TE Connectivity plc 10-Q

ITEM 1. FINANCIAL STATEMENTS TE CONNECTIVITY LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions, except per share data) ​ Net sales ​ $ 3,818 ​ $ 3,522 ​ Cost of sales ​ 2,588 ​ 2,376 ​ Gross margin ​ 1,230 ​ 1,146 ​ Selling, general, and administrative expenses ​ 363 ​ ​ 361 ​ Research, development, and engineering expenses ​ 175 ​ ​ 162 ​ Acquisition and integration costs ​ 8 ​ ​ 8 ​ Restructuring and other charges, net ​ 12 ​ ​ 167 ​ Operating income ​ ​ 672 ​ ​ 448 ​ Interest income ​ ​ 2 ​ ​ 3 ​ Interest expense ​ ( 12 ) ​ ​ ( 15 ) ​ Other income (expense), net ​ 15 ​ ​ ( 1 ) ​ Income from continuing operations before income taxes ​ 677 ​ 435 ​ Income tax expense ​ ( 110 ) ​ ​ ( 60 ) ​ Income from continuing operations ​ 567 ​ 375 ​ Income (loss) from discontinued operations, net of income taxes ​ ( 1 ) ​ ​ 6 ​ Net income ​ $ 566 ​ $ 381 ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share: ​ ​ ​ ​ ​ ​ ​ Income from continuing operations ​ $ 1.73 ​ $ 1.13 ​ Income from discontinued operations ​ — ​ 0.02 ​ Net income ​ 1.73 ​ 1.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ Income from continuing operations ​ $ 1.72 ​ $ 1.13 ​ Income from discontinued operations ​ — ​ 0.02 ​ Net income ​ 1.72 ​ 1.14 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average number of shares outstanding: ​ ​ ​ ​ ​ ​ ​ Basic ​ 327 ​ ​ 331 ​ Diluted ​ 330 ​ ​ 333 ​ See Notes to Condensed Consolidated Financial Statements. ​ 1 Table of Contents TE CONNECTIVITY LTD. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Net income ​ $ 566 ​ $ 381 ​ Other comprehensive income: ​ ​ ​ ​ ​ ​ ​ Currency translation ​ 18 ​ ​ 111 ​ Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes ​ 4 ​ ​ 6 ​ Gains on cash flow hedges, net of income taxes ​ 1 ​ ​ 29 ​ Other comprehensive income ​ 23 ​ 146 ​ Comprehensive income ​ ​ 589 ​ ​ 527 ​ Less: comprehensive (income) loss attributable to noncontrolling interests ​ ​ 6 ​ ​ ( 6 ) ​ Comprehensive income attributable to TE Connectivity Ltd. ​ $ 595 ​ $ 521 ​ See Notes to Condensed Consolidated Financial Statements. ​ 2 Table of Contents TE CONNECTIVITY LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions, except share ​ ​ ​ data) ​ Assets ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 982 ​ $ 1,203 ​ Accounts receivable, net of allowance for doubtful accounts of $ 41 ​ 2,844 ​ 2,928 ​ Inventories ​ 2,845 ​ 2,511 ​ Prepaid expenses and other current assets ​ 573 ​ 621 ​ Total current assets ​ 7,244 ​ 7,263 ​ Property, plant, and equipment, net ​ 3,827 ​ 3,778 ​ Goodwill ​ 5,503 ​ 5,590 ​ Intangible assets, net ​ 1,509 ​ 1,549 ​ Deferred income taxes ​ 2,513 ​ 2,499 ​ Other assets ​ 813 ​ 783 ​ Total assets ​ $ 21,409 ​ $ 21,462 ​ Liabilities, redeemable noncontrolling interests, and shareholders' equity ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Short-term debt ​ $ 484 ​ $ 503 ​ Accounts payable ​ 1,964 ​ 1,911 ​ Accrued and other current liabilities ​ 1,826 ​ 2,242 ​ Total current liabilities ​ 4,274 ​ 4,656 ​ Long-term debt ​ 3,519 ​ 3,589 ​ Long-term pension and postretirement liabilities ​ 1,119 ​ 1,139 ​ Deferred income taxes ​ 192 ​ 181 ​ Income taxes ​ 331 ​ 302 ​ Other liabilities ​ 846 ​ 847 ​ Total liabilities ​ 10,281 ​ 10,714 ​ Commitments and contingencies (Note 9) ​ ​ ​ ​ ​ ​ ​ Redeemable noncontrolling interests ​ ​ 108 ​ ​ 114 ​ Shareholders' equity: ​ ​ ​ ​ ​ ​ ​ Common shares, CHF 0.57 par value, 336,099,881 shares authorized and issued ​ 148 ​ ​ 148 ​ Accumulated earnings ​ 12,285 ​ 11,709 ​ Treasury shares, at cost, 9,911,977 and 9,060,919 shares, respectively ​ ( 1,274 ) ​ ( 1,055 ) ​ Accumulated other comprehensive loss ​ ( 139 ) ​ ( 168 ) ​ Total shareholders' equity ​ 11,020 ​ 10,634 ​ Total liabilities, redeemable noncontrolling interests, and shareholders' equity ​ $ 21,409 ​ $ 21,462 ​ See Notes to Condensed Consolidated Financial Statements. ​ ​ 3 Table of Contents TE CONNECTIVITY LTD. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Quarter Ended December 24, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ Total ​ ​ ​ Common Shares ​ Treasury Shares ​ Contributed ​ Accumulated ​ Comprehensive ​ Shareholders' ​ ​ Shares Amount Shares Amount Surplus Earnings Loss Equity ​ ​ (in millions) ​ Balance at September 24, 2021 336 ​ $ 148 ( 9 ) ​ $ ( 1,055 ) ​ $ — ​ $ 11,709 ​ $ ( 168 ) ​ $ 10,634 ​ Net income — ​ — — ​ — ​ — ​ 566 ​ — ​ 566 ​ Other comprehensive income — ​ — — ​ — ​ — ​ — ​ 29 ​ 29 ​ Share-based compensation expense — ​ — — ​ — ​ 32 ​ — ​ — ​ 32 ​ Exercise of share options — ​ — — ​ 22 ​ — ​ — ​ — ​ 22 ​ Restricted share award vestings and other activity — ​ — 1 ​ 5 ​ ( 32 ) ​ 10 ​ — ​ ( 17 ) ​ Repurchase of common shares — ​ — ( 2 ) ​ ( 246 ) ​ — ​ — ​ — ​ ( 246 ) ​ Balance at December 24, 2021 ​ 336 ​ $ 148 ( 10 ) ​ $ ( 1,274 ) ​ $ — ​ $ 12,285 ​ $ ( 139 ) ​ $ 11,020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Quarter Ended December 25, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ Total ​ ​ ​ Common Shares ​ Treasury Shares ​ Contributed ​ Accumulated ​ Comprehensive ​ Shareholders' ​ ​ Shares Amount Shares Amount Surplus Earnings Loss Equity ​ ​ (in millions) ​ Balance at September 25, 2020 339 ​ $ 149 ( 8 ) ​ $ ( 669 ) ​ $ — ​ $ 10,348 ​ $ ( 445 ) ​ $ 9,383 ​ Net income ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 381 ​ ​ — ​ ​ 381 ​ Other comprehensive income — ​ — — ​ — ​ — ​ — ​ 140 ​ 140 ​ Share-based compensation expense — ​ — — ​ — ​ 19 ​ — ​ — ​ 19 ​ Exercise of share options — ​ — 1 ​ 75 ​ — ​ — ​ — ​ 75 ​ Restricted share award vestings and other activity — ​ — — ​ 66 ​ ( 19 ) ​ ( 57 ) ​ — ​ ( 10 ) ​ Repurchase of common shares — ​ — ( 1 ) ​ ( 127 ) ​ — ​ — ​ — ​ ( 127 ) ​ Balance at December 25, 2020 ​ 339 ​ $ 149 ( 8 ) ​ $ ( 655 ) ​ $ — ​ $ 10,672 ​ $ ( 305 ) ​ $ 9,861 ​ See Notes to Condensed Consolidated Financial Statements. ​ ​ 4 Table of Contents TE CONNECTIVITY LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 566 ​ $ 381 ​ (Income) loss from discontinued operations, net of income taxes ​ 1 ​ ( 6 ) ​ Income from continuing operations ​ 567 ​ 375 ​ Adjustments to reconcile income from continuing operations to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 198 ​ 187 ​ Deferred income taxes ​ 4 ​ ( 42 ) ​ Non-cash lease cost ​ ​ 31 ​ ​ 30 ​ Provision for losses on accounts receivable and inventories ​ 33 ​ 6 ​ Share-based compensation expense ​ 32 ​ 19 ​ Other ​ ( 9 ) ​ 21 ​ Changes in assets and liabilities, net of the effects of acquisitions and divestitures: ​ ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ 148 ​ ( 299 ) ​ Inventories ​ ( 264 ) ​ ( 145 ) ​ Prepaid expenses and other current assets ​ 52 ​ ( 87 ) ​ Accounts payable ​ 15 ​ 349 ​ Accrued and other current liabilities ​ ( 285 ) ​ 88 ​ Income taxes ​ 34 ​ 17 ​ Other ​ ( 24 ) ​ 121 ​ Net cash provided by operating activities ​ 532 ​ 640 ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ Capital expenditures ​ ( 172 ) ​ ( 142 ) ​ Proceeds from sale of property, plant, and equipment ​ 54 ​ 1 ​ Acquisition of businesses, net of cash acquired ​ ( 100 ) ​ ( 107 ) ​ Proceeds from divestiture of businesses, net of cash retained by businesses sold ​ ​ 16 ​ ​ — ​ Other ​ 3 ​ 2 ​ Net cash used in investing activities ​ ( 199 ) ​ ( 246 ) ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ Net increase in commercial paper ​ 479 ​ — ​ Repayment of debt ​ ( 555 ) ​ ( 30 ) ​ Proceeds from exercise of share options ​ 22 ​ 75 ​ Repurchase of common shares ​ ( 304 ) ​ ( 119 ) ​ Payment of common share dividends to shareholders ​ ( 163 ) ​ ( 159 ) ​ Other ​ ( 31 ) ​ ( 19 ) ​ Net cash used in financing activities ​ ( 552 ) ​ ( 252 ) ​ Effect of currency translation on cash ​ ( 2 ) ​ 11 ​ Net increase (decrease) in cash, cash equivalents, and restricted cash ​ ( 221 ) ​ 153 ​ Cash, cash equivalents, and restricted cash at beginning of period ​ 1,203 ​ 945 ​ Cash, cash equivalents, and restricted cash at end of period ​ $ 982 ​ $ 1,098 ​ See Notes to Condensed Consolidated Financial Statements. ​ ​ 5 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The unaudited Condensed Consolidated Financial Statements of TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and the instructions to Form 10-Q under the Securities Exchange Act of 1934. In management’s opinion, the unaudited Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period. The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 24, 2021. Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2022 and fiscal 2021 are to our fiscal years ending September 30, 2022 and ended September 24, 2021, respectively. 2. Restructuring and Other Charges, Net Net restructuring and other charges consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Restructuring charges, net ​ $ 21 ​ $ 149 ​ (Gain) loss on divestitures and impairment of held for sale businesses ​ ​ ( 9 ) ​ ​ 17 ​ Other charges, net ​ — ​ 1 ​ Restructuring and other charges, net ​ $ 12 ​ $ 167 ​ ​ Net restructuring and related charges by segment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Transportation Solutions ​ $ 5 ​ $ 118 ​ Industrial Solutions ​ 8 ​ 20 ​ Communications Solutions ​ 8 ​ 11 ​ Restructuring charges, net ​ ​ 21 ​ ​ 149 ​ Plus: charges included in cost of sales (1) ​ ​ 12 ​ ​ — ​ Restructuring and related charges, net ​ $ 33 ​ $ 149 ​ (1) Charges included in cost of sales were attributable to inventory-related charges within the Industrial Solutions segment. 6 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Activity in our restructuring reserves was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ September 24, ​ ​ ​ ​ Changes in ​ Cash ​ Non-Cash ​ Currency ​ December 24, ​ ​ 2021 Charges Estimate Payments Items Translation 2021 ​ ​ (in millions) ​ Fiscal 2022 Actions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee severance ​ $ — ​ $ 15 ​ $ — ​ $ ( 1 ) ​ $ — ​ $ — ​ $ 14 ​ Property, plant, and equipment and inventories ​ ​ — ​ ​ 18 ​ ​ — ​ ​ — ​ ​ ( 18 ) ​ ​ — ​ ​ — ​ Total ​ ​ — ​ ​ 33 ​ ​ — ​ ​ ( 1 ) ​ ​ ( 18 ) ​ ​ — ​ ​ 14 ​ Fiscal 2021 Actions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee severance ​ ​ 152 ​ ​ 1 ​ ​ — ​ ​ ( 29 ) ​ ​ — ​ ​ ( 5 ) ​ ​ 119 ​ Facility and other exit costs ​ ​ 2 ​ ​ 1 ​ ​ — ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ 2 ​ Property, plant, and equipment ​ ​ — ​ ​ 2 ​ ​ — ​ ​ — ​ ​ ( 2 ) ​ ​ — ​ ​ — ​ Total ​ ​ 154 ​ ​ 4 ​ ​ — ​ ​ ( 30 ) ​ ​ ( 2 ) ​ ​ ( 5 ) ​ ​ 121 ​ Pre-Fiscal 2021 Actions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee severance ​ ​ 135 ​ ​ — ​ ​ ( 6 ) ​ ​ ( 12 ) ​ ​ — ​ ​ ( 3 ) ​ ​ 114 ​ Facility and other exit costs ​ ​ 15 ​ ​ 2 ​ ​ — ​ ​ ( 3 ) ​ ​ — ​ ​ — ​ ​ 14 ​ Total ​ ​ 150 ​ ​ 2 ​ ​ ( 6 ) ​ ​ ( 15 ) ​ ​ — ​ ​ ( 3 ) ​ ​ 128 ​ Total Activity ​ $ 304 ​ $ 39 ​ $ ( 6 ) ​ $ ( 46 ) ​ $ ( 20 ) ​ $ ( 8 ) ​ $ 263 ​ ​ 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Cumulative ​ Remaining ​ ​ ​ Expected ​ Charges ​ Expected ​ ​ Charges Incurred Charges ​ ​ (in millions) ​ Transportation Solutions ​ $ 131 ​ $ 125 ​ $ 6 ​ Industrial Solutions ​ 53 ​ 50 ​ 3 ​ Communications Solutions ​ 27 ​ 24 ​ 3 ​ Total ​ $ 211 ​ $ 199 ​ $ 12 ​ ​ 7 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Pre-Fiscal 2021 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. Total Restructuring Reserves Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Accrued and other current liabilities ​ $ 208 ​ $ 236 ​ Other liabilities ​ 55 ​ 68 ​ Restructuring reserves ​ $ 263 ​ $ 304 ​ ​ 3. Acquisitions 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. 4. Inventories Inventories consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Raw materials ​ $ 423 ​ $ 320 ​ Work in progress ​ 1,134 ​ 991 ​ Finished goods ​ 1,288 ​ 1,200 ​ Inventories ​ $ 2,845 ​ $ 2,511 ​ ​ ​ ​ 8 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 5. Goodwill The changes in the carrying amount of goodwill by segment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transportation Industrial Communications ​ ​ ​ ​ Solutions ​ Solutions ​ Solutions ​ Total ​ ​ ​ (in millions) ​ September 24, 2021 (1) ​ $ 1,549 ​ $ 3,446 ​ $ 595 ​ $ 5,590 ​ Acquisition ​ ​ — ​ ​ — ​ ​ 78 ​ ​ 78 ​ Purchase price adjustments ​ ​ — ​ ​ ( 103 ) ​ ​ — ​ ​ ( 103 ) ​ Currency translation and other ​ ( 20 ) ​ ( 36 ) ​ ( 6 ) ​ ( 62 ) ​ December 24, 2021 (1) ​ $ 1,529 ​ $ 3,307 ​ $ 667 ​ $ 5,503 ​ (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. 6. Intangible Assets, Net Intangible assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, 2021 ​ September 24, 2021 ​ ​ Gross ​ ​ Net Gross ​ ​ Net ​ ​ ​ Carrying ​ Accumulated ​ Carrying ​ Carrying ​ Accumulated ​ Carrying ​ ​ ​ Amount ​ Amortization ​ Amount ​ Amount ​ Amortization ​ Amount ​ ​ (in millions) ​ Customer relationships ​ $ 1,766 ​ $ ( 680 ) ​ $ 1,086 ​ $ 1,766 ​ $ ( 660 ) ​ $ 1,106 ​ Intellectual property ​ ​ 1,262 ​ ​ ( 852 ) ​ ​ 410 ​ ​ 1,262 ​ ​ ( 832 ) ​ ​ 430 ​ Other ​ 19 ​ ( 6 ) ​ 13 ​ 19 ​ ( 6 ) ​ 13 ​ Total ​ $ 3,047 ​ $ ( 1,538 ) ​ $ 1,509 ​ $ 3,047 ​ $ ( 1,498 ) ​ $ 1,549 ​ ​ 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 ​ $ 150 ​ Fiscal 2023 ​ ​ 199 ​ Fiscal 2024 ​ 167 ​ Fiscal 2025 ​ 151 ​ Fiscal 2026 ​ 145 ​ Fiscal 2027 ​ 124 ​ Thereafter ​ 573 ​ Total ​ $ 1,509 ​ ​ 9 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 7. Debt 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. 8. Leases The components of lease cost were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ (in millions) Operating lease cost ​ $ 31 ​ $ 30 ​ Variable lease cost ​ ​ 12 ​ ​ 11 ​ Total lease cost ​ $ 43 ​ $ 41 ​ ​ Cash flow information, including significant non-cash transactions, related to leases was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ (in millions) Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ ​ ​ ​ Payments for operating leases (1) ​ $ 34 ​ $ 30 ​ ​ ​ ​ ​ ​ ​ ​ ​ Right-of-use assets, including modifications and extensions, obtained in exchange for operating lease liabilities ​ ​ 36 ​ ​ 22 ​ (1) These payments are included in cash flows from operating activities, primarily in changes in accrued and other current liabilities. 9. Commitments and Contingencies Legal Proceedings In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. 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. 10 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 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. Environmental Matters We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of December 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. Guarantees In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows. At December 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 $ 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; however, based on historical experience, we do not anticipate having to perform. 10. Financial Instruments Foreign Currency Exchange Rate Risk 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 € 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, we will pay the notional value of the contracts in 11 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) euros and receive U.S. dollars from our counterparties. In connection with the cross-currency swap contracts, both counterparties to each contract are required to provide cash collateral. These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Prepaid expenses and other current assets ​ $ 4 ​ $ — ​ Other liabilities ​ — ​ 20 ​ ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Losses recorded in other comprehensive income (loss) ​ $ ( 3 ) ​ $ ( 4 ) ​ Gains (losses) excluded from the hedging relationship (1) ​ 29 ​ ( 40 ) ​ (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. dollar. Hedge of Net Investment We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies. The aggregate notional value of these hedges was $ 3,055 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 $ 1,576 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. dollars at a weighted-average rate of 1.67 % per annum and pay no interest. 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. We are not required to provide collateral for these contracts. These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Prepaid expenses and other current assets ​ $ 6 ​ $ 3 ​ Other assets ​ 29 ​ 18 ​ Accrued and other current liabilities ​ ​ — ​ ​ 13 ​ Other liabilities ​ ​ 9 ​ ​ 18 ​ ​ 12 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) The impacts of our hedge of net investment programs were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Foreign currency exchange gains (losses) on intercompany loans and external borrowings (1) ​ $ 108 ​ $ ( 168 ) ​ Gains (losses) on cross-currency swap contracts designated as hedges of net investment (1) ​ 37 ​ ( 85 ) ​ (1) Recorded as currency translation, a component of accumulated other comprehensive income (loss). 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Prepaid expenses and other current assets ​ $ 8 ​ $ 7 ​ Accrued and other current liabilities ​ ​ 37 ​ ​ 38 ​ ​ The impacts of these forward starting interest rate swap contracts were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Gains recorded in other comprehensive income (loss) ​ $ 2 ​ $ 13 ​ ​ Commodity 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 24, ​ September 24, ​ ​ 2021 2021 ​ ​ (in millions) ​ Prepaid expenses and other current assets ​ $ 18 ​ $ 23 ​ Other assets ​ 1 ​ — ​ Accrued and other current liabilities ​ ​ 13 ​ ​ 18 ​ Other liabilities ​ ​ 1 ​ ​ 4 ​ ​ 13 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) The impacts of these commodity swap contracts were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Gains recorded in other comprehensive income (loss) ​ $ 15 ​ $ 37 ​ Gains reclassified from accumulated other comprehensive income (loss) into cost of sales ​ ​ 15 ​ ​ 15 ​ ​ 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. 11. Retirement Plans The net periodic pension benefit cost (credit) for all non-U.S. and U.S. defined benefit pension plans was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-U.S. Plans ​ U.S. Plans ​ ​ ​ For the ​ For the ​ ​ ​ Quarters Ended ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ December 24, ​ December 25, ​ ​ 2021 2020 2021 2020 ​ ​ (in millions) ​ Operating expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Service cost ​ $ 10 ​ $ 12 ​ $ 2 ​ $ 3 ​ Other (income) expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest cost ​ 9 ​ 7 ​ 7 ​ 8 ​ Expected return on plan assets ​ ( 15 ) ​ ( 14 ) ​ ( 12 ) ​ ( 13 ) ​ Amortization of net actuarial loss ​ 6 ​ 8 ​ 1 ​ 2 ​ Amortization of prior service credit ​ ( 1 ) ​ ( 1 ) ​ — ​ — ​ Net periodic pension benefit cost (credit) ​ $ 9 ​ $ 12 ​ $ ( 2 ) ​ $ — ​ ​ During the quarter ended December 24, 2021, we contributed $ 9 million to our non-U.S. pension plans. 12. Income Taxes 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. 14 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 24, 2021. 13. Earnings Per Share The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Basic 327 ​ 331 ​ Dilutive impact of share-based compensation arrangements 3 ​ 2 ​ Diluted 330 333 ​ ​ 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. 14. Shareholders’ Equity Dividends We paid cash dividends to shareholders as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ Quarters Ended ​ December 24, December 25, ​ 2021 2020 Dividends paid per common share ​ $ 0.50 ​ $ 0.48 ​ ​ Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. 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 Common shares repurchased under the share repurchase program were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Number of common shares repurchased ​ 2 ​ 1 ​ Repurchase value $ 246 $ 127 ​ ​ At December 24, 2021, we had $ 1.3 billion of availability remaining under our share repurchase authorization. 15 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 15. Share Plans Share-based compensation expense, which was included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Share-based compensation expense $ 32 $ 19 ​ ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant-Date ​ ​ Shares Fair Value ​ ​ (in millions) ​ ​ ​ ​ Share options ​ 0.8 ​ $ 37.67 ​ Restricted share awards ​ 0.3 ​ 158.00 ​ Performance share awards ​ 0.1 ​ ​ 158.00 ​ ​ 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. Share-Based Compensation Assumptions The assumptions we used in the Black-Scholes-Merton option pricing model for the options granted as part of our annual incentive plan grant were as follows: ​ ​ ​ ​ ​ ​ Expected share price volatility 29 % Risk-free interest rate ​ 1.1 % ​ Expected annual dividend per share ​ $ 2.00 ​ ​ Expected life of options (in years) ​ 5.1 ​ ​ ​ ​ 16 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 16. Segment and Geographic Data Net sales by segment (1) and industry end market (2) were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Transportation Solutions: ​ ​ ​ ​ ​ ​ ​ Automotive ​ $ 1,520 ​ $ 1,629 ​ Commercial transportation ​ 365 ​ 331 ​ Sensors ​ 273 ​ 264 ​ Total Transportation Solutions ​ ​ 2,158 ​ ​ 2,224 ​ Industrial Solutions: ​ ​ ​ ​ ​ ​ ​ Industrial equipment ​ ​ 462 ​ ​ 295 ​ Aerospace, defense, oil, and gas ​ 242 ​ 250 ​ Energy ​ 188 ​ 172 ​ Medical ​ ​ 167 ​ ​ 156 ​ Total Industrial Solutions ​ ​ 1,059 ​ ​ 873 ​ Communications Solutions: ​ ​ ​ ​ ​ ​ ​ Data and devices ​ ​ 349 ​ ​ 234 ​ Appliances ​ 252 ​ 191 ​ Total Communications Solutions ​ ​ 601 ​ ​ 425 ​ Total ​ $ 3,818 ​ $ 3,522 ​ (1) Intersegment sales were not material. (2) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. 17 Table of Contents TE CONNECTIVITY LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Net sales by geographic region (1) and segment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Europe/Middle East/Africa (“EMEA”): ​ ​ ​ ​ ​ ​ ​ Transportation Solutions ​ $ 771 ​ $ 894 ​ Industrial Solutions ​ 452 ​ 358 ​ Communications Solutions ​ 91 ​ 64 ​ Total EMEA ​ 1,314 ​ 1,316 ​ Asia–Pacific: ​ ​ ​ ​ ​ ​ ​ Transportation Solutions ​ 928 ​ 876 ​ Industrial Solutions ​ 209 ​ 163 ​ Communications Solutions ​ ​ 333 ​ ​ 254 ​ Total Asia–Pacific ​ 1,470 ​ 1,293 ​ Americas: ​ ​ ​ ​ ​ ​ ​ Transportation Solutions ​ ​ 459 ​ ​ 454 ​ Industrial Solutions ​ 398 ​ 352 ​ Communications Solutions ​ ​ 177 ​ ​ 107 ​ Total Americas ​ 1,034 ​ 913 ​ Total ​ $ 3,818 ​ $ 3,522 ​ (1) Net sales to external customers are attributed to individual countries based on the legal entity that records the sale. Operating income by segment was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 24, ​ December 25, ​ ​ 2021 2020 ​ ​ (in millions) ​ Transportation Solutions ​ $ 395 ​ $ 308 ​ Industrial Solutions ​ ​ 123 ​ ​ 76 ​ Communications Solutions ​ ​ 154 ​ ​ 64 ​ Total ​ $ 672 ​ $ 448 ​ ​ 17. 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. ​ ​ 18 Table of Contents ​