What changed in this filing

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Item 1. Financial Statements

2021-07-29 compared with 2021-04-23 · 143 added, 119 removed, 451 unchanged (37% of the section changed)

3 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions, except per share data)

5 unchanged sentences

Impairment of goodwill

Operating income (loss)

Operating income

Interest income

1 unchanged sentence

Other income, net

Income (loss) from continuing operations before income taxes

Income from continuing operations before income taxes

Income tax expense

15 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

6 unchanged sentences

Comprehensive income (loss)

comprehensive (income) loss attributable to noncontrolling interests

comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to TE Connectivity Ltd.

26 unchanged sentences

Shareholders' equity:

Common shares, CHF 0.57 par value, 338,953,381 shares authorized and issued

Common shares, CHF 0.57 par value, 336,099,881 shares authorized and issued , and 338,953,381 shares authorized and issued , respectively

Accumulated earnings

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Quarter Ended March 26, 2021

For the Quarter Ended June 25, 2021

TE Connectivity

4 unchanged sentences

(in millions)

Balance at December 25, 2020

Balance at March 26, 2021

Other comprehensive income

3 unchanged sentences

Repurchase of common shares

Balance at March 26, 2021

For the Six Months Ended March 26, 2021

Cancellation of treasury shares

Balance at June 25, 2021

For the Nine Months Ended June 25, 2021

TE Connectivity

10 unchanged sentences

Repurchase of common shares

Balance at March 26, 2021

Cancellation of treasury shares

Balance at June 25, 2021

TE CONNECTIVITY LTD.

1 unchanged sentence

(UNAUDITED) (Continued)

For the Quarter Ended March 27, 2020

For the Quarter Ended June 26, 2020

TE Connectivity

4 unchanged sentences

(in millions)

Balance at December 27, 2019

Other comprehensive loss

Balance at March 27, 2020

Other comprehensive income

Share-based compensation expense

2 unchanged sentences

Repurchase of common shares

Balance at March 27, 2020

For the Six Months Ended March 27, 2020

Cancellation of treasury shares

Balance at June 26, 2020

For the Nine Months Ended June 26, 2020

TE Connectivity

5 unchanged sentences

Balance at September 27, 2019

Other comprehensive loss

Other comprehensive

income (loss)

Share-based compensation expense

2 unchanged sentences

Repurchase of common shares

Balance at March 27, 2020

Cancellation of treasury shares

Balance at June 26, 2020

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(in millions)

1 unchanged sentence

Net income (loss)

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

Income from discontinued operations, net of income taxes

Income (loss) from continuing operations

44 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

Restructuring charges, net

Impairment of held for sale businesses and loss on divestiture

Impairment of held for sale businesses and loss on divestitures

Other charges, net

2 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

23 unchanged sentences

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.

During the nine months ended June 25, 2021, we recorded net restructuring charges of $ 162 million in connection with this program.

We expect to complete all restructuring actions commenced during the nine months ended June 25, 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.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2021 program by segment:

(in millions)

Transportation Solutions

Industrial Solutions

Communications Solutions

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 six months ended March 26, 2021 and March 27, 2020, we recorded restructuring charges of $ 14 million and $ 43 million, respectively.

In connection with this program, during the nine months ended June 25, 2021 and June 26, 2020, we recorded restructuring charges of $ 18 million and $ 138 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 $ 22 million related primarily to employee severance and facility exit costs.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes expected, incurred, and remaining charges for the fiscal 2020 program by segment:

3 unchanged sentences

Communications Solutions

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Pre-Fiscal 2020 Actions

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

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.

During the nine months ended June 25, 2021 and June 26, 2020, we recorded net restructuring credits of $ 10 million and charges of $ 6 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 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 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.

During the nine months ended June 25, 2021, we acquired two businesses for a combined cash purchase price of $ 125 million, net of cash acquired.

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

We acquired four businesses, including First Sensor AG (“First Sensor”), for a combined cash purchase price of $ 325 million, net of cash acquired, during the nine months ended June 26, 2020.

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

2 unchanged sentences

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.

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 Sheets as of June 25, 2021 and September 25, 2020 as the exercise of the put right by First Sensor minority shareholders is not within our control.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Inventories consisted of the following:

4 unchanged sentences

Finished goods

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

5 unchanged sentences

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.

June 25, 2021 (1)

(1) At June 25, 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 nine months ended June 25, 2021, we recognized goodwill in the Industrial Solutions segment in connection with recent acquisitions.

See Note 3 for additional information regarding acquisitions.

Intangible Assets, Net

Intangible assets consisted of the following:

March 26, 2021

June 25, 2021

September 25, 2020

2 unchanged sentences

Intellectual property

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

Intangible asset amortization expense was $ 48 million and $ 46 million for the quarters ended June 25, 2021 and June 26, 2020, respectively, and $ 144 million and $ 137 million for the nine months ended June 25, 2021 and June 26, 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.

At June 25, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:

(in millions)

Remainder of fiscal 2021

During the nine months ended June 25, 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 and € 350 million of fixed-to-floating rate senior notes due in June 2021.

During the nine months ended June 25, 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.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with total commitments of $ 1.5 billion.

The Credit Facility was amended in June 2021 primarily to extend the maturity date from November 2023 to June 2026.

The amended Credit Facility contains customary provisions for the replacement of London Interbank Offered Rate (“LIBOR”) with successor rates and amends certain representations, warranties, and covenants applicable to us and TEGSA as obligors under the credit agreement.

TEGSA had no borrowings under the Credit Facility at June 25, 2021 or September 25, 2020.

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) LIBOR or, upon a phase-out of LIBOR, an alternative benchmark rate, (2) an alternate base rate equal to the highest of (i) Bank of America , N.A.’s base rate, (ii) the federal funds effective rate plus 1 / 2 of 1%, and (iii) one-month LIBOR , or an alternative benchmark rate, plus 1 %, (3) an alternative currency daily rate , or (4) an alternative currency term rate , plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA.

TEGSA is required to pay an annual facility fee.

Based on the applicable credit ratings of TEGSA, this fee ranges from 5.0 to 12.5 basis points of the lenders’ commitments under the Credit Facility.

During the nine months ended June 25, 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 $ 4,510 million and $ 4,550 million at June 25, 2021 and September 25, 2020, respectively.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The components of lease cost were as follows:

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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

Six Months Ended

Nine Months Ended

(in millions)

2 unchanged sentences

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.

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

Commitments and Contingencies

Legal Proceedings

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.

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.

8 unchanged sentences

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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Environmental Matters

1 unchanged sentence

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 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.

As of June 25, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 18 million to $ 47 million, and we accrued $ 21 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 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.

At June 25, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 135 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.

These performance guarantees and letters of credit had a combined value of approximately $ 129 million as of June 25, 2021 and are expected to expire at various dates through fiscal 2025.

During the nine months ended June 25, 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 March 26, 2021 and September 25, 2020.

The aggregate notional value of these contracts was € 700 million at June 25, 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

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.

At June 25, 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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

position, or prepaid expenses and other current assets when the contracts are in a net liability position on the Condensed Consolidated Balance Sheets.

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

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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

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

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 $ 4,154 million and $ 3,511 million at March 26, 2021 and September 25, 2020, respectively.

The aggregate notional value of these hedges was $ 4,216 million and $ 3,511 million at June 25, 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 $ 1,380 million and $ 1,664 million at March 26, 2021 and September 25, 2020, respectively.

The aggregate notional value of the contracts under this program was $ 1,509 million and $ 1,664 million at June 25, 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:

6 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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)

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

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).

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Interest Rate Risk Management

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 contracts had an aggregate notional value of $ 450 million at June 25, 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:

6 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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 $ 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 contracts had an aggregate notional value of $ 478 million and $ 312 million at June 25, 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:

6 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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

Gains 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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Retirement Plans

9 unchanged sentences

Amortization of net actuarial loss

Amortization of prior service credit

Amortization of prior service credit and other

Net periodic pension benefit cost (credit)

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six Months Ended

Nine Months Ended

(in millions)

4 unchanged sentences

Amortization of net actuarial loss

Amortization of prior service credit

Amortization of prior service credit and other

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.

During the nine months ended June 25, 2021, we contributed $ 31 million and $ 18 million to our non-U.S.

pension plans, respectively.

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.

We recorded income tax expense of $ 124 million and $ 185 million for the quarters ended June 25, 2021 and June 26, 2020, respectively.

The income tax expense for the quarter ended June 26, 2020 included $ 170 million of income tax expense related to an increase to the valuation allowance for certain non-U.S.

deferred tax assets.

Due to the COVID-19 pandemic and its negative impact on our current and expected future operating profit and taxable income, we believed it was more likely than not that a portion of our deferred tax assets would not be realized.

Depending on business conditions, additional adjustments to our valuation allowance may be required in future periods as we continue to assess the realizability of our deferred tax assets.

We recorded income tax expense of $ 290 million and $ 674 million for the nine months ended June 25, 2021 and June 26, 2020, respectively.

The income tax expense for the nine months ended June 25, 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 nine months ended June 26, 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”).

See “Swiss Tax Reform” below for additional information.

In addition, the income tax expense included $ 170

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

million of income tax expense related to an increase to the valuation allowance for certain non-U.S.

deferred tax assets, partially offset by 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 nine months ended June 26, 2020 resulted in a tax benefit of $ 4 million as the associated goodwill was primarily not deductible for income tax purposes.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $ 90 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 26, 2021.

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 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)

During the nine months ended June 26, 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.

Earnings (Loss) Per Share

1 unchanged sentence

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

Dilutive impact of share-based compensation arrangements

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;

For both the quarter and nine months ended June 26, 2020, there were one million 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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Nine Months Ended

(in millions)

3 unchanged sentences

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.

The capital reduction by cancellation of these shares was subject to a notice period and filing with the commercial register in Switzerland and became effective in May 2021.

We paid cash dividends to shareholders as follows:

Quarters Ended

Six Months Ended

Nine Months Ended

Dividends paid per common share

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)

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 fiscal 2021 and ending in the second quarter of fiscal 2022.

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.

At June 25, 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 $ 493 million and $ 317 million, respectively.

Share Repurchase Program

During the quarter ended June 25, 2021, our board of directors authorized an increase of $ 1.5 billion in the share repurchase program.

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

Six Months Ended

Nine Months Ended

(in millions)

1 unchanged sentence

Repurchase value

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

At June 25, 2021, we had $ 1.9 billion of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Nine Months Ended

(in millions)

Share-based compensation expense

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.

As of June 25, 2021, there was $ 140 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 1.8 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 March 26, 2021, we had 13 million shares available for issuance under the TE Connectivity Ltd.

As of June 25, 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

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Expected life of options (in years)

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Segment and Geographic Data

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Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

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Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

15 unchanged sentences

Quarters Ended

Six Months Ended

Nine Months Ended

(in millions)

4 unchanged sentences

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