What changed in this filing

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Item 1. Business

2021-11-09 compared with 2020-11-10 · 76 added, 34 removed, 141 unchanged (44% of the section changed)

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Fiscal 2021, 2020, and 2019 were each 52 weeks in length and ended on September 24, 2021, September 25, 2020, and September 27, 2019, respectively.

For fiscal years in which there are 53 weeks, the fourth quarter reporting period includes 14 weeks, with the next such occurrence taking place in fiscal 2022.

For fiscal years in which there are 53 weeks, the fourth fiscal quarter includes 14 weeks, with the next such occurrence taking place in fiscal 2022.

COVID-19 Pandemic

A novel strain of coronavirus (“COVID-19”) was first identified in China in December 2019 and subsequently declared a pandemic by the World Health Organization.

To date, COVID-19 has surfaced in nearly all regions around the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas.

The COVID-19 pandemic negatively affected our sales and operating results during fiscal 2020, and we expect that it will continue to have an impact on our financial condition and results of operations in the near term and may have a material impact on our financial condition, liquidity, and results of operations in future periods.

COVID-19 has surfaced in nearly all regions around the world and resulted in business slowdowns or shutdowns and travel restrictions in affected areas.

The pandemic had a significant, negative impact on our sales and operating results during fiscal 2020 and continued to negatively affect certain of our businesses in fiscal 2021.

See “Part II.

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Transportation Solutions, Industrial Solutions, and Communications Solutions.

Although the COVID-19 pandemic has negatively affected our markets, we expect a gradual recovery with our three segments once again serving a combined market of approximately $190 billion.

Prior to the COVID-19 pandemic, our three segments served a combined market of approximately $190 billion.

Although COVID-19 negatively affected our markets in fiscal 2020, certain of our markets experienced recovery in fiscal 2021.

We expect this recovery will continue and our three segments will once again serve a combined market of approximately $190 billion in future periods.

Our net sales by segment as a percentage of our total net sales were as follows:

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The Transportation Solutions segment is a leader in connectivity and sensor technologies.

The primary products sold by the Transportation Solutions segment include terminals and connector systems and components, sensors, relays, antennas, application tooling, and wire and heat shrink tubing.

The primary products sold by the Transportation Solutions segment include terminals and connector systems and components, sensors, relays, antennas, heat shrink tubing, and application tooling.

The Transportation Solutions segment’s products, which must withstand harsh conditions, are used in the following end markets:

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The Industrial Solutions segment is a leading supplier of products that connect and distribute power, data, and signals.

The primary products sold by the Industrial Solutions segment include terminals and connector systems and components, heat shrink tubing, interventional medical components, relays, and wire and cable.

The primary products sold by the Industrial Solutions segment include terminals and connector systems and components, interventional medical components, heat shrink tubing, relays, and wire and cable.

The Industrial Solutions segment’s products are used in the following end markets:

● Industrial equipment (36% of segment’s net sales)— Our products are used in factory and warehouse automation and process control systems such as industrial controls, robotics, human machine interface, industrial communication, and power distribution.

Our building automation and smart city infrastructure products are used to connect lighting and offer solutions in HVAC, elevators/escalators, and security.

Our rail products are used in high-speed trains, metros, light rail vehicles, locomotives, and signaling switching equipment.

● Aerospace, defense, oil, and gas (27% of segment’s net sales)— We design, develop, and manufacture a comprehensive portfolio of critical electronic components and systems for the harsh operating conditions of the commercial aerospace, defense, and marine industries.

Our products and systems are designed and manufactured to operate effectively in harsh conditions ranging from the depths of the ocean to the far reaches of space.

● Industrial equipment (30% of segment’s net sales)— Our products are used in factory automation and process control systems such as industrial controls, robotics, human machine interface, industrial communication, and power distribution.

Our intelligent building products are used to connect lighting and offer solutions in HVAC, elevators/escalators, and security.

Our rail products are used in high-speed trains, metros, light rail vehicles, locomotives, and signaling switching equipment.

Our products are also used by the solar industry.

● Energy (19% of segment’s net sales)— Our products are used by electric power utilities, OEMs, and engineering procurement construction companies serving the electrical power grid and renewables industries.

They include a wide range of insulation, protection, and connection solutions for electrical power generation, transmission, distribution, and industrial markets.

● Medical (18% of segment’s net sales)— Our products are used in imaging, diagnostic, surgical, and minimally invasive interventional applications.

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Key markets served include cardiovascular, peripheral vascular, structural heart, endoscopy, electrophysiology, and neurovascular therapies.

● Energy (19% of segment’s net sales)— Our products are used by OEMs and utility companies in the electrical power industry and include a wide range of solutions for the electrical power generation, transmission, distribution, and industrial markets.

The Industrial Solutions segment competes primarily against Amphenol, Hubbell, Carlisle Companies, ABB, Integer Holdings, Esterline, Molex, and Omron.

The Industrial Solutions segment competes primarily against Amphenol, Hubbell, Carlisle Companies, Integer Holdings, Esterline, Molex, and Omron.

Communications Solutions

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Also, our sales in the energy market typically increase in the third and fourth fiscal quarters as customer activity increases.

Customer orders and demand may fluctuate as a result of economic and market conditions.

We have experienced, and expect to continue to experience, fluctuations as a result of the impacts of the COVID-19 pandemic.

Customer orders and demand may fluctuate as a result of economic and market conditions, including the impacts of the COVID-19 pandemic.

Backlog by reportable segment was as follows:

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We have experienced, and expect to continue to experience, downward pressure on prices.

However, as a result of increased costs, certain of our businesses implemented price increases in fiscal 2021.

Raw Materials

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The prices of these materials are driven by global supply and demand.

As markets recover from the COVID-19 pandemic, increases in consumer demand have led to shortages and price increases in some of our input materials.

Intellectual Property

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We also rely upon trade secrets, manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive position.

We review third-party proprietary rights, including patents and patent applications, as available, in an effort to

develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities, and monitor the intellectual property claims of others.

We review third-party proprietary rights, including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities, and monitor the intellectual property claims of others.

We own a large portfolio of patents that relate principally to electrical, optical, and electronic products.

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As of fiscal year end 2021, we employed approximately 89,000 people worldwide, including contract employees.

Approximately 22,000 were in the Asia–Pacific region, 31,000 were in the EMEA region, and 29,000 were in the Americas region.

Approximately 37,000 were in the EMEA region, 24,000 were in the Asia–Pacific region, and 28,000 were in the Americas region.

Of our total employees, approximately 56,000 were employed in manufacturing.

Our strong employee base, along with their commitment to uncompromising values, provides the foundation of our company’s success.

Our employees are responsible for upholding our purpose—to create a safer, sustainable, productive, and connected future;

our values—integrity, accountability, teamwork, and innovation;

and our strategy, execution, and talent (“SET”) leadership expectations.

Our core values—integrity, accountability, teamwork, and innovation—govern us.

They guide our decisions and our actions, both individually and as an organization.

Additionally, our employees are responsible for upholding our purpose—to create a safer, sustainable, productive, and connected future.

We track and report internally on key talent metrics including workforce demographics, critical role pipeline data, diversity data, and engagement and inclusion indices.

We aspire to have more than 26% women in leadership roles by fiscal 2025 and are committed to increasing the total number of women across all levels of the organization.

Additionally, as part of its charter, the management development and compensation committee of our board of directors oversees our policies and practices related to the management of human capital resources including talent management, culture, diversity, and inclusion.

We embrace diversity and inclusion.

A truly innovative workforce needs to be diverse and leverage the skills and perspectives of a wealth of backgrounds and experiences.

To attract a global workforce, we strive to embed a culture where employees can bring their whole selves to work.

Our employee resource groups (“ERGs”) are company-sponsored groups of employees that support and promote certain mutual objectives of both the employees and the company, including inclusion and diversity and the professional development of employees.

To drive our business outcomes globally, we believe we must build a workforce and supplier network that represents our global markets and the customers we serve.

We are also committed to a work environment where all employees are engaged, feel differences are valued and mutually-respected, and believe that all opinions count.

Our people reflect our customers and markets.

Our employees are in over 50 countries representing approximately 120 nationalities, and our total employee population is over 40% women.

Our employee resource groups (“ERGs”) are company-sponsored, voluntary, employee-led groups that focus on diverse talent segments or shared experiences of employees.

These groups apply those perspectives to create value for our company as a whole.

The ERGs provide a space where employees can foster connections and develop in a supportive environment.

As of fiscal year end 2020, we had six ERGs—ALIGN (LGBTQ), Women in Networking, TE Young Professionals, African Heritage, TE Veterans, and Asian Heritage.

We are focused on recruitment of diverse candidates and on internal talent development of our diverse leaders so that they can advance their careers and move into leadership positions within the company.

Also, during fiscal 2020, we conducted a fully digital, enterprise-wide engagement survey, our Every Connection Counts survey, which was available in 13 languages and focused on measuring engagement and inclusion.

We continue to emphasize employee development and training.

To empower employees to unleash their potential, we provide a range of development programs and opportunities, skills, and resources they need to be successful.

As of fiscal year end 2021, we had eight ERGs—ALIGN (lesbian, gay, bisexual, transgender, and queer/questioning employees and their allies), Women in Networking, TE Young Professionals, African Heritage, Asian Heritage, Latin Heritage, THRIVE (employees and their allies with mixed mental, emotional, and physical abilities), and TE Veterans.

Our ERGs have a total of over 6,000 members.

During fiscal 2021, we conducted our second consecutive employee engagement survey which was a fully digital, enterprise-wide survey available in 15 languages and focused on measuring engagement, inclusion, and leadership effectiveness.

We had a participation rate of over 80% in fiscal 2021.

Both our participation rate and engagement score improved in fiscal 2021 while our inclusion score remained consistent with fiscal 2020.

Fiscal 2021 was the first year leadership effectiveness was measured as part of this survey.

Additionally, our survey results for fiscal 2021 were favorable when compared to Glint Inc.’s external global manufacturing benchmark .

By fiscal 2025, we aspire to be in the top tier of this benchmark on engagement and inclusion.

We continue to emphasize employee development and training to support engagement and retention.

To empower employees to unleash their potential, we provide a range of development programs and opportunities, skills, and resources

they need to be successful.

Our LEARN@TE platform supplements our talent development strategies.

It is an online portal that enables employees to access instructor-led classroom or virtual courses and self-directed web-based courses.

In fiscal 2019, we launched SET leadership expectations to all employees which focus on how we drive strategy, effectively execute, and build talent.

We believe these behavioral expectations are integrated into the way we assess and select talent, manage performance, and develop our people.

We are committed to identifying and developing the talents of our next generation leaders.

We have a robust talent and succession planning process and have established specialized programs to support the development of our talent pipeline for critical roles in general management, engineering, and operations.

Strategy, execution, and talent (“SET”) leadership expectations, which focus on how we drive strategy, effectively execute, and build talent, have been rolled out to all employees and are embedded in all of our leadership programs.

We integrate these behavioral expectations into the way we assess and select talent, manage performance, and develop and reward our people.

We are committed to identifying and developing our next generation of leaders.

We are focused on both the recruitment of diverse candidates and the development of our diverse employees to provide the opportunity to advance their careers and move into leadership positions within the company.

On an annual basis, we conduct an organization and leadership review process with our chief executive officer and all segment, business unit, and function leaders focusing on our high-performing and high-potential talent, diverse talent, and the succession for our most critical roles.

Also, our board of directors reviews and assesses management development plans for senior executives and the succession plans relating to those positions.

We are committed to the safety, health, human rights, and well-being of our employees.

We continuously evaluate opportunities to raise safety and health standards through our environmental, health, and safety team.

Compliance audits and internal processes are in place to stay ahead of workplace hazards, and we aim to reduce our Occupational Safety and Health Administration (“OSHA”) total recordable incident rate—a rate equivalent to the number of incidents per 100 employees or 200,000 work hours—to 0.12 by fiscal 2025.

During the COVID-19 pandemic, we have taken additional actions to protect the physical and mental health and well-being of our global employees.

We have utilized our workplace flexibility guidelines, promoted our Wellbeing Connection program and health care benefits to support the needs of all employees, and instituted additional safety measures at all factories and sites.

In fiscal 2021, we implemented a human rights policy for the organization outlining our commitment to operating with respect for human rights.

We believe our management team has the experience necessary to effectively execute our strategy and advance our product and technology leadership.

Our chief executive officer and segment leaders average approximately 25 years of industry experience.

Our chief executive officer and segment leaders average over 25 years of industry experience.

They are supported by an experienced and talented management team who is dedicated to maintaining and expanding our position as a global leader in the industry.

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Any failure to maintain compliance with domestic and foreign trade regulation could limit our ability to import and export raw materials and finished goods into or from the relevant jurisdiction.

See Note 13 to the Consolidated Financial Statements for additional information regarding trade compliance matters.

Also, see “Part I.

Risk Factors” for discussion of the risks and uncertainties associated with trade regulations.

Environmental

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and other measures.

We also have a program for compliance with the European Union (“EU”) Restriction of Hazardous Substances and Waste Electrical and Electronic Equipment Directives, the China Restriction of Hazardous Substances law, the EU Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) Regulation, and similar laws.

We also have a program for compliance with the European Union (“EU”) Restriction of Hazardous Substances and Waste Electrical and Electronic Equipment Directives, the China Administrative Measures for the Restriction of Hazardous Substances in Electrical and Electronic Products, the EU Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) Regulation, and similar laws.

Compliance with these laws has increased our costs of doing business in a variety of ways and may continue to do so in the future.

For example, laws regarding product content and chemical registration require extensive and costly data collection, management, and reporting, and laws regulating greenhouse gas emissions may increase our costs for energy and certain materials and products.

For example, laws regarding product content and chemical registration require extensive and costly data

collection, management, and reporting, and laws regulating greenhouse gas emissions may increase our costs for energy and certain materials and products.

We also have projects underway at a number of current and former manufacturing sites to investigate and remediate environmental contamination resulting from past operations.

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We do not anticipate any material capital expenditures during fiscal 2022 for environmental control facilities or other costs of compliance with laws or regulations relating to greenhouse gas emissions.

Sustainability

We look to build on our strong foundation of environmental sustainability in our operations.

Our environmental sustainability strategy guides how we balance investor and customer expectations and drive improved environmental sustainability.

Our sustainability initiatives in our operations began more than 10 years ago.

From fiscal 2010 to 2020, we achieved more than a 25% reduction in absolute energy usage, absolute greenhouse gas emissions (Scopes 1 and 2), and absolute water usage.

Over the last few years, we have recycled approximately 80% of the waste materials from our operations.

We have challenged ourselves to find new ways to continue to drive sustainability improvements.

In fiscal 2021, we:

● established a new goal to further reduce our greenhouse gas emissions from our operations by more than 40%, on an absolute basis, by fiscal 2030 and made measurable progress towards this goal;

● improved our energy efficiency through energy efficient solutions such as implementing operating standards and advancing our equipment infrastructure (for example, LED lighting, compressor controls, and HVAC);

● reported our Scope 3 emissions to CDP for the first time.

While sustainability is embedded in our operations, we are exploring opportunities with our direct suppliers and logistics service providers to strengthen the environmental sustainability of our supply chain.

The majority of our greenhouse gas emissions are from the goods and services we use in our operations.

In addition to improving the sustainability of our operations and working with our suppliers to reduce their greenhouse gas emissions, we help our customers produce smaller, lighter, and more energy-efficient products, reducing the environmental impact of the products our customers make through the life of their products.

With every product that comes out of our facilities, we support a safer, sustainable, productive, and connected future.

Additional information regarding our sustainability initiatives and progress is available in our annual Corporate Responsibility Report and Task Force on Climate-Related Financial Disclosures (“TCFD”) Report located on our website at www.te.com under the heading “Corporate Responsibility.” The contents of our Corporate Responsibility Report and TCFD Report are not incorporated by reference in this Annual Report on Form 10-K.

Available Information

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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-K

Item 1. Business