What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-11-09 compared with 2020-11-10 · 249 added, 324 removed, 1454 unchanged (28% of the section changed)

13 unchanged sentences

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Our Guide to Ethical Conduct also meets the requirements of a code of business conduct and ethics under the listing standards of the NYSE.

Our Guide to Ethical Conduct is posted on our website at www.te.com under the heading “Corporate Responsibility—Governance—Compliance.” We also will provide a copy of our Guide to Ethical Conduct to shareholders upon request.

Our Guide to Ethical Conduct is posted on our website at www.te.com under the heading “Corporate Responsibility—Disclosures.” We also will provide a copy of our Guide to Ethical Conduct to shareholders upon request.

We intend to disclose any amendments to our Guide to Ethical Conduct, as well as any waivers for executive officers or directors, on our website.

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The 2007 Plan provides for a maximum of 69,843,452 common shares to be issued as Awards, subject to adjustment as provided under the terms of the 2007 Plan.

(2) In connection with the acquisition of ADC Telecommunications, Inc.

(“ADC”) in fiscal 2011, we assumed equity awards issued under plans sponsored by ADC and the remaining pool of shares available for grant under the plans.

Subsequent to the acquisition, we registered 6,764,455 shares related to the plans via Forms S-3 and S-8 and renamed the primary ADC plan the TE Connectivity Ltd.

2010 Stock and Incentive Plan, amended and restated as of March 9, 2017 (the “2010 Plan”).

Grants under the 2010 Plan are settled in TE Connectivity common shares.

(2) In connection with an acquisition in fiscal 2011, we assumed equity awards issued under plans sponsored by the acquired business and the remaining pool of shares available for grant under the plans.

Subsequent to the acquisition, we registered 6,764,455 shares related to the plans via Forms S-3 and S-8.

Those plans have since expired, and no additional grants will be made from them.

Previously granted awards under the plans will continue to be settled in TE Connectivity common shares.

(3) Does not take into account restricted, performance, or deferred share unit awards that do not have exercise prices.

32 unchanged sentences

December 14, 2007

Fifth Supplemental Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd.

and Deutsche Bank Trust Company Americas, as trustee, dated as of December 20, 2010

Current Report on Form 8-K

December 20, 2010

Seventh Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd.

and Deutsche Bank Trust Company Americas, as trustee, dated as of February 3, 2012

Current Report on Form 8-K

February 3, 2012

Tenth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd.

6 unchanged sentences

February 27, 2015

Incorporated by Reference Herein

Thirteenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated as of January 28, 2016

4 unchanged sentences

August 3, 2017

Incorporated by Reference Herein

Sixteenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated February 14, 2020

1 unchanged sentence

February 14, 2020

Seventeenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated February 16, 2021

Current Report on Form 8-K

February 16, 2021

Amended and Restated Five-Year Senior Credit Agreement dated as of November 14, 2018 among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as guarantor, the lenders party thereto and Bank of America, N.A., as administrative agent

1 unchanged sentence

November 14, 2018

First Amendment to Amended and Restated Credit Agreement, dated as of June 1, 2021, by and among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as parent guarantor, the lenders party thereto and Bank of America, N.A., as administrative agent

Current Report on Form 8-K

TE Connectivity Ltd.

Annual Incentive Plan (as amended and restated)

Quarterly Report on Form 10-Q for the quarterly period ended December 27, 2019

January 29, 2020

TE Connectivity Ltd.

1 unchanged sentence

TE Connectivity Ltd.

Employee Stock Purchase Plan (amended and restated as of April 8, 2020)

Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2020

Employee Stock Purchase Plan (amended and restated as of September 22, 2021)

Form of Option Award Terms and Conditions

7 unchanged sentences

November 12, 2019

Form of Option Award Terms and Conditions for Option Grants beginning in September 2020

Incorporated by Reference Herein

Form of Restricted Unit Award Terms and Conditions

Form of Option Award Terms and Conditions for Option Grants beginning in November 2020

Quarterly Report on Form 10-Q for the quarterly period ended December 25, 2020

3 unchanged sentences

November 14, 2017

Incorporated by Reference Herein

Form of Restricted Stock Unit Award Terms and Conditions for RSU Grants Beginning in November 2019

1 unchanged sentence

November 12, 2019

Form of Restricted Stock Unit Award Terms and Conditions for RSU Grants Beginning in September 2020

Form of Performance Stock Unit Award Terms and Conditions

Form of Restricted Stock Unit Award Terms and Conditions for RSU Grants Beginning in November 2020

Quarterly Report on Form 10-Q for the quarterly period ended December 25, 2020

January 28, 2021

Form of Performance Stock Unit Award Terms and Conditions for Performance Cycles Starting in Fiscal Year 2016 and Fiscal Year 2017

Annual Report on Form 10-K for the fiscal year ended September 30, 2016

November 15, 2016

Form of Performance Stock Unit Award Terms and Conditions for Performance Cycles Starting in and After Fiscal Year 2018

5 unchanged sentences

Form of Performance Stock Unit Award Terms and Conditions for Performance Cycles Starting in and After Fiscal Year 2021

Quarterly Report on Form 10-Q for the quarterly period ended December 25, 2020

January 28, 2021

TE Connectivity Change in Control Severance Plan for Certain U.S.

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TE Connectivity Supplemental Savings and Retirement Plan (amended and restated as of January 1, 2021)

Annual Report on Form 10-K for the fiscal year ended September 25, 2009

November 18, 2009

Incorporated by Reference Herein

TE Connectivity Ltd.

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December 16, 2015

Incorporated by Reference Herein

Employment Agreement between Heath A.

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January 24, 2018

Letter Agreement between Kevin N.

Rock and TE Connectivity Corporation dated October 30, 2020

Employment Agreement between Shad Kroeger and TE Connectivity Corporation dated February 23, 2018

Quarterly Report on Form 10-Q for the quarterly period ended December 25, 2020

January 28, 2021

Credit Support Agreement dated November 2, 2018 by and between Tyco Electronics Group S.A.

12 unchanged sentences

Inline XBRL Taxonomy Extension Calculation Linkbase Document (3)

Incorporated by Reference Herein

Inline XBRL Taxonomy Extension Definition Linkbase Document (3)

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(Principal Executive Officer)

Executive Vice President and

Chief Financial Officer

Executive Vice President,

Chief Financial Officer, and Director

November 9, 2021

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November 9, 2021

November 10, 2020

Jenkins, Jr., by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals, which have been filed as Exhibit 24.1 to this Report.

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Change in Accounting Principle

As discussed in Note 2 to the financial statements, effective September 28, 2019, the Company adopted FASB Accounting Standards Update 2016-02 which codified Accounting Standards Codification 842, Leases , using the modified retrospective approach.

As discussed in Note 2 to the financial statements, effective September 28, 2019, the Company adopted Financial Accounting Standards Board Accounting Standards Update 2016-02 which codified Accounting Standards Codification 842, Leases , using the modified retrospective approach.

Basis for Opinion

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Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves comparing the carrying amount of each reporting unit to its fair value on the first day of the fourth fiscal quarter or whenever the Company believes a triggering event requiring a more frequent assessment has occurred.

The Company’s evaluation of goodwill for impairment involves comparing the carrying amount of each reporting unit to its fair value on the first day of the fourth fiscal quarter or whenever the Company believes an event or other change in reporting unit structure requiring a more frequent assessment has occurred.

The Company uses the income approach based on the present value of future cash flows to estimate fair value.

2 unchanged sentences

The goodwill balance was $5.6 billion as of September 24, 2021, of which $0.3 billion was allocated to the Sensors reporting unit within the Transportation Solutions reportable segment.

As a result of current and projected declines in sales and profitability, due in part to the impact of the COVID-19 pandemic and projected reductions in global automotive production, the Company recorded a partial impairment charge of $900 million during the quarter ended March 27, 2020 for the Sensors reporting unit.

The fair value of this reporting unit exceeded its carrying amount as of the annual measurement date and, therefore, no additional impairment was recognized.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenue and operating margin and the selection of a discount rate.

The fair value of this reporting unit exceeded its carrying amount, therefore, no impairment was recognized.

We identified goodwill for the Sensors reporting unit as a critical audit matter because of the significant judgments made by management to estimate its fair value, especially considering the partial impairment charge recorded in the prior fiscal year and future revenue growth rates were based on an expectation of an increase in net sales in a product portfolio with limited available third-party industry reports.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures for the $900 million impairment charge and the annual quantitative assessment related to the forecasts of future revenue and operating margin (the “forecasts”), and the selection of a discount rate for the Sensors reporting unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value, such as controls related to forecasts and management’s selection of the discount rate.

Our audit procedures related to the forecasts of future revenue and operating margin (the “forecasts”), and the selection of discount rates for the Sensors reporting unit included the following, among others:

• We evaluated management’s ability to accurately forecast future revenue and operating margin by comparing actual results to management’s historical forecasts.

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– Third-party industry reports for similar products.

– The effects of the COVID-19 pandemic on projections.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

– Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

– Developing a range of independent estimates and comparing those to the discount rate selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rates by:

– Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations.

– Developing a range of independent estimates and comparing those to the discount rates selected by management.

Income Taxes — Realizability of Deferred Tax Assets — Refer to Notes 2 and 16 to the financial statements

1 unchanged sentence

The Company recognizes deferred income taxes for temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

A valuation allowance is provided to offset deferred tax assets

if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Future realization of deferred tax assets depends on the existence of sufficient taxable income of the appropriate character prior to expiration.

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– Management’s history of carrying out its stated plans and its ability to carry out its plans considering contractual commitments, available financing, or debt covenants.

• We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit, including the effects of the COVID-19 pandemic on projections.

• We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit.

• We evaluated whether the taxable income in prior carryback years was of the appropriate character and available under the tax law.

• With the assistance of our income tax specialists, we evaluated (1) the appropriateness of qualifying tax planning strategies, including that they were prudent, feasible and would more likely than not result in the realization of deferred tax assets and (2) management’s assessment that sufficient taxable income will be generated in the future to realize a portion of the deferred tax assets prior to expiration.

• With the assistance of our income tax and other specialists, we evaluated (1) the appropriateness of qualifying tax planning strategies, including that they were prudent, feasible and would more likely than not result in the realization of deferred tax assets and (2) management’s assessment that sufficient taxable income will be generated in the future to realize a portion of the deferred tax assets prior to expiration.

/s/ Deloitte & Touche LLP

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 24, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the financial statements as of and for the fiscal year ended September 25, 2020, of the Company and our report dated November 10, 2020 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of FASB Accounting Standards Update 2016-02 which codified Accounting Standards Codification 842, Leases .

Basis for Opinion

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Interest expense

Other income, net

Other income (expense), net

Income from continuing operations before income taxes

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Shareholders'

Income (Loss)

(in millions)

6 unchanged sentences

Repurchase of common shares

Cancellation of treasury shares

Balance at fiscal year end 2019

Adoption of ASU No.

Other comprehensive loss

Other comprehensive income

Share-based compensation expense

44 unchanged sentences

Cash flows from financing activities:

Net increase (decrease) in commercial paper

Net decrease in commercial paper

Proceeds from issuance of debt

8 unchanged sentences

Effect of currency translation on cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of fiscal year

17 unchanged sentences

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

Our products are used in the aerospace, defense, oil, and gas;

industrial equipment;

and energy markets.

Our products are used in the industrial equipment;

aerospace, defense, oil, and gas;

and medical markets.

● Communications Solutions —The Communications Solutions segment is a leading supplier of electronic components for the data and devices and the appliances markets.

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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.

Summary of Significant Accounting Policies

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We apply the practical expedient of ASC 606 with respect to financing components and do not evaluate contracts in which payment is due within one year of satisfaction of the related performance obligation.

Since our performance obligations to deliver products are part of contracts that generally have original durations of one year or less, we have elected to use the optional exemption to not disclose the aggregate amount of transaction prices associated with unsatisfied or partially satisfied performance obligations as of fiscal year end 2020.

See Note 21 for net sales disaggregated by industry end market and geographic region which is summarized by segment and that we consider meaningful to depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

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Goodwill and Other Intangible Assets

We account for goodwill and other intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other , as updated by Accounting Standards Update (“ASU”) No.

2017-04, Simplifying the Test for Goodwill Impairment .

We account for goodwill and other intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other .

Intangible assets include both indeterminable-lived residual goodwill and determinable-lived identifiable intangible assets.

Intangible assets with determinable lives primarily include intellectual property, consisting of patents, trademarks, and unpatented technology, and customer relationships.

Recoverability estimates range from 1 to 50 years and costs are generally

Recoverability estimates range from 1 to 50 years and costs are generally amortized on a straight-line basis.

Evaluations of the remaining useful lives of determinable-lived intangible assets are performed on a periodic basis and when events and circumstances warrant.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

amortized on a straight-line basis.

Evaluations of the remaining useful lives of determinable-lived intangible assets are performed on a periodic basis and when events and circumstances warrant.

At fiscal year end 2021, we had five reporting units, all of which contained goodwill.

1 unchanged sentence

When changes occur in the composition of one or more reporting units, goodwill is reassigned to the reporting units affected based on their relative fair values.

Goodwill impairment is evaluated by comparing the carrying value of each reporting unit to its fair value on the first day of the fourth fiscal quarter of each year or whenever we believe a triggering event requiring a more frequent assessment has occurred.

In assessing the existence of a triggering event, management relies on several reporting unit-specific factors including operating results, business plans, economic projections, anticipated future cash flows, transactions, and marketplace data.

Goodwill impairment is evaluated by comparing the carrying value of each reporting unit to its fair value on the first day of the fourth fiscal quarter of each year or more frequently if events or changes in circumstances indicate that the asset may be impaired.

In assessing a potential impairment, management relies on several reporting unit-specific factors including operating results, business plans, economic projections, anticipated future cash flows, transactions, and marketplace data.

There are inherent uncertainties related to these factors and management’s judgment in applying these factors to the impairment analysis.

2 unchanged sentences

Fair value estimates used in the goodwill impairment tests are calculated using an income approach based on the present value of future cash flows of each reporting unit.

The income approach is supported by guideline analyses (a market approach).

The income approach is supported by a guideline analysis (a market approach).

These approaches incorporate several assumptions including future growth rates, discount rates, income tax rates, and market activity in assessing fair value and are reporting unit specific.

13 unchanged sentences

Due to the complexity of these uncertainties, the ultimate resolution may result in a settlement that differs from our current estimate of the tax liabilities and related interest.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Financial Instruments

1 unchanged sentence

We account for derivative financial instrument contracts on the Consolidated Balance Sheets at fair value.

For instruments not designated as hedges under ASC 815, Derivatives and Hedging , the changes in the instruments’ fair value are recognized currently in earnings.

For instruments not designated as hedges under ASC 815, Derivatives and Hedging , the changes in the instruments’ fair value are

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

recognized currently in earnings.

For instruments designated as cash flow hedges, the effective portion of changes in the fair value of a derivative is recorded in other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the underlying hedged item affects earnings.

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These instruments are recorded on the Consolidated Balance Sheets at book value.

For cash and cash equivalents, accounts receivable, and accounts payable, we believe book value approximates fair value due to the short-

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

term nature of these instruments.

For cash and cash equivalents, accounts receivable, and accounts payable, we believe book value approximates fair value due to the short-term nature of these instruments.

See Note 11 for disclosure of the fair value of debt.

1 unchanged sentence

● Cash and cash equivalents— Cash and cash equivalents are valued at book value, which we consider to be equivalent to unadjusted quoted prices (level 1).

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

● Accounts receivable— Accounts receivable are valued based on the net value expected to be realized.

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Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding adjusted for the potentially dilutive impact of share-based compensation arrangements.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Beginning in fiscal 2020, we account for leases in accordance with the provisions of ASC 842, Leases .

We have facility, land, vehicle, and equipment leases that expire at various dates.

2 unchanged sentences

The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the identified asset and the right to direct the use of the identified asset.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date of the lease based on the present value of remaining lease payments over the lease term.

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The likelihood of a loss with respect to a particular contingency is often difficult to predict, and determining a meaningful estimate of the loss or a range of loss may not be practicable based on information available.

In addition, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and

In addition, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must continuously be evaluated to determine whether a loss is probable and a reasonable estimate of that loss can be made.

When a loss is probable but a reasonable estimate cannot be made, or when a loss is at least reasonably possible, disclosure is provided.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

new information must continuously be evaluated to determine whether a loss is probable and a reasonable estimate of that loss can be made.

When a loss is probable but a reasonable estimate cannot be made, or when a loss is at least reasonably possible, disclosure is provided.

Recently Adopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2017-04, an update to ASC 350.

The update simplifies the subsequent measurement of goodwill by eliminating step 2 of the goodwill impairment test.

Under the amendments in the update, goodwill impairment should be tested by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The amendments are to be applied on a prospective basis.

We elected to early adopt this update and applied it during the quarter ended March 27, 2020.

See Note 8 for additional information regarding our interim and annual goodwill impairment tests.

In February 2016, the FASB issued ASU No.

2016-02 which codified ASC 842, Leases .

This guidance, as subsequently amended, requires lessees to recognize a lease liability and a ROU asset for most leases.

We adopted ASC 842, as amended, in fiscal 2020 using the optional transition method permitted by ASU No.

2018-11, which allows for application of the standard at the adoption date and no restatement of comparative periods.

We elected to use the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the carry forward of historical lease classification of existing and expired leases.

In addition, we elected to use the hindsight practical expedient in determining the lease term for existing leases.

As a result of adoption, we recorded ROU assets and related lease liabilities of approximately $ 520 million on the Consolidated Balance Sheet.

Adoption did not have a material impact on our results of operations or cash flows.

See Note 12 for additional information regarding leases.

Restructuring and Other Charges, Net

2 unchanged sentences

Restructuring charges, net

Gain on divestiture

Other credits, net

Impairment of held for sale businesses and loss on divestitures

Other charges, net

Restructuring and other charges, net

21 unchanged sentences

Facility and other exit costs

Property, plant, and equipment

Pre-Fiscal 2019 Actions:

1 unchanged sentence

Facility and other exit costs

Property, plant, and equipment

Total fiscal 2021 activity

26 unchanged sentences

Fiscal 2021 Actions

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

In connection with this program, during fiscal 2021, we recorded net restructuring charges of $ 195 million.

We expect to complete all restructuring actions commenced during fiscal 2021 by the end of fiscal 2023 and to incur additional charges of approximately $ 16 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 fiscal 2020, we recorded restructuring charges of $ 250 million.

We expect to complete all restructuring actions commenced during fiscal 2020 by the end of fiscal 2022 and to incur additional charges of approximately $ 45 million related to all three classes of costs.

In connection with this program, during fiscal 2021 and 2020, we recorded restructuring charges of $ 23 million and $ 250 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 $ 15 million related primarily to employee severance and facility exit costs.

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

5 unchanged sentences

During fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural improvements impacting all segments.

In connection with this program, during fiscal 2020 and 2019, we recorded net restructuring charges of $ 5 million and $ 254 million, respectively.

We expect to complete all restructuring actions commenced during fiscal 2019 by the end of fiscal 2021.

We anticipate that any additional charges will be insignificant for restructuring actions commenced during fiscal 2019.

Fiscal 2018 Actions

During fiscal 2018, we initiated a restructuring program associated with footprint consolidation and structural improvements primarily impacting the Industrial Solutions and Transportation Solutions segments.

In connection with this program, during fiscal 2020 and 2018, we recorded net restructuring charges of $ 4 million and $ 142 million, respectively.

In connection with this program, during fiscal 2021, 2020, and 2019, we recorded net restructuring credits of $ 7 million, charges of $ 5 million, and charges of $ 254 million, respectively.

We anticipate that any additional charges will be insignificant for restructuring actions commenced during fiscal 2019.

Pre-Fiscal 2019 Actions

During fiscal 2020, 2019, and 2018, we recorded net restructuring credits of $ 2 million, charges of $ 1 million, and credits of $ 2 million, respectively, related to pre-fiscal 2018 actions.

During fiscal 2021, 2020, and 2019, we recorded net restructuring credits of $ 3 million, charges of $ 2 million, and charges of $ 1 million, respectively, related to pre-fiscal 2019 actions.

We anticipate that any additional charges will be insignificant for restructuring actions commenced prior to fiscal 2019.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Total Restructuring Reserves

5 unchanged sentences

Restructuring reserves

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Discontinued Operations

3 unchanged sentences

As a result, the SubCom business met the held for sale and discontinued operations criteria and has been reported as such in all periods presented on our Consolidated Financial Statements.

Upon entering into the definitive agreement, which we consider a level 2 observable input in the fair value hierarchy, we assessed the carrying value of the SubCom business and determined that it was in excess of its fair value.

In fiscal 2018, we recorded a pre-tax impairment charge of $ 19 million, which was included in income (loss) from discontinued operations on the Consolidated Statement of Operations, to write the carrying value of the business down to its estimated fair value less costs to sell.

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 guarantees had a combined value of approximately $ 600 million as of fiscal year end 2020 and are expected to expire at various dates through fiscal 2025.

These performance guarantees and letters of credit had a combined value of approximately $ 119 million as of fiscal year end 2021 and are expected to expire at various dates through fiscal 2025.

At the time of sale, we determined that the fair value of these guarantees was $ 12 million, which we recognized by a charge to pre-tax loss on sale.

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 .

At fiscal year end 2020, there were no such new performance guarantees outstanding.

During fiscal 2021, we amended our agreement with SubCom and removed a requirement to issue new performance guarantees for certain projects entered into by the SubCom business following the sale.

As of fiscal year end 2021, there were no such new performance guarantees outstanding.

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.

The following table presents the summarized components of income (loss) from discontinued operations, net of income taxes, for the SubCom business and prior divestitures:

The following table presents the summarized components of loss from discontinued operations, net of income taxes, for the SubCom business and prior divestitures for fiscal 2019;

activity in fiscal 2021 and 2020 was not material:

(in millions)

3 unchanged sentences

Restructuring and other charges, net

Operating loss

Non-operating expense, net

Pre-tax loss from discontinued operations

Pre-tax gain (loss) on sale of discontinued operations

Pre-tax loss on sale of discontinued operations

Income tax benefit

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

(1) Included a $ 19 million impairment charge recorded in connection with the sale of our SubCom business.

Loss from discontinued operations, net of income taxes

During fiscal 2021, we acquired four businesses for a combined cash purchase price of $ 422 million, net of cash acquired.

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

Due to the timing of two transactions that closed in the quarter ended September 24, 2021, we have preliminarily allocated the purchase price of those acquisitions to goodwill and identifiable intangibles assets.

Our valuation of identifiable intangible assets,

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

First Sensor AG

During fiscal 2020, we acquired approximately 72 % of the outstanding shares of First Sensor AG (“First Sensor”), a provider of sensing solutions based in Germany, for € 181 million in cash (equivalent to $ 201 million using an exchange rate of $ 1.11 per €1.00), net of cash acquired.

As a result of the transaction, we recognized a noncontrolling interest with a fair value of € 96 million (equivalent to $ 107 million) as of the acquisition date.

The fair value of the noncontrolling interest for First Sensor common shares that were not acquired was determined using the stated price in the Domination and Profit and Loss Transfer Agreement (“DPLTA”) which is considered to be a level 2 observable input under the fair value hierarchy.

The First Sensor business has been reported as part of our Transportation Solutions segment from the date of acquisition.

We and First Sensor entered into a DPLTA which was approved by First Sensor shareholders and became effective in July 2020 following registration in the commercial register in Germany.

Under the terms of the DPLTA, upon its effectiveness, 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.

Following the registration of the DPLTA, the First Sensor noncontrolling interest balance of € 96 million (equivalent to $ 108 million using an exchange rate of $ 1.13 per €1.00) was reclassified and is now presented as redeemable noncontrolling interest outside of equity on the Consolidated Balance Sheet as the exercise of the put right by First Sensor minority shareholders is not within our control.

Other Acquisitions

During fiscal 2020, we acquired four additional businesses for a combined cash purchase price of $ 135 million, net of cash acquired.

assets acquired, and liabilities assumed is currently in process;

therefore, the current allocation is subject to adjustment upon finalization of those valuations.

The amount of these potential adjustments could be significant.

We acquired five businesses, including First Sensor AG (“First Sensor”), for a combined cash purchase price of $ 336 million, net of cash acquired, during fiscal 2020.

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

In connection with our acquisition of approximately 72 % of the outstanding shares of First Sensor, we and First Sensor entered into a Domination and Profit and Loss Transfer Agreement (“DPLTA”) which became effective in fiscal 2020.

Under the terms of the DPLTA, 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) at the acquisition date, is recorded as redeemable noncontrolling interest outside of equity on the Consolidated Balance Sheets as of fiscal year end 2021 and 2020 as the exercise of the put right by First Sensor minority shareholders is not within our control.

During fiscal 2019, we acquired three businesses for a combined cash purchase price of $ 296 million, net of cash acquired.

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

We acquired two businesses during fiscal 2018 for a combined cash purchase price of $ 153 million, net of cash acquired.

In fiscal 2019, we received $ 13 million as a result of a customary net working capital settlement for one of the acquisitions.

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

Inventories consisted of the following:

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Finished goods

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant, and Equipment, Net

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Depreciation expense was $ 576 million, $ 529 million, and $ 510 million in fiscal 2021, 2020, and 2019, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Balance at fiscal year end 2019 (1)

Purchase price adjustments

Currency translation

Balance at fiscal year end 2019 (1)

Impairment of goodwill

Purchase price adjustments

Currency translation

Currency translation and other

Balance at fiscal year end 2020 (2)

(1) At fiscal year end 2019 and 2018, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 2,191 million, $ 669 million, and $ 489 million, respectively.

Currency translation and other

Balance at fiscal year end 2021 (2)

(1) At fiscal year end 2019, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 2,191 million, $ 669 million, and $ 489 million, respectively.

During fiscal 2020, we completed the acquisition of First Sensor and recognized goodwill of $ 215 million in the Transportation Solutions segment.

Further adjustments to the purchase price allocation may be needed in fiscal 2021.

In addition, during fiscal 2020 and 2019, we recognized goodwill in connection with other recent acquisitions.

(2) At fiscal year end 2021 and 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 fiscal 2021 and 2020, we recognized goodwill of $ 307 million and $ 294 million, respectively, in connection with new acquisitions.

See Note 5 for additional information regarding acquisitions.

We test goodwill allocated to reporting units for impairment annually during the fourth fiscal quarter, or more frequently if events occur or circumstances exist that indicate that a reporting unit’s carrying value may exceed its fair value.

As a result of current and projected declines in sales and profitability, due in part to the impact of the COVID-19 pandemic and projected reductions in global automotive production as of March 2020, of the Sensors reporting unit of the Transportation Solutions segment during the quarter ended March 27, 2020, we determined that an indicator of impairment had occurred and goodwill impairment testing of this reporting unit was required.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As discussed in Note 2, during the quarter ended March 27, 2020, we adopted ASU No.

2017-04 which simplifies the subsequent measurement of goodwill by eliminating step 2 of the goodwill impairment test.

Under the new standard, goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill.

We completed our annual goodwill impairment test in the fourth quarter of fiscal 2021 and determined that no impairment existed.

During the quarter ended March 27, 2020, as a result of current and projected declines in sales and profitability of the Sensors reporting unit of the Transportation Solutions segment, due in part to the impact of the COVID-19 pandemic and projected reductions in global automotive production as of March 2020, we determined that an indicator of impairment had occurred and goodwill impairment testing of this reporting unit was required.

We determined the fair value of the Sensors reporting unit to be $ 1.0 billion as of March 27, 2020.

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As a result, we recorded a partial impairment charge of $ 900 million in the quarter ended March 27, 2020.

As of fiscal year end 2020, the Sensors reporting unit had a remaining goodwill allocation of $ 511 million.

We completed our annual goodwill impairment test in the fourth quarter of fiscal 2020 and determined that no impairment existed.

No additional impairment was identified during our annual goodwill impairment test in the fourth quarter of fiscal 2020.

Intangible Assets, Net

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Intellectual property

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Intangible asset amortization expense was $ 193 million, $ 182 million, and $ 180 million for fiscal 2021, 2020, and 2019, respectively.

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(in millions)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrued and Other Current Liabilities

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Restructuring reserves

Lease liability

Income taxes payable

Lease liability

Share repurchase program payable

Deferred revenue

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Accrued and other current liabilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Debt was as follows:

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Principal debt:

Commercial paper, at a weighted-average interest rate of 2.20 % at fiscal year end 2019

Floating rate senior notes due 2020 (1)

4.875 % senior notes due 2021

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3.125 % senior notes due 2027

0.00 % euro-denominated senior notes due 2029

7.125 % senior notes due 2037

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Effects of fair value hedge-designated interest rate swap contracts

(1) The floating rate senior notes due 2020 bore interest at a rate of three-month London Interbank Offered Rate (“LIBOR”) plus 0.45 % per year.

(2) The euro-denominated fixed-to-floating rate senior notes due 2021 bore interest at a rate of 0 % until June 2020 and then bear interest at a rate of three-month Euro Interbank Offered Rate (“EURIBOR”) plus 0.30 % , with the minimum interest rate of 0 % , per year until maturity.

(1) The euro-denominated fixed-to-floating rate senior notes due 2021 bore interest at a rate of 0 % until June 2020 and then at a rate of three-month Euro Interbank Offered Rate (“EURIBOR”) plus 0.30 % , with the minimum interest rate of 0 % , per year until maturity.

During fiscal 2021, Tyco Electronics Group S.A.

(“TEGSA”), our wholly -owned subsidiary, issued € 550 million aggregate principal amount of 0.00 % senior notes due in February 2029.

The notes are TEGSA’s unsecured senior

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of November 2023 and total commitments of $ 1.5 billion.

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.

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

The Credit Facility contains provisions that allow for incremental commitments of up to $ 500 million, an option to temporarily increase the financial ratio covenant following a qualified acquisition, and borrowings in designated currencies.

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 fiscal year end 2021 or 2020.

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) LIBOR plus an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA, or (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 plus 1 %, 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 ranging from 5.0 to 12.5 basis points based upon the amount of the lenders’ commitments under the Credit Facility and the applicable credit ratings of TEGSA.

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.

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered.

The Credit Facility and our other debt agreements contain other customary covenants.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Periodically, TEGSA issues commercial paper to U.S.

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Borrowings under the commercial paper program are backed by the Credit Facility.

TEGSA had no borrowings under the commercial paper program at fiscal year end 2021 or 2020.

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

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Total lease cost

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts recognized on the Consolidated Balance Sheet were as follows:

Amounts recognized on the Consolidated Balance Sheets were as follows:

Fiscal Year End

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Weighted-average discount rate

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Payments for operating leases (1)

ROU 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.

ROU assets, including modifications and extensions, obtained in exchange for operating lease liabilities

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

At fiscal year end 2021, the maturities of operating lease liabilities were as follows:

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Prior to fiscal 2020, we accounted for our leases in accordance with ASC 840, Leases .

Under ASC 840, rental expense for operating leases was $ 162 million and $ 141 million for fiscal 2019 and 2018, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the future minimum lease payments under non-cancelable operating lease obligations as of September 27, 2019 under ASC 840:

(in millions)

Under ASC 840, rental expense for operating leases was $ 162 million for fiscal 2019.

Commitments and Contingencies

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

Trade Compliance Matters

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

trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S.

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

State Department’s Directorate of Defense Trade Controls (“DDTC”).

We are cooperating with the BIS and DDTC on these matters, and 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Environmental Matters

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

At fiscal year end 2020, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 249 million.

We sold our SubCom business during fiscal 2019.

In connection with the sale, we contractually agreed to honor certain performance guarantees and letters of credit related to the SubCom business.

See Note 4 for additional information regarding these guarantees and the divestiture of the SubCom business.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At fiscal year end 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 135 million, excluding those related to our SubCom business which are discussed in Note 4.

Financial Instruments and Fair Value Measurements

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During fiscal 2015, we entered into 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 and € 1,000 million at fiscal year end 2020 and 2019, respectively.

Certain contracts were terminated during fiscal 2020;

the remaining contracts mature in fiscal 2022.

The aggregate notional value of these contracts was € 700 million at fiscal year end 2021 and 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.

dollars at a weighted-average rate of 5.34 % per annum.

Upon maturity, we will pay the notional value of the contracts in euros and receive U.S.

Upon maturity in fiscal 2022, we will pay the notional value of the contracts in euros and receive U.S.

dollars from our counterparties.

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Other liabilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At fiscal year end 2021 and 2020, collateral received from or paid to our counterparties approximated the net derivative position.

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dollars at a weighted-average rate of 1.85 % per annum and pay no interest.

Upon the maturity of these contracts at various dates through fiscal 2024, we will pay the notional

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

value of the contracts in the designated foreign currency and receive U.S.

Upon the maturity of these contracts at various dates through fiscal 2025, we will pay the notional value of the contracts in the designated foreign currency and receive U.S.

dollars from our counterparties.

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

During fiscal 2020 and 2019, we entered into forward starting interest rate swap contracts which had an aggregate notional value of $ 450 million and $ 350 million at fiscal year end 2020 and 2019, respectively, and were designated as cash flow hedges.

The aggregate notional value of our forward starting interest rate swap

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

contracts, which are designated as cash flow hedges, was $ 450 million at fiscal year end 2021 and 2020.

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

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(in millions)

Prepaid expenses and other current assets

Accrued and other current liabilities

Other liabilities

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(in millions)

Losses recorded in other comprehensive income (loss)

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

We also utilize investment swap contracts to manage earnings exposure on certain nonqualified deferred compensation liabilities.

Commodity Hedges

As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts designated as cash flow hedges.

As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts.

The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in prices of commodities used in production.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At fiscal year end 2020 and 2019, our commodity hedges had notional values of $ 312 million and $ 316 million, respectively.

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

These contracts had an aggregate notional value of $ 512 million and $ 312 million at fiscal year end 2021 and 2020, respectively, and were designated as cash flow hedges.

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

Fiscal Year End

(in millions)

Prepaid expenses and other current assets

Accrued and other current liabilities

Other liabilities

The impacts of these commodity swap contracts were as follows:

(in millions)

Gains recorded in other comprehensive income (loss)

Gains (losses) 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 Consolidated Statement of Operations within the next twelve months .

Fair Value Measurements

Financial instruments recorded at fair value on a recurring basis, which consist of marketable securities and derivative instruments not discussed above, were immaterial at fiscal year end 2021 and 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Retirement Plans

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Amortization of net actuarial loss

Amortization of prior service credit and other

Amortization of prior service credit

Settlement and curtailment losses (gains)

Net periodic pension benefit cost (credit)

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Benefits and administrative expenses paid

Settlements and curtailments

Currency translation

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Current year prior service cost recorded in accumulated other comprehensive income (loss)

Amortization of prior service credit

Amortization of prior service (credit) cost (1)

(1) Includes amounts reflected as settlement and curtailment losses (gains) in the above net periodic pension benefit cost (credit) table.

As part of our continued effort to manage U.S.

pension plan obligations, during the quarter ended September 24, 2021, we transferred approximately $ 190 million of U.S.

pension plan liabilities to an insurance company through the purchase of a group annuity contract funded by a transfer of plan assets totaling approximately $ 180 million.

As a result of this transaction, we recognized a settlement charge of $ 28 million, which was recorded in net other income (expense) on the Consolidated Statement of Operations.

In fiscal 2021, unrecognized actuarial gains recorded in accumulated other comprehensive income (loss) were primarily the result of favorable asset performance and higher discount rates for our non-U.S.

defined benefit pension plans as compared to fiscal 2020.

In fiscal 2020, unrecognized actuarial gains recorded in accumulated other comprehensive income (loss) were primarily the result of favorable asset performance for our U.S.

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defined benefit pension plans as compared to fiscal 2019.

In fiscal 2019, unrecognized actuarial losses recorded in accumulated other comprehensive income (loss) were primarily the result of lower discount rates, partially offset by favorable asset performance for both non-U.S.

defined benefit pension plans as compared to fiscal 2018.

The estimated amortization of actuarial losses from accumulated other comprehensive income (loss) into net periodic pension benefit cost for non-U.S.

defined benefit pension plans in fiscal 2021 is expected to be $ 31 million and $ 9 million, respectively.

The estimated amortization of prior service credit from accumulated other comprehensive income (loss) into net periodic pension benefit cost for non-U.S.

defined benefit pension plans in fiscal 2021 is expected to be $ 6 million.

In determining the expected return on plan assets, we consider the relative weighting of plan assets by class and individual asset class performance expectations.

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Fixed income:

Government bonds (2)

Corporate bonds (3)

Commingled bond funds (4)

Government and corporate bonds (2)

Commingled fixed income funds (3)

Items to reconcile to fair value of plan assets (5)

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Fixed income:

Government bonds (2)

Corporate bonds (3)

Commingled bond funds (4)

Government and corporate bonds (2)

Commingled fixed income funds (3)

Items to reconcile to fair value of plan assets (5)

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Fair value is calculated as the closing price of the underlying investments, an observable market condition, divided by the number of shares of the fund outstanding.

(2) Government bonds are marked to fair value based on quoted market prices or market approach valuation models using observable market data such as quotes, spreads, and data points for yield curves.

(3) Corporate bonds are marked to fair value based on quoted market prices or market approach valuation models using observable market data such as quotes, spreads, and data points for yield curves.

(4) Commingled bond funds are pooled investments in multiple debt-type securities.

(2) Government and corporate bonds are marked to fair value based on quoted market prices or market approach valuation models using observable market data such as quotes, spreads, and data points for yield curves.

(3) Commingled fixed income funds are pooled investments in multiple fixed income-type securities.

Fair value is calculated as the closing price of the underlying investments, an observable market condition, divided by the number of shares of the fund outstanding.

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Hedge funds are valued at their net asset value which is calculated using unobservable inputs that are supported by little or no market activity (level 3).

(5) Items to reconcile to fair value of plan assets include certain investments containing no significant redemption restrictions that were measured at net asset value (“NAV”) using the NAV practical expedient available in ASC 820 and amounts receivable or payable for unsettled transactions and cash balances, both of which are considered to be carried at book value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(6) Items to reconcile to fair value of plan assets include amounts receivable for securities sold, amounts payable for securities purchased, and any cash balances, considered to be carried at book value, that are held in the plans.

Changes in Level 3 assets in non-U.S.

plans were primarily the result of net investment losses in fiscal 2020 and purchases in 2019.

Fiscal 2021 and 2020 changes in Level 3 assets in non-U.S.

plans were primarily the result of investment sales and net investment losses, respectively.

Defined Contribution Retirement Plans

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Divestitures and goodwill impairments

Legal entity restructuring and intercompany transactions

Excess tax benefits from share-based payments

Income tax expense (benefit)

federal statutory rate was 21 % for fiscal 2020 and 2019 and 24.58 % for fiscal 2018.

federal statutory rate was 21 % for fiscal 2021, 2020, and 2019.

(2) Excludes items which are separately presented.

The income tax expense for fiscal 2021 included a $ 353 million income tax benefit related to changes in valuation allowances, of which $ 327 million related to the net reduction in valuation allowances associated primarily with certain tax planning actions, as well as improved current and expected future operating profit and taxable income.

In addition, the income tax expense for fiscal 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 and $ 23 million of income tax expense associated with the tax impacts of an intercompany transaction.

The income tax expense for fiscal 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.

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In addition, the income tax expense for fiscal 2020 included $ 226 million of income tax expense related to increases to the valuation allowance for certain deferred tax assets, related primarily to the COVID-19 pandemic.

As a result of the 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 will not be realized.

Depending on the duration and severity of COVID-19 disruptions to our business, additional adjustments to our valuation allowance may be required in future periods.

As a result of the pandemic and its negative impact on our current and expected operating profit and taxable income, we believed it was more likely than not that a portion of our deferred tax assets will not be realized.

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

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The income tax benefit for fiscal 2019 included a $ 216 million income tax benefit related to the tax impacts of certain measures of Swiss Tax Reform, a $ 90 million income tax benefit related to the effective settlement of a tax audit in a non-U.S.

jurisdiction, and $ 15 million of income tax expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions.

See “Swiss Tax Reform” below for additional information regarding Swiss Tax Reform.

jurisdiction, and $ 15 million of income tax expense associated with the tax impacts of certain legal entity

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The income tax benefit for fiscal 2018 included a $ 1,222 million net income tax benefit associated with the tax impacts of certain legal entity restructurings and intercompany transactions that occurred in the quarter ended September 28, 2018.

The net income tax benefit of $ 1,222 million related primarily to the recognition of certain non-U.S.

loss carryforwards and basis differences in subsidiaries expected to be utilized against future taxable income, partially offset by a $ 46 million increase in the valuation allowance for certain U.S.

federal tax credit carryforwards.

The income tax benefit for fiscal 2018 also included $ 567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act (the “Act”) and a $ 61 million net income tax benefit related to the tax impacts of certain legal entity restructurings that occurred in the quarter ended December 29, 2017.

See “Tax Cuts and Jobs Act” below for additional information regarding the Act.

restructurings and intercompany transactions.

See “Swiss Tax Reform” below for additional information regarding Swiss Tax Reform.

Deferred Tax Assets and Liabilities

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Net deferred tax assets

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our tax loss and credit carryforwards (tax effected) at fiscal year end 2021 were as follows:

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Tax credit carryforwards

Capital loss carryforwards

Net operating loss carryforwards

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Net operating loss carryforwards

Tax credit carryforwards

Capital loss carryforwards

Total tax loss and credit carryforwards

The valuation allowance for deferred tax assets of $ 4,429 million and $ 4,970 million at fiscal year end 2020 and 2019, respectively, related principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss, capital loss, and credit carryforwards in various jurisdictions.

During fiscal 2020, tax loss and credit carryforwards decreased primarily as a result of a $ 818 million (tax effected) recovery of prior years’ net write-downs of investments in subsidiaries in certain jurisdictions, offset by a corresponding decrease to the valuation allowance.

The valuation allowance for deferred tax assets of $ 2,729 million and $ 4,429 million at fiscal year end 2021 and 2020, respectively, related principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

capital loss, and credit carryforwards in various jurisdictions.

During fiscal 2021, the valuation allowance decreased primarily as a result of a $ 1,295 million (tax effected) recovery of prior years’ net write-downs of investments in subsidiaries in certain jurisdictions, with a corresponding decrease to tax loss and credit carryforwards.

In addition, as discussed above, a $ 327 million net reduction in valuation allowances was associated primarily with certain tax planning actions, as well as improved current and expected future operating profit and taxable income.

We believe that we will generate sufficient future taxable income to realize the income tax benefits related to the remaining net deferred tax assets on the Consolidated Balance Sheet.

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Uncertain Tax Positions

As of fiscal year end 2020, we had total unrecognized income tax benefits of $ 414 million.

If recognized in future years, $ 393 million of these currently unrecognized income tax benefits would reduce income tax expense and the effective tax rate.

As of fiscal year end 2019, we had total unrecognized income tax benefits of $ 542 million.

If recognized in future

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

years, $ 397 million of these currently unrecognized income tax benefits would reduce income tax expense and the effective tax rate.

The following table summarizes the activity related to unrecognized income tax benefits:

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Additions related to current year tax positions

Current year acquisitions

Reductions due to lapse of applicable statute of limitations

Balance at end of fiscal year

The total amount of unrecognized tax benefits that, if recognized, would reduce income tax expense and the effective tax rate were $ 378 million, $ 393 million, and $ 397 million at fiscal year end 2021, 2020, and 2019, respectively.

We record accrued interest and penalties related to uncertain tax positions as part of income tax expense (benefit).

As of fiscal year end 2020 and 2019, we had $ 42 million of accrued interest and penalties related to uncertain tax positions on the Consolidated Balance Sheets, recorded primarily in income taxes.

During fiscal 2020, 2019, and 2018, we recognized income tax benefits of $ 1 million, benefits of $ 14 million, and expense of $ 5 million, respectively, related to interest and penalties on the Consolidated Statements of Operations.

As of fiscal year end 2021 and 2020, we had $ 53 million and $ 42 million, respectively, of accrued interest and penalties related to uncertain tax positions on the Consolidated Balance Sheets, recorded primarily in income taxes.

During fiscal 2021, 2020, and 2019, we recognized income tax expense of $ 12 million, benefits of $ 1 million, and benefits of $ 14 million, respectively, related to interest and penalties on the Consolidated Statements of Operations.

We file income tax returns on a unitary, consolidated, or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years .

Various state and local income tax returns are currently in the process of examination or administrative appeal.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

subsidiaries file income tax returns in the countries in which they have operations.

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In most jurisdictions, taxing authorities retain the ability to review prior tax years and to adjust any net operating loss and tax credit carryforwards from these years that are utilized in a subsequent period.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $ 100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

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Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing in September 2018, and it was approved by public vote on May 19, 2019.

Swiss Tax Reform eliminates certain preferential tax items and implements new tax rates at both the federal and cantonal levels.

Swiss Tax Reform eliminated certain preferential tax items and implemented new tax rates at both the federal and cantonal levels.

On May 24, 2019, the federal tax authority issued guidance abolishing certain interest deductions effective January 1, 2020.

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The federal provisions of Swiss Tax Reform were enacted into law in the quarter ended September 27, 2019.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

During fiscal 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.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act, which was enacted in December 2017, included numerous significant changes to existing tax law, including a permanent reduction in the U.S.

federal corporate income tax rate to 21 %, effective January 1, 2018;

further limitations on the deductibility of interest expense and certain executive compensation;

repeal of the corporate Alternative Minimum Tax;

and imposition of a territorial tax system with a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries.

In the period of enactment, we revalued our U.S.

federal deferred tax assets and liabilities at the 21 % tax rate and recorded income tax expense of $ 567 million primarily in connection with the write-down of our U.S.

federal deferred tax asset for net operating loss and interest carryforwards to the lower tax rate.

Included in the expense of $ 567 million was an income tax benefit of $ 34 million related to the reduction in the existing valuation allowance recorded against certain U.S.

federal tax credit carryforwards.

Tax Sharing Agreement

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Accordingly, during fiscal 2020, we recognized an income tax benefit of $ 31 million and net other income of $ 8 million representing settlement of the remaining shared pre-separation income tax matters and indemnification balances.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Earnings (Loss) Per Share

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dollar, however, as our reporting currency on the Consolidated Financial Statements.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subject to certain conditions specified in our articles of association, we are authorized to increase our conditional share capital by issuing new shares in aggregate not exceeding 50 % of our authorized shares.

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Shares held both directly by us and by our subsidiary are presented as treasury shares on the Consolidated Balance Sheets.

In fiscal 2020 and 2019, our shareholders approved the cancellation of 12 million and 6 million shares, respectively, purchased under our share repurchase program.

In fiscal 2021, 2020, and 2019, our shareholders approved the cancellation of 3 million, 12 million, and 6 million shares, respectively, purchased under our share repurchase program.

These capital reductions by cancellation of shares were subject to a notice period and filing with the commercial register in Switzerland.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Contributed Surplus

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Dividends on our shares must be approved by our shareholders.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our shareholders approved the following dividends on our common shares:

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At fiscal year end 2021 and 2020, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Consolidated Balance Sheets totaled $ 327 million and $ 317 million, respectively.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Share Repurchase Program

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At fiscal year end 2021, we had $ 1.6 billion of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accumulated Other Comprehensive Income (Loss)

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Balance at fiscal year end 2018

Adoption of ASU No.

Other comprehensive income (loss), net of tax:

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Amounts reclassified from accumulated other comprehensive income (loss)

Income tax (expense) benefit

Income tax expense

Other comprehensive income (loss), net of tax

other comprehensive income attributable to noncontrolling interests

Balance at fiscal year end 2020

Other comprehensive income (loss), net of tax:

Other comprehensive income (loss) before reclassifications

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income (loss)

Income tax expense

Income tax (expense) benefit

Other comprehensive income (loss), net of tax

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See Note 4 for additional information regarding the divestiture of SubCom .

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our equity compensation plans, of which the TE Connectivity Ltd.

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and other share-based awards (collectively, “Awards”) and allow for the use of unissued shares or treasury shares to be used to satisfy such Awards.

As of fiscal year end 2020, our plans provided for a maximum of 77 million shares to be issued as Awards, subject to adjustment as provided under the terms of the plans.

As of fiscal year end 2021, the 2007 Plan provided for a maximum of 70 million shares to be issued as Awards, subject to adjustment as provided under the terms of the plan.

A total of 12 million shares remained available for issuance under the 2007 Plan as of fiscal year end 2021.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Share-Based Compensation Expense

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The fair value of restricted share awards is determined based on the closing value of our shares on the grant date.

Restricted share awards generally vest in increments over a period of four years as determined by the management development and compensation committee.

Restricted share awards generally vest in increments over a period of four years as determined by the management development and compensation committee of our board of directors.

Restricted share award activity was as follows:

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As of fiscal year end 2021, there was $ 68 million of unrecognized compensation expense related to nonvested restricted share awards, which is expected to be recognized over a weighted-average period of 1.7 years.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Performance Share Awards

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Recipients of performance share units have no voting rights but do receive dividend equivalents.

Performance share awards generally vest after a period of three years as determined by the management development and compensation committee.

Performance share awards generally vest after a period of three years as determined by the management development and compensation committee of our board of directors.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Performance share award activity was as follows:

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Outstanding at fiscal year end 2020

( 2,397,357 )

Outstanding at fiscal year end 2021

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Exercisable at fiscal year end 2021

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The weighted-average exercise price of share option awards granted during fiscal 2021, 2020, and 2019 was $ 106.52 , $ 93.39 , and $ 76.91 , respectively.

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As of fiscal year end 2021, there was $ 32 million of unrecognized compensation expense related to nonvested share options granted under our share option plans, which is expected to be recognized over a weighted-average period of 1.6 years.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Share-Based Compensation Assumptions

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Industrial Solutions:

Aerospace, defense, oil, and gas

Industrial equipment

Aerospace, defense, oil, and gas

Total Industrial Solutions

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

(2) Effective for fiscal 2020, we are separately presenting net sales in the medical end market.

Such amounts were previously included in net sales in the industrial equipment end market.

Net sales by geographic region and segment were as follows:

(in millions)

Asia–Pacific:

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

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Communications Solutions

Total Asia–Pacific

Europe/Middle East/Africa (“EMEA”):

Asia–Pacific:

Transportation Solutions

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Communications Solutions

Total Asia–Pacific

Transportation Solutions

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Operating income by segment was as follows:

Operating income (loss) by segment was as follows:

(in millions)

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

Quarterly Financial Data (unaudited)

Summarized quarterly financial data was as follows:

(in millions, except per share data)

Acquisition and integration costs

Restructuring and other charges, net

Impairment of goodwill

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

Net income (loss)

Diluted earnings (loss) per share:

Income (loss) from continuing operations

Net income (loss)

(1) Results for the quarter ended December 27, 2019 included $ 355 million of income tax expense related to the tax impacts of certain measures of Swiss Tax Reform.

See Note 16 for additional information regarding income taxes.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(2) Results for the quarter ended March 27, 2020 included a pre-tax goodwill impairment charge of $ 900 million relating to the Sensors reporting unit in our Transportation Solutions segment.

See Note 8 for additional information regarding goodwill impairment.

(3) Results 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.

See Note 16 for additional information regarding income taxes.

(4) Results for the quarter ended December 28, 2018 included a pre-tax loss of $ 86 million on the sale of our SubCom business which was reported as a discontinued operation on our Consolidated Financial Statements.

See Note 4 for additional information regarding discontinued operations.

(5) Results for the quarter ended June 28, 2019 included a $ 214 million income tax benefit related to the tax impacts of certain measures of Swiss Tax Reform and a $ 93 million income tax benefit related to the effective settlement of a tax audit in a non-U.S.

jurisdiction.

See Note 16 for additional information regarding income taxes.

Subsequent Event

Subsequent to fiscal year end 2021, TEGSA called for the early redemption of all of its outstanding 3.50 % senior notes due in February 2022, representing $ 500 million aggregate principal amount.

The notes were redeemed on November 3, 2021.

TE CONNECTIVITY LTD.

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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 9A. Controls and Procedures