filings.toolsTE Connectivity (TEL) 10-K risk factor changes: FY2021 vs FY2020
The 2021-09-24 10-K against the 2020-09-25 one, compared heading by heading and sentence by sentence.
All filing items771 rewritten1,175 added999 removed1,665 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: the parser did not find an Item 1A in both filings.
- Sentence by sentence, 1,175 added, 999 removed, 771 rewritten and 1,665 unchanged across 9 items that differ.
- New this year: Item 6. RESERVED; Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS; Item 13. . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Sentences by item
9 items, with every count and a link to each item that changed
| Item | Added | Removed | Rewritten | Unchanged |
|---|---|---|---|---|
| Cover and table of contents | 80 | 16 | 107 | 495 |
| Item 1B. UNRESOLVED STAFF COMMENTS | 1 | 1 | 5 | 23 |
| Item 4. MINE SAFETY DISCLOSURES | 8 | 676 | 8 | 27 |
| Item 6. RESERVEDnew | 746 | 0 | 0 | 0 |
| Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 0 | 0 | 5 | 10 |
| Item 9B. OTHER INFORMATION | 0 | 119 | 0 | 1 |
| Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSnew | 43 | 0 | 0 | 0 |
| Item 13. . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEnew | 96 | 0 | 0 | 0 |
| Item 16. FORM 10-K SUMMARY | 201 | 187 | 646 | 1,109 |
Underlined words on a shaded ground are new in FY2021; struck-through words were in FY2020. Sentences that are wholly new or wholly gone are labelled rather than marked.
Cover and table of contents
107 rewritten, 80 added, 16 removed, 495 unchanged
| For the fiscal year ended September [removed: 25, 2020] [added: 24, 2021] | |
[removed: ][added: ]
The aggregate market value of the registrant’s common shares held by non-affiliates of the registrant was [removed: $20.7] [added: $42.5] billion as of March [removed: 27, 2020,] [added: 26, 2021,] the last business day of the registrant’s most recently completed second fiscal quarter.
The number of common shares outstanding as of November [removed: 6, 2020] [added: 4, 2021] was [removed: 330,742,574.][added: 326,313,355.]
Portions of the registrant’s Proxy Statement to be filed in connection with the registrant’s [removed: 2021] [added: 2022] annual general meeting of shareholders are incorporated by reference into Part III of this Form 10-K.
| [Item 1A.](#ITEM1ARISKFACTORS_703633) | [Risk Factors](#ITEM1ARISKFACTORS_703633) | [removed: 7] [added: 8] |
| [Item 1B.](#Item_1B_Unresolved) | [Unresolved Staff Comments](#Item_1B_Unresolved) | [removed: 18] [added: 19] |
| [Item 2.](#ITEM2PROPERTIES_247356) | [Properties](#ITEM2PROPERTIES_247356) | [removed: 19] [added: 20] |
| [Item 3.](#ITEM3LEGALPROCEEDINGS_106864) | [Legal Proceedings](#ITEM3LEGALPROCEEDINGS_106864) | [removed: 19] [added: 20] |
| [Item 4.](#Item_4_Mine_Safety) | [Mine Safety Disclosures](#Item_4_Mine_Safety) | [removed: 19] [added: 20] |
| [Item 5.](#ITEM5MARKETFORREGISTRANTSCOMMONEQUITYREL) | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM5MARKETFORREGISTRANTSCOMMONEQUITYREL) | [removed: 20] [added: 21] |
| [Item 6.](#ITEM6SELECTEDFINANCIALDATA_567333) | [removed: [Selected Financial Data](#ITEM6SELECTEDFINANCIALDATA_567333)] [added: [Reserved](#ITEM6SELECTEDFINANCIALDATA_567333)] | [removed: 21] [added: 22] |
| [Item 7A.](#ITEM7AQUANTITATIVEANDQUALITATIVEDISCLOSU) | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM7AQUANTITATIVEANDQUALITATIVEDISCLOSU) | [removed: 41] [added: 40] |
| [Item 16.](#Item_16_Form_10K_Summary) | [Form [removed: 10–K] [added: 10-K] Summary](#Item_16_Form_10K_Summary) | 50 |
_© [removed: 2020] [added: 2021] TE Connectivity Ltd. All Rights Reserved._
Fiscal [added: 2021,] 2020, [removed: 2019,] and [removed: 2018] [added: 2019] were each 52 weeks in length and ended on September [added: 24, 2021, September] 25, 2020, [added: and] September 27, 2019, [removed: and September 28, 2018,] respectively.
For fiscal years in which there are 53 weeks, the fourth [added: fiscal] quarter [removed: reporting period] includes 14 weeks, with the next such occurrence taking place in fiscal 2022.
[removed: To date,] COVID-19 has surfaced in nearly all regions around the world and resulted in [removed: travel restrictions and] business slowdowns or shutdowns [added: and travel restrictions] in affected areas.
The COVID-19 pandemic [removed: negatively affected our sales and operating results during fiscal 2020, and we expect that it will continue to have an impact on our financial condition and results of operations in the near term and] may have a [removed: material] [added: negative] impact on our financial [removed: condition, liquidity,] [added: condition] and results of operations in future periods.
[removed: Although] [added: Prior to] the COVID-19 [removed: pandemic has negatively affected our markets, we expect a gradual recovery with] [added: pandemic,] our three segments [removed: once again serving] [added: served] a combined market of approximately $190 billion.
| | | [removed: 2020] [added: 2021] | | [removed: 2019] [added: 2020] | | [removed: 2018] [added: 2019] | | |
| Transportation Solutions | | [removed: 56] [added: 60] | % | [removed: 58] [added: 56] | % | [removed: 59] [added: 58] | % | |
| Industrial Solutions | | [removed: 31] [added: 26] | | [removed: 30] [added: 31] | | [removed: 28] [added: 30] | | |
| Communications Solutions | | [removed: 13] [added: 14] | | [removed: 12] [added: 13] | | [removed: 13] [added: 12] | | |
The primary products sold by the Transportation Solutions segment include terminals and connector systems and components, sensors, relays, antennas, [removed: application tooling, and wire and] heat shrink [removed: tubing.][added: tubing, and application tooling.]
| | ● | _Automotive [removed: (72%] [added: (71%] of segment’s net sales)—_We are one of the leading providers of advanced automobile connectivity solutions. The automotive industry uses our products in automotive technologies for body and chassis systems, convenience applications, driver information, infotainment solutions, miniaturization solutions, motor and powertrain applications, and safety and security systems. Hybrid and electronic mobility solutions include in-vehicle technologies, battery technologies, and charging solutions. |
| | ● | _Commercial transportation [removed: (15%] [added: (16%] of segment’s net sales)—_We deliver reliable connectivity products designed to withstand harsh environmental conditions for on- and off-highway vehicles and recreational transportation, including heavy trucks, construction, agriculture, buses, and other vehicles. |
The primary products sold by the Industrial Solutions segment include terminals and connector systems and components, [removed: heat shrink tubing,] interventional medical components, [added: heat shrink tubing,] relays, and wire and cable.
| | ● | _Aerospace, defense, oil, and gas [removed: (32%] [added: (27%] of segment’s net sales)—_We design, develop, and manufacture a comprehensive portfolio of critical electronic components and systems for the harsh operating conditions of the commercial aerospace, defense, and marine industries. Our products and systems are designed and manufactured to operate effectively in harsh conditions ranging from the depths of the ocean to the far reaches of space. |
| | ● | _Industrial equipment [removed: (30%] [added: (36%] of segment’s net sales)—_Our products are used in factory [added: and warehouse] automation and process control systems such as industrial controls, robotics, human machine interface, industrial communication, and power distribution. Our [removed: intelligent] building [added: automation and smart city infrastructure] products are used to connect lighting and offer solutions in HVAC, elevators/escalators, and security. Our rail products are used in high-speed trains, metros, light rail vehicles, locomotives, and signaling switching equipment. [removed: Our products are also used by the solar industry.] |
| | ● | _Medical [removed: (19%] [added: (18%] of segment’s net sales)—_Our products are used in imaging, diagnostic, surgical, and minimally invasive interventional applications. We specialize in the design and manufacture of advanced surgical, imaging, and interventional device solutions. Key markets served include cardiovascular, peripheral vascular, structural heart, endoscopy, electrophysiology, and neurovascular therapies. |
| | ● | _Energy (19% of segment’s net sales)—_Our products are used by [removed: OEMs] [added: electric power utilities, OEMs,] and [removed: utility] [added: engineering procurement construction] companies [removed: in] [added: serving] the electrical power [removed: industry] [added: grid] and [added: renewables industries. They] include a wide range of [added: insulation, protection, and connection] solutions for [removed: the] electrical power generation, transmission, distribution, and industrial markets. |
The Industrial Solutions segment competes primarily against Amphenol, Hubbell, Carlisle Companies, [removed: ABB,] Integer Holdings, Esterline, Molex, and Omron.
| | · | _Data and devices [removed: (60%] [added: (57%] of segment’s net sales)—_We deliver products and solutions that are used in a variety of equipment architectures within the networking equipment, data center equipment, and wireless infrastructure industries. Additionally, we deliver a range of connectivity solutions for the Internet of Things, smartphones, tablet computers, notebooks, and virtual reality applications to help our customers meet their current challenges and future innovations. |
| | · | _Appliances [removed: (40%] [added: (43%] of segment’s net sales)—_We provide solutions to meet the daily demands of home appliances. Our products are used in many household appliances, including washers, dryers, refrigerators, air conditioners, dishwashers, cooking appliances, water heaters, air purifiers, floor care devices, and microwaves. Our expansive range of standard products is supplemented by an array of custom-designed solutions. |
No single customer accounted for a significant amount of our net sales in fiscal [added: 2021,] 2020, [removed: 2019,] or [removed: 2018.][added: 2019.]
| Asia–Pacific | | [removed: 35] [added: 36] | [removed: %] [added: ] | [removed: 33] [added: 35] | [removed: %] [added: ] | [removed: 34] [added: 33] | [removed: %] [added: ] | |
| Europe/Middle East/Africa (“EMEA”) | | [removed: 35] [added: 37] | [removed: ] [added: %] | [removed: 36] [added: 35] | [removed: ] [added: %] | [removed: 38] [added: 36] | [removed: ] [added: %] | |
| Americas | | [removed: 30] [added: 27] | | [removed: 31] [added: 30] | | [removed: 28] [added: 31] | | |
In fiscal [removed: 2020,] [added: 2021,] our direct sales represented approximately 80% of total net sales.
| [Item 9C.](#Item_9C_Disclosure_Regarding_Foreign_Jur) | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#Item_9C_Disclosure_Regarding_Foreign_Jur) | 43 |
The pandemic had a significant, negative impact on our sales and operating results during fiscal 2020 and continued to negatively affect certain of our businesses in fiscal 2021.
Although COVID-19 negatively affected our markets in fiscal 2020, certain of our markets experienced recovery in fiscal 2021.
We expect this recovery will continue and our three segments will once again serve a combined market of approximately $190 billion in future periods.
| | | | | | | | | |
| | | | | | | | | |
| | | 2021 | | | 2020 | | |
However, as a result of increased costs, certain of our businesses implemented price increases in fiscal 2021.
As markets recover from the COVID-19 pandemic, increases in consumer demand have led to shortages and price increases in some of our input materials.
Our core values—integrity, accountability, teamwork, and innovation—govern us.
They guide our decisions and our actions, both individually and as an organization.
We aspire to have more than 26% women in leadership roles by fiscal 2025 and are committed to increasing the total number of women across all levels of the organization.
Additionally, as part of its charter, the management development and compensation committee of our board of directors oversees our policies and practices related to the management of human capital resources including talent management, culture, diversity, and inclusion.
To drive our business outcomes globally, we believe we must build a workforce and supplier network that represents our global markets and the customers we serve.
We are also committed to a work environment where all employees are engaged, feel differences are valued and mutually-respected, and believe that all opinions count.
Our people reflect our customers and markets.
Our employees are in over 50 countries representing approximately 120 nationalities, and our total employee population is over 40% women.
Our employee resource groups (“ERGs”) are company-sponsored, voluntary, employee-led groups that focus on diverse talent segments or shared experiences of employees.
These groups apply those perspectives to create value for our company as a whole.
As of fiscal year end 2021, we had eight ERGs—ALIGN (lesbian, gay, bisexual, transgender, and queer/questioning employees and their allies), Women in Networking, TE Young Professionals, African Heritage, Asian Heritage, Latin Heritage, THRIVE (employees and their allies with mixed mental, emotional, and physical abilities), and TE Veterans.
Our ERGs have a total of over 6,000 members.
We had a participation rate of over 80% in fiscal 2021.
Both our participation rate and engagement score improved in fiscal 2021 while our inclusion score remained consistent with fiscal 2020.
Fiscal 2021 was the first year leadership effectiveness was measured as part of this survey.
Additionally, our survey results for fiscal 2021 were favorable when compared to Glint Inc.’s external global manufacturing benchmark.
By fiscal 2025, we aspire to be in the top tier of this benchmark on engagement and inclusion.
they need to be successful.
Also, our board of directors reviews and assesses management development plans for senior executives and the succession plans relating to those positions.
We are committed to the safety, health, human rights, and well-being of our employees.
We continuously evaluate opportunities to raise safety and health standards through our environmental, health, and safety team.
Compliance audits and internal processes are in place to stay ahead of workplace hazards, and we aim to reduce our Occupational Safety and Health Administration (“OSHA”) total recordable incident rate—a rate equivalent to the number of incidents per 100 employees or 200,000 work hours—to 0.12 by fiscal 2025.
During the COVID-19 pandemic, we have taken additional actions to protect the physical and mental health and well-being of our global employees.
We have utilized our workplace flexibility guidelines, promoted our Wellbeing Connection program and health care benefits to support the needs of all employees, and instituted additional safety measures at all factories and sites.
In fiscal 2021, we implemented a human rights policy for the organization outlining our commitment to operating with respect for human rights.
See Note 13 to the Consolidated Financial Statements for additional information regarding trade compliance matters.
Also, see “Part I.
Item 1A.
Risk Factors” for discussion of the risks and uncertainties associated with trade regulations.
For example, laws regarding product content and chemical registration require extensive and costly data
Sustainability
We have experienced, and expect to continue to experience, fluctuations as a result of the impacts of the COVID-19 pandemic.
develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities, and monitor the intellectual property claims of others.
To attract a global workforce, we strive to embed a culture where employees can bring their whole selves to work.
Our employee resource groups (“ERGs”) are company-sponsored groups of employees that support and promote certain mutual objectives of both the employees and the company, including inclusion and diversity and the professional development of employees.
As of fiscal year end 2020, we had six ERGs—ALIGN (LGBTQ), Women in Networking, TE Young Professionals, African Heritage, TE Veterans, and Asian Heritage.
As a
The COVID-19 pandemic has had, and we expect that it will continue to have, a negative impact on our financial condition and results of operations in the near term and may have a material impact on our financial condition, liquidity, and results of operations in future periods.
The aerospace and defense industry has undergone significant fluctuations in demand as a result of economic and political conditions, including the impact of the COVID-19 pandemic.
Demand in the oil and gas market is impacted by oil price volatility.
serve.
employee information or related data, including the EU’s General Data Protection Regulation, which went into effect in May 2018, and the California Consumer Privacy Act of 2018, which went into effect in January 2020.
In
While we
Additionally, various proposals in Switzerland for corporate law changes, if passed in the future, may require shareholder registration in order to exercise voting rights for shareholders who hold their shares in street name through brokerages and banks.
Such a registration requirement could make our stock less attractive to investors.
legislative action will not apply to us.
An excerpt. Shown here: 40 of 107 rewritten, 40 of 80 added and all 16 removed. The counts are complete. For every sentence, read Cover and table of contents in the FY2021 filing and the FY2020 filing.
Item 1B. UNRESOLVED STAFF COMMENTS
5 rewritten, 1 added, 1 removed, 23 unchanged
As of fiscal year end [removed: 2020,] [added: 2021,] we owned approximately 18 million square feet and leased approximately [removed: 9] [added: 10] million square feet of aggregate floor space, used primarily for manufacturing, warehousing, and office space.
As of fiscal year end [removed: 2020,] [added: 2021,] our principal centers of manufacturing output by segment and geographic region were as follows:
| Asia–Pacific | | 9 | | [removed: 7] [added: 6] | | 7 | | [removed: 23] [added: 22] | |
| EMEA | | 22 | | [removed: 22] [added: 21] | | 3 | | [removed: 47] [added: 46] | |
| Americas | | 10 | | [removed: 24] [added: 22] | | 3 | | [removed: 37] [added: 35] | |
| Total | | 41 | | 49 | | 13 | | 103 | |
| Total | | 41 | | 53 | | 13 | | 107 | |
Item 4. MINE SAFETY DISCLOSURES
8 rewritten, 8 added, 676 removed, 27 unchanged
Our common shares are listed and traded on the NYSE under the symbol “TEL.” As of November [removed: 4, 2020,] [added: 3, 2021,] there were [removed: 18,230] [added: 17,583] shareholders of record of our common shares.
The graph assumes the investment of $100 in our common shares and in each index at fiscal year end [removed: 2015] [added: 2016] and assumes the reinvestment of all dividends and distributions.
[removed: ][added: ]
| | | [removed: 2015 | | |] 2016 | | | 2017 | | | 2018 | | | 2019 | | | 2020 | | | [added: 2021 | | |]
| Dow Jones Electrical Components and Equipment Index | | | 100.00 | | | [removed: 118.71] [added: 128.95] | | | [removed: 153.08] [added: 143.39] | | | [removed: 170.22] [added: 138.06] | | | [removed: 163.89] [added: 144.71] | | | [removed: 171.79] [added: 210.09] | |
| (1) | $100 invested on September [removed: 25, 2015] [added: 30, 2016] in TE Connectivity Ltd.’s common shares and in indexes. Indexes calculated on month-end basis. |
The following table presents information about our purchases of our common shares during the quarter ended September [removed: 25, 2020:][added: 24, 2021:]
| [removed: (1)] | [removed: These columns represent] [added: (i) |] the acquisition of [added: 6,720] common shares from individuals [added: in order] to satisfy tax withholding requirements in connection with the vesting of restricted share awards issued under equity compensation [removed: plans.] [added: plans; and] |
| TE Connectivity Ltd. | | $ | 100.00 | | $ | 131.73 | | $ | 141.92 | | $ | 152.90 | | $ | 160.65 | | $ | 246.37 | |
| S&P 500 Index | | | 100.00 | | | 118.61 | | | 139.85 | | | 145.06 | | | 164.64 | | | 225.71 | |
| June 26–July 23, 2021 | | 611,573 | | $ | 136.20 | | 611,200 | | $ | 1,820,911,579 | |
| July 24–August 27, 2021 | | 682,093 | | | 148.58 | | 677,000 | | | 1,720,315,363 | |
| August 28–September 24, 2021 | | 893,254 | | | 145.27 | | 892,000 | | | 1,590,735,387 | |
| Total | | 2,186,920 | | $ | 143.76 | | 2,180,200 | | | | |
| (1) | These columns include the following transactions which occurred during the quarter ended September 24, 2021: |
| | (ii) | open market purchases totaling 2,180,200 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007. |
| TE Connectivity Ltd. | | $ | 100.00 | | $ | 112.75 | | $ | 148.52 | | $ | 160.01 | | $ | 172.38 | | $ | 181.13 | |
| S&P 500 Index | | | 100.00 | | | 114.80 | | | 136.17 | | | 160.55 | | | 166.53 | | | 189.01 | |
| --- | --- |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 27–July 24, 2020 | | 295 | | $ | 81.09 | | — | | $ | 995,115,788 | |
| July 25–August 28, 2020 | | 6,752 | | | 88.11 | | — | | | 995,115,788 | |
| August 29–September 25, 2020 | | 8,106 | | | 99.26 | | — | | | 995,115,788 | |
| Total | | 15,153 | | $ | 93.94 | | — | | | | |
ITEM 6.
SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data.
The data presented should be read in conjunction with our Consolidated Financial Statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report.
Our consolidated financial information may not be indicative of our future performance.
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | As of or for Fiscal | | | | | | | | | | | | | | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016(1) | | |
| | | | | | | | | | | | | | | | | |
| | | (in millions, except per share data) | | | | | | | | | | | | | | |
| Statement of Operations Data | | | | | | | | | | | | | | | | |
| Net sales | | $ | 12,172 | | $ | 13,448 | | $ | 13,988 | | $ | 12,185 | | $ | 11,352 | |
| Acquisition and integration costs | | | 36 | | | 27 | | | 14 | | | 6 | | | 22 | |
| Restructuring and other charges (credits), net(2) | | | 257 | | | 255 | | | 126 | | | 147 | | | (2) | |
| Impairment of goodwill(3) | | | 900 | | | — | | | — | | | — | | | — | |
| Other income (expense), net(4) | | | 20 | | | 2 | | | 1 | | | (42) | | | (677) | |
| Income tax (expense) benefit(5) | | | (783) | | | 15 | | | 344 | | | (180) | | | 826 | |
| Income (loss) from continuing operations | | | (259) | | | 1,946 | | | 2,584 | | | 1,540 | | | 1,847 | |
| Income (loss) from discontinued operations, net of income taxes(6) | | | 18 | | | (102) | | | (19) | | | 143 | | | 162 | |
| Net income (loss) | | | (241) | | | 1,844 | | | 2,565 | | | 1,683 | | | 2,009 | |
| Per Share Data | | | | | | | | | | | | | | | | |
| Basic earnings (loss) per share: | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | (0.78) | | $ | 5.76 | | $ | 7.38 | | $ | 4.34 | | $ | 5.05 | |
| Net income (loss) | | | (0.73) | | | 5.46 | | | 7.33 | | | 4.74 | | | 5.49 | |
| Diluted earnings (loss) per share: | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | (0.78) | | $ | 5.72 | | $ | 7.32 | | $ | 4.30 | | $ | 5.01 | |
| Net income (loss) | | | (0.73) | | | 5.42 | | | 7.27 | | | 4.70 | | | 5.44 | |
| Dividends paid per common share | | $ | 1.88 | | $ | 1.80 | | $ | 1.68 | | $ | 1.54 | | $ | 1.40 | |
| Balance Sheet Data | | | | | | | | | | | | | | | | |
An excerpt. Shown here: all 8 rewritten, all 8 added and 40 of 676 removed. The counts are complete. For every sentence, read Item 4. MINE SAFETY DISCLOSURES in the FY2021 filing and the FY2020 filing.
Item 6. RESERVED
0 rewritten, 746 added, 0 removed, 0 unchanged
New section this year
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included elsewhere in this Annual Report.
The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs.
Our actual results could differ materially from those discussed in these forward-looking statements.
Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Annual Report, particularly in “Risk Factors” and “Forward-Looking Information.”
Our Consolidated Financial Statements have been prepared in U.S. dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
Discussion of our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 is presented below.
Discussion of our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be found in “Part II.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended September 25, 2020.
The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure.
See “Non-GAAP Financial Measure” for additional information regarding this measure.
Overview
We are a global industrial technology leader creating a safer, sustainable, productive, and connected future.
Our broad range of connectivity and sensor solutions, proven in the harshest environments, enable advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.
Summary of Fiscal 2021 Performance
| | ● | Our fiscal 2021 net sales increased 22.6% from fiscal 2020 levels due to sales increases in the Transportation Solutions and Communications Solutions segments, and, to a lesser degree, the Industrial Solutions segment. On an organic basis, our net sales increased 18.2% in fiscal 2021 as compared to fiscal 2020. In fiscal 2020, our net sales included significant, unfavorable impacts from the COVID-19 pandemic. |
| --- | --- | --- |
| | ● | Our net sales by segment were as follows: |
| --- | --- | --- |
| | ● | _Transportation Solutions_—Our net sales increased 31.1% with sales increases in all end markets. |
| --- | --- | --- |
| | ● | _Industrial Solutions_—Our net sales increased 3.5% primarily as a result of sales increases in the industrial equipment end market, partially offset by declines in the aerospace, defense, oil, and gas end market. |
| --- | --- | --- |
| | ● | _Communications Solutions_—Our net sales increased 30.4% due to sales increases in both the appliances and the data and devices end markets. |
| --- | --- | --- |
| | ● | During fiscal 2021, our shareholders approved a dividend payment to shareholders of $2.00 per share, payable in four equal quarterly installments of $0.50 beginning in the third quarter of fiscal 2021 and ending in the second quarter of fiscal 2022. |
| --- | --- | --- |
| | ● | Net cash provided by continuing operating activities was $2,676 million in fiscal 2021. |
| --- | --- | --- |
COVID-19 Pandemic
A novel strain of coronavirus (“COVID-19”) was first identified in China in December 2019 and subsequently declared a pandemic by the World Health Organization.
COVID-19 has surfaced in nearly all regions around the world and resulted in business slowdowns or shutdowns and travel restrictions in affected areas.
The pandemic had a significant, negative impact on our sales and operating results during fiscal 2020 and continued to negatively affect certain of our businesses in fiscal 2021.
We do not expect that it will continue to have a significant impact on our sales and operating results in the near term.
The COVID-19 pandemic has impacted and continues to impact our business operations globally, causing disruption in our suppliers’ and customers’ supply chains, some of our business locations to reduce or suspend operations, and a reduction in demand for certain products from direct customers or end markets.
In addition, the pandemic had far-reaching impacts on many additional aspects of our operations, both directly and indirectly, including with respect to its impacts on customer behaviors, business and manufacturing operations, inventory, our employees, and the market generally.
We assessed the impact of the COVID-19 pandemic and adjusted our operations and businesses, a number of which are operating as essential businesses, and will continue to do so if necessary.
Throughout our operations, we implemented additional health and safety measures for the protection of our employees, including providing personal protective equipment, enhanced cleaning and sanitizing of our facilities, and remote working arrangements.
An excerpt. Shown here: all 0 rewritten, 40 of 746 added and all 0 removed. The counts are complete. For every sentence, read Item 6. RESERVED in the FY2021 filing.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
5 rewritten, 0 added, 0 removed, 10 unchanged
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September [removed: 25, 2020.][added: 24, 2021.]
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September [removed: 25, 2020.][added: 24, 2021.]
Based on this evaluation, management concluded our internal control over financial reporting was effective as of September [removed: 25, 2020.][added: 24, 2021.]
Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as of September [removed: 25, 2020,] [added: 24, 2021,] which is included in this Annual Report.
During the quarter ended September [removed: 25, 2020,] [added: 24, 2021,] there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
0 rewritten, 0 added, 119 removed, 1 unchanged
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors, executive officers, and corporate governance may be found under the captions “Agenda Item No. 1—Election of Directors,” “Nominees for Election,” “Corporate Governance,” “The Board of Directors and Board Committees,” and “Executive Officers” in our definitive proxy statement for our 2021 Annual General Meeting of Shareholders (the “2021 Proxy Statement”), which will be filed with the SEC within 120 days after the close of our fiscal year.
Such information is incorporated herein by reference.
The information in the 2021 Proxy Statement under the caption “Delinquent Section 16(a) Reports” is incorporated herein by reference.
Code of Ethics
We have adopted a guide to ethical conduct, which applies to all employees, officers, and directors.
Our Guide to Ethical Conduct meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and applies to our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as well as all other employees and directors.
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.
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.
ITEM 11.
EXECUTIVE COMPENSATION
Information concerning executive compensation may be found under the captions “Compensation Discussion and Analysis,” “Management Development and Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Executive Officer Compensation,” and “Compensation of Non-Employee Directors” in our 2021 Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in our 2021 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.
Equity Compensation Plan Information
The following table provides information as of fiscal year end 2020 with respect to common shares issuable under our equity compensation plans:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | Number of securities | |
| | | | | | | | remaining available for | |
| | | Number of securities | | | | | future issuance under | |
| | | to be issued upon | | Weighted‑average | | | equity compensation | |
| | | exercise of outstanding | | exercise price of | | | plans (excluding | |
| | | options, warrants | | outstanding options, | | | securities reflected | |
| | | and rights | | warrants and rights | | | in column (a)) | |
| Plan Category | | (a) | | (b)(3) | | | (c)(4) | |
| Equity compensation plans approved by security holders(1) | | 7,098,225 | | $ | 77.38 | | 17,234,923 | |
| Equity compensation plans not approved by security holders(2) | | 1,583,175 | | | 79.71 | | — | |
| Total | | 8,681,400 | | | | | 17,234,923 | |
| (1) | Includes securities issuable upon exercise of outstanding options and rights under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of September 17, 2020 (the “2007 Plan”), and the Tyco Electronics Limited Savings Related Share Plan. The 2007 Plan provides for the award of annual performance bonuses and long-term performance awards, including share options; restricted, performance, and deferred share units; and other share-based awards (collectively, “Awards”) to board members, officers, and non-officer employees. 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. |
| (3) | Does not take into account restricted, performance, or deferred share unit awards that do not have exercise prices. |
| (4) | Includes securities remaining available for future issuance under the 2007 Plan, the Tyco Electronics Limited Savings Related Plan, and the Employee Stock Purchase Plan. The 2007 Plan applies a weighting of 1.80 to outstanding nonvested restricted, performance, deferred share units, and other share-based awards. The remaining shares issuable under the 2007 Plan and the Tyco Electronics Limited Savings Plan are increased by forfeitures and cancellations, among other factors. Amounts include 930,609 shares remaining available for issuance under our Tyco Electronics Limited Savings Related Share Plan and 1,509,673 shares remaining available for issuance under our Employee Stock Purchase Plan. |
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
An excerpt. Shown here: all 0 rewritten, all 0 added and 40 of 119 removed. The counts are complete. For every sentence, read Item 9B. OTHER INFORMATION in the FY2021 filing and the FY2020 filing.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
0 rewritten, 43 added, 0 removed, 0 unchanged
New section this year
Not Applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors, executive officers, and corporate governance may be found under the captions “Agenda Item No. 1—Election of Directors,” “Nominees for Election,” “Corporate Governance,” “The Board of Directors and Board Committees,” and “Executive Officers” in our definitive proxy statement for our 2022 Annual General Meeting of Shareholders (the “2022 Proxy Statement”), which will be filed with the SEC within 120 days after the close of our fiscal year.
Such information is incorporated herein by reference.
The information in the 2022 Proxy Statement under the caption “Delinquent Section 16(a) Reports” is incorporated herein by reference.
Code of Ethics
We have adopted a guide to ethical conduct, which applies to all employees, officers, and directors.
Our Guide to Ethical Conduct meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K and applies to our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as well as all other employees and directors.
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—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.
ITEM 11.
EXECUTIVE COMPENSATION
Information concerning executive compensation may be found under the captions “Compensation Discussion and Analysis,” “Management Development and Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Executive Officer Compensation,” and “Compensation of Non-Employee Directors” in our 2022 Proxy Statement.
Such information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in our 2022 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.
Equity Compensation Plan Information
The following table provides information as of fiscal year end 2021 with respect to common shares issuable under our equity compensation plans:
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | Number of securities | |
| | | | | | | | remaining available for | |
| | | Number of securities | | | | | future issuance under | |
| | | to be issued upon | | Weighted‑average | | | equity compensation | |
| | | exercise of outstanding | | exercise price of | | | plans (excluding | |
| | | options, warrants | | outstanding options, | | | securities reflected | |
| | | and rights | | warrants and rights | | | in column (a)) | |
| Plan Category | | (a) | | (b)(3) | | | (c)(4) | |
| Equity compensation plans approved by security holders(1) | | 6,330,436 | | $ | 89.04 | | 17,581,095 | |
| Equity compensation plans not approved by security holders(2) | | 945,520 | | | 79.81 | | — | |
| Total | | 7,275,956 | | | | | 17,581,095 | |
| (1) | Includes securities issuable upon exercise of outstanding options and rights under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of September 17, 2020 (the “2007 Plan”), and the Tyco Electronics Limited Savings Related Share Plan. The 2007 Plan provides for the award of annual performance bonuses and long-term performance awards, including share options; restricted, performance, and deferred share units; and other share-based awards (collectively, “Awards”) to board members, officers, and non-officer employees. 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 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. |
An excerpt. Shown here: all 0 rewritten, 40 of 43 added and all 0 removed. The counts are complete. For every sentence, read Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS in the FY2021 filing.
Item 13. . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
0 rewritten, 96 added, 0 removed, 0 unchanged
New section this year
The information in our 2022 Proxy Statement under the captions “Corporate Governance,” “The Board of Directors and Board Committees,” and “Certain Relationships and Related Transactions” is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information in our 2022 Proxy Statement under the caption “Agenda Item No. 7—Election of Auditors—Agenda Item No. 7.1” is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1.Financial Statements.
See Item 8.
| | 2. | Financial Statement Schedule. See Item 8. |
| --- | --- | --- |
| | 3. | Exhibit Index: |
| --- | --- | --- |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Exhibit | | | | Incorporated by Reference Herein | | | | |
| Number | | Description | | Form | | Exhibit | | Filing Date |
| 2.1 | | [Stock Purchase Agreement, dated as of September 16, 2018, by and between Tyco Electronics Group S.A. and Crown Subsea AcquisitionCo LLC](http://www.sec.gov/Archives/edgar/data/1385157/000110465918057061/a18-31004_1ex2d1.htm)(1) | | Current Report on Form 8-K | | 2.1 | | September 17, 2018 |
| 3.1 | | [Articles of Association of TE Connectivity Ltd., as amended and restated](https://www.sec.gov/Archives/edgar/data/0001385157/000110465921069874/tm2116293d1_ex3-1.htm) | | Current Report on Form 8-K | | 3.1 | | May 20, 2021 |
| 3.2 | | [Organizational Regulations of TE Connectivity Ltd., as amended and restated](http://www.sec.gov/Archives/edgar/data/1385157/000110465915017711/a15-5588_2ex3d2.htm) | | Current Report on Form 8-K | | 3.2 | | March 6, 2015 |
| 4.1 | * | [Description of Registrant’s Securities](https://www.sec.gov/Archives/edgar/data/1385157/000155837021015228/tel-20210924xex4d1.htm) | | | | | | |
| 4.2(a) | | [Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of September 25, 2007](http://www.sec.gov/Archives/edgar/data/1385157/000104746907010039/a2180783zex-4_1a.htm) | | Annual Report on Form 10-K for the fiscal year ended September 28, 2007 | | 4.1(a) | | December 14, 2007 |
| 4.2(b) | | [Third Supplemental Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of September 25, 2007](http://www.sec.gov/Archives/edgar/data/1385157/000104746907010039/a2180783zex-4_1d.htm) | | Annual Report on Form 10-K for the fiscal year ended September 28, 2007 | | 4.1(d) | | December 14, 2007 |
| 4.2(c) | | [Tenth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of July 31, 2014](http://www.sec.gov/Archives/edgar/data/1385157/000110465914055474/a14-18007_1ex4d2.htm) | | Current Report on Form 8-K | | 4.2 | | July 31, 2014 |
| 4.2(d) | | [Twelfth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of February 27, 2015](http://www.sec.gov/Archives/edgar/data/1385157/000110465915014710/a15-5387_1ex4d1.htm) | | Current Report on Form 8-K | | 4.1 | | February 27, 2015 |
| 4.2(e) | | [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](http://www.sec.gov/Archives/edgar/data/1385157/000110465916092177/a16-2819_4ex4d1.htm) | | Current Report on Form 8-K | | 4.1 | | January 28, 2016 |
| 4.2(f) | | [Fourteenth 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 August 3, 2017](http://www.sec.gov/Archives/edgar/data/1385157/000110465917049306/a17-18835_1ex4d2.htm) | | Current Report on Form 8-K | | 4.2 | | August 3, 2017 |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Exhibit | | | | Incorporated by Reference Herein | | | | |
| Number | | Description | | Form | | Exhibit | | Filing Date |
| 4.2(g) | | [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](https://www.sec.gov/Archives/edgar/data/1385157/000110465920021560/tm207938d1_ex4-1.htm) | | Current Report on Form 8-K | | 4.1 | | February 14, 2020 |
| 4.2(h) | | [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](https://www.sec.gov/Archives/edgar/data/0001385157/000110465921022914/tm214477d5_ex4-1.htm) | | Current Report on Form 8-K | | 4.1 | | February 16, 2021 |
| 10.1 | | [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](http://www.sec.gov/Archives/edgar/data/1385157/000110465918068489/a18-39748_1ex10d1.htm) | | Current Report on Form 8-K | | 10.1 | | November 14, 2018 |
| 10.2 | | [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](https://www.sec.gov/Archives/edgar/data/0001385157/000110465921075106/tm2117662d1_ex10-1.htm) | | Current Report on Form 8-K | | 10.1 | | June 1, 2021 |
| 10.3 | ‡* | [TE Connectivity Ltd. Annual Incentive Plan (as amended and restated)](https://www.sec.gov/Archives/edgar/data/1385157/000155837021015228/tel-20210924xex10d3.htm) | | | | | | |
| 10.4 | ‡* | [TE Connectivity Ltd. 2007 Stock and Incentive Plan (amended and restated as of September 17, 2020)](https://www.sec.gov/Archives/edgar/data/1385157/000155837021015228/tel-20210924xex10d4.htm) | | | | | | |
| 10.5 | ‡* | [TE Connectivity Ltd. Employee Stock Purchase Plan (amended and restated as of September 22, 2021)](https://www.sec.gov/Archives/edgar/data/1385157/000155837021015228/tel-20210924xex10d5.htm) | | | | | | |
| 10.6 | ‡ | [Form of Option Award Terms and Conditions](http://www.sec.gov/Archives/edgar/data/1385157/000104746911000265/a2201621zex-10_3.htm) | | Quarterly Report on Form 10-Q for the quarterly period ended December 24, 2010 | | 10.3 | | January 24, 2011 |
| 10.7 | ‡ | [Form of Option Award Terms and Conditions for Option Grants Beginning in November 2017](http://www.sec.gov/Archives/edgar/data/1385157/000104746917007037/a2233456zex-10_8.htm) | | Annual Report on Form 10-K for the fiscal year ended September 29, 2017 | | 10.8 | | November 14, 2017 |
An excerpt. Shown here: all 0 rewritten, 40 of 96 added and all 0 removed. The counts are complete. For every sentence, read Item 13. . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE in the FY2021 filing.
Item 16. FORM 10-K SUMMARY
646 rewritten, 201 added, 187 removed, 1,109 unchanged
Date: November [removed: 10, 2020][added: 9, 2021]
| /s/ Terrence R. Curtin | | | | Chief Executive Officer and Director | | | | November [removed: 10, 2020] [added: 9, 2021] | | |
| /s/ Heath A. Mitts | | | | Executive Vice [removed: President and] [added: President,] | | | | | | |
| Heath A. Mitts | | | | Chief Financial [removed: Officer] [added: Officer, and Director] | | | | November [removed: 10, 2020] [added: 9, 2021] | | |
| Robert J. Ott | | | | Corporate Controller | | | | November [removed: 10, 2020] [added: 9, 2021] | | |
| * | | | | Director | | | | November [removed: 10, 2020] [added: 9, 2021] | | |
| * | [added: | |] | Director | [added: | |] | November [removed: 10, 2020] [added: 9, 2021] | [added: | |]
| Abhijit Y. Talwalkar | [added: | |] | | [added: | |] | | [added: | |]
| Mark C. Trudeau | [added: | |] | | [added: | |] | | [added: | |]
| Dawn C. Willoughby | [added: | |] | | [added: | |] | | [added: | |]
| Laura H. Wright | [added: | |] | | [added: | |] | | [added: | |]
| [Consolidated Statements of Operations for the Fiscal Years Ended September [added: 24, 2021, September] 25, 2020, [removed: September 27, 2019,] and September [removed: 28, 2018](#CONSOLIDATEDSTATEMENTSOFOPERATIONS_80060)] [added: 27, 2019](#CONSOLIDATEDSTATEMENTSOFOPERATIONS_80060)] | | 58 |
| [Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended September [added: 24, 2021, September] 25, 2020, [removed: September 27, 2019,] and September [removed: 28, 2018](#CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINC)] [added: 27, 2019](#CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINC)] | | 59 |
| [Consolidated Balance Sheets as of September [removed: 25, 2020] [added: 24, 2021] and September [removed: 27, 2019](#CONSOLIDATEDBALANCESHEETS_690499)] [added: 25, 2020](#CONSOLIDATEDBALANCESHEETS_690499)] | | 60 |
| [Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended September [added: 24, 2021, September] 25, 2020, [removed: September 27, 2019,] and September [removed: 28, 2018](#CONSOLIDATEDSTATEMENTSOFSHAREHOLDERSEQUI)] [added: 27, 2019](#CONSOLIDATEDSTATEMENTSOFSHAREHOLDERSEQUI)] | | 61 |
| [Consolidated Statements of Cash Flows for the Fiscal Years Ended September [added: 24, 2021, September] 25, 2020, [removed: September 27, 2019,] and September [removed: 28, 2018](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_2618)] [added: 27, 2019](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_2618)] | | 62 |
| [Schedule II—Valuation and Qualifying Accounts](#SCHEDULEIIVALUATIONANDQUALIFYINGACCOUNTS) | | [removed: 103] [added: 102] |
We have audited the accompanying consolidated balance sheets of TE Connectivity Ltd. and subsidiaries (the "Company") as of September [removed: 25, 2020] [added: 24, 2021] and September [removed: 27, 2019,] [added: 25, 2020,] the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows, for each of the three years in the period ended September [removed: 25, 2020,] [added: 24, 2021,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September [removed: 25, 2020] [added: 24, 2021] and September [removed: 27, 2019,] [added: 25, 2020,] and the results of its operations and its cash flows for each of the three years in the period ended September [removed: 25, 2020,] [added: 24, 2021,] in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September [removed: 25, 2020,] [added: 24, 2021,] based on criteria established in _Internal Control — Integrated Framework (2013)_ issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November [removed: 10, 2020,] [added: 9, 2021,] expressed an unqualified opinion on the Company's internal control over financial reporting.
As discussed in Note 2 to the financial statements, effective September 28, 2019, the Company adopted [removed: FASB] [added: Financial] Accounting Standards [added: Board Accounting Standards] Update 2016-02 which codified Accounting Standards Codification 842, _Leases_, using the modified retrospective approach.
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 [removed: a triggering] [added: an] event [added: or other change in reporting unit structure] requiring a more frequent assessment has occurred.
The income approach is supported by [added: a] guideline [removed: analyses] [added: analysis] (a market approach).
The goodwill balance was [removed: $5.2] [added: $5.6] billion as of September [removed: 25, 2020,] [added: 24, 2021,] of which [removed: $0.5] [added: $0.3] billion was allocated to the Sensors reporting unit within the Transportation Solutions reportable segment.
[removed: As] [added: During the quarter ended March 27, 2020, as] a result of current and projected declines in sales and [removed: profitability,] [added: 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 [removed: production, the Company recorded a partial impairment charge] [added: production as] of [removed: $900 million during the quarter ended] March [removed: 27, 2020 for the Sensors] [added: 2020, we determined that an indicator of impairment had occurred and goodwill impairment testing of this] reporting [removed: unit.][added: unit was required.]
The fair value of this reporting unit exceeded its carrying [removed: amount as of the annual measurement date and,] [added: amount,] therefore, no [removed: additional] 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 [removed: reduction of] [added: partial impairment charge recorded in the prior fiscal year and] future revenue growth rates [removed: and resulting cash flows.][added: were based on an expectation of an increase in net sales in a product portfolio with limited available third-party industry reports.]
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 [removed: a] discount [removed: rate.][added: rates.]
Our audit procedures [removed: 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 [removed: a] discount [removed: rate] [added: rates] 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 [removed: the] discount [removed: rate.] [added: rates.] |
| | • | With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount [removed: rate] [added: rates] by: |
| | – | Testing the source information underlying the determination of the discount [removed: rate] [added: rates] and the mathematical accuracy of the [removed: calculation.] [added: calculations.] |
| | – | Developing a range of independent estimates and comparing those to the discount [removed: rate] [added: rates] selected by management. |
[removed: A] [added: | Deferred tax assets, net of] valuation allowance [removed: is provided to offset deferred tax assets][added: | | | 2,602 | | | 2,301 | |]
[added: 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.
Management has determined that it is more likely than not that sufficient taxable income will be generated in the future to realize a portion of its deferred tax assets, and therefore, a valuation allowance of [removed: $4.4] [added: $2.7] billion has been recorded to offset the Company’s gross deferred tax assets as of September [removed: 25, 2020] [added: 24, 2021] of [removed: $6.7] [added: $5.3] billion.
| | • | We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the [removed: audit, including the effects of the COVID-19 pandemic on projections.] [added: audit.] |
| | • | With the assistance of our income tax [added: 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. |
We have audited the internal control over financial reporting of TE Connectivity Ltd. and subsidiaries (the “Company”) as of September [removed: 25, 2020,] [added: 24, 2021,] based on criteria established in _Internal Control—Integrated Framework (2013)_ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September [removed: 25, 2020,] [added: 24, 2021,] based on criteria established in _Internal Control—Integrated Framework (2013)_ issued by COSO.
| * | | | | Director | | | | November 9, 2021 | | |
| * | | | | Director | | | | November 9, 2021 | | |
| * | | | | Director | | | | November 9, 2021 | | |
| * | | | | Director | | | | November 9, 2021 | | |
| * | | | | Director | | | | November 9, 2021 | | |
| * | | | | Director | | | | November 9, 2021 | | |
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| * | | | | Director | | | | November 9, 2021 | | |
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| * | | | | Director | | | | November 9, 2021 | | |
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| * | | | | Director | | | | November 9, 2021 | | |
November 9, 2021
November 9, 2021
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Fiscal Years Ended September 24, 2021, September 25, 2020, and September 27, 2019
Fiscal Years Ended September 24, 2021, September 25, 2020, and September 27, 2019
| Net income | | — | | | — | | — | | | — | | | — | | | 2,261 | | | — | | | 2,261 | |
| Other comprehensive income | | — | | | — | | — | | | — | | | — | | | — | | | 277 | | | 277 | |
| Dividends | | — | | | — | | — | | | — | | | — | | | (656) | | | — | | | (656) | |
| Cancellation of treasury shares | | (3) | | | (1) | | 3 | | | 262 | | | — | | | (261) | | | — | | | — | |
| Balance at fiscal year end 2021 | | 336 | | $ | 148 | | (9) | | $ | (1,055) | | $ | — | | $ | 11,709 | | $ | (168) | | $ | 10,634 | |
Fiscal Years Ended September 24, 2021, September 25, 2020, and September 27, 2019
| Accrued and other current liabilities | | | 173 | | | (99) | | | (15) | |
recognized currently in earnings.
Beginning in fiscal 2020, we account for leases in accordance with the provisions of ASC 842, _Leases_.
| Impairment of held for sale businesses and loss on divestitures | | | 21 | | | — | | | — | |
| Restructuring charges, net | | $ | 208 | | $ | 257 | | $ | 255 | |
| Total | | | — | | | 212 | | | (17) | | | (28) | | | (9) | | | (4) | | | 154 | |
| Employee severance | | | 180 | | | 5 | | | — | | | (84) | | | — | | | 3 | | | 104 | |
| Total | | | 188 | | | 23 | | | — | | | (88) | | | (7) | | | 3 | | | 119 | |
| Total fiscal 2021 activity | | $ | 285 | | $ | 237 | | $ | (29) | | $ | (175) | | $ | (13) | | $ | (1) | | $ | 304 | |
During fiscal 2021, we initiated a restructuring program across all segments to optimize our manufacturing footprint and improve the cost structure of the organization.
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:
| Transportation Solutions | | $ | 131 | | $ | 122 | | $ | 9 | |
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| David M. Kerko | | | | | | | | | | |
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TE CONNECTIVITY LTD.
| | – | The effects of the COVID-19 pandemic on projections. |
November 10, 2020
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| Balance at fiscal year end 2017 | | 357 | | $ | 157 | | (5) | | $ | (421) | | $ | — | | $ | 10,175 | | $ | (160) | | $ | 9,751 | |
| Adoption of ASU No. 2018-02 | | — | | | — | | — | | | — | | | — | | | 38 | | | (38) | | | — | |
| Dividends | | — | | | — | | — | | | — | | | — | | | (610) | | | — | | | (610) | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
amortized on a straight-line basis.
term nature of these instruments.
new information must continuously be evaluated to determine whether a loss is probable and a reasonable estimate of that loss can be made.
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.
| Gain on divestiture | | | — | | | — | | | (2) | |
| Employee severance | | $ | — | | $ | 130 | | $ | — | | $ | (16) | | $ | — | | $ | — | | $ | 114 | |
| Total | | | — | | | 142 | | | — | | | (18) | | | (6) | | | — | | | 118 | |
| Total | | | 138 | | | 22 | | | (24) | | | (82) | | | (2) | | | (3) | | | 49 | |
| Total fiscal 2018 activity | | $ | 138 | | $ | 164 | | $ | (24) | | $ | (100) | | $ | (8) | | $ | (3) | | $ | 167 | |
| Transportation Solutions | | $ | 140 | | $ | 115 | | $ | 25 | |
| Total | | $ | 295 | | $ | 250 | | $ | 45 | |
An excerpt. Shown here: 40 of 646 rewritten, 40 of 201 added and 40 of 187 removed. The counts are complete. For every sentence, read Item 16. FORM 10-K SUMMARY in the FY2021 filing and the FY2020 filing.