes

 

326

 

304

Other liabilities

 

782

 

718

Total liabilities

 

10,364

 

9,885

Commitments and contingencies (Note 9)

Redeemable noncontrolling interests

106

95

Shareholders' equity:

Common shares, CHF 0.57 par value, 322,470,281 shares authorized and issued, and 330,830,781 shares authorized and issued, respectively

 

142

146

Accumulated earnings

 

11,824

 

12,832

Treasury shares, at cost, 7,053,036 and 12,749,540 shares, respectively

 

(933)

 

(1,681)

Accumulated other comprehensive loss

 

(13)

 

(495)

Total shareholders' equity

 

11,020

 

10,802

Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$

21,490

$

20,782

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

For the Quarter Ended March 31, 2023

Accumulated

Other

Total

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

(in millions)

Balance at December 30, 2022

 

331

$

146

 

(14)

$

(1,854)

$

$

13,200

$

(128)

$

11,364

Net income

 

 

 

 

 

 

433

 

 

433

Other comprehensive income

 

 

 

 

 

 

 

115

 

115

Share-based compensation expense

 

 

 

 

 

31

 

 

 

31

Dividends

 

 

 

 

 

 

(744)

 

 

(744)

Exercise of share options

 

 

 

 

9

 

 

 

 

9

Restricted share award vestings and other activity

 

 

 

 

16

 

(31)

 

26

 

 

11

Repurchase of common shares

 

 

 

(2)

 

(199)

 

 

 

 

(199)

Cancellation of treasury shares

(9)

(4)

9

1,095

(1,091)

Balance at March 31, 2023

322

$

142

 

(7)

$

(933)

$

$

11,824

$

(13)

$

11,020

For the Six Months Ended March 31, 2023

Accumulated

Other

Total

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

(in millions)

Balance at September 30, 2022

 

331

$

146

 

(13)

$

(1,681)

$

$

12,832

$

(495)

$

10,802

Net income

 

 

 

 

 

 

830

 

 

830

Other comprehensive income

 

 

 

 

 

 

 

482

 

482

Share-based compensation expense

 

 

 

 

 

63

 

 

 

63

Dividends

 

 

 

 

(744)

 

 

(744)

Exercise of share options

 

 

 

 

20

 

 

 

 

20

Restricted share award vestings and other activity

 

 

 

1

 

65

 

(63)

 

(3)

 

 

(1)

Repurchase of common shares

 

 

 

(4)

 

(432)

 

 

 

 

(432)

Cancellation of treasury shares

(9)

 

(4)

 

9

 

1,095

 

 

(1,091)

 

 

Balance at March 31, 2023

322

$

142

 

(7)

$

(933)

$

$

11,824

$

(13)

$

11,020

4

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TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended March 25, 2022

Accumulated

Other

Total

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

(in millions)

Balance at December 24, 2021

 

336

$

148

 

(10)

$

(1,274)

$

$

12,285

$

(139)

$

11,020

Net income

 

 

 

 

 

560

 

 

560

Other comprehensive income

 

 

 

 

 

 

 

42

 

42

Share-based compensation expense

 

 

 

 

 

28

 

 

 

28

Dividends

 

 

 

 

 

 

(722)

 

 

(722)

Exercise of share options

 

 

 

 

8

 

 

 

 

8

Restricted share award vestings and other activity

 

 

 

 

3

 

(28)

 

37

 

 

12

Repurchase of common shares

 

 

 

(3)

 

(506)

 

 

 

 

(506)

Balance at March 25, 2022

336

$

148

 

(13)

$

(1,769)

$

$

12,160

$

(97)

$

10,442

For the Six Months Ended March 25, 2022

Accumulated

Other

Total

Common Shares

Treasury Shares

Contributed

Accumulated

Comprehensive

Shareholders'

   

Shares

   

Amount

   

Shares

   

Amount

   

Surplus

   

Earnings

   

Loss

   

Equity

   

(in millions)

Balance at September 24, 2021

 

336

$

148

 

(9)

$

(1,055)

$

$

11,709

$

(168)

$

10,634

Net income

1,126

1,126

Other comprehensive income

 

 

 

 

 

 

 

71

 

71

Share-based compensation expense

 

 

 

 

 

60

 

 

 

60

Dividends

 

 

 

 

 

 

(722)

 

 

(722)

Exercise of share options

 

 

 

 

30

 

 

 

 

30

Restricted share award vestings and other activity

 

 

 

1

 

8

 

(60)

 

47

 

 

(5)

Repurchase of common shares

 

 

 

(5)

 

(752)

 

 

 

 

(752)

Balance at March 25, 2022

336

$

148

 

(13)

$

(1,769)

$

$

12,160

$

(97)

$

10,442

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the

Six Months Ended

March 31,

March 25,

    

2023

    

2022

    

(in millions)

Cash flows from operating activities:

Net income

$

830

$

1,126

(Income) loss from discontinued operations, net of income taxes

 

(7)

 

1

Income from continuing operations

 

823

 

1,127

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

Depreciation and amortization

 

394

 

392

Deferred income taxes

 

(70)

 

42

Non-cash lease cost

70

64

Provision for losses on accounts receivable and inventories

 

69

 

68

Share-based compensation expense

 

63

 

60

Impairment of held for sale businesses

67

Other

 

68

 

4

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

Accounts receivable, net

 

(224)

 

(57)

Inventories

 

(273)

 

(411)

Prepaid expenses and other current assets

 

(25)

 

36

Accounts payable

 

104

 

15

Accrued and other current liabilities

 

(83)

 

(305)

Income taxes

 

35

 

27

Other

 

197

 

(117)

Net cash provided by operating activities

 

1,215

 

945

Cash flows from investing activities:

Capital expenditures

 

(372)

 

(351)

Proceeds from sale of property, plant, and equipment

 

2

 

63

Acquisition of businesses, net of cash acquired

 

(108)

 

(102)

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

51

16

Other

 

23

 

(9)

Net cash used in investing activities

 

(404)

 

(383)

Cash flows from financing activities:

Net decrease in commercial paper

 

(85)

 

Proceeds from issuance of debt

 

499

 

588

Repayment of debt

 

(591)

 

(558)

Proceeds from exercise of share options

 

20

 

30

Repurchase of common shares

 

(466)

 

(708)

Payment of common share dividends to shareholders

 

(355)

 

(326)

Other

 

(28)

 

(38)

Net cash used in financing activities

 

(1,006)

 

(1,012)

Effect of currency translation on cash

 

12

 

(4)

Net decrease in cash, cash equivalents, and restricted cash

 

(183)

 

(454)

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

 

1,088

 

1,203

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

$

905

$

749

See Notes to Condensed Consolidated Financial Statements.

6

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TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

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 30, 2022.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2023 and fiscal 2022 are to our fiscal years ending September 29, 2023 and ended September 30, 2022, respectively.

2. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Restructuring charges, net

$

62

$

22

$

166

$

43

Impairment of held for sale businesses and (gain) loss on divestitures, net

56

(1)

62

(10)

Other charges, net

 

1

 

 

2

 

Restructuring and other charges, net

$

119

$

21

$

230

$

33

Restructuring Charges, Net

Net restructuring and related charges by segment were as follows:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Transportation Solutions

$

18

$

10

$

92

$

15

Industrial Solutions

 

36

 

10

 

42

 

18

Communications Solutions

 

8

 

2

 

32

 

10

Restructuring charges, net

62

22

166

43

Plus: charges included in cost of sales(1)

12

Restructuring and related charges, net

$

62

$

22

$

166

$

55

(1)Charges included in cost of sales were attributable to inventory-related charges within the Industrial Solutions segment.

7

Table of Contents

TE CONNECTIVITY LTD.

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

Activity in our restructuring reserves was as follows:

Balance at

Balance at

  

September 30,

Changes in

Cash

Non-Cash

Currency

March 31,

    

2022

    

Charges

    

Estimate

    

Payments

    

Items

    

Translation

    

2023

    

(in millions)

Fiscal 2023 Actions:

Employee severance

$

$

155

$

$

(18)

$

$

2

$

139

Facility and other exit costs

1

1

Property, plant, and equipment

5

(5)

Total

161

(18)

(5)

2

140

Fiscal 2022 Actions:

Employee severance

108

6

(7)

(28)

6

85

Facility and other exit costs

1

6

(3)

4

Total

109

12

(7)

(31)

6

89

Pre-Fiscal 2022 Actions:

Employee severance

112

4

(2)

(27)

8

95

Facility and other exit costs

7

(2)

(7)

2

Total

119

4

(4)

(34)

10

95

Total Activity

$

228

$

177

$

(11)

$

(83)

$

(5)

$

18

$

324

Fiscal 2023 Actions

During fiscal 2023, we initiated a restructuring program associated with cost structure improvements across all segments. During the six months ended March 31, 2023, we recorded restructuring charges of $161 million in connection with this program. We expect to complete all restructuring actions commenced during the six months ended March 31, 2023 by the end of fiscal 2025 and to incur additional charges of approximately $19 million related to employee severance, facility exit costs, and accelerated depreciation on property, plant, and equipment.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2023 program by segment as of March 31, 2023:

Total

Cumulative

Remaining

Expected

Charges

Expected

    

Charges

    

Incurred

    

Charges

    

(in millions)

Transportation Solutions

$

102

$

94

$

8

Industrial Solutions

 

54

 

44

 

10

Communications Solutions

 

24

 

23

 

1

Total

$

180

$

161

$

19

Fiscal 2022 Actions

During fiscal 2022, we initiated a restructuring program associated with footprint consolidation and cost structure improvements across all segments. In connection with this program, during the six months ended March 31, 2023 and March 25, 2022, we recorded net restructuring and related charges of $5 million and $53 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2022 by the end of fiscal 2024 and to incur additional charges of approximately $16 million related primarily to employee severance and facility exit costs.

8

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TE CONNECTIVITY LTD.

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

The following table summarizes expected, incurred, and remaining charges for the fiscal 2022 program by segment as of March 31, 2023:

Total

Cumulative

Remaining

Expected

Charges

Expected

    

Charges

    

Incurred

    

Charges

    

(in millions)

Transportation Solutions

$

96

$

88

$

8

Industrial Solutions

 

55

 

52

 

3

Communications Solutions

 

31

 

26

 

5

Total

$

182

$

166

$

16

Pre-Fiscal 2022 Actions

During the six months ended March 25, 2022, we recorded net restructuring charges of $2 million related to pre-fiscal 2022 actions. We expect that any additional charges related to restructuring actions commenced prior to fiscal 2022 will be insignificant.

Total Restructuring Reserves

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

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Accrued and other current liabilities

$

279

$

182

Other liabilities

 

45

 

46

Restructuring reserves

$

324

$

228

Divestitures

During the six months ended March 31, 2023, we sold two businesses for net cash proceeds of $51 million. In connection with the divestitures, we recorded pre-tax impairment charges and a net pre-tax gain on sales, which totaled to a net charge of $2 million. The businesses sold were both reported in our Industrial Solutions segment. Additionally, during the six months ended March 31, 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

During the six months ended March 25, 2022, we sold two businesses for net cash proceeds of $16 million and recognized a net pre-tax gain of $10 million on the transactions. The businesses sold were reported in our Transportation Solutions and Industrial Solutions segments.

3. Acquisitions

During the six months ended March 31, 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired. The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.

We acquired one business for a cash purchase price of $127 million, net of cash acquired, during the six months ended March 25, 2022. The acquisition was reported as part of our Communications Solutions segment from the date of acquisition. Also during the six months ended March 25, 2022, we finalized the purchase price allocation of certain fiscal 2021 acquisitions, which included the recognition of $25 million of cash acquired.

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TE CONNECTIVITY LTD.

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

4. Inventories

Inventories consisted of the following:

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Raw materials

$

434

$

390

Work in progress

 

1,288

 

1,066

Finished goods

 

1,089

 

1,220

Inventories

$

2,811

$

2,676

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 30, 2022(1)

$

1,439

$

3,118

$

701

$

5,258

Acquisition

73

73

Currency translation and other

 

57

 

111

 

28

 

196

March 31, 2023(1)

$

1,496

$

3,302

$

729

$

5,527

(1)At March 31, 2023 and September 30, 2022, 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 six months ended March 31, 2023, we recognized goodwill in the Industrial Solutions segment in connection with a recent acquisition. See Note 3 for additional information regarding acquisitions.

6. Intangible Assets, Net

Intangible assets consisted of the following:

March 31, 2023

September 30, 2022

    

Gross

    

    

Net

    

Gross

    

    

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

    

(in millions)

Customer relationships

$

1,754

$

(770)

$

984

$

1,642

$

(687)

$

955

Intellectual property

1,210

(919)

291

1,174

(852)

322

Other

 

17

 

(6)

 

11

 

16

 

(5)

 

11

Total

$

2,981

$

(1,695)

$

1,286

$

2,832

$

(1,544)

$

1,288

Intangible asset amortization expense was $49 million for both the quarters ended March 31, 2023 and March 25, 2022, and $95 million and $97 million for the six months ended March 31, 2023 and March 25, 2022, respectively.

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TE CONNECTIVITY LTD.

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

At March 31, 2023, the aggregate amortization expense on intangible assets is expected to be as follows:

    

(in millions)

  

Remainder of fiscal 2023

$

97

Fiscal 2024

164

Fiscal 2025

 

149

Fiscal 2026

 

144

Fiscal 2027

 

126

Fiscal 2028

 

93

Thereafter

 

513

Total

$

1,286

7. Debt

During the quarter ended March 31, 2023, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, issued $500 million aggregate principal amount of 4.50% senior notes due in February 2026. The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur. The notes are fully and unconditionally guaranteed as to payment on an unsecured basis by TE Connectivity Ltd.

During the quarter ended March 31, 2023, TEGSA repaid, at maturity, €550 million of 1.10% senior notes due in March 2023.

As of March 31, 2023, TEGSA had $285 million of commercial paper outstanding at a weighted-average interest rate of 5.5%. TEGSA had $370 million of commercial paper outstanding at a weighted-average interest rate of 3.45% at September 30, 2022.

The fair value of our debt, based on indicative valuations, was approximately $3,966 million and $3,990 million at March 31, 2023 and September 30, 2022, respectively.

8. Leases

The components of lease cost were as follows:

For the

For the

Quarters Ended

    

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

    

(in millions)

    

Operating lease cost

$

36

$

33

$

70

$

64

Variable lease cost

13

13

25

25

Total lease cost

$

49

$

46

$

95

$

89

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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

Six Months Ended

March 31,

March 25,

    

2023

    

2022

    

    

(in millions)

    

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

Payments for operating leases(1)

$

64

$

61

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

56

77

(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 March 31, 2023, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $17 million to $45 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.

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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 March 31, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $171 million, excluding those related to our former Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $58 million as of March 31, 2023 and are expected to expire at various dates through fiscal 2027. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

10. Financial Instruments

Foreign Currency Exchange Rate Risk

We may utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. As of fiscal year end 2022, all such cross-currency swap contracts had been terminated or matured and were settled; additionally, all related collateral positions were settled.

The impacts of these cross-currency swap contracts were as follows:

For the

For the

Quarter Ended

Six Months Ended

March 25,

March 25,

2022

    

2022

(in millions)

Losses recorded in other comprehensive income (loss)

$

(2)

$

(5)

Gains excluded from the hedging relationship(1)

 

10

 

39

(1)Gains excluded from the hedging relationship are recognized prospectively in selling, general, and administrative expenses and are offset by losses generated as a result of re-measuring certain intercompany loans to the U.S. dollar.

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 $3,210 million and $1,658 million at March 31, 2023 and September 30, 2022, 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 $3,782 million and $1,873 million at March 31, 2023 and September 30, 2022, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 1.61% per annum and pay no interest. Upon the maturity of these contracts at various dates through fiscal 2027, 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.

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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:

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Prepaid expenses and other current assets

$

43

$

55

Other assets

 

48

 

172

Accrued and other current liabilities

5

Other liabilities

25

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

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

$

(51)

$

80

$

(216)

$

188

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

 

(19)

 

33

 

(156)

 

70

(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.

Interest Rate Risk Management

We may utilize forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated issuance of fixed rate debt. During fiscal 2022, we terminated forward starting interest rate swap contracts as a result of the issuance of our 2.50% senior notes due in 2032.

The impacts of these forward starting interest rate swap contracts were as follows:

For the

For the

Quarter Ended

Six Months Ended

March 25,

March 25,

    

2022

    

2022

    

(in millions)

Gains recorded in other comprehensive income (loss)

$

11

$

13

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 $492 million and $566 million at

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TE CONNECTIVITY LTD.

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

March 31, 2023 and September 30, 2022, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Prepaid expenses and other current assets

$

28

$

2

Other assets

 

2

 

Accrued and other current liabilities

10

77

Other liabilities

1

7

The impacts of these commodity swap contracts were as follows:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Gains recorded in other comprehensive income (loss)

$

31

$

46

$

78

    

$

61

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

(9)

5

(38)

20

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.

11. Retirement Plans

The net periodic pension benefit cost (credit) 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

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Operating expense:

Service cost

$

6

$

10

$

2

$

2

Other (income) expense:

Interest cost

 

14

 

8

 

10

 

6

Expected returns on plan assets

 

(11)

 

(14)

 

(10)

 

(12)

Amortization of net actuarial loss

 

2

 

7

 

1

 

1

Amortization of prior service credit

 

(1)

 

(2)

 

 

Net periodic pension benefit cost (credit)

$

10

$

9

$

3

$

(3)

15

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TE CONNECTIVITY LTD.

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

Non-U.S. Plans

U.S. Plans

For the

For the

Six Months Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Operating expense:

Service cost

$

13

$

20

$

4

$

4

Other (income) expense:

Interest cost

 

28

 

17

 

19

 

13

Expected returns on plan assets

 

(22)

 

(29)

 

(19)

 

(24)

Amortization of net actuarial loss

 

3

 

13

 

2

 

2

Amortization of prior service credit

 

(2)

 

(3)

 

 

Net periodic pension benefit cost (credit)

$

20

$

18

$

6

$

(5)

During the six months ended March 31, 2023, we contributed $21 million to our non-U.S. pension plans.

12. Income Taxes

We recorded income tax expense of $100 million and $136 million for the quarters ended March 31, 2023 and March 25, 2022, respectively. The income tax expense for the quarter ended March 25, 2022 included $27 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate enacted in the canton of Schaffhausen on December 27, 2021 and a $19 million income tax benefit related to the tax impacts of an intercompany transaction.

We recorded income tax expense of $187 million and $246 million for the six months ended March 31, 2023 and March 25, 2022, respectively. The income tax expense for the six months ended March 25, 2022 included a $36 million income tax benefit related to the tax impacts of the intercompany transaction discussed above and $27 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate enacted in the canton of Schaffhausen. In addition, the income tax expense for the six months ended March 25, 2022 included $12 million of income tax expense related to an income tax audit of an acquired entity. As we are entitled to indemnification of pre-acquisition period tax obligations under the terms of the purchase agreement, we recorded an associated indemnification receivable and other income of $11 million during the six months ended March 25, 2022.

During the quarter ended March 31, 2023, we completed tax returns for certain non-U.S. entities which resulted in the recognition of additional deferred tax assets for tax loss carryforwards of $313 million. As we do not expect these subsidiaries to generate sufficient future taxable income to realize the deferred tax assets, we recognized a corresponding increase to the valuation allowance. Accordingly, there was no impact to the Condensed Consolidated Statement of Operations for the quarter ended March 31, 2023 or Condensed Consolidated Balance Sheet as of March 31, 2023.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of March 31, 2023, approximately $20 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 March 31, 2023.

16

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TE CONNECTIVITY LTD.

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

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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Basic

316

325

317

326

Dilutive impact of share-based compensation arrangements

2

2

2

2

Diluted

318

327

319

328

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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Antidilutive share options

 

1

1

1

1

14. Shareholders’ Equity

Common Shares

In March 2023, our shareholders approved, for a period of one year ending March 15, 2024, our board of directors’ authorization to issue additional new shares to a maximum of 120% and/or reduce shares to a minimum of 80% of the existing share capital, subject to certain conditions specified in our articles of association.

Common Shares Held in Treasury

In March 2023, our shareholders approved the cancellation of approximately eight and a half million shares purchased under our share repurchase program during the period beginning September 25, 2021 and ending September 30, 2022. The capital reduction by cancellation of these shares, which was subject to filing with the commercial register in Switzerland, approval by our board of directors, and other requirements, became effective in March 2023.

Dividends

We paid cash dividends to shareholders as follows:

For the

For the

 

Quarters Ended

Six Months Ended

 

    

March 31,

    

March 25,

    

March 31,

    

March 25,

 

    

2023

    

2022

    

2023

    

2022

    

Dividends paid per common share

$

0.56

$

0.50

$

1.12

$

1.00

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

17

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

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At March 31, 2023 and September 30, 2022, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $744 million and $356 million, respectively.

Share Repurchase Program

Common shares repurchased under the share repurchase program were as follows:

For the

Six Months Ended

March 31,

March 25,

    

2023

    

2022

    

(in millions)

Number of common shares repurchased

 

4

 

5

Repurchase value

 

$

432

 

$

752

At March 31, 2023, we had $1.2 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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Share-based compensation expense

 

$

31

 

$

28

$

63

 

$

60

As of March 31, 2023, there was $179 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 1.7 years.

During the quarter ended December 30, 2022, 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

$

35.79

Restricted share awards

0.4

 

124.52

Performance share awards

0.2

124.52

As of March 31, 2023, we had eight million shares available for issuance under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of September 17, 2020.

18

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TE CONNECTIVITY LTD.

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

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

 

4.0

%

Expected annual dividend per share

$

2.24

Expected life of options (in years)

 

5.1

16. Segment and Geographic Data

Effective for fiscal 2023, we realigned certain product lines from the Industrial Solutions segment to the Communications Solutions segment. We continue to operate through three reporting segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. The following segment information reflects our current segment reporting structure. Prior period segment results have been restated to conform to the current segment reporting structure. As a result of the realignment, $14 million of net sales and $6 million of operating income for the first six months of fiscal 2022 were reflected in the Communications Solutions segment.

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Transportation Solutions:

Automotive

$

1,795

$

1,653

$

3,444

$

3,173

Commercial transportation

 

405

 

394

 

753

 

759

Sensors

 

283

 

267

 

545

 

540

Total Transportation Solutions

2,483

2,314

4,742

4,472

Industrial Solutions:

Industrial equipment

461

465

895

920

Aerospace, defense, and marine

 

298

 

261

 

562

 

503

Energy

 

233

 

184

 

422

 

372

Medical

199

158

372

325

Total Industrial Solutions

1,191

1,068

2,251

2,120

Communications Solutions:

Data and devices

288

392

617

748

Appliances

 

198

 

233

 

391

 

485

Total Communications Solutions

486

625

1,008

1,233

Total

$

4,160

$

4,007

$

8,001

$

7,825

(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.

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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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Asia–Pacific:

Transportation Solutions

$

861

$

883

$

1,785

$

1,811

Industrial Solutions

 

196

 

194

 

385

 

399

Communications Solutions

242

334

536

671

Total Asia–Pacific

 

1,299

 

1,411

 

2,706

 

2,881

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

1,046

899

1,858

1,670

Industrial Solutions

 

527

 

443

 

971

 

893

Communications Solutions

 

94

 

91

 

164

 

184

Total EMEA

 

1,667

 

1,433

 

2,993

 

2,747

Americas:

Transportation Solutions

576

532

1,099

991

Industrial Solutions

 

468

 

431

 

895

 

828

Communications Solutions

150

200

308

378

Total Americas

 

1,194

 

1,163

 

2,302

 

2,197

Total

$

4,160

$

4,007

$

8,001

$

7,825

(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:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Transportation Solutions

$

333

$

409

$

615

$

804

Industrial Solutions

134

145

290

265

Communications Solutions

70

151

134

308

Total

$

537

$

705

$

1,039

$

1,377

20

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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, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.

Summary of Performance

Our net sales increased 3.8% and 2.2% in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022 due to sales growth in the Transportation Solutions and Industrial Solutions segments, partially offset by declines in the Communications Solutions segment. On an organic basis, our net sales increased 7.6% and 7.7% during the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022.
Our net sales by segment were as follows:
Transportation Solutions—Our net sales increased 7.3% and 6.0% in the second quarter and first six months of fiscal 2023, respectively, due primarily to sales increases in the automotive end market.
Industrial Solutions—Our net sales increased 11.5% and 6.2% in the second quarter and first six months of fiscal 2023, respectively, as a result of sales increases in the aerospace, defense, and marine, the energy, and the medical end markets, partially offset by declines in the industrial equipment end market.
Communications Solutions—Our net sales decreased 22.2% and 18.2% in the second quarter and first six months of fiscal 2023, respectively, due to sales declines in the data and devices and the appliances end markets.
Net cash provided by operating activities was $1,215 million in the first six months of fiscal 2023.

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 by supply chain disruptions and inflationary cost pressures as well as the military

21

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conflict between Russia and Ukraine and the COVID-19 pandemic in recent years. We are monitoring the current environment and its potential effects on our customers and the end markets we serve.

We have experienced inflationary cost pressures including increased costs for transportation, energy, and raw materials. However, we have been able to partially mitigate increased costs and supply chain disruptions through price increases or productivity. We have implemented select price increases for certain products. 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 are monitoring the continuing military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated sanctions. We sold our business operations in Russia, and our operations in Ukraine have been reduced. Neither Russia nor Ukraine represents a material portion of our business, and the military conflict did not have a significant impact on our business, financial condition, or results of operations during the first six months of fiscal 2023. The extent to which the conflict may impact our business in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, and supply chain disruptions. We will continue to actively monitor the conflict and assess the related sanctions and other effects and may take further actions if necessary.

The COVID-19 pandemic has had a global impact, most recently and significantly in China, and has resulted in business slowdowns or shutdowns. While the pandemic has impacted certain aspects of our business, the extent to which the pandemic will continue to impact our business and the markets we serve will depend on future developments which may include the resurgence of the spread of the virus and variant strains of the virus as well as the success of public health advancements. While certain of our operations in China were impacted in the first six months of fiscal 2023 and were shut down for a period of time in fiscal 2022, we do not expect the COVID-19 pandemic to have a significant impact on our businesses globally in fiscal 2023. However, it may have a negative impact on our financial condition and results of operations in future periods. We will continue to actively monitor the COVID-19 situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, shareholders, and the communities in which we operate.

Outlook

In the third quarter of fiscal 2023, we expect our net sales to be approximately $4.0 billion as compared to $4.1 billion in the third quarter of fiscal 2022. This decrease reflects sales declines in the Communications Solutions segment, partially offset by growth in the Transportation Solutions segment. We expect diluted earnings per share from continuing operations to be approximately $1.56 per share in the third quarter of fiscal 2023. This outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

Acquisition

During the first six months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired. The acquisition was 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.

Divestitures

During the first six months of fiscal 2023, we sold two businesses for net cash proceeds of $51 million. In connection with the divestitures, we recorded pre-tax impairment charges and a net pre-tax gain on sales, which totaled to a net charge of $2 million. The businesses sold were both reported in our Industrial Solutions segment. Additionally, during the first six months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding divestitures.

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Results of Operations

Net Sales

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

2023

    

    

2022

    

    

 

($ in millions)

 

Transportation Solutions

$

2,483

60

%  

$

2,314

58

%  

$

4,742

59

%  

$

4,472

57

%  

Industrial Solutions

 

1,191

 

28

 

1,068

 

26

 

2,251

 

28

 

2,120

 

27

Communications Solutions

 

486

 

12

 

625

 

16

 

1,008

 

13

 

1,233

 

16

Total

$

4,160

 

100

%  

$

4,007

 

100

%  

$

8,001

 

100

%  

$

7,825

 

100

%  

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

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Net Sales

Organic Net Sales

Acquisitions

Net Sales

Organic Net Sales

Acquisitions

Growth (Decline)

Growth (Decline)

Translation

(Divestiture)

    

Growth (Decline)

Growth (Decline)

    

Translation

    

(Divestiture)

($ in millions)

Transportation Solutions

$

169

 

7.3

%  

$

275

 

11.9

%  

$

(106)

$

$

270

 

6.0

%  

$

571

 

12.8

%  

$

(301)

$

Industrial Solutions

 

123

 

11.5

 

156

 

14.6

 

(32)

 

(1)

 

131

 

6.2

 

227

 

10.7

 

(95)

 

(1)

Communications Solutions

 

(139)

 

(22.2)

 

(126)

 

(20.2)

 

(17)

 

4

 

(225)

 

(18.2)

 

(194)

 

(15.7)

 

(44)

 

13

Total

$

153

 

3.8

%  

$

305

 

7.6

%  

$

(155)

$

3

$

176

 

2.2

%  

$

604

 

7.7

%  

$

(440)

$

12

Net sales increased $153 million, or 3.8%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022. The increase in net sales resulted primarily from organic net sales growth of 7.6%, partially offset by the negative impact of foreign currency translation of 3.9% due to the weakening of certain foreign currencies. In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $166 million.

In the first six months of fiscal 2023, net sales increased $176 million, or 2.2%, as compared to the first six months of fiscal 2022. The increase in net sales resulted primarily from organic net sales growth of 7.7%, partially offset by the negative impact of foreign currency translation of 5.6% due to the weakening of certain foreign currencies. Pricing actions positively affected organic net sales by $295 million in the first six months of fiscal 2023.

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

Net Sales by Geographic Region. Our business operates in three geographic regions—Asia–Pacific, Europe/Middle East/Africa (“EMEA”), 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 six months of fiscal 2023.

23

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

2023

    

    

2022

    

    

($ in millions)

Asia–Pacific

$

1,299

 

31

%  

$

1,411

 

35

%  

$

2,706

 

34

%  

$

2,881

 

37

%  

EMEA

1,667

40

1,433

36

2,993

37

2,747

35

Americas

 

1,194

 

29

 

1,163

 

29

 

2,302

 

29

 

2,197

 

28

Total

$

4,160

 

100

%  

$

4,007

 

100

%  

$

8,001

 

100

%  

$

7,825

 

100

%  

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

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

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Net Sales

Organic Net Sales

Acquisitions

Net Sales

Organic Net Sales

Acquisitions

    

Growth (Decline)

    

Growth (Decline)

    

Translation

    

(Divestiture)

    

Growth (Decline)

    

Growth

Translation

(Divestiture)

    

($ in millions)

 

Asia–Pacific

$

(112)

(7.9)

%  

$

(24)

(1.7)

%  

$

(88)

$

$

(175)

 

(6.1)

%  

$

58

 

2.0

%  

$

(233)

$

EMEA

234

 

16.3

294

 

20.5

(65)

5

246

 

9.0

445

16.2

(204)

5

Americas

 

31

 

2.7

 

35

 

3.0

 

(2)

 

(2)

 

105

 

4.8

 

101

 

4.6

 

(3)

 

7

Total

$

153

 

3.8

%  

$

305

 

7.6

%  

$

(155)

$

3

$

176

 

2.2

%  

$

604

7.7

%  

$

(440)

$

12

Cost of Sales and Gross Margin

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

Change

     

2023

    

    

2022

    

    

Change

    

($ in millions)

Cost of sales

$

2,876

$

2,670

$

206

$

5,530

$

5,258

$

272

As a percentage of net sales

 

69.1

%

 

66.6

%

 

  

 

69.1

%

 

67.2

%

 

  

Gross margin

$

1,284

$

1,337

$

(53)

$

2,471

$

2,567

$

(96)

As a percentage of net sales

 

30.9

%

 

33.4

%

 

  

 

30.9

%

 

32.8

%

 

  

Gross margin decreased $53 million and $96 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022 due primarily to inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions.

We use a wide variety of raw materials in the manufacture of our products, and cost of sales and gross margin are subject to variability in raw material prices. In recent years, raw material prices and availability have been impacted by worldwide economic conditions, including supply chain disruptions, inflationary cost pressures, and the COVID-19 pandemic. As a result, we have experienced shortages and price increases in some of our input materials; however, we have

24

Table of Contents

been able to initiate pricing actions which have partially offset these impacts. The following table presents the average prices incurred related to copper, gold, silver, and palladium:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

Measure

    

2023

    

2022

    

2023

    

2022

    

Copper

 

Lb.

$

4.13

$

4.13

 

$

4.16

$

3.97

 

Gold

 

Troy oz.

 

1,870

 

1,831

 

 

1,843

 

1,814

 

Silver

Troy oz.

23.34

24.64

23.75

24.10

Palladium

 

Troy oz.

 

2,308

 

2,380

 

 

2,185

 

2,363

 

We expect to purchase approximately 185 million pounds of copper, 120,000 troy ounces of gold, 2.5 million troy ounces of silver, and 8,000 troy ounces of palladium in fiscal 2023.

Operating Expenses

The following table presents operating expense information:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

Change

     

2023

    

    

2022

    

    

Change

    

($ in millions)

Selling, general, and administrative expenses

$

435

$

416

$

19

$

827

$

779

$

48

As a percentage of net sales

 

10.5

%

 

10.4

%

 

  

 

10.3

%

 

10.0

%

 

  

Restructuring and other charges, net

$

119

$

21

$

98

$

230

$

33

$

197

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $19 million in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to the impact of cost inflation, partially offset by the positive impact of foreign currency translation. In the first six months of fiscal 2023, selling, general, and administrative expenses increased $48 million as compared to the first six months of fiscal 2022 due primarily to a gain on the sale of real estate in the first six months of fiscal 2022 and the impact of cost inflation, partially offset by the positive impact of foreign currency translation.

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 2023, we initiated a restructuring program associated with cost structure improvements across all segments. We incurred net restructuring charges of $166 million during the first six months of fiscal 2023. Annualized cost savings related to the fiscal 2023 actions commenced during the first six months of fiscal 2023 are expected to be approximately $125 million and are expected to be 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 2023, we expect total restructuring charges to be approximately $250 million and total spending, which will be funded with cash from operations, to be approximately $225 million.

During the first six months of fiscal 2023, we recorded a pre-tax impairment charge of $60 million in connection with a held for sale business in the Transportation Solutions segment.

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

25

Table of Contents

Operating Income

The following table presents operating income and operating margin information:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

Change

     

2023

    

    

2022

    

    

Change

    

($ in millions)

Operating income

$

537

$

705

$

(168)

$

1,039

$

1,377

$

(338)

Operating margin

 

12.9

%

 

17.6

%

 

  

 

13.0

%

 

17.6

%

 

  

Operating income included the following:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Acquisition-related charges:

 

  

 

  

 

  

 

  

Acquisition and integration costs

$

8

$

10

$

17

$

18

Charges associated with the amortization of acquisition-related fair value adjustments

 

 

 

 

8

 

8

 

10

 

17

 

26

Restructuring and other charges, net

 

119

 

21

 

230

 

33

Restructuring-related charges recorded in cost of sales

12

Total

$

127

$

31

$

247

$

71

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

Non-Operating Items

The following table presents select non-operating information:

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

Change

     

2023

    

    

2022

    

    

Change

    

($ in millions)

Income tax expense

$

100

$

136

$

(36)

$

187

$

246

$

(59)

Effective tax rate

 

19.0

%

 

19.5

%

 

  

 

18.5

%

 

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 towards the enactment of a 15% global minimum tax. South Korea and Japan are the first countries to enact the global minimum tax. European Union members must adopt the global minimum tax by the end of calendar 2023 and many other jurisdictions have also committed to implementing the global minimum tax. The global minimum tax is a significant structural change to the international taxation framework, which will 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 potential impact on our results of operations, cash taxes, and worldwide corporate effective tax rate.

Segment Results

Effective for fiscal 2023, we realigned certain product lines from the Industrial Solutions segment to the Communications Solutions segment. Prior period segment results have been restated to conform to the current segment

26

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reporting structure. See Note 16 to the Condensed Consolidated Financial Statements for additional information regarding our segments.

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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

2023

    

    

2022

    

    

($ in millions)

Automotive

$

1,795

    

73

%  

$

1,653

    

71

%  

$

3,444

73

%  

$

3,173

71

%  

Commercial transportation

 

405

 

16

 

394

 

17

 

753

 

16

 

759

 

17

Sensors

 

283

 

11

 

267

 

12

 

545

 

11

 

540

 

12

Total

$

2,483

 

100

%  

$

2,314

 

100

%  

$

4,742

 

100

%  

$

4,472

 

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 Transportation Solutions segment’s net sales by industry end market:

Change in Net Sales for the Quarter Ended March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

    

Net Sales

    

Organic Net Sales

    

    

Net Sales

    

Organic Net Sales

    

    

Growth

Growth

Translation

Growth (Decline)

Growth

Translation

 

($ in millions)

 

Automotive

$

142

8.6

%  

$

226

13.6

%  

$

(84)

$

271

8.5

%  

$

508

16.0

%  

$

(237)

Commercial transportation

 

11

 

2.8

 

26

 

6.5

 

(15)

 

(6)

 

(0.8)

 

33

 

4.4

 

(39)

Sensors

 

16

 

6.0

 

23

 

8.8

 

(7)

 

5

 

0.9

 

30

 

5.6

 

(25)

Total

$

169

 

7.3

%  

$

275

 

11.9

%  

$

(106)

$

270

 

6.0

%  

$

571

 

12.8

%  

$

(301)

Net sales in the Transportation Solutions segment increased $169 million, or 7.3%, in the second quarter of fiscal 2023 from the second quarter of fiscal 2022 due to organic net sales growth of 11.9%, partially offset by the negative impact of foreign currency translation of 4.6%. In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $107 million. Our organic net sales by industry end market were as follows:

Automotive—Our organic net sales increased 13.6% in the second quarter of fiscal 2023 with growth of 22.7% in the EMEA region, 11.5% in the Americas region, and 6.2% in the Asia–Pacific region. Our organic net sales growth across all regions was attributable to increased content per vehicle as well as vehicle production growth, primarily in the EMEA and Americas regions.
Commercial transportation—Our organic net sales increased 6.5% in the second quarter of fiscal 2023 due to growth in the EMEA and Americas regions, partially offset by declines in the Asia–Pacific region.
Sensors—Our organic net sales increased 8.8% in the second quarter of fiscal 2023 as a result of growth in transportation and industrial applications.

In the first six months of fiscal 2023, net sales in the Transportation Solutions segment increased $270 million, or 6.0%, as compared to the first six months of fiscal 2022 due to organic net sales growth of 12.8%, partially offset by the

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Table of Contents

negative impact of foreign currency translation of 6.8%. In the first six months of fiscal 2023, pricing actions positively affected organic net sales by $198 million. Our organic net sales by industry end market were as follows:

Automotive—Our organic net sales increased 16.0% in the first six months of fiscal 2023 with growth of 21.5% in the EMEA region, 14.5% in the Americas region, and 12.1% in the Asia–Pacific region. Our organic net sales growth across all regions resulted from increased content per vehicle as well as vehicle production growth, primarily in the Americas and EMEA regions.
Commercial transportation—Our organic net sales increased 4.4% in the first six months of fiscal 2023 as a result of growth in the EMEA and Americas regions, partially offset by declines in the Asia–Pacific region.
Sensors—Our organic net sales increased 5.6% in the first six months of fiscal 2023 due primarily to growth in transportation applications.

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

Change

     

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

333

$

409

$

(76)

$

615

$

804

$

(189)

Operating margin

 

13.4

%

 

17.7

%

 

 

13.0

%

 

18.0

%

 

Operating income in the Transportation Solutions segment decreased $76 million and $189 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022. Excluding the items below, operating income decreased in the second quarter of fiscal 2023 primarily as a result of inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions. Excluding the items below, operating income decreased in the first six months of fiscal 2023 primarily as a result of inflationary pressure on material and operating costs and the negative impact of foreign currency translation, partially offset by the positive impact of pricing actions and higher volume.

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Acquisition and integration costs

$

$

4

$

2

$

7

Restructuring and other charges, net

78

9

 

152

 

3

Total

$

78

$

13

$

154

$

10

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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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

2023

    

    

2022

    

    

($ in millions)

Industrial equipment

$

461

 

38

%  

$

465

 

44

%  

$

895

 

39

%  

$

920

 

43

%  

Aerospace, defense, and marine

298

25

261

24

562

25

503

24

Energy

 

233

 

20

 

184

 

17

 

422

 

19

 

372

 

18

Medical

199

 

17

158

15

372

17

325

15

Total

$

1,191

 

100

%  

$

1,068

 

100

%  

$

2,251

 

100

%  

$

2,120

 

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 March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

Net Sales

Organic Net Sales

Acquisition

Net Sales

Organic Net Sales

Acquisition

    

Growth (Decline)

    

Growth

    

Translation

    

(Divestiture)

    

Growth (Decline)

    

Growth

    

Translation

    

(Divestiture)

    

($ in millions)

 

Industrial equipment

$

(4)

 

(0.9)

%  

$

15

 

3.2

%  

$

(19)

$

$

(25)

 

(2.7)

%  

$

29

3.2

%  

$

(54)

$

Aerospace, defense, and marine

 

37

14.2

48

18.6

(5)

(6)

 

59

11.7

83

16.3

(18)

(6)

Energy

49

 

26.6

 

51

 

27.7

 

(7)

 

5

50

 

13.4

 

66

17.6

 

(21)

5

Medical

 

41

 

25.9

 

42

 

26.3

 

(1)

 

 

47

 

14.5

 

49

15.2

 

(2)

Total

$

123

 

11.5

%  

$

156

 

14.6

%  

$

(32)

$

(1)

$

131

6.2

%  

$

227

 

10.7

%  

$

(95)

$

(1)

In the Industrial Solutions segment, net sales increased $123 million, or 11.5%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to organic net sales growth of 14.6%, partially offset by the negative impact of foreign currency translation of 3.0%. In the second quarter of fiscal 2023, pricing actions positively affected organic net sales by $58 million. Our organic net sales by industry end market were as follows:

Industrial equipment—Our organic net sales increased 3.2% in the second quarter of fiscal 2023 due to growth in the EMEA and Asia–Pacific regions, partially offset by declines in the Americas region.
Aerospace, defense, and marine—Our organic net sales increased 18.6% in the second quarter of fiscal 2023 primarily as a result of growth in the defense and the commercial aerospace markets.
Energy—Our organic net sales increased 27.7% in the second quarter of fiscal 2023 as a result of growth across all regions and strength in renewable energy applications.
Medical—Our organic net sales increased 26.3% in the second quarter of fiscal 2023 due to growth in interventional medical applications as well as surgical and imaging applications.

Net sales in the Industrial Solutions segment increased $131 million, or 6.2%, in the first six months of fiscal 2023 as compared to the first six months of fiscal 2022 due primarily to organic net sales growth of 10.7%, partially offset by the

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negative impact of foreign currency translation of 4.5%. In the first six months of fiscal 2023, pricing actions positively affected organic net sales by $92 million. Our organic net sales by industry end market were as follows:

Industrial equipment—Our organic net sales increased 3.2% in the first six months of fiscal 2023 as a result of growth in the EMEA and Asia–Pacific regions, partially offset by declines in the Americas region.
Aerospace, defense, and marine—Our organic net sales increased 16.3% in the first six months of fiscal 2023 due primarily to growth in the defense and the commercial aerospace markets.
Energy—Our organic net sales increased 17.6% in the first six months of fiscal 2023 due to growth across all regions and strength in renewable energy applications.
Medical—Our organic net sales increased 15.2% in the first six months of fiscal 2023 as a result of growth in interventional medical applications as well as surgical and imaging applications.

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

Change

     

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

134

$

145

$

(11)

$

290

$

265

$

25

Operating margin

 

11.3

%

 

13.6

%

 

  

 

12.9

%

 

12.5

%

 

  

Operating income in the Industrial Solutions segment decreased $11 million in the second quarter of fiscal 2023 and increased $25 million in the first six months of fiscal 2023, as compared to the same periods of fiscal 2022. Excluding the items below, operating income increased primarily as a result of the positive impact of pricing actions, partially offset by inflationary pressure on material and operating costs and the negative impact of foreign currency translation.

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

2023

    

2022

    

(in millions)

Acquisition-related charges:

 

  

 

  

 

  

 

  

 

Acquisition and integration costs

$

7

$

6

$

13

$

10

Charges associated with the amortization of acquisition-related fair value adjustments

 

 

 

 

8

 

7

 

6

 

13

 

18

Restructuring and other charges, net

 

33

 

10

 

46

 

20

Restructuring-related charges recorded in cost of sales

12

Total

$

40

$

16

$

59

$

50

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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

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

    

2022

    

    

2023

    

    

2022

    

    

($ in millions)

Data and devices

$

288

59

%  

$

392

63

%  

$

617

61

%  

$

748

61

%  

Appliances

 

198

 

41

 

233

 

37

 

391

 

39

 

485

 

39

Total

$

486

 

100

%  

$

625

 

100

%  

$

1,008

 

100

%  

$

1,233

 

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 March 31, 2023

Change in Net Sales for the Six Months Ended March 31, 2023

versus Net Sales for the Quarter Ended March 25, 2022

versus Net Sales for the Six Months Ended March 25, 2022

    

Net Sales

    

Organic Net Sales

    

    

Net Sales

    

Organic Net Sales

    

    

Decline

Decline

Translation

Acquisition

Decline

Decline

Translation

Acquisitions

($ in millions)

Data and devices

$

(104)

(26.5)

%  

$

(97)

(24.9)

%  

$

(11)

$

4

$

(131)

(17.5)

%  

$

(120)

(15.9)

%  

$

(24)

$

13

Appliances

 

(35)

 

(15.0)

 

(29)

 

(12.4)

 

(6)

 

 

(94)

 

(19.4)

 

(74)

 

(15.3)

 

(20)

 

Total

$

(139)

 

(22.2)

%  

$

(126)

 

(20.2)

%  

$

(17)

 

$

4

$

(225)

 

(18.2)

%  

$

(194)

 

(15.7)

%  

$

(44)

$

13

Net sales in the Communications Solutions segment decreased $139 million, or 22.2%, in the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 due primarily to organic net sales declines of 20.2% and the negative impact of foreign currency translation of 2.7%. Our organic net sales by industry end market were as follows:

Data and devices—Our organic net sales decreased 24.9% in the second quarter of fiscal 2023 as a result of market declines and reduced demand resulting from inventory corrections in the supply chain.
Appliances—Our organic net sales decreased 12.4% in the second quarter of fiscal 2023 due primarily to market declines across all regions.

In the first six months of fiscal 2023, net sales in the Communications Solutions segment decreased $225 million, or 18.2%, as compared to the first six months of fiscal 2022 due primarily to organic net sales declines of 15.7% and the negative impact of foreign currency translation of 3.6%. Our organic net sales by industry end market were as follows:

Data and devices—Our organic net sales decreased 15.9% in the first six months of fiscal 2023 due to market declines and reduced demand resulting from inventory corrections in the supply chain.
Appliances—Our organic net sales decreased 15.3% in the first six months of fiscal 2023 primarily as a result of market declines across all regions.

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Table of Contents

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

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

2023

    

2022

    

Change

     

2023

    

2022

    

Change

    

($ in millions)

Operating income

$

70

$

151

$

(81)

$

134

$

308

$

(174)

Operating margin

 

14.4

%

 

24.2

%

 

 

13.3

%

 

25.0

%

 

  

Operating income in the Communications Solutions segment decreased $81 million and $174 million in the second quarter and first six months of fiscal 2023, respectively, as compared to the same periods of fiscal 2022. Excluding the items below, operating income decreased due primarily to lower volume.

For the

For the

Quarters Ended

Six Months Ended

March 31,

March 25,

March 31,

March 25,

    

    

2023

    

2022

    

2023

    

2022

(in millions)

Acquisition and integration costs

$

1

$

$

2

$

1

Restructuring and other charges, net

8

2

32

10

Total

$

9

$

2

$

34

$

11

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. 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 six months of fiscal 2023, net cash provided by operating activities increased $270 million to $1,215 million from $945 million in the first six months of fiscal 2022. The increase resulted primarily from the impact of changes in working capital levels, partially offset by lower pre-tax income. The amount of income taxes paid, net of refunds, during the first six months of fiscal 2023 and 2022 was $223 million and $177 million, respectively.

Cash Flows from Investing Activities

Capital expenditures were $372 million and $351 million in the first six months of fiscal 2023 and 2022, respectively. We expect fiscal 2023 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 six months of fiscal 2023, we received net cash proceeds of $51 million related to the sale of two businesses. We received net cash proceeds of $16 million related to the sale of two businesses during the first six months of fiscal 2022. See Note 2 to the Condensed Consolidated Financial Statements for additional information.

During the first six months of fiscal 2023, we acquired one business for a cash purchase price of $108 million, net of cash acquired. We acquired one business for a cash purchase price of $127 million, net of cash acquired, during the first six

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months of fiscal 2022. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.

Cash Flows from Financing Activities and Capitalization

Total debt at March 31, 2023 and September 30, 2022 was $4,202 million and $4,206 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.

During the second quarter of fiscal 2023, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, issued $500 million aggregate principal amount of 4.50% senior notes due in February 2026. The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur.

During the second quarter of fiscal 2023, TEGSA repaid, at maturity, €550 million of 1.10% senior notes due in March 2023.

As of March 31, 2023, TEGSA had $285 million of commercial paper outstanding at a weighted-average interest rate of 5.5%. TEGSA had $370 million of commercial paper outstanding at a weighted-average interest rate of 3.45% at September 30, 2022.

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 March 31, 2023 or September 30, 2022.

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 March 31, 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 $355 million and $326 million in the first six months of fiscal 2023 and 2022, respectively.

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

We repurchased approximately four million of our common shares for $432 million and approximately five million of our common shares for $752 million under the share repurchase program during the first six months of fiscal 2023 and 2022, respectively. At March 31, 2023, we had $1.2 billion of availability remaining under our share repurchase authorization.

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Table of Contents

Summarized Guarantor Financial Information

As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Ltd. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd. and TEGSA on a combined basis.

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Balance Sheet Data:

Total current assets

$

828

$

1,400

Total noncurrent assets(1)

 

2,593

 

2,769

Total current liabilities

 

1,190

 

1,937

Total noncurrent liabilities(2)

9,103

15,871

(1)Includes $2,546 million and $2,601 million as of March 31, 2023 and September 30, 2022, respectively, of intercompany loans receivable from non-guarantor subsidiaries.
(2)Includes $5,166 million and $12,582 million as of March 31, 2023 and September 30, 2022, respectively, of intercompany loans payable to non-guarantor subsidiaries.

For the

For the

Six Months Ended

Fiscal Year Ended

March 31,

September 30,

    

2023

    

2022

    

(in millions)

Statement of Operations Data:

Loss from continuing operations

$

(567)

$

(35)

Net loss

 

(567)

 

(35)

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 2023 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 March 31, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $171 million, excluding those related to our former Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These performance guarantees and letters of credit had a combined value of approximately $58 million as of March 31, 2023 and are expected to expire at various dates through fiscal 2027. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

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Table of Contents

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.

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 30, 2022. There were no significant changes to this information during the first six months of fiscal 2023.

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

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Table of Contents

“Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP.

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 30, 2022, 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;
competition and pricing pressure;
market acceptance of our new product introductions and product innovations and product life cycles;
raw material availability, quality, and cost;
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;

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global risks of business interruptions due to natural disasters or other disasters such as the COVID-19 pandemic, which have impacted and could continue to negatively impact our results of operations as well as customer behaviors, business, and manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business;
global risks of political, economic, and military instability, including the continuing military conflict between Russia and Ukraine resulting from Russia’s invasion of Ukraine or escalating tensions in surrounding countries, and volatile and uncertain economic conditions in China;
risks associated with security breaches and other disruptions to our information technology infrastructure;
risks related to compliance with current and future environmental and other laws and regulations;
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;
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;
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 six months of fiscal 2023. 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 30, 2022.

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 March 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 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.

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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 30, 2022. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 for additional information regarding legal proceedings.

Environmental Matter

The following information is reported in accordance with Item 103 of Regulation S-K:

During fiscal 2021, we determined that the Silicon Microstructures, Inc. (“SMI”) manufacturing site in Milpitas, California historically miscalculated and inaccurately reported its sulfur hexafluoride (SF6) emissions prior to our acquisition of SMI. The site voluntarily disclosed the matter to the applicable state and local authorities, and in fiscal 2022, we received approval and installed new air abatement equipment at the site. In connection with an inspection of the air abatement equipment and an unrelated hazardous materials inspection during the quarter ended March 31, 2023, the local environmental authorities identified additional environmental deficiencies at the site. We are in the process of thoroughly investigating these matters with the intent to fully cooperate with the authorities to ensure a satisfactory resolution of these matters. We may face monetary sanctions, although we do not anticipate such claims will have a material adverse effect on our results of operations, financial position, or cash flows.

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 30, 2022. 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 March 31, 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)

    

December 31, 2022–January 27, 2023

462,571

$

121.80

462,300

$

1,391,903,053

January 28–March 3, 2023

 

604,536

 

130.25

 

600,800

 

1,313,652,619

March 4–March 31, 2023

 

510,792

 

126.35

 

510,300

 

1,249,175,700

Total

 

1,577,899

126.51

 

1,573,400

 

  

(1)These columns include the following transactions which occurred during the quarter ended March 31, 2023:
(i)the acquisition of 4,499 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 1,573,400 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007.

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(2)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.

ITEM 6. EXHIBITS

Exhibit Number

Exhibit

3.1

Articles of Association of TE Connectivity Ltd., as amended and restated (incorporated by reference to Exhibit 3.1 to TE Connectivity’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 20, 2023)

4.1

Nineteenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated February 13, 2023 (incorporated by reference to Exhibit 4.1 to TE Connectivity’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 13, 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)

*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: April 28, 2023

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