What changed in this filing

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Item 1. Financial Statements

2021-04-23 compared with 2021-01-28 · 196 added, 99 removed, 374 unchanged (44% of the section changed)

3 unchanged sentences

Quarters Ended

Six Months Ended

(in millions, except per share data)

4 unchanged sentences

Restructuring and other charges, net

Operating income

Impairment of goodwill

Operating income (loss)

Interest income

Interest expense

Other income (expense), net

Income from continuing operations before income taxes

Other income, net

Income (loss) from continuing operations before income taxes

Income tax expense

Income from continuing operations

Income from discontinued operations, net of income taxes

Basic earnings per share:

Income from continuing operations

Income from discontinued operations

Diluted earnings per share:

Income from continuing operations

Income from discontinued operations

Income (loss) from continuing operations

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

Net income (loss)

Basic earnings (loss) per share:

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

Diluted earnings (loss) per share:

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

Weighted-average number of shares outstanding:

1 unchanged sentence

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Quarters Ended

Six Months Ended

(in millions)

Other comprehensive income:

Net income (loss)

Other comprehensive income (loss):

Currency translation

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

Gains on cash flow hedges, net of income taxes

Other comprehensive income

Comprehensive income

comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to TE Connectivity Ltd.

Gains (losses) on cash flow hedges, net of income taxes

Other comprehensive income (loss)

Comprehensive income (loss)

comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to TE Connectivity Ltd.

See Notes to Condensed Consolidated Financial Statements.

33 unchanged sentences

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Quarter Ended December 25, 2020

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Quarter Ended March 26, 2021

TE Connectivity

Common Shares

3 unchanged sentences

(in millions)

Balance at September 25, 2020

Balance at December 25, 2020

Other comprehensive income

3 unchanged sentences

Repurchase of common shares

Balance at December 25, 2020

For the Quarter Ended December 27, 2019

Balance at March 26, 2021

For the Six Months Ended March 26, 2021

TE Connectivity

Common Shares

9 unchanged sentences

Repurchase of common shares

Balance at March 26, 2021

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended March 27, 2020

TE Connectivity

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at December 27, 2019

Other comprehensive loss

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Balance at March 27, 2020

For the Six Months Ended March 27, 2020

TE Connectivity

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at September 27, 2019

Other comprehensive loss

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Balance at March 27, 2020

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Quarters Ended

Six Months Ended

(in millions)

Cash flows from operating activities:

Income from discontinued operations, net of income taxes

Income from continuing operations

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

Net income (loss)

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

Income (loss) from continuing operations

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

Impairment of goodwill

Depreciation and amortization

11 unchanged sentences

Capital expenditures

Proceeds from sale of property, plant, and equipment

Acquisition of businesses, net of cash acquired

2 unchanged sentences

Net decrease in commercial paper

Proceeds from issuance of debt

Repayment of debt

22 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

Restructuring charges, net

Impairment of held for sale businesses and loss on divestiture

Other charges, net

2 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

19 unchanged sentences

Facility and other exit costs

Property, plant, and equipment

Total Activity

Fiscal 2021 Actions

During fiscal 2021, we initiated a restructuring program associated with footprint consolidation and structural improvements, due in part to the COVID-19 pandemic, across all segments.

In connection with this program, during the quarter ended December 25, 2020, we recorded restructuring charges of $ 142 million.

We expect to complete all restructuring actions commenced during the quarter ended December 25, 2020 by the end of fiscal 2022 and to incur additional charges of approximately $ 12 million related primarily to employee severance and facility exit costs across all segments.

During fiscal 2021, we initiated a restructuring program across all segments to optimize our manufacturing footprint and improve the cost structure of the organization.

During the six months ended March 26, 2021, we recorded net restructuring charges of $ 153 million in connection with this program.

We expect to complete all restructuring actions commenced during the six months ended March 26, 2021 by the end of fiscal 2022 and to incur additional charges of approximately $ 20 million related primarily to employee severance and facility exit costs across all segments.

Fiscal 2020 Actions

During fiscal 2020, we initiated a restructuring program associated with footprint consolidation and structural improvements, due in part to the COVID-19 pandemic, across all segments.

In connection with this program, during the quarters ended December 25, 2020 and December 27, 2019, we recorded restructuring charges of $ 11 million and $ 15 million, respectively.

In connection with this program, during the six months ended March 26, 2021 and March 27, 2020, we recorded restructuring charges of $ 14 million and $ 43 million, respectively.

We expect to complete all restructuring actions commenced during fiscal 2020 by the end of fiscal 2023 and to incur additional charges of approximately $ 26 million related primarily to employee severance and facility exit costs.

8 unchanged sentences

Prior to fiscal 2020, we initiated restructuring programs associated with footprint consolidation and structural improvements impacting all segments.

During the quarters ended December 25, 2020 and December 27, 2019, we recorded net restructuring credits of $ 4 million and charges of $ 9 million, respectively, related to pre-fiscal 2020 actions.

During the six months ended March 26, 2021 and March 27, 2020, we recorded net restructuring credits of $ 7 million and charges of $ 3 million, respectively, related to pre-fiscal 2020 actions.

We expect additional charges related to pre-fiscal 2020 actions to be insignificant.

6 unchanged sentences

Restructuring reserves

During the quarter ended December 25, 2020, we acquired one business for a cash purchase price of $ 106 million, net of cash acquired.

During the six months ended March 26, 2021, we acquired one business for a cash purchase price of $ 106 million, net of cash acquired.

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

We acquired two businesses for a combined cash purchase price of $ 112 million, net of cash acquired, during the quarter ended December 27, 2019.

We acquired four businesses, including First Sensor AG (“First Sensor”), for a combined cash purchase price of $ 356 million, net of cash acquired, during the six months ended March 27, 2020.

The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

In connection with the acquisition of First Sensor, we and First Sensor entered into a Domination and Profit and Loss Transfer Agreement (“DPLTA”).

Under the terms of the DPLTA, upon its effectiveness in July 2020, First Sensor minority shareholders can elect either (1) to remain First Sensor minority shareholders and receive recurring annual compensation of € 0.56 per First Sensor share or (2) to put their First Sensor shares in exchange for compensation of € 33.27 per First Sensor share.

The ultimate amount and timing of any future cash payments related to the DPLTA is uncertain.

Our First Sensor noncontrolling interest balance, which was originally recorded at a fair value of € 96 million (equivalent to $ 107 million), is recorded as redeemable noncontrolling interest outside of equity on the Condensed Consolidated Balance Sheet as of March 26, 2021 and September 25, 2020 as the exercise of the put right by First Sensor minority shareholders is not within our control.

Inventories consisted of the following:

12 unchanged sentences

Purchase price adjustments

Currency translation

December 25, 2020 (1)

(1) At December 25, 2020 and September 25, 2020, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 3,091 million, $ 669 million, and $ 489 million, respectively.

During the quarter ended December 25, 2020, we recognized goodwill in the Industrial Solutions segment in connection with a recent acquisition.

Currency translation and other

March 26, 2021 (1)

(1) At March 26, 2021 and September 25, 2020, 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 26, 2021, we recognized goodwill in the Industrial Solutions segment in connection with a recent acquisition.

See Note 3 for additional information regarding the acquisition.

1 unchanged sentence

Intangible assets consisted of the following:

December 25, 2020

March 26, 2021

September 25, 2020

2 unchanged sentences

Intellectual property

Intangible asset amortization expense was $ 48 million and $ 45 million for the quarters ended December 25, 2020 and December 27, 2019, respectively.

At December 25, 2020, the aggregate amortization expense on intangible assets is expected to be as follows:

Intangible asset amortization expense was $ 48 million and $ 46 million for the quarters ended March 26, 2021 and March 27, 2020, respectively, and $ 96 million and $ 91 million for the six months ended March 26, 2021 and March 27, 2020, respectively.

At March 26, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:

(in millions)

Remainder of fiscal 2021

The fair value of our debt, based on indicative valuations, was approximately $ 4,621 million and $ 4,550 million at December 25, 2020 and September 25, 2020, respectively.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the quarter ended March 26, 2021, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, repaid, at maturity, $ 250 million of 4.875 % senior notes due in January 2021.

In February 2021, TEGSA issued € 550 million aggregate principal amount of 0.00 % senior notes due in February 2029.

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 26, 2021, we reclassified $ 500 million of 3.50 % senior notes due in February 2022 from long-term debt to short-term debt on the Condensed Consolidated Balance Sheet.

The fair value of our debt, based on indicative valuations, was approximately $ 4,899 million and $ 4,550 million at March 26, 2021 and September 25, 2020, respectively.

The components of lease cost were as follows:

Quarters Ended

Six Months Ended

(in millions)

3 unchanged sentences

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

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

Payments for operating leases (1)

ROU assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for new operating lease liabilities

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

(2) Excludes right-of-use assets recognized in connection with the adoption of ASC 842.

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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

1 unchanged sentence

We are investigating our past compliance with relevant U.S.

trade controls and are making voluntary disclosures of apparent trade controls violations to the U.S.

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

We are cooperating with BIS, and both our internal assessment and the BIS investigation are ongoing.

We are unable to predict the final outcome of the BIS investigation or to reasonably estimate the time it may take to resolve these matters.

An unfavorable outcome may include fines or penalties imposed in response to our disclosures;

however, we are not yet able to estimate whether any such fines or penalties would be material to our financial condition and results of operations.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 both our internal assessment and the resulting investigations by the agencies remain ongoing.

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.

While 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

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The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

As of December 25, 2020, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 16 million to $ 46 million, and we accrued $ 19 million as the probable loss, which was the best estimate within this range.

As of March 26, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 17 million to $ 47 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.

1 unchanged sentence

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

At December 25, 2020, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 252 million, of which $ 93 million related to our Subsea Communications (“SubCom”) business which was sold during fiscal 2019.

In connection with the SubCom 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 $ 280 million as of December 25, 2020 and are expected to expire at various dates through fiscal 2025.

Also, under the terms of the definitive agreement, we are required to issue up to $ 300 million of new performance guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of up to three years .

As of December 25, 2020, there were no new performance guarantees outstanding.

At March 26, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 157 million, excluding those related to our 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 $ 130 million as of March 26, 2021 and are expected to expire at various dates through fiscal 2025.

During the quarter ended March 26, 2021, we amended our agreement with SubCom and removed the requirement to issue new performance guarantees.

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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Financial Instruments

1 unchanged sentence

We utilize cross-currency swap contracts to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans.

The aggregate notional value of these contracts was € 700 million at December 25, 2020 and September 25, 2020.

The aggregate notional value of these contracts was € 700 million at March 26, 2021 and September 25, 2020.

Under the terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros at 3.50 % per annum and receive interest in U.S.

7 unchanged sentences

Other liabilities

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At December 25, 2020 and September 25, 2020, collateral received from or paid to our counterparties approximated the net derivative position.

At March 26, 2021 and September 25, 2020, collateral received from or paid to our counterparties approximated the net derivative position.

Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset position, or prepaid expenses and other current assets when the contracts are in a net liability position on the Condensed Consolidated Balance Sheets.

1 unchanged sentence

Quarters Ended

Six Months Ended

(in millions)

Gains (losses) recorded in other comprehensive income (loss)

Losses excluded from the hedging relationship (1)

Gains (losses) excluded from the hedging relationship (1)

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

1 unchanged sentence

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 $ 3,820 million and $ 3,511 million at December 25, 2020 and September 25, 2020, respectively.

The aggregate notional value of these hedges was $ 4,154 million and $ 3,511 million at March 26, 2021 and September 25, 2020, 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 $ 1,957 million and $ 1,664 million at December 25, 2020 and September 25, 2020, respectively.

The aggregate notional value of the contracts under this program was $ 1,380 million and $ 1,664 million at March 26, 2021 and September 25, 2020, respectively.

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

3 unchanged sentences

We are not required to provide collateral for these contracts.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

4 unchanged sentences

Other liabilities

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Quarters Ended

Six Months Ended

(in millions)

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

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

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

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

(1) Recorded as currency translation, a component of accumulated other comprehensive income (loss).

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.

These contracts had an aggregate notional value of $ 450 million at December 25, 2020 and September 25, 2020, and were designated as cash flow hedges.

We utilize forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated issuance of fixed rate debt.

These contracts had an aggregate notional value of $ 450 million at March 26, 2021 and September 25, 2020 and were designated as cash flow hedges.

These forward starting interest rate swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

1 unchanged sentence

(in millions)

Prepaid expenses and other current assets

Accrued and other current liabilities

Other liabilities

1 unchanged sentence

Quarters Ended

Six Months Ended

(in millions)

Gains recorded in other comprehensive income (loss)

Gains (losses) recorded in other comprehensive income (loss)

Commodity Hedges

1 unchanged sentence

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 $ 321 million and $ 312 million at December 25, 2020 and September 25, 2020, respectively, and were designated as cash flow hedges.

These contracts had an aggregate notional value of $ 410 million and $ 312 million at March

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

26, 2021 and September 25, 2020, respectively, and were designated as cash flow hedges.

These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

4 unchanged sentences

Other liabilities

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The impacts of these commodity swap contracts were as follows:

Quarters Ended

Six Months Ended

(in millions)

Gains recorded in other comprehensive income (loss)

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

Gains (losses) recorded in other comprehensive income (loss)

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

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.

12 unchanged sentences

Net periodic pension benefit cost (credit)

During the quarter ended December 25, 2020, we contributed $ 10 million and $ 17 million to our non-U.S.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six Months Ended

(in millions)

Operating expense:

Other (income) expense:

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Amortization of prior service credit

Net periodic pension benefit cost (credit)

During the six months ended March 26, 2021, we contributed $ 20 million and $ 18 million to our non-U.S.

pension plans, respectively.

We recorded income tax expense of $ 60 million and $ 447 million for the quarters ended December 25, 2020 and December 27, 2019, respectively.

The income tax expense for the quarter ended December 25, 2020 included a $ 29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.

The income tax expense for the quarter ended December 27, 2019 included $ 355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”).

We recorded income tax expense of $ 106 million and $ 42 million for the quarters ended March 26, 2021 and March 27, 2020, respectively.

The income tax expense for the quarter ended March 27, 2020 included an income tax benefit of $ 31 million related to pre-separation tax matters and the termination of the Tax Sharing Agreement with Tyco International plc (now part of Johnson Controls International plc) and Covidien plc (now part of Medtronic plc).

The pre-tax goodwill impairment charge of $ 900 million recorded during the quarter ended March 27, 2020 resulted in a tax benefit of $ 4 million as the associated goodwill was primarily not deductible for income tax purposes.

We recorded income tax expense of $ 166 million and $ 489 million for the six months ended March 26, 2021 and March 27, 2020, respectively.

The income tax expense for the six months ended March 26, 2021 included a $ 29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.

The income tax expense for the six months ended March 27, 2020 included $ 355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”), and an income tax benefit of $ 31 million related to pre-separation tax matters and the termination of the Tax Sharing Agreement.

See “Swiss Tax Reform” below for additional information.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $ 110 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 25, 2020.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Swiss Tax Reform

3 unchanged sentences

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law, including reductions in tax rates.

During the quarter ended December 27, 2019, we recognized $ 355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

Earnings Per Share

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

During the six months ended March 27, 2020, we recognized $ 355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Earnings (Loss) Per Share

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

Quarters Ended

Six Months Ended

(in millions)

Dilutive impact of share-based compensation arrangements

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 quarter and six months ended March 27, 2020, there were nonvested share awards and options outstanding with underlying exercise prices less than the average market prices of our common shares;

however, these were excluded from the calculation of diluted loss per share as inclusion would be antidilutive as a result of our loss during the period.

Such shares not included in the computation of diluted loss per share were one million and two million in the quarter and six months ended March 27, 2020, respectively.

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

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

Shareholders’ Equity

Common Shares Held in Treasury

In March 2021, our shareholders approved the cancellation of approximately 3 million shares purchased under our share repurchase program during the period beginning September 28, 2019 and ending September 25, 2020.

The capital reduction by cancellation of these shares is subject to a notice period and filing with the commercial register in Switzerland and is not yet reflected on the Condensed Consolidated Balance Sheet.

We paid cash dividends to shareholders as follows:

Quarters Ended

Six Months Ended

Dividends paid per common share

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity.

At December 25, 2020 and September 25, 2020, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 159 million and $ 317 million, respectively.

In March 2021, our shareholders approved a dividend payment to shareholders of $ 2.00 per share, payable in four equal quarterly installments of $ 0.50 per share beginning in the third quarter of 2021 and ending in the second quarter of fiscal 2022.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity.

At March 26, 2021 and September 25, 2020, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 661 million and $ 317 million, respectively.

Share Repurchase Program

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

Quarters Ended

Six Months Ended

(in millions)

1 unchanged sentence

Repurchase value

At December 25, 2020, we had $ 868 million of availability remaining under our share repurchase authorization.

At March 26, 2021, we had $ 686 million of availability remaining under our share repurchase authorization.

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

Quarters Ended

Six Months Ended

(in millions)

Share-based compensation expense

As of December 25, 2020, there was $ 170 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.2 years.

As of March 26, 2021, there was $ 151 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.0 years.

During the quarter ended December 25, 2020, we granted the following share-based awards as part of our annual incentive plan grant:

3 unchanged sentences

Performance share awards

As of December 25, 2020, we had 13 million shares available for issuance under the TE Connectivity Ltd.

As of March 26, 2021, we had 13 million shares available for issuance under the TE Connectivity Ltd.

2007 Stock and Incentive Plan, amended and restated as of September 17, 2020.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Share-Based Compensation Assumptions

4 unchanged sentences

Expected life of options (in years)

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Segment and Geographic Data

1 unchanged sentence

Quarters Ended

Six Months Ended

(in millions)

15 unchanged sentences

Quarters Ended

Six Months Ended

(in millions)

13 unchanged sentences

(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:

Operating income (loss) by segment was as follows:

Quarters Ended

Six Months Ended

(in millions)

2 unchanged sentences

Communications Solutions

(1) Includes goodwill impairment charge of $ 900 million.

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

What changed 10-Q

Item 1. Financial Statements