What changed in this filing

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Item 1. Financial Statements

2022-01-28 compared with 2021-07-29 · 120 added, 231 removed, 363 unchanged (49% of the section changed)

3 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions, except per share data)

4 unchanged sentences

Restructuring and other charges, net

Impairment of goodwill

Operating income

1 unchanged sentence

Interest expense

Other income, net

Other income (expense), net

Income from continuing operations before income taxes

Income tax expense

Income (loss) from continuing operations

Income from continuing operations

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

Net income (loss)

Basic earnings (loss) per share:

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

Diluted earnings (loss) per share:

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

Basic earnings per share:

Income from continuing operations

Income from discontinued operations

Diluted earnings per share:

Income from continuing operations

Income from discontinued operations

Weighted-average number of shares outstanding:

1 unchanged sentence

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarters Ended

Nine Months Ended

(in millions)

Net income (loss)

Other comprehensive income (loss):

Other comprehensive income:

Currency translation

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

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

Other comprehensive income (loss)

Comprehensive income (loss)

comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to TE Connectivity Ltd.

Gains on cash flow hedges, net of income taxes

Other comprehensive income

Comprehensive income

comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income attributable to TE Connectivity Ltd.

See Notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 41 and $ 29 , respectively

Accounts receivable, net of allowance for doubtful accounts of $ 41

Prepaid expenses and other current assets

17 unchanged sentences

Shareholders' equity:

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

Common shares, CHF 0.57 par value, 336,099,881 shares authorized and issued

Accumulated earnings

5 unchanged sentences

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Quarter Ended June 25, 2021

TE Connectivity

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at March 26, 2021

Other comprehensive income

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Cancellation of treasury shares

Balance at June 25, 2021

For the Nine Months Ended June 25, 2021

TE Connectivity

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Quarter Ended December 24, 2021

Common Shares

9 unchanged sentences

Repurchase of common shares

Cancellation of treasury shares

Balance at June 25, 2021

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED) (Continued)

For the Quarter Ended June 26, 2020

TE Connectivity

Common Shares

Treasury Shares

Comprehensive

Shareholders'

(in millions)

Balance at March 27, 2020

Other comprehensive income

Share-based compensation expense

Exercise of share options

Restricted share award vestings and other activity

Repurchase of common shares

Cancellation of treasury shares

Balance at June 26, 2020

For the Nine Months Ended June 26, 2020

TE Connectivity

Balance at December 24, 2021

For the Quarter Ended December 25, 2020

Common Shares

4 unchanged sentences

Balance at September 25, 2020

Other comprehensive

income (loss)

Other comprehensive income

Share-based compensation expense

2 unchanged sentences

Repurchase of common shares

Cancellation of treasury shares

Balance at June 26, 2020

Balance at December 25, 2020

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Quarters Ended

(in millions)

Cash flows from operating activities:

Net income (loss)

Income from discontinued operations, net of income taxes

Income (loss) from continuing operations

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

Impairment of goodwill

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

Income from continuing operations

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

Depreciation and amortization

13 unchanged sentences

Acquisition of businesses, net of cash acquired

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

Net cash used in investing activities

Cash flows from financing activities:

Net decrease in commercial paper

Proceeds from issuance of debt

Net increase in commercial paper

Repayment of debt

22 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

Restructuring charges, net

Impairment of held for sale businesses and loss on divestitures

(Gain) loss on divestitures and impairment of held for sale businesses

Other charges, net

Restructuring and other charges, net

Net restructuring charges by segment were as follows:

Net restructuring and related charges by segment were as follows:

Quarters Ended

Nine Months Ended

(in millions)

3 unchanged sentences

Restructuring charges, net

charges included in cost of sales (1)

Restructuring and related charges, net

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

TE CONNECTIVITY LTD.

5 unchanged sentences

Employee severance

Facility and other exit costs

Property, plant, and equipment

Property, plant, and equipment and inventories

Fiscal 2021 Actions:

5 unchanged sentences

Facility and other exit costs

Property, plant, and equipment

Total Activity

Fiscal 2022 Actions

During fiscal 2022, we initiated a restructuring program associated with footprint consolidation and cost structure improvements across all segments.

During the quarter ended December 24, 2021, we recorded restructuring and related charges of $ 33 million in connection with this program.

We expect to complete all restructuring actions commenced during the quarter ended December 24, 2021 by the end of fiscal 2024 and anticipate that any additional charges will be insignificant.

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.

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

We expect to complete all restructuring actions commenced during the nine months ended June 25, 2021 by the end of fiscal 2022 and to incur additional charges of approximately $ 20 million related primarily to employee severance and facility exit costs.

In connection with this program, during the quarters ended December 24, 2021 and December 25, 2020, we recorded restructuring charges of $ 4 million and $ 142 million, respectively.

We expect to complete all restructuring actions commenced during fiscal 2021 by the end of fiscal 2023 and to incur additional charges of approximately $ 12 million related to employee severance and facility exit costs.

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

3 unchanged sentences

Communications Solutions

Fiscal 2020 Actions

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

In connection with this program, during the nine months ended June 25, 2021 and June 26, 2020, we recorded restructuring charges of $ 18 million and $ 138 million, respectively.

We expect to complete all restructuring actions commenced during fiscal 2020 by the end of fiscal 2023 and to incur additional charges of approximately $ 22 million related primarily to employee severance and facility exit costs.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

(in millions)

Transportation Solutions

Industrial Solutions

Communications Solutions

Pre-Fiscal 2021 Actions

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

During the nine months ended June 25, 2021 and June 26, 2020, we recorded net restructuring credits of $ 10 million and charges of $ 6 million, respectively, related to pre-fiscal 2020 actions.

During the quarters ended December 24, 2021 and December 25, 2020, we recorded net restructuring credits of $ 4 million and charges of $ 7 million, respectively, related to pre-fiscal 2021 actions.

We expect additional charges related to pre-fiscal 2021 actions to be insignificant.

6 unchanged sentences

Restructuring reserves

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

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

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

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

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

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

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

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the quarter ended December 24, 2021, we acquired one business for a cash purchase price of $ 125 million, net of cash acquired.

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

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

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

Inventories consisted of the following:

4 unchanged sentences

Finished goods

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

5 unchanged sentences

Currency translation and other

June 25, 2021 (1)

(1) At June 25, 2021 and September 25, 2020, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 3,091 million, $ 669 million, and $ 489 million, respectively.

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

December 24, 2021 (1)

(1) At December 24, 2021 and September 24, 2021, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $ 3,091 million, $ 669 million, and $ 489 million, respectively.

During the quarter ended December 24, 2021, we recognized goodwill in the Communications Solutions segment in connection with a recent acquisition.

Also during the quarter ended December 24, 2021, we recognized purchase price adjustments in the Industrial Solutions segment in connection with prior year acquisitions, including two acquisitions that closed late in the fourth quarter of fiscal 2021.

See Note 3 for additional information regarding acquisitions.

1 unchanged sentence

Intangible assets consisted of the following:

June 25, 2021

December 24, 2021

September 24, 2021

2 unchanged sentences

Intellectual property

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Intangible asset amortization expense was $ 48 million for the quarters ended December 24, 2021 and December 25, 2020.

At December 24, 2021, the aggregate amortization expense on intangible assets is expected to be as follows:

(in millions)

Remainder of fiscal 2022

During the nine months ended June 25, 2021, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, repaid, at maturity, $ 250 million of 4.875 % senior notes due in January 2021 and € 350 million of fixed-to-floating rate senior notes due in June 2021.

During the nine months ended June 25, 2021, TEGSA issued € 550 million aggregate principal amount of 0.00 % senior notes due in February 2029.

The notes are TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur.

The notes are fully and unconditionally guaranteed as to payment on an unsecured basis by TE Connectivity Ltd.

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

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

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

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

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

TEGSA is required to pay an annual facility fee.

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

During the nine months ended June 25, 2021, we reclassified $ 500 million of 3.50 % senior notes due in February 2022 from long-term debt to short-term debt on the Condensed Consolidated Balance Sheet.

The fair value of our debt, based on indicative valuations, was approximately $ 4,510 million and $ 4,550 million at June 25, 2021 and September 25, 2020, respectively.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the quarter ended December 24, 2021, Tyco Electronics Group S.A.

(“TEGSA”), our wholly-owned subsidiary, 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 in November 2021.

As of December 24, 2021, TEGSA had $ 479 million of commercial paper outstanding at a weighted-average interest rate of 0.25 %.

TEGSA had no commercial paper outstanding at September 24, 2021.

The fair value of our debt, based on indicative valuations, was approximately $ 4,343 million and $ 4,465 million at December 24, 2021 and September 24, 2021, respectively.

The components of lease cost were as follows:

Quarters Ended

Nine Months Ended

(in millions)

3 unchanged sentences

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

Nine Months Ended

Quarters Ended

(in millions)

1 unchanged sentence

Payments for operating leases (1)

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

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

Right-of-use assets, including modifications and extensions, obtained in exchange for operating lease liabilities

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

Commitments and Contingencies

2 unchanged sentences

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.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Trade Compliance Matters

7 unchanged sentences

While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Environmental Matters

1 unchanged sentence

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

As of June 25, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 18 million to $ 47 million, and we accrued $ 21 million as the probable loss, which was the best estimate within this range.

As of December 24, 2021, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $ 18 million to $ 46 million, and we accrued $ 21 million as the probable loss, which was the best estimate within this range.

We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

1 unchanged sentence

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

At June 25, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 135 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

At December 24, 2021, we had outstanding letters of credit, letters of guarantee, and surety bonds of $ 132 million, excluding those related to our Subsea Communications (“SubCom”) business which are discussed below.

During fiscal 2019, we sold our SubCom business.

In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale.

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

During the nine months ended June 25, 2021, we amended our agreement with SubCom and removed the requirement to issue new performance guarantees.

These performance guarantees and letters of credit had a combined value of approximately $ 118 million as of December 24, 2021 and are expected to expire at various dates through fiscal 2025.

We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees;

3 unchanged sentences

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

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

The aggregate notional value of these contracts was € 500 million and € 700 million at December 24, 2021 and September 24, 2021, respectively.

Certain contracts were terminated in the quarter ended December 24, 2021;

the remaining contracts mature in the fourth quarter of fiscal 2022.

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 5.32 % per annum.

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

Upon maturity, we will pay the notional value of the contracts in

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

euros and receive U.S.

dollars from our counterparties.

3 unchanged sentences

(in millions)

Prepaid expenses and other current assets

Other liabilities

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

Collateral is recorded in accrued and other current liabilities when the contracts are in a net asset

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

At December 24, 2021 and September 24, 2021, collateral received from or paid to our counterparties approximated the net derivative position.

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

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

Quarters Ended

Nine Months Ended

(in millions)

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

Losses excluded from the hedging relationship (1)

Losses recorded in other comprehensive income (loss)

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

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

1 unchanged sentence

We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies.

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

The aggregate notional value of these hedges was $ 3,055 million and $ 3,798 million at December 24, 2021 and September 24, 2021, respectively.

We also use a cross-currency swap program to hedge our net investment in certain foreign operations.

The aggregate notional value of the contracts under this program was $ 1,509 million and $ 1,664 million at June 25, 2021 and September 25, 2020, respectively.

The aggregate notional value of the contracts under this program was $ 1,576 million and $ 1,430 million at December 24, 2021 and September 24, 2021, respectively.

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

9 unchanged sentences

Other liabilities

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Quarters Ended

Nine Months Ended

(in millions)

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

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

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

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

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Interest Rate Risk Management

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

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

These contracts had an aggregate notional value of $ 450 million at December 24, 2021 and September 24, 2021 and were designated as cash flow hedges.

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

3 unchanged sentences

Accrued and other current liabilities

Other liabilities

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

Quarters Ended

Nine Months Ended

(in millions)

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

Gains recorded in other comprehensive income (loss)

Commodity Hedges

1 unchanged sentence

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

These contracts had an aggregate notional value of $ 478 million and $ 312 million at June 25, 2021 and September 25, 2020, respectively, and were designated as cash flow hedges.

These contracts had an aggregate notional value of $ 545 million and $ 512 million at December 24, 2021 and September 24, 2021, respectively, and were designated as cash flow hedges.

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

4 unchanged sentences

Other liabilities

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The impacts of these commodity swap contracts were as follows:

Quarters Ended

Nine Months Ended

(in millions)

2 unchanged sentences

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Retirement Plans

9 unchanged sentences

Amortization of net actuarial loss

Amortization of prior service credit and other

Net periodic pension benefit cost (credit)

Nine Months Ended

(in millions)

Operating expense:

Other (income) expense:

Interest cost

Expected return on plan assets

Amortization of net actuarial loss

Amortization of prior service credit and other

Amortization of prior service credit

Net periodic pension benefit cost (credit)

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

pension plans, respectively.

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

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

deferred tax assets.

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

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

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

The income tax expense for the nine months ended June 25, 2021 included a $ 29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.

The income tax expense for the nine months ended June 26, 2020 included $ 355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”).

See “Swiss Tax Reform” below for additional information.

In addition, the income tax expense included $ 170

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

deferred tax assets, partially offset by an income tax benefit of $ 31 million related to pre-separation tax matters and the termination of the Tax Sharing Agreement with Tyco International plc (now part of Johnson Controls International plc) and Covidien plc (now part of Medtronic plc).

The pre-tax goodwill impairment charge of $ 900 million recorded during the nine months ended June 26, 2020 resulted in a tax benefit of $ 4 million as the associated goodwill was primarily not deductible for income tax purposes.

During the quarter ended December 24, 2021, we contributed $ 9 million to our non-U.S.

pension plans.

We recorded income tax expense of $ 110 million and $ 60 million for the quarters ended December 24, 2021 and December 25, 2020, respectively.

The income tax expense for the quarter ended December 24, 2021 included a $ 17 million income tax benefit related to the tax impacts of an intercompany transaction.

Our estimated annual effective tax rate for fiscal 2022 includes a total income tax benefit of approximately $ 75 million related to this transaction, with a portion recognized in the quarter ended December 24, 2021 and the remainder to be recognized in the remaining quarters of fiscal 2022.

In addition, the income tax expense for the quarter ended December 24, 2021 included $ 12 million of income tax expense related to an income tax audit of an acquired entity.

As we are entitled to indemnification of pre-acquisition period tax obligations under the terms of the purchase agreement, we recorded an associated indemnification receivable and other income of $ 11 million during the quarter ended December 24, 2021.

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

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.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of June 25, 2021.

Swiss Tax Reform

The Federal Act on Tax Reform and AHV Financing eliminated certain preferential tax items and implemented new tax rates at both the federal and cantonal levels.

During fiscal 2019, Switzerland enacted the federal provisions of Swiss Tax Reform and the federal tax authority issued guidance abolishing certain interest deductions.

The impacts of these measures were reflected in our fiscal 2019 Consolidated Financial Statements.

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

During the nine months ended June 26, 2020, we recognized $ 355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

Earnings (Loss) Per Share

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

Quarters Ended

Nine Months Ended

(in millions)

Dilutive impact of share-based compensation arrangements

For both the quarter and nine months ended June 26, 2020, there were one million nonvested share awards and options outstanding with underlying exercise prices less than the average market prices of our common shares;

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

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Earnings Per Share

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

Quarters Ended

Nine Months Ended

(in millions)

Antidilutive share options

Dilutive impact of share-based compensation arrangements

For the quarter ended December 24, 2021, one million share options were not included in the computation of diluted earnings per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive.

Shareholders’ Equity

Common Shares Held in Treasury

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

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

We paid cash dividends to shareholders as follows:

Quarters Ended

Nine Months Ended

Dividends paid per common share

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

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

At June 25, 2021 and September 25, 2020, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 493 million and $ 317 million, respectively.

At December 24, 2021 and September 24, 2021, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $ 163 million and $ 327 million, respectively.

Share Repurchase Program

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

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

Nine Months Ended

Quarters Ended

(in millions)

1 unchanged sentence

Repurchase value

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

At December 24, 2021, we had $ 1.3 billion of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Quarters Ended

Nine Months Ended

(in millions)

Share-based compensation expense

As of June 25, 2021, there was $ 140 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 1.8 years.

As of December 24, 2021, there was $ 214 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.2 years.

During the quarter ended December 24, 2021, we granted the following share-based awards as part of our annual incentive plan grant:

3 unchanged sentences

Performance share awards

As of June 25, 2021, we had 13 million shares available for issuance under the TE Connectivity Ltd.

As of December 24, 2021, we had 11 million shares available for issuance under the TE Connectivity Ltd.

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

10 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

3 unchanged sentences

Industrial Solutions:

Aerospace, defense, oil, and gas

Industrial equipment

Aerospace, defense, oil, and gas

Total Industrial Solutions

8 unchanged sentences

Quarters Ended

Nine Months Ended

(in millions)

Asia–Pacific:

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions

1 unchanged sentence

Communications Solutions

Total Asia–Pacific

Europe/Middle East/Africa (“EMEA”):

Asia–Pacific:

Transportation Solutions

1 unchanged sentence

Communications Solutions

Total Asia–Pacific

Transportation Solutions

3 unchanged sentences

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

Operating income (loss) by segment was as follows:

Operating income by segment was as follows:

Quarters Ended

Nine Months Ended

(in millions)

2 unchanged sentences

Communications Solutions

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

Subsequent Event

On December 27, 2021, the canton of Schaffhausen in Switzerland enacted a reduction to its corporate income tax rate.

We expect to recognize approximately $ 25 million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rate in the quarter ending March 25, 2022, the period of enactment.

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

What changed 10-Q

Item 1. Financial Statements