10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 27, 2019
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-33260

(Commission File Number)

TE CONNECTIVITY LTD.

(Exact name of registrant as specified in its charter)

Switzerland (Jurisdiction of Incorporation)	98-0518048 (I.R.S. Employer Identification No.)
Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland (Address of principal executive offices)	+41 (0)52 633 66 61 (Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Shares, Par Value CHF 0.57	TEL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of common shares outstanding as of January 24, 2020 was 334,142,101.

TE CONNECTIVITY LTD.

INDEX TO FORM 10-Q

		Page
Part I.	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations for the Quarters Ended December 27, 2019 and December 28, 2018 (unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended December 27, 2019 and December 28, 2018 (unaudited)	2
	Condensed Consolidated Balance Sheets as of December 27, 2019 and September 27, 2019 (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Quarters Ended December 27, 2019 and December 28, 2018 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 27, 2019 and December 28, 2018 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
Part II.	Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
Signatures		43

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions, except per share data)
Net sales	$	3,168	$	3,347
Cost of sales		2,138		2,233
Gross margin		1,030		1,114
Selling, general, and administrative expenses		367		389
Research, development, and engineering expenses		161		161
Acquisition and integration costs		7		5
Restructuring and other charges, net		24		75
Operating income		471		484
Interest income		6		5
Interest expense		(12)		(27)
Other income (expense), net		5		(1)
Income from continuing operations before income taxes		470		461
Income tax expense		(447)		(78)
Income from continuing operations		23		383
Income (loss) from discontinued operations, net of income taxes		3		(107)
Net income	$	26	$	276
Basic earnings per share:
Income from continuing operations	$	0.07	$	1.12
Income (loss) from discontinued operations		0.01		(0.31)
Net income		0.08		0.81
Diluted earnings per share:
Income from continuing operations	$	0.07	$	1.11
Income (loss) from discontinued operations		0.01		(0.31)
Net income		0.08		0.80
Weighted-average number of shares outstanding:
Basic		335		342
Diluted		337		344

See Notes to Condensed Consolidated Financial Statements.

1

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Net income	$	26	$	276
Other comprehensive income:
Currency translation		50		19
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes		8		6
Gains on cash flow hedges, net of income taxes		31		24
Other comprehensive income		89		49
Comprehensive income	$	115	$	325

See Notes to Condensed Consolidated Financial Statements.

2

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	December 27,		September 27,
	2019		2019
	(in millions, except share
	data)
Assets
Current assets:
Cash and cash equivalents	$	742	$	927
Accounts receivable, net of allowance for doubtful accounts of $29 and $25, respectively		2,338		2,320
Inventories		2,003		1,836
Prepaid expenses and other current assets		483		471
Total current assets		5,566		5,554
Property, plant, and equipment, net		3,659		3,574
Goodwill		5,846		5,740
Intangible assets, net		1,602		1,596
Deferred income taxes		2,360		2,776
Other assets		943		454
Total assets	$	19,976	$	19,694
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	561	$	570
Accounts payable		1,433		1,357
Accrued and other current liabilities		1,410		1,613
Total current liabilities		3,404		3,540
Long-term debt		3,412		3,395
Long-term pension and postretirement liabilities		1,365		1,367
Deferred income taxes		142		156
Income taxes		247		239
Other liabilities		849		427
Total liabilities		9,419		9,124
Commitments and contingencies (Note 10)
Shareholders’ equity:
Common shares, CHF 0.57 par value, 350,951,381 shares authorized and issued		154		154
Accumulated earnings		12,206		12,256
Treasury shares, at cost, 16,520,951 and 15,862,337 shares, respectively		(1,389)		(1,337)
Accumulated other comprehensive loss		(414)		(503)
Total shareholders’ equity		10,557		10,570
Total liabilities and shareholders’ equity	$	19,976	$	19,694

See Notes to Condensed Consolidated Financial Statements.

3

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

	For the Quarter Ended December 27, 2019
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity
	(in millions)
Balance at September 27, 2019	351	$	154	(16)	$	(1,337)	$	—	$	12,256	$	(503)	$	10,570
Net income	—		—	—		—		—		26		—		26
Other comprehensive income	—		—	—		—		—		—		89		89
Share-based compensation expense	—		—	—		—		22		—		—		22
Exercise of share options	—		—	—		14		—		—		—		14
Restricted share award vestings and other activity	—		—	1		77		(22)		(76)		—		(21)
Repurchase of common shares	—		—	(2)		(143)		—		—		—		(143)
Balance at December 27, 2019	351	$	154	(17)	$	(1,389)	$	—	$	12,206	$	(414)	$	10,557

	For the Quarter Ended December 28, 2018
											Accumulated
											Other		Total
	Common Shares			Treasury Shares			Contributed		Accumulated		Comprehensive		Shareholders'
	Shares	Amount		Shares	Amount		Surplus		Earnings		Loss		Equity
	(in millions)
Balance at September 28, 2018	357	$	157	(12)	$	(1,134)	$	—	$	12,114	$	(306)	$	10,831
Adoption of ASU No. 2016-16	—		—	—		—		—		(443)		—		(443)
Net income	—		—	—		—		—		276		—		276
Other comprehensive income	—		—	—		—		—		—		49		49
Share-based compensation expense	—		—	—		—		23		—		—		23
Exercise of share options	—		—	—		7		—		—		—		7
Restricted share award vestings and other activity	—		—	—		72		(23)		(61)		—		(12)
Repurchase of common shares	—		—	(6)		(495)		—		—		—		(495)
Balance at December 28, 2018	357	$	157	(18)	$	(1,550)	$	—	$	11,886	$	(257)	$	10,236

See Notes to Condensed Consolidated Financial Statements.

4

TE CONNECTIVITY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Cash flows from operating activities:
Net income	$	26	$	276
(Income) loss from discontinued operations, net of income taxes		(3)		107
Income from continuing operations		23		383
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		174		168
Deferred income taxes		394		(11)
Non-cash lease cost		27		—
Provision for losses on accounts receivable and inventories		20		23
Share-based compensation expense		22		23
Other		10		18
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net		(24)		(26)
Inventories		(176)		(119)
Prepaid expenses and other current assets		(23)		67
Accounts payable		94		(9)
Accrued and other current liabilities		(185)		(190)
Income taxes		10		15
Other		45		(14)
Net cash provided by continuing operating activities		411		328
Net cash used in discontinued operating activities		—		(31)
Net cash provided by operating activities		411		297
Cash flows from investing activities:
Capital expenditures		(176)		(210)
Acquisition of businesses, net of cash acquired		(115)		—
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation		—		288
Other		2		4
Net cash provided by (used in) continuing investing activities		(289)		82
Net cash used in discontinued investing activities		—		(2)
Net cash provided by (used in) investing activities		(289)		80
Cash flows from financing activities:
Net increase (decrease) in commercial paper		(9)		63
Proceeds from issuance of debt		—		350
Repayment of debt		—		(441)
Proceeds from exercise of share options		14		7
Repurchase of common shares		(139)		(519)
Payment of common share dividends to shareholders		(154)		(150)
Transfers to discontinued operations		—		(33)
Other		(26)		(29)
Net cash used in continuing financing activities		(314)		(752)
Net cash provided by discontinued financing activities		—		33
Net cash used in financing activities		(314)		(719)
Effect of currency translation on cash		7		(1)
Net decrease in cash, cash equivalents, and restricted cash		(185)		(343)
Cash, cash equivalents, and restricted cash at beginning of period		927		848
Cash, cash equivalents, and restricted cash at end of period	$	742	$	505

See Notes to Condensed Consolidated Financial Statements.

5

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation and Accounting Policies

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 27, 2019.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2020 and fiscal 2019 are to our fiscal years ending September 25, 2020 and ended September 27, 2019, respectively.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2016-02 which codified Accounting Standards Codification (“ASC”) 842, Leases. This guidance, as subsequently amended, requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for most leases. We adopted ASC 842, as amended, in the quarter ended December 27, 2019 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 Condensed Consolidated Balance Sheet. Adoption did not have a material impact on our results of operations or cash flows. See Note 9 for additional information regarding leases.

2. Restructuring and Other Charges, Net

Net restructuring charges by segment were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	4	$	21
Industrial Solutions		15		35
Communications Solutions		5		19
Restructuring charges, net	$	24	$	75

6

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Activity in our restructuring reserves was as follows:

	Balance at										Currency		Balance at
	September 27,				Changes in		Cash		Non-Cash		Translation		December 27,
	2019		Charges		Estimate		Payments		Items		and Other		2019
	(in millions)
Fiscal 2020 Actions:
Employee severance	$	—	$	15	$	—	$	(1)	$	—	$	—	$	14
Fiscal 2019 Actions:
Employee severance		188		5		(3)		(23)		(1)		3		169
Facility and other exit costs		1		1		—		(2)		—		2		2
Property, plant, and equipment		—		4		—		—		(4)		—		—
Total		189		10		(3)		(25)		(5)		5		171
Pre-Fiscal 2019 Actions:
Employee severance		73		1		(3)		(18)		—		1		54
Facility and other exit costs		2		4		—		(5)		—		—		1
Total		75		5		(3)		(23)		—		1		55
Total Activity	$	264	$	30	$	(6)	$	(49)	$	(5)	$	6	$	240

Fiscal 2020 Actions

During fiscal 2020, we initiated a restructuring program associated with footprint consolidation and structural improvements across all segments. In connection with this program, during the quarter ended December 27, 2019, we recorded restructuring charges of $15 million. We expect to complete all restructuring actions commenced during the quarter ended December 27, 2019 by the end of fiscal 2021 and to incur additional charges of approximately $5 million.

Fiscal 2019 Actions

During fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural improvements impacting all segments. In connection with this program, during the quarters ended December 27, 2019 and December 28, 2018, we recorded net restructuring charges of $7 million and $67 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2019 by the end of fiscal 2021 and to incur additional charges of approximately $25 million related primarily to employee severance and facility exit costs in the Transportation Solutions and Industrial Solutions segments.

Pre-Fiscal 2019 Actions

Prior to fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural improvements primarily impacting the Industrial Solutions and Transportation Solutions segments. Also prior to fiscal 2019, we initiated a restructuring program associated with footprint consolidation related to recent acquisitions and structural improvements impacting all segments. During the quarters ended December 27, 2019 and December 28, 2018, we recorded net restructuring charges of $2 million and $8 million, respectively, related to pre-fiscal 2019 actions. We expect additional charges related to pre-fiscal 2019 actions to be insignificant.

7

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Total Restructuring Reserves

Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Accrued and other current liabilities	$	215	$	245
Other liabilities		25		19
Restructuring reserves	$	240	$	264

3. Discontinued Operations

During the quarter ended December 28, 2018, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $288 million and incurred a pre-tax loss on sale of $96 million, related primarily to the recognition of cumulative translation adjustment losses of $67 million and certain guarantee liabilities. The SubCom business met the held for sale and discontinued operations criteria and was reported as such in all periods presented on the Condensed Consolidated Financial Statements. Prior to reclassification to discontinued operations, the SubCom business was included in the Communications Solutions segment.

In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These guarantees had a combined value of approximately $1.2 billion as of December 27, 2019 and are expected to expire at various dates through fiscal 2025. Also, under the terms of the definitive agreement, we are required to issue up to $300 million of new performance guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of up to three years. As of December 27, 2019, there were no such new performance guarantees outstanding. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

The following table presents the summarized components of loss from discontinued operations, net of income taxes for the quarter ended December 28, 2018:

	(in millions)
Net sales	$	41
Cost of sales		(50)
Operating expenses		(10)
Pre-tax loss from discontinued operations		(19)
Pre-tax loss on sale of discontinued operations		(96)
Income tax benefit		8
Loss from discontinued operations, net of income taxes	$	(107)

4. Acquisitions

During the quarter ended December 27, 2019, we acquired two businesses for a combined cash purchase price of $112 million, net of cash acquired. The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

Pending Acquisition

During fiscal 2019, we entered into a business combination agreement and commenced a voluntary public tender offer for all outstanding shares of First Sensor AG (“First Sensor”), a provider of sensing solutions based in Germany. The

8

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

offer was accepted for approximately 72% of First Sensor’s shares. The transaction, including the assumption of First Sensor’s outstanding net debt, is valued at approximately €330 million, based on the tendered shares and an estimated premium for untendered shares. Completion of the offer will be subject to customary closing conditions, including receipt of any outstanding regulatory approvals. We expect to complete the transaction in fiscal 2020.

5. Inventories

Inventories consisted of the following:

	December 27,		September 27,
	2019		2019
	(in millions)
Raw materials	$	282	$	260
Work in progress		817		739
Finished goods		904		837
Inventories	$	2,003	$	1,836

6. Goodwill

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

	Transportation		Industrial		Communications
	Solutions		Solutions		Solutions		Total
	(in millions)
September 27, 2019(1)	$	2,124	$	3,039	$	577	$	5,740
Acquisitions		50		9		—		59
Currency translation		19		24		4		47
December 27, 2019(1)	$	2,193	$	3,072	$	581	$	5,846

(1) At December 27, 2019 and September 27, 2019, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $2,191 million, $669 million, and $489 million, respectively.

During the quarter ended December 27, 2019, we recognized goodwill in the Transportation Solutions and Industrial Solutions segments in connection with recent acquisitions. See Note 4 for additional information regarding acquisitions.

7. Intangible Assets, Net

Intangible assets consisted of the following:

	December 27, 2019						September 27, 2019
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
	(in millions)
Customer relationships	$	1,561	$	(486)	$	1,075	$	1,513	$	(459)	$	1,054
Intellectual property		1,269		(758)		511		1,260		(734)		526
Other		33		(17)		16		33		(17)		16
Total	$	2,863	$	(1,261)	$	1,602	$	2,806	$	(1,210)	$	1,596

Intangible asset amortization expense was $45 million for both the quarters ended December 27, 2019 and December 28, 2018.

9

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

At December 27, 2019, the aggregate amortization expense on intangible assets is expected to be as follows:

	(in millions)
Remainder of fiscal 2020	$	137
Fiscal 2021		180
Fiscal 2022		180
Fiscal 2023		179
Fiscal 2024		149
Fiscal 2025		129
Thereafter		648
Total	$	1,602

8. Debt

As of December 27, 2019, Tyco Electronics Group S.A. (“TEGSA’), our 100%-owned subsidiary, had $210 million of commercial paper outstanding at a weighted-average interest rate of 1.85%. TEGSA had $219 million of commercial paper outstanding at a weighted-average interest rate of 2.20% at September 27, 2019.

The fair value of our debt, based on indicative valuations, was approximately $4,292 million and $4,278 million at December 27, 2019 and September 27, 2019, respectively.

9. Leases

We have facility, land, vehicle, and equipment leases that expire at various dates. We determine if a contract qualifies as a lease at inception. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the identified asset and the right to direct the use of the identified asset.

Lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of remaining lease payments over the lease term. Lease ROU assets represent our right to use the underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. We do not recognize ROU assets or lease liabilities that arise from short-term leases. Since our lease contracts do not contain a readily determinable implicit rate, we determine a fully-collateralized incremental borrowing rate that reflects a similar term to the lease and the economic environment of the applicable country or region in which the asset is leased.

We have elected to account for lease and non-lease components in our real estate leases as a single lease component; other leases generally do not contain non-lease components. The non-lease components in our real estate leases include logistics services, warehousing, and other operational costs. Many of these costs are variable, fluctuating based on services provided, such as pallets shipped in and out of a location or square footage of space occupied. These costs, and any other variable rental costs, are excluded from our ROU assets and lease liabilities, and instead are expensed as incurred. Some of our leases may include options to either renew or early terminate the lease. The exercise of these options is generally at our sole discretion and would only occur if there is an economic, financial, or business reason to do so. Such options are included in the lease term if we determine it is reasonably certain they will be exercised.

10

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The components of lease cost were as follows:

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Operating lease cost	$	27
Variable lease cost		11
Total lease cost	$	38

Amounts recognized on the Condensed Consolidated Balance Sheet were as follows:

	December 27,
	2019
	($ in millions)
Operating lease ROU assets:
Other assets	$	506
Operating lease liabilities:
Accrued and other current liabilities	$	122
Other liabilities		397
Total operating lease liabilities	$	519
Weighted-average remaining lease term (in years)		6.1
Weighted-average discount rate		1.3	%

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

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)	$	26
ROU assets obtained in exchange for new operating lease liabilities(2)		525

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

(2) Includes ROU assets obtained in connection with the adoption of ASC 842.

11

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

At December 27, 2019, the maturities of operating lease liabilities were as follows:

	(in millions)
Remainder of fiscal 2020	$	91
Fiscal 2021		105
Fiscal 2022		85
Fiscal 2023		72
Fiscal 2024		60
Thereafter		126
Total lease payments		539
Less: interest		(20)
Present value of lease liabilities	$	519

The following table, which was included in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019 and presented in accordance with the previous lease accounting standard, presents the future minimum lease payments under non-cancelable operating lease obligations as of September 27, 2019:

	(in millions)
Fiscal 2020	$	117
Fiscal 2021		102
Fiscal 2022		81
Fiscal 2023		67
Fiscal 2024		55
Thereafter		118
Total	$	540

10. 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.

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 27, 2019, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $14 million to $45 million, and we accrued $18 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

12

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

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 27, 2019, we had outstanding letters of credit, letters of guarantee, and surety bonds of $279 million.

We sold our SubCom business during fiscal 2019. In connection with the sale, we contractually agreed to honor certain performance guarantees and letters of credit related to the SubCom business. See Note 3 for additional information regarding these guarantees and the divestiture of the SubCom business.

11. Financial Instruments

Foreign Currency Exchange Rate Risk

During fiscal 2015, we entered into cross-currency swap contracts with an aggregate notional value of €1,000 million to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. 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 5.33% per annum. Upon the maturity of these contracts in fiscal 2022, we will pay the notional value of the contracts in 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.

At December 27, 2019 and September 27, 2019, these cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Other assets	$	6	$	19
Other liabilities		5		—

At December 27, 2019 and September 27, 2019, 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 27,		December 28,
	2019		2018
	(in millions)
Gains recorded in other comprehensive income (loss)	$	4	$	19
Gains (losses) excluded from the hedging relationship(1)		(22)		17

(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 $3,296 million and $3,374 million at December 27, 2019 and September 27, 2019, respectively.

13

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

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 $2,283 million and $1,844 million at December 27, 2019 and September 27, 2019, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 2.76% per annum and pay no interest. Upon the maturity of these contracts at various dates through fiscal 2023, 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.

At December 27, 2019 and September 27, 2019, these cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Prepaid expenses and other current assets	$	16	$	27
Other assets		26		46
Accrued and other current liabilities		7		2
Other liabilities		—		1

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

		For the
		Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Foreign currency exchange gains (losses) on intercompany loans and external borrowings(1)	$	(65)	$	76
Losses on cross-currency swap contracts designated as hedges of net investment(2)		(33)		(5)

(1) Foreign currency exchange gains and losses on intercompany loans and external borrowings are recorded as currency translation, a component of accumulated other comprehensive income (loss), and are offset by changes attributable to the translation of the net investment.

(2) Gains and losses on cross-currency swap contracts designated as hedges of net investment are recorded as currency translation.

12. 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 27,		December 28,		December 27,		December 28,
	2019		2018		2019		2018
	(in millions)
Operating expense:
Service cost	$	13	$	12	$	3	$	3
Other (income) expense:
Interest cost		6		11		9		12
Expected return on plan assets		(15)		(16)		(15)		(14)
Amortization of net actuarial loss		10		6		2		4
Amortization of prior service credit		(2)		(2)		—		—
Net periodic pension benefit cost (credit)	$	12	$	11	$	(1)	$	5

14

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

13. Income Taxes

We recorded income tax expense of $447 million and $78 million for the quarters ended December 27, 2019 and December 28, 2018, respectively. The income tax expense for the quarter ended December 27, 2019 included $355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”). See “Swiss Tax Reform” below for additional information.

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

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 27, 2019.

Swiss Tax Reform

The Federal Act on Tax Reform and AHV Financing eliminates certain preferential tax items and implements new tax rates at both the federal and cantonal levels. During fiscal 2019, Switzerland enacted the federal provisions of Swiss Tax Reform, and the federal tax authority issued guidance abolishing certain interest deductions. The impacts of these measures were reflected in our fiscal 2019 Consolidated Financial Statements.

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law, including reductions in tax rates. During the quarter ended December 27, 2019, we recognized $355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

Tax Sharing Agreement

Under a Tax Sharing Agreement entered into upon our separation from Tyco International plc (“Tyco International”) in fiscal 2007, we, Tyco International, and Covidien plc (“Covidien”) share 31%, 27%, and 42%, respectively, of income tax liabilities that arise from adjustments made by tax authorities to the collective income tax returns for periods prior to and including June 29, 2007. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and indemnifications with Tyco International and Covidien. As a result of subsequent transactions, Tyco International and Covidien now operate as part of Johnson Controls International plc and Medtronic plc, respectively.

We have substantially settled all U.S. federal income tax matters with the Internal Revenue Service for periods covered under the Tax Sharing Agreement. Certain shared U.S. state and non-U.S. income tax matters remain open. We expect resolution of these matters and the termination of the Tax Sharing Agreement in fiscal 2020. We do not expect these matters or the termination of the TSA to have a material effect on our results of operations, financial position, or cash flows.

14. 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 27,	December 28,
	2019	2018
	(in millions)
Basic	335	342
Dilutive impact of share-based compensation arrangements	2	2
Diluted	337	344

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

The following 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:

	For the
	Quarters Ended
	December 27,	December 28,
	2019	2018
	(in millions)
Antidilutive share options	3	1

15. Shareholders’ Equity

Dividends

We paid cash dividends to shareholders as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
Dividends paid per common share	$	0.46	$	0.44

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At December 27, 2019 and September 27, 2019, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $154 million and $308 million, respectively.

Share Repurchase Program

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

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Number of common shares repurchased		2		6
Repurchase value	$	143	$	495

At December 27, 2019, we had $1.4 billion of availability remaining under our share repurchase authorization.

16. Share Plans

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

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Share-based compensation expense	$	22	$	23

16

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

As of December 27, 2019, there was $176 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.4 years.

During the quarter ended December 27, 2019, we granted the following share-based awards as part of our annual incentive plan grant:

		Grant-Date
	Shares	Fair Value
	(in millions)
Share options	1.5	$	15.52
Restricted share awards	0.5		93.63
Performance share awards	0.2		93.63

As of December 27, 2019, we had 15 million shares available for issuance under our stock and incentive plans, of which the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of March 8, 2017, was the primary plan.

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		21	%
Risk-free interest rate		1.8	%
Expected annual dividend per share	$	1.84
Expected life of options (in years)		5.1

17

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

17. Segment and Geographic Data

Net sales by segment⁽¹⁾ and industry end market⁽²⁾ were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions:
Automotive	$	1,405	$	1,469
Commercial transportation		258		297
Sensors		205		220
Total Transportation Solutions		1,868		1,986
Industrial Solutions:
Aerospace, defense, oil, and gas		309		285
Industrial equipment		263		315
Medical(3)		179		168
Energy		176		160
Total Industrial Solutions		927		928
Communications Solutions:
Data and devices		219		257
Appliances		154		176
Total Communications Solutions		373		433
Total	$	3,168	$	3,347

(1) Intersegment sales were not material and were recorded at selling prices that approximated market prices.

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

(3) Effective for fiscal 2020, we are separately presenting net sales in the medical end market. Such amounts were previously included in net sales in the industrial equipment end market.

18

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Net sales by geographic region⁽¹⁾ and segment were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Europe/Middle East/Africa (“EMEA”):
Transportation Solutions	$	702	$	756
Industrial Solutions		340		350
Communications Solutions		55		65
Total EMEA		1,097		1,171
Asia–Pacific:
Transportation Solutions		742		764
Industrial Solutions		145		155
Communications Solutions		226		254
Total Asia–Pacific		1,113		1,173
Americas:
Transportation Solutions		424		466
Industrial Solutions		442		423
Communications Solutions		92		114
Total Americas		958		1,003
Total	$	3,168	$	3,347

(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 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	316	$	332
Industrial Solutions		115		100
Communications Solutions		40		52
Total	$	471	$	484

19

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

18. Tyco Electronics Group S.A.

Tyco Electronics Group S.A. (“TEGSA”), a Luxembourg company and our 100%-owned subsidiary, is a holding company that owns, directly or indirectly, all of our operating subsidiaries. TEGSA is the obligor under our senior notes, commercial paper, and five-year unsecured senior revolving credit facility, which are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd. The following tables present condensed consolidating financial information for TE Connectivity Ltd., TEGSA, and all other subsidiaries that are not providing a guarantee of debt but which represent assets of TEGSA, using the equity method of accounting.

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,168	$	—	$	3,168
Cost of sales		—		—		2,138		—		2,138
Gross margin		—		—		1,030		—		1,030
Selling, general, and administrative expenses, net(1)		26		16		325		—		367
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		1		—		6		—		7
Restructuring and other charges, net		—		—		24		—		24
Operating income (loss)		(27)		(16)		514		—		471
Interest income		—		—		6		—		6
Interest expense		—		(10)		(2)		—		(12)
Other income, net		—		—		5		—		5
Equity in net income of subsidiaries		74		101		—		(175)		—
Equity in net income of subsidiaries of discontinued operations		3		—		—		(3)		—
Intercompany interest income (expense), net		(24)		(1)		25		—		—
Income from continuing operations before income taxes		26		74		548		(178)		470
Income tax expense		—		—		(447)		—		(447)
Income from continuing operations		26		74		101		(178)		23
Income from discontinued operations, net of income taxes		—		3		—		—		3
Net income		26		77		101		(178)		26
Other comprehensive income		89		89		108		(197)		89
Comprehensive income	$	115	$	166	$	209	$	(375)	$	115

(1) TE Connectivity Ltd. and TEGSA selling, general, and administrative expenses include gains of $14 million and losses of $13 million, respectively, related to intercompany transactions. These gains and losses are offset by corresponding net losses recorded by other subsidiaries.

20

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,347	$	—	$	3,347
Cost of sales		—		—		2,233		—		2,233
Gross margin		—		—		1,114		—		1,114
Selling, general, and administrative expenses, net(1)		35		(107)		461		—		389
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		—		—		5		—		5
Restructuring and other charges, net		—		—		75		—		75
Operating income (loss)		(35)		107		412		—		484
Interest income		—		—		5		—		5
Interest expense		—		(27)		—		—		(27)
Other expense, net		—		—		(1)		—		(1)
Equity in net income of subsidiaries		441		389		—		(830)		—
Equity in net loss of subsidiaries of discontinued operations		(107)		(49)		—		156		—
Intercompany interest income (expense), net		(23)		(28)		51		—		—
Income from continuing operations before income taxes		276		392		467		(674)		461
Income tax expense		—		—		(78)		—		(78)
Income from continuing operations		276		392		389		(674)		383
Loss from discontinued operations, net of income taxes		—		(58)		(49)		—		(107)
Net income		276		334		340		(674)		276
Other comprehensive income		49		49		35		(84)		49
Comprehensive income	$	325	$	383	$	375	$	(758)	$	325

(1) TEGSA selling, general, and administrative expenses include gains of $110 million related to intercompany transactions. These gains are offset by corresponding losses recorded by other subsidiaries.

21

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Condensed Consolidating Balance Sheet (unaudited)

As of December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	742	$	—	$	742
Accounts receivable, net		—		—		2,338		—		2,338
Inventories		—		—		2,003		—		2,003
Intercompany receivables		51		3,253		62		(3,366)		—
Prepaid expenses and other current assets		6		29		448		—		483
Total current assets		57		3,282		5,593		(3,366)		5,566
Property, plant, and equipment, net		—		—		3,659		—		3,659
Goodwill		—		—		5,846		—		5,846
Intangible assets, net		—		—		1,602		—		1,602
Deferred income taxes		—		—		2,360		—		2,360
Investment in subsidiaries		13,994		28,344		—		(42,338)		—
Intercompany loans receivable		—		2,595		16,189		(18,784)		—
Other assets		—		38		905		—		943
Total assets	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	559	$	2	$	—	$	561
Accounts payable		1		—		1,432		—		1,433
Accrued and other current liabilities		178		66		1,166		—		1,410
Intercompany payables		3,315		—		51		(3,366)		—
Total current liabilities		3,494		625		2,651		(3,366)		3,404
Long-term debt		—		3,412		—		—		3,412
Intercompany loans payable		—		16,189		2,595		(18,784)		—
Long-term pension and postretirement liabilities		—		—		1,365		—		1,365
Deferred income taxes		—		—		142		—		142
Income taxes		—		—		247		—		247
Other liabilities		—		39		810		—		849
Total liabilities		3,494		20,265		7,810		(22,150)		9,419
Total shareholders’ equity		10,557		13,994		28,344		(42,338)		10,557
Total liabilities and shareholders’ equity	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976

22

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Condensed Consolidating Balance Sheet (unaudited)

As of September 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	927	$	—	$	927
Accounts receivable, net		—		—		2,320		—		2,320
Inventories		—		—		1,836		—		1,836
Intercompany receivables		49		2,959		60		(3,068)		—
Prepaid expenses and other current assets		4		36		431		—		471
Total current assets		53		2,995		5,574		(3,068)		5,554
Property, plant, and equipment, net		—		—		3,574		—		3,574
Goodwill		—		—		5,740		—		5,740
Intangible assets, net		—		—		1,596		—		1,596
Deferred income taxes		—		—		2,776		—		2,776
Investment in subsidiaries		13,865		28,336		—		(42,201)		—
Intercompany loans receivable		—		2,562		16,033		(18,595)		—
Other assets		—		72		382		—		454
Total assets	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	568	$	2	$	—	$	570
Accounts payable		1		—		1,356		—		1,357
Accrued and other current liabilities		328		57		1,228		—		1,613
Intercompany payables		3,019		—		49		(3,068)		—
Total current liabilities		3,348		625		2,635		(3,068)		3,540
Long-term debt		—		3,395		—		—		3,395
Intercompany loans payable		—		16,033		2,562		(18,595)		—
Long-term pension and postretirement liabilities		—		—		1,367		—		1,367
Deferred income taxes		—		—		156		—		156
Income taxes		—		—		239		—		239
Other liabilities		—		47		380		—		427
Total liabilities		3,348		20,100		7,339		(21,663)		9,124
Total shareholders’ equity		10,570		13,865		28,336		(42,201)		10,570
Total liabilities and shareholders’ equity	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694

23

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) operating activities(1)	$	(69)	$	462	$	476	$	(458)	$	411
Cash flows from investing activities:
Capital expenditures		—		—		(176)		—		(176)
Acquisition of businesses, net of cash acquired		—		—		(115)		—		(115)
Change in intercompany loans		—		(149)		—		149		—
Other		—		—		2		—		2
Net cash used in investing activities		—		(149)		(289)		149		(289)
Cash flows from financing activities:
Changes in parent company equity(2)		46		(304)		258		—		—
Net decrease in commercial paper		—		(9)		—		—		(9)
Proceeds from exercise of share options		—		—		14		—		14
Repurchase of common shares		(119)		—		(20)		—		(139)
Payment of common share dividends to shareholders		(154)		—		—		—		(154)
Intercompany distributions(1)		—		—		(458)		458		—
Loan activity with parent		296		—		(147)		(149)		—
Other		—		—		(26)		—		(26)
Net cash provided by (used in) financing activities		69		(313)		(379)		309		(314)
Effect of currency translation on cash		—		—		7		—		7
Net decrease in cash, cash equivalents, and restricted cash		—		—		(185)		—		(185)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		927		—		927
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	742	$	—	$	742

(1) Other subsidiaries made distributions to TEGSA in the amount of $458 million. Cash flows are presented based upon the nature of the distributions.

(2) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

24

TE CONNECTIVITY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities	$	(73)	$	(9)	$	410	$	—	$	328
Net cash used in discontinued operating activities		—		—		(31)		—		(31)
Net cash provided by (used in) operating activities		(73)		(9)		379		—		297
Cash flows from investing activities:
Capital expenditures		—		—		(210)		—		(210)
Proceeds from divestiture of business, net of cash retained by sold business		—		303		(15)		—		288
Change in intercompany loans		—		(25)		—		25		—
Other		—		—		4		—		4
Net cash provided by (used in) continuing investing activities		—		278		(221)		25		82
Net cash used in discontinued investing activities		—		—		(2)		—		(2)
Net cash provided by (used in) investing activities		—		278		(223)		25		80
Cash flows from financing activities:
Changes in parent company equity(1)		23		(240)		217		—		—
Net increase in commercial paper		—		63		—		—		63
Proceeds from issuance of debt		—		350		—		—		350
Repayment of debt		—		(441)		—		—		(441)
Proceeds from exercise of share options		—		—		7		—		7
Repurchase of common shares		(519)		—		—		—		(519)
Payment of common share dividends to shareholders		(150)		—		—		—		(150)
Loan activity with parent		719		—		(694)		(25)		—
Transfers to discontinued operations		—		—		(33)		—		(33)
Other		—		(1)		(28)		—		(29)
Net cash provided by (used in) continuing financing activities		73		(269)		(531)		(25)		(752)
Net cash provided by discontinued financing activities		—		—		33		—		33
Net cash provided by (used in) financing activities		73		(269)		(498)		(25)		(719)
Effect of currency translation on cash		—		—		(1)		—		(1)
Net decrease in cash, cash equivalents, and restricted cash		—		—		(343)		—		(343)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		848		—		848
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	505	$	—	$	505

(1) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

25

ITEM 2. 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 Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. 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 as a result of many factors, including but not limited to those under the heading “Forward-Looking Information” and “Part II. Item 1A. Risk Factors.”

Our Condensed Consolidated Financial Statements have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

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

TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is 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.

The first quarter of fiscal 2020 included the following:

● Our net sales decreased 5.3% in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019, due to sales declines in the Transportation Solutions and Communications Solutions segments. On an organic basis, our net sales decreased 4.8% during the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019.

● Our net sales by segment were as follows:

● Transportation Solutions—Our net sales decreased 5.9% in the first quarter of fiscal 2020 due to sales declines in all end markets.

● Industrial Solutions—Our net sales were flat in the first quarter of fiscal 2020 with sales declines in the industrial equipment end market offset by increased sales in the aerospace, defense, oil, and gas, the energy, and the medical end markets.

● Communications Solutions—Our net sales decreased 13.9% in the first quarter of fiscal 2020 due to sales declines in both the data and devices and the appliances end markets.

● Net cash provided by continuing operating activities was $411 million in the first quarter of fiscal 2020.

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Outlook

In the second quarter of fiscal 2020, we expect our net sales to be between $3.1 billion and $3.3 billion as compared to $3.4 billion in the second quarter of fiscal 2019, with sales declines in all segments. Additional information regarding expectations for our reportable segments for the second quarter of fiscal 2020 as compared to the same period of fiscal 2019 is as follows:

● Transportation Solutions—We expect our net sales to decrease in the automotive end market due primarily to declines in global automotive production. We also expect our net sales to decline in the commercial transportation end market as a result of continued market weakness.

● Industrial Solutions—We expect our net sales to decline in the industrial equipment end market due to continued market weakness. This decrease is expected to be partially offset by our net sales growth in the medical end market.

● Communications Solutions—We expect our net sales to decline in both the data and devices and the appliances end markets as a result of reduced demand resulting from high inventory levels at distributors and market weakness across all regions.

We expect diluted earnings per share from continuing operations to be in the range of $1.05 to $1.11 per share in the second quarter of fiscal 2020. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $77 million and $0.04 per share, respectively, in the second quarter of fiscal 2020 as compared to the second quarter of fiscal 2019.

For fiscal 2020, we expect our net sales to be between $12.85 billion and $13.25 billion as compared to $13.4 billion in fiscal 2019. This decrease is driven by sales declines in the Transportation Solutions and Communications Solutions segments relative to fiscal 2019. Additional information regarding expectations for our reportable segments for fiscal 2020 compared to fiscal 2019 is as follows:

● Transportation Solutions—We expect our net sales to decrease in the automotive end market as a result of declines in global automotive production. However, we expect our content gains to partially offset the impact of the overall market decline. We expect our net sales to decrease in the commercial transportation end market due to market weakness.

● Industrial Solutions—We expect our net sales growth in the medical and the aerospace, defense, oil, and gas end markets to be offset by declines in the industrial equipment end market due primarily to reduced demand resulting from high inventory levels at distributors.

● Communications Solutions—We expect our net sales to decline in the data and devices and the appliances end markets due to market weakness and reduced demand resulting from high inventory levels at distributors.

In fiscal 2020, we expect diluted earnings per share from continuing operations to be in the range of $3.23 to $3.53 per share. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $209 million and $0.11 per share, respectively, in fiscal 2020 as compared to fiscal 2019.

The above outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.

We are monitoring the current macroeconomic environment and its potential effects on our customers and the end markets we serve. We continue to closely manage our costs in line with economic conditions. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund future capital needs. See further discussion in “Liquidity and Capital Resources.”

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Acquisitions

During the first quarter of fiscal 2020, we acquired two businesses for a combined cash purchase price of $112 million, net of cash acquired. The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

Pending Acquisition

During fiscal 2019, we entered into a business combination agreement and commenced a voluntary public tender offer for all outstanding shares of First Sensor AG (“First Sensor”), a provider of sensing solutions based in Germany. The offer was accepted for approximately 72% of First Sensor’s shares. The transaction, including the assumption of First Sensor’s outstanding net debt, is valued at approximately €330 million, based on the tendered shares and an estimated premium for untendered shares. Completion of the offer will be subject to customary closing conditions, including receipt of any outstanding regulatory approvals. We expect to complete the transaction in fiscal 2020.

Results of Operations

Net Sales

The following table presents our net sales and the percentage of total net sales by segment:

	For the
	Quarters Ended
	December 27,				December 28,
	2019				2018
	($ in millions)
Transportation Solutions	$	1,868	59	%	$	1,986	59	%
Industrial Solutions		927	29			928	28
Communications Solutions		373	12			433	13
Total	$	3,168	100	%	$	3,347	100	%

The following table provides an analysis of the change in our net sales by segment:

	Changes in Net Sales for the Quarter Ended December 27, 2019
	versus Net Sales for the Quarter Ended December 28, 2018
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation		Acquisitions
	($ in millions)
Transportation Solutions	$	(118)	(5.9)	%	$	(113)	(5.6)	%	$	(30)	$	25
Industrial Solutions		(1)	(0.1)			11	1.2			(12)		—
Communications Solutions		(60)	(13.9)			(59)	(13.7)			(1)		—
Total	$	(179)	(5.3)	%	$	(161)	(4.8)	%	$	(43)	$	25

Net sales decreased $179 million, or 5.3%, in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019. The decrease in net sales resulted from organic net sales declines of 4.8% and the negative impact of foreign currency translation of 1.2% due to the weakening of certain foreign currencies, partially offset by sales contributions from acquisitions of 0.7%. Price erosion adversely affected organic net sales by $41 million in the first quarter of fiscal 2020.

See further discussion of net sales below under “Segment Results.”

Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.

28

Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2020.

The following table presents our net sales and the percentage of total net sales by geographic region⁽¹⁾:

	For the
	Quarters Ended
	December 27,				December 28,
	2019				2018
	($ in millions)
EMEA	$	1,097	35	%	$	1,171	35	%
Asia–Pacific		1,113	35			1,173	35
Americas		958	30			1,003	30
Total	$	3,168	100	%	$	3,347	100	%

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

The following table provides an analysis of the change in our net sales by geographic region:

	Change in Net Sales for the Quarter Ended December 27, 2019
	versus Net Sales for the Quarter Ended December 28, 2018
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation		Acquisitions
	($ in millions)
EMEA	$	(74)	(6.3)	%	$	(54)	(4.5)	%	$	(31)	$	11
Asia–Pacific		(60)	(5.1)			(53)	(4.5)			(7)		—
Americas		(45)	(4.5)			(54)	(5.4)			(5)		14
Total	$	(179)	(5.3)	%	$	(161)	(4.8)	%	$	(43)	$	25

Cost of Sales and Gross Margin

The following table presents cost of sales and gross margin information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Cost of sales	$	2,138		$	2,233		$	(95)
As a percentage of net sales		67.5	%		66.7	%
Gross margin	$	1,030		$	1,114		$	(84)
As a percentage of net sales		32.5	%		33.3	%

Gross margin decreased $84 million in the first quarter of fiscal 2020 primarily as a result of lower volume and price erosion, partially offset by lower material costs. Gross margin as a percentage of net sales decreased to 32.5% in the first quarter of fiscal 2020 from 33.3% in the first quarter of fiscal 2019.

We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are subject to variability in raw material prices which continue to fluctuate for many of the raw materials we use, including copper, gold, and silver. We expect to purchase approximately 175 million pounds of copper, 125,000 troy ounces of gold,

29

and 2.4 million troy ounces of silver in fiscal 2020. The following table presents the average prices incurred related to copper, gold, and silver:

		For the
		Quarters Ended
		December 27,		December 28,
	Measure	2019		2018
Copper	Lb.	$	2.84	$	2.88
Gold	Troy oz.		1,354		1,293
Silver	Troy oz.		16.26		16.60

Operating Expenses

The following table presents operating expense information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Selling, general, and administrative expenses	$	367		$	389		$	(22)
As a percentage of net sales		11.6	%		11.6	%
Restructuring and other charges, net	$	24		$	75		$	(51)

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased $22 million in the first quarter of fiscal 2020 from the first quarter of fiscal 2019 due primarily to cost control measures and savings attributable to restructuring actions as well as reduced selling expenses. Selling, general, and administrative expenses as a percentage of net sales was 11.6% in both the first quarters of fiscal 2020 and 2019.

Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.

During fiscal 2020 and 2019, we initiated restructuring programs associated with footprint consolidation and structural improvements across all segments. In connection with these initiatives, we incurred net restructuring charges of $24 million during the first quarter of fiscal 2020, of which $15 million related to the fiscal 2020 restructuring program. Annualized cost savings related to the fiscal 2020 actions commenced during the first quarter of fiscal 2020 are expected to be approximately $20 million and are expected to be realized by the end of fiscal 2022. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2020, we expect total restructuring charges to be approximately $200 million to $250 million and total spending, which will be funded with cash from operations, to be approximately $220 million.

See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.

Operating Income

The following table presents operating income and operating margin information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Operating income	$	471		$	484		$	(13)
Operating margin		14.9	%		14.5	%

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Operating income included the following:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Acquisition-related charges:
Acquisition and integration costs	$	7	$	5
Charges associated with the amortization of acquisition-related fair value adjustments		—		1
		7		6
Restructuring and other charges, net		24		75
Total	$	31	$	81

See discussion of operating income below under “Segment Results.”

Non-Operating Items

The following table presents select non-operating information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Interest expense	$	12		$	27		$	(15)
Income tax expense	$	447		$	78		$	369
Effective tax rate		95.1	%		16.9	%
Income (loss) from discontinued operations, net of income taxes	$	3		$	(107)		$	110

Interest Expense. Interest expense decreased $15 million in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019 due primarily to the cross-currency swap program that hedges our net investment in certain foreign operations. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 2.76% per annum and pay no interest. See Note 11 to the Condensed Consolidated Financial Statements for additional information regarding our cross-currency swap program.

Income Taxes. See Note 13 to the Condensed Consolidated Financial Statements for discussion of items impacting income tax expense and the effective tax rate for the first quarters of fiscal 2020 and 2019, including the Switzerland Federal Act on Tax Reform and AHV Financing.

Income (Loss) from Discontinued Operations, Net of Income Taxes. During the first quarter of fiscal 2019, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $288 million and incurred a pre-tax loss on sale of $96 million. The SubCom business met the held for sale and discontinued operations criteria and was reported as such in all periods presented on the Condensed Consolidated Financial Statements. Prior to reclassification to discontinued operations, the SubCom business was included in the Communications Solutions segment. The net sales of the business were $41 million in the first quarter of fiscal 2019 which represented one month of activity. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding discontinued operations.

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Segment Results

Transportation Solutions

Net Sales. The following table presents the Transportation Solutions segment’s net sales and the percentage of total net sales by industry end market⁽¹⁾:

	For the
	Quarters Ended
	December 27,				December 28,
	2019				2018
	($ in millions)
Automotive	$	1,405	75	%	$	1,469	74	%
Commercial transportation		258	14			297	15
Sensors		205	11			220	11
Total	$	1,868	100	%	$	1,986	100	%

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

The following table provides an analysis of the change in the Transportation Solutions segment’s net sales by industry end market:

	Change in Net Sales for the Quarter Ended December 27, 2019
	versus Net Sales for the Quarter Ended December 28, 2018
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation		Acquisitions
	($ in millions)
Automotive	$	(64)	(4.4)	%	$	(43)	(2.9)	%	$	(21)	$	—
Commercial transportation		(39)	(13.1)			(45)	(15.6)			(7)		13
Sensors		(15)	(6.8)			(25)	(11.3)			(2)		12
Total	$	(118)	(5.9)	%	$	(113)	(5.6)	%	$	(30)	$	25

Net sales in the Transportation Solutions segment decreased $118 million, or 5.9%, in the first quarter of fiscal 2020 from the first quarter of fiscal 2019 due to organic net sales declines of 5.6% and the negative impact of foreign currency translation of 1.5%, partially offset by sales contributions from acquisitions of 1.2%. Our organic net sales by industry end market were as follows:

● Automotive—Our organic net sales decreased 2.9% in the first quarter of fiscal 2020 due to declines in global automotive production. Organic net sales declines were 4.4%, 3.2%, and 1.8% in the Americas, Asia–Pacific, and EMEA regions, respectively.

● Commercial transportation—Our organic net sales decreased 15.6% in the first quarter of fiscal 2020 primarily as a result of market weakness in the Americas and EMEA regions.

● Sensors—Our organic net sales decreased 11.3% in the first quarter of fiscal 2020 due to weakness in commercial transportation and industrial applications.

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Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Operating income	$	316		$	332		$	(16)
Operating margin		16.9	%		16.7	%

Operating income in the Transportation Solutions segment decreased $16 million in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019. The Transportation Solutions segment’s operating income included the following:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Acquisition and integration costs	$	5	$	3
Restructuring and other charges, net		4		21
Total	$	9	$	24

Excluding these items, operating income decreased in the first quarter of fiscal 2020 primarily as a result of lower volume and price erosion, partially offset by lower material costs.

Industrial Solutions

Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net sales by industry end market⁽¹⁾:

	For the
	Quarters Ended
	December 27,				December 28,
	2019				2018
	($ in millions)
Aerospace, defense, oil, and gas	$	309	33	%	$	285	31	%
Industrial equipment		263	28			315	34
Medical		179	20			168	18
Energy		176	19			160	17
Total	$	927	100	%	$	928	100	%

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

33

The following table provides an analysis of the change in the Industrial Solutions segment’s net sales by industry end market:

	Change in Net Sales for the Quarter Ended December 27, 2019
	versus Net Sales for the Quarter Ended December 28, 2018
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation
	($ in millions)
Aerospace, defense, oil, and gas	$	24	8.4	%	$	27	9.4	%	$	(3)
Industrial equipment		(52)	(16.5)			(47)	(15.0)			(5)
Medical		11	6.5			12	6.9			(1)
Energy		16	10.0			19	12.1			(3)
Total	$	(1)	(0.1)	%	$	11	1.2	%	$	(12)

In the Industrial Solutions segment, net sales were flat in the first quarter of fiscal 2020 as compared to the same period of fiscal 2019 with the negative impact of foreign currency translation of 1.3% largely offset by organic net sales growth of 1.2%. Our organic net sales by industry end market were as follows:

● Aerospace, defense, oil, and gas—Our organic net sales increased 9.4% in the first quarter of fiscal 2020 as a result of strength in the defense, oil and gas, and commercial aerospace markets.

● Industrial equipment—Our organic net sales decreased 15.0% in the first quarter of fiscal 2020 due to market weakness across all regions and reduced demand resulting from high inventory levels at distributors.

● Medical—Our organic net sales increased 6.9% in the first quarter of fiscal 2020 due primarily to strength in interventional medical applications.

● Energy—Our organic net sales increased 12.1% in the first quarter of fiscal 2020 with growth in all regions.

Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Operating income	$	115		$	100		$	15
Operating margin		12.4	%		10.8	%

Operating income in the Industrial Solutions segment increased $15 million in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019. The Industrial Solutions segment’s operating income included the following:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Acquisition-related charges:
Acquisition and integration costs	$	2	$	2
Charges associated with the amortization of acquisition-related fair value adjustments		—		1
		2		3
Restructuring and other charges, net		15		35
Total	$	17	$	38

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Excluding these items, operating income decreased slightly in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019.

Communications Solutions

Net Sales. The following table presents the Communications Solutions segment’s net sales and the percentage of total net sales by industry end market⁽¹⁾:

	For the
	Quarters Ended
	December 27,				December 28,
	2019				2018
	($ in millions)
Data and devices	$	219	59	%	$	257	59	%
Appliances		154	41			176	41
Total	$	373	100	%	$	433	100	%

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

The following table provides an analysis of the change in the Communications Solutions segment’s net sales by industry end market:

	Change in Net Sales for the Quarter Ended December 27, 2019
	versus Net Sales for the Quarter Ended December 28, 2018
	Net Sales				Organic Net Sales
	Growth (Decline)				Growth (Decline)				Translation
	($ in millions)
Data and devices	$	(38)	(14.8)	%	$	(38)	(14.8)	%	$	—
Appliances		(22)	(12.5)			(21)	(11.4)			(1)
Total	$	(60)	(13.9)	%	$	(59)	(13.7)	%	$	(1)

Net sales in the Communications Solutions segment decreased $60 million, or 13.9%, in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019 due primarily to organic net sales declines of 13.7%. Our organic net sales by industry end market were as follows:

● Data and devices—Our organic net sales decreased 14.8% in the first quarter of fiscal 2020 as a result of reduced demand resulting from high inventory levels at distributors and market weakness across all regions.

● Appliances—Our organic net sales decreased 11.4% in the first quarter of fiscal 2020 due to reduced demand resulting from high inventory levels at distributors and market declines in all regions.

Operating Income. The following table presents the Communications Solutions segment’s operating income and operating margin information:

	For the
	Quarters Ended
	December 27,			December 28,
	2019			2018			Change
	($ in millions)
Operating income	$	40		$	52		$	(12)
Operating margin		10.7	%		12.0	%

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Operating income in the Communications Solutions segment decreased $12 million in the first quarter of fiscal 2020 as compared to the first quarter of fiscal 2019. The Communications Solutions segment’s operating income included the following:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
Restructuring and other charges, net	$	5	$	19

Excluding these items, operating income decreased in the first quarter of fiscal 2020 due primarily to lower volume and price erosion.

Liquidity and Capital Resources

Our ability to fund our future capital needs will be affected by our ability to continue to generate cash from operations and may be affected by our ability to access the capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of $350 million of floating rate senior notes due in fiscal 2020, the pending acquisition of First Sensor, and cash spending related to restructuring initiatives. We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions.

Cash Flows from Operating Activities

In the first quarter of fiscal 2020, net cash provided by continuing operating activities increased $83 million to $411 million from $328 million in the first quarter of fiscal 2019. The increase resulted primarily from a reduction in income tax payments and lower incentive compensation payments. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2020 and 2019 was $43 million and $75 million, respectively.

Cash Flows from Investing Activities

Capital expenditures were $176 million and $210 million in the first quarters of fiscal 2020 and 2019, respectively. We expect fiscal 2020 capital spending levels to be approximately 5-6% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.

During the first quarter of fiscal 2020, we acquired two businesses for a combined cash purchase price of $112 million, net of cash acquired. See Note 4 to the Condensed Consolidated Financial Statements for additional information.

During the first quarter of fiscal 2019, we received net cash proceeds of $288 million related to the sale of our SubCom business. See additional information in Note 3 to the Condensed Consolidated Financial Statements.

Cash Flows from Financing Activities and Capitalization

Total debt at December 27, 2019 and September 27, 2019 was $3,973 million and $3,965 million, respectively. See Note 8 to the Condensed Consolidated Financial Statements for additional information regarding debt.

Tyco Electronics Group S.A. (“TEGSA”) has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of November 2023 and total commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at December 27, 2019 or September 27, 2019.

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The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 27, 2019, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future.

In addition to the Credit Facility, TEGSA is the borrower under our senior notes and commercial paper. TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd.

Payments of common share dividends to shareholders were $154 million and $150 million in the first quarters of fiscal 2020 and 2019, respectively.

We repurchased approximately 2 million of our common shares for $143 million and approximately 6 million of our common shares for $495 million under the share repurchase program during the first quarters of fiscal 2020 and 2019, respectively. At December 27, 2019, we had $1.4 billion of availability remaining under our share repurchase authorization.

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.

Guarantees

In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2020 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows.

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 27, 2019, we had outstanding letters of credit, letters of guarantee, and surety bonds of $279 million.

As discussed above, in the first quarter of 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 guarantees had a combined value of approximately $1.2 billion as of December 27, 2019 and are expected to expire at various dates through fiscal 2025. Also, under the terms of the definitive agreement, we are required to issue up to $300 million of new performance guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of up to three years. As of December 27, 2019, there were no such new performance guarantees outstanding. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having

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to perform. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding the divestiture of the SubCom business.

Critical Accounting Policies and Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.

Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019.There were no significant changes to this information during the first quarter of fiscal 2020.

Accounting Pronouncements

See Note 1 to the Condensed Consolidated Financial Statements for information regarding recently adopted accounting pronouncements including adoption of ASU 2016-02 which codified Accounting Standards Codification (“ASC”) 842, Leases.

Non-GAAP Financial Measure

Organic Net Sales Growth (Decline)

We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity.

Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The tables presented in “Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP.

Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts.

Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions,

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divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law.

The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019, could cause our results to differ materially from those expressed in forward-looking statements:

● conditions in the global or regional economies and global capital markets, and cyclical industry conditions;

● conditions affecting demand for products in the industries we serve, particularly the automotive industry;

● competition and pricing pressure;

● market acceptance of our new product introductions and product innovations and product life cycles;

● raw material availability, quality, and cost;

● fluctuations in foreign currency exchange rates and impacts of offsetting hedges;

● financial condition and consolidation of customers and vendors;

● reliance on third-party suppliers;

● risks associated with current and future acquisitions and divestitures;

● global risks of business interruptions such as natural disasters;

● global risks of political, economic, and military instability, including volatile and uncertain economic conditions in China;

● risks associated with security breaches and other disruptions to our information technology infrastructure;

● risks related to compliance with current and future environmental and other laws and regulations;

● our ability to protect our intellectual property rights;

● risks of litigation;

● our ability to operate within the limitations imposed by our debt instruments;

● the possible effects on us of various non-U.S. and U.S. legislative proposals and other initiatives that, if adopted, could materially increase our worldwide corporate effective tax rate and negatively impact our U.S. government contracts business;

● various risks associated with being a Swiss corporation;

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● the impact of fluctuations in the market price of our shares; and

● the impact of certain provisions of our articles of association on unsolicited takeover proposals.

There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposures to market risk during the first quarter of fiscal 2020. For further discussion of our exposures to market risk, refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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 Securities Exchange Act of 1934), as of December 27, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 27, 2019.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 27, 2019, we adopted ASC 842, Leases. In connection with the adoption, we implemented changes to our accounting policies, internal controls, financial statement disclosures, and systems to enable compliance with this new standard. See Notes 1 and 9 to the Condensed Consolidated Financial Statements for additional information regarding adoption of the new standard. There were no other 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.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended September 27, 2019. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019 for additional information regarding legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019. The risk factors described in our Annual Report on Form 10-K, in addition to other information in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information about our purchases of our common shares during the quarter ended December 27, 2019:

					Maximum
				Total Number of	Approximate
				Shares Purchased	Dollar Value
				as Part of	of Shares that May
	Total Number	Average Price		Publicly Announced	Yet Be Purchased
	of Shares	Paid Per		Plans or	Under the Plans
Period	Purchased(1)	Share(1)		Programs(2)	or Programs(2)
September 28–October 25, 2019	493,376	$	91.23	493,200	$	1,455,737,091
October 26–November 29, 2019	715,037		92.58	578,600		1,402,285,398
November 30–December 27, 2019	623,668		92.65	476,700		1,358,100,303
Total	1,832,081	$	92.24	1,548,500

(1) These columns include the following transactions which occurred during the quarter ended December 27, 2019:

(i)the acquisition of 283,581 common shares from individuals in order to satisfy tax withholding requirements in connection with the vesting of restricted share awards issued under equity compensation plans; and

(ii)open market purchases totaling 1,548,500 common shares, summarized on a trade-date basis, in conjunction with the share repurchase program announced in September 2007.

(2) Our share repurchase program authorizes us to purchase a portion of our outstanding common shares from time to time through open market or private transactions, depending on business and market conditions. The share repurchase program does not have an expiration date.

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ITEM 6. EXHIBITS

Exhibit Number		Exhibit
10.1	‡*	TE Connectivity Ltd. Annual Incentive Plan (as amended and restated)
31.1	*	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	**	Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document(1)(2)
101.SCH		XBRL Taxonomy Extension Schema Document(2)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document(2)
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document(2)
101.LAB		XBRL Taxonomy Extension Label Linkbase Document(2)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document(2)
104		Cover Page Interactive Data File(3)

‡ Management contract or compensatory plan or arrangement

* Filed herewith

** Furnished herewith

(1)Submitted electronically with this report in accordance with the provisions of Regulation S-T

(2) The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

(3) Formatted in Inline XBRL and contained in exhibit 101

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TE CONNECTIVITY LTD.
By:	/s/ Heath A. Mitts Heath A. Mitts Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: January 29, 2020

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EX-10.1

Exhibit 10.1

TE  CONNECTIVITY  LTD.

ANNUAL  INCENTIVE  PLAN

(as amended and restated effective December 12, 2019)

TE Connectivity Ltd.

Annual Incentive Plan

I. Purpose.

The purpose of the TE Connectivity Ltd. Annual Incentive Plan (the “Plan”) is to reward the performance of selected Employees who, individually or as members of a group, contribute to the success of TE Connectivity Ltd. (the “Company”) and its subsidiaries, thus providing them a means of sharing in, and an incentive to contribute further to, that success.  The Plan is intended to strengthen the commitment of such Employees by making part of their individual pay dependent on the achievement of corporate financial goals.  The Plan was originally effective as of June 29, 2007 and has been amended and restated several times since.  The effective date of this amended and restated Plan is December 12, 2019.

II. Definitions.

The following words and phrases shall have the meanings set forth below:

“Annual Plan Description” shall mean the written or unwritten procedures and guidelines established or employed by the Committee pursuant to Section III hereof for the purpose of administering the Plan.

“Award” or “Annual Incentive Award” shall mean the bonus payable to a Participant under the Plan for any Plan Year.

“Annual Base Salary” shall mean, unless otherwise provided by the Committee, the annual compensation, excluding bonuses, commissions, overtime, incentive payments, perquisite allowance, non-monetary awards, directors fees and other fees, relocation expenses, auto allowances, imputed income from group term life insurance, and any other non-recurring item, paid to or on behalf of a Participant for employment services rendered to the Company, before reduction for compensation deferred pursuant to all qualified, nonqualified and cafeteria plans of any Company.  The definition of Annual Base Salary may be modified by the Committee or its designee, as is deemed necessary or appropriate to meet the particular circumstances or needs of a particular country, locality or business.  Unless otherwise provided by the Committee, the Award shall be based on the Annual Base Salary as in effect on  September 30th of the Plan Year.

“Board” shall mean the board of directors of TE Connectivity Ltd.  To the extent permissible under applicable law and the operative corporate documentation of the Company, the Board may delegate its authority or discretion to a third party (such as the Company’s Management Development and Compensation Committee or Chief Human Resources Officer (“CHRO”)) and such third party may in turn delegate that authority or discretion to the extent permitted in the Board action.

“Business Unit” shall mean each of the companies or businesses within each Segment.

“Cause” shall mean an Employee’s (i) refusal to perform duties and responsibilities of his or her job as required by the Company, (ii) violation of any fiduciary duty owed to the Company, (iii) conviction of a felony or misdemeanor (or outside of the United States, conviction of a significant crime), (iv) dishonesty, (v) theft, (vi) violation of Company rules or policy, or (vii) other egregious conduct, that has or could have a serious and detrimental impact on the Company and its Employees. Examples of “Cause” may include, but are not limited to, excessive absenteeism, misconduct, insubordination, violation of Company policy (in particular, TE’s Guide to Ethical Conduct and/or TE Policy Avoiding Conflict of Interest), dishonestly, and deliberate unsatisfactory performance (e.g., Employee refuses to improve deficient performance).

“Change in Control” means the first to occur of any of the following events:

(a)any “person” (as defined in Section 13(d) and 14(d) of the Exchange Act, excluding for this purpose, (i) the Company or (ii) any employee benefit plan of the Company (or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan that acquires beneficial ownership of voting securities of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities of the Company representing more than 30 percent of the combined voting power of the Company’s then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; or

(b)persons who, as of December12, 2019 , constitute the Board (the “Incumbent Directors”) cease for any reason (including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction) to constitute at least a majority thereof, provided that any person becoming a director of the Company subsequent to December 12, 2019, shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least 50 percent of the Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened proxy contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as defined in Section 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or

(c)consummation of a reorganization, merger or consolidation or sale or other disposition of at least 80 percent of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own directly or indirectly more than 50 percent of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the

outstanding voting securities of the Company; or

(d)approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

“Committee” shall mean theManagement Development andCompensation Committee of the Board or such otherpersons appointed by the Board to administer the Plan and which also may act for the Company or the Board in making decisions and performing specified duties under the Plan.

“Company” shall mean TE Connectivity Ltd. and any subsidiary and affiliate whose Employees have been selected by the Senior Vice President, Chief Human Resource Officer or his/her delegate to participate in the Plan.  The duties and obligations of the “Company” as they relate to a particular Participant shall refer to the specific entity that employs that Participant at such time and not any other entity, unless otherwise specified.

“Disability” shall mean the Participant's permanent and total incapacity resulting in an inability to engage in any employment for the Company for physical or mental reasons.  Disability shall be deemed to exist only when the Participant meets either the requirements for disability benefits under the Company's long-term disability plan or, if the Company has no such plan applicable to the Participant, the requirements for disability benefits under the Social Security law (or similar law outside the United States) then in effect.

“Employee” shall mean any individual employed by the Company on a regular, full-time basis, other than an individual (a) employed in a casual or temporary capacity (i.e., those hired for a specific job of limited duration), (b) characterized as a “leased employee” within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended, (c) classified by the Company as a flexible part-time employee, or (d) classified by the Company as a “contractor” or “consultant”, no matter how characterized by the Internal Revenue Service, other governmental agency or a court or (e) whose terms of employment are covered by the terms and conditions of a collective bargaining agreement (“CBA”) unless participation is provided for under the CBA.  Any change of characterization of an individual by any court or government agency shall have no effect upon the classification of an individual as an Employee for purposes of this Plan, unless the Committee determines otherwise.

“Exchange Act” shall mean the United States Securities Exchange Act of 1934, as amended.

“U.S. GAAP” shall mean United States generally accepted accounting principles.

“Individual Performance” considers personal work-related factors that the financial formula does not address.

“Participant” shall mean, for any Plan Year, an Employee who satisfies the eligibility requirements of Section IV.

“Performance Measures” are the annual preestablished organizational or Individual Performance criteria selected by the Committee or its designee on which the requirements to earn an Annual Bonus are based.

“Plan” shall mean this TE Connectivity Ltd. Annual Incentive Plan, as from time to time amended and in effect.

“Plan Year” shall mean the fiscal year of the Company or any other period designated by the Committee.

“Retirement” shall mean voluntary termination of employment on or after a Participant has attained the age and other requirements for retirement described in the Annual Plan Description.

“Schedule” shall mean the Performance Measures established for each Plan Year as set out for each business and function.

“Segment” shall mean each of the major business segments within the Company.  As of December 12, 2019 , the Segments of the Company are Transportation Solutions, Industrial Solutions and Communication Solutions.

 “Target Award” is the cash bonus that will be paid for target performance, expressed as a percentage of Annual Base Salary.  A Target Award will be assigned to each Participant at the beginning of the Plan Year based on job level or other competitive guidelines; and may change based on job assignment.

“Termination of Employment” shall mean the cessation of employment with the Company, voluntarily or involuntarily, for any reason.

III. Administration.

The Plan shall be administered by the Committee or its designee consistent with the purpose and the terms of the Plan.  On an annual basis the Committee shall approve, for the overall company and for each Segment and business unit, the Performance Measures selected for the Plan Year to the extent not delegated to the Chief Executive Officer.  The Committee shall have full power and authority to interpret the Plan,, to approve Awards, to make factual determinations, to prescribe, amend and rescind any rules, forms, or Annual Plan Description as the Committee deems necessary or appropriate for the proper administration of the Plan, and to make any other determinations and take such other actions as it deems necessary or advisable in carrying out its duties under the Plan, including the delegation of any such authority or power, where appropriate.  All decisions and determinations by the Committee or its designee shall be final, conclusive and binding on the Company, all Employees, Participants, and Plan beneficiaries, and any other persons having or claiming an interest hereunder.

IV. Eligibility.

Subject to the limitations contained in this Section IV or the Annual Plan Description, and also subject to any local requirements imposed by the Company, including requiring eligible Employees’ acceptance of the terms and conditions of a restrictive covenant agreement as a condition to participation, all Employees identified, either individually or by group classification, are eligible to participate in the Plan.  Employees shall be eligible to receive an Award calculated under only one Schedule of this Plan for any specific period in time.  An Employee may, however, participate in more than one Schedule provided that participation in each such Schedule shall be pro-rated in a manner consistent with the Annual Plan Description.  During any period in which an Employee participates in this Plan (including any sub-program hereunder), he or she may not participate in any other annual incentive compensation program (including other sub-programs under this Plan) offered by the Company, unless otherwise provided by the Committee (or its designee) in its sole discretion.

V. Determination of Awards.

The Committee (or its designee) shall have the authority to enact rules applicable to the payment of awards under the Plan, either for all Participants or for selected Participants (including without limitation by country, business unit or other classification, as are deemed necessary and appropriate as determined by the Committee (or its designee) in its sole and absolute discretion.  Subject to theCommittee’s (or its designee’s) discretion to adjust any Award individually or by class or as otherwise permitted under the rules of the Plan described in the Annual Plan Description, the amount of each Participant’s Award, if any, shall be determined in accordance with the Performance Measures approved for such Participant.  Award calculations are generally based on Segment, Business Unit, or overall Company financial results, or any combination thereof, and are subject to adjustments based on Individual Performance.

VI. Payment of Awards.

The Committee shall determine the level of achievement attained under the Performance Measures applicable under each Schedule.  Awards payable to each Participant under his / her applicable Schedule shall be determined after an assessment of the Participant’s Individual Performance for the Plan Year.  Subject to the provisions of Section VII, authorized Awards shall then be payable in cash in a single sum on the date established by the Committee, or as soon as administratively feasible thereafter, at the end of the Plan Year or another time period, if applicable, provided however, thatall Awards will be paid no later than the 15th day of the third month following the later of, a) the end of the Plan year or b) the last day of the calendar year in which falls the last day of the Plan year, except to the extent that a Participant has elected to defer payment under the terms of a duly authorized deferred compensation arrangement.

Unless otherwise prohibited under applicable law, no Award under the Plan shall be deemed earned until actually paid.  No Participant who commits an act giving rise to Cause shall be entitled to an Award.  In addition, the Committee shall have the authority to establish any other terms and conditions applicable to the Awards (including the mandatory return of all or any portion of an award previously paid) as are deemed necessary and/or appropriate to comply with

applicable rules adopted or to be adopted by the Securities Exchange Commission, New York Stock Exchange or any other governmental agency or stock exchange having the authority to establish rules affecting the payment of compensation under this Plan.

Unless otherwise prohibited under applicable law, a Participant must be employed by the Company as a regular, full-time Employee on the Award payment date in order to receive an Award, or on such other date as may be determined by the Committee for any Plan Year.  A Participant who incurs a Termination of Employment prior to the end of the Plan Year shall not be entitled to an Award except to the extent otherwise required under applicable law.  Notwithstanding the foregoing, in the event of a termination of employment on account of death, Disability, Retirement or divestiture during the Plan Year, or as otherwise provided under the TE Connectivity Corporation Officer or Broad-based Severance Plans, or as otherwise provided by the Committee or its designee, the Company may make a pro rata payment of the Award that would otherwise have been paid to the Participant.  Subject to the provisions of Section VII, authorized Awards shall then be payable in cash in a single sum on the date established by the Committee, or as soon as administratively feasible thereafter.

If a Participant was (a) on an unpaid approved leave of absence during the Plan Year; or (b) not employed by the Company at the beginning of the Plan Year, payment of any Award may be pro-rated.

Notwithstanding any provision herein to the contrary, the Committeeshall have full power and authority to decide, in its sole discretion, exercised consistent with the Company’s best interest, that no Awards or lesser Award amountsshall be paid under the Plan for a given Plan Year or that no Award shall be paid to any one or more Participants.  The Committee shall also have the full power and authority to decide, in its sole discretion, exercised consistent with the Company’s best interest, that greater amounts shall be paid to designated businesses under the Plan for a given year or to any one or more participants. Any such decision by the Committee shall be final, conclusive and binding on the Company, all Employees, Participants, and Plan beneficiaries, and any other persons having or claiming an interest hereunder.

VII. Change in Control.

In the event of a Change in Control, the performance targets established by the Committee for the Plan Year in which the Change in Control occurs shall be deemed to be satisfied at a level of 100% of each Participant’s target amount, and each Participant will be entitled to receive a pro-rated payment of the Award through the date of the Change in Control, unless otherwise provided by the Committee.  In addition, no later than 90 days after the date of Change in Control, the Committee (as constituted prior to the date of Change in Control) shall provide, in its discretion, for any of the following actions to apply to each Award that is outstanding as of the date of Change in Control:  (i) the assumption of such Award by the acquiring or surviving corporation after such Change in Control; or (ii) the payment of such Award by the acquiring or surviving corporation, at the Participant’s request, in cash.  The Committee may specify how an Award will be treated in the event of a Change in Control either when the Award is granted or at any time thereafter.

VIII. Deferred Awards.

Any Participant who is eligible to participate in the TE Connectivity Corporation Supplemental Savings and Retirement Plan, or any successor plan (the “DCP”) and who makes a deferral election in the manner prescribed by the DCP shall have that portion of his/her Award deferred under the DCP.  The Committee shall also have the authority to approve deferral of Awards under any other deferred compensation plan or arrangement sponsored by the company.

IX. Amendment and Termination.

The Plan may be amended, suspended, discontinued or terminated at any time by the Board; provided, however, that no such amendment, suspension, discontinuance or termination shall reduce, or in any manner adversely affect the rights of any Participant with respect to, Awards determined by the Committee to be outstanding as of the effective date of such amendment, suspension, discontinuance or termination.

X. Designation of Beneficiary.

Any payments under the Plan payable to a Participant following the Participant’s death shall be payable to the beneficiary designated on the Participant’s Company-provided life insurance policy or, if none or if there are conflicting beneficiaries, to the Participant’s estate or as otherwise provided by will or under the applicable lows of descent and distribution.

XI. No Implied Rights.

The establishment and operation of the Plan, including the eligibility of a Participant to participate in the Plan shall not be construed as conferring any legal or other right upon any Employee for the continuation of employment through the end of the Plan Year or other period.  The Company expressly reserves the right, which may be exercised at any time and in the Company’s sole discretion, to discharge any individual or treat him or her without regard to the effect that discharge might have upon him or her as a Participant in the Plan.

XII. Adjustment for Non-Recurring Items.

Notwithstanding anything herein to the contrary, the Committee in applying Performance Measures, may, in its discretion, exclude unusual or infrequently occurring items and the cumulative effect of changes in the law, regulations or accounting rules, and may determine to exclude other items, each determined in accordance with U.S. GAAP (to the extent applicable).

XIII. Obligations to Company.

If a Participant has outstanding any debt, obligation, or other liability representing an amount owing to the Company, such Participant’s future Awards under the Plan may be offset, at the Committee’s discretion, to the extent necessary to cover the amounts owing to the Company.  If a Participant receives an Award and such Participant has engaged in acts that the Committee, in its sole discretion, determines to constitute Cause, the amount of such Award shall be treated as a liability of the Participant to the Company that the Company may offset against any amounts otherwise payable to the Participant.

If the Committee or its designee reasonably suspects the Participant has an outstanding debt, obligation, or other liability to the Company, any Award otherwise distributable shall be placed by the Company in escrow but shall earn interest at market rate pending the conclusion of the Committee’s (or its designee’s) investigation.  Following the end of such an investigation, the amount in escrow, reduced by the amount the Participant owes the Company, if any, shall be distributed to the Participant.  All determinations under this Article XIII shall be made by the Committee (or its designee) in its sole discretion.

XIV. Nonalienation of Benefits.

Except as expressly provided herein, no Participant or beneficiary shall have the power or right to transfer other than by will or the laws of descent and distribution, alienate, or otherwise encumber the Participant’s interest under the Plan.  The Company’s obligations under this Plan are not assignable or transferable except to (a) any corporation or partnership which acquires all or substantially all of the Company’s assets or (b) any corporation or partnership into which the Company may be merged or consolidated.  The provisions of the Plan shall inure to the benefit of each Participant and the Participant’s beneficiaries, heirs, executors, administrators or successors in interest.

XV. Withholding Taxes.

The Company may make such provisions and take such action as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether Federal, state or local, to withhold in connection with any Award under the Plan, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Participant (or his estate).  Each Participant, however, shall be responsible for the payment of all individual tax liabilities relating to any such Awards.

XVI. Unfunded Status of Plan.

The Plan is intended to constitute an “unfunded” plan of incentive compensation for Participants.  Awards payable hereunder shall be payable out of the general assets of the Company, and no segregation of any assets whatsoever for such Awards shall be made.  Notwithstanding any segregation of assets or transfer to a grantor trust, with respect to any payments not yet made to a Participant, nothing contained herein shall give any such Participant any rights to assets that are greater than the rights of an unsecured general creditor of the Company.

XVII. Governing Law; Severability.

The Plan and all determinations made and actions taken under the Plan shall be governed by the law of Pennsylvania (excluding the choice of law provisions thereof) and construed accordingly.  If any provision of the Plan is held unlawful or otherwise invalid or unenforceable in whole or in part, unlawfulness, invalidity or unenforceability shall not affect any other parts of the Plan, which parts shall remain in full force and effect.

XVIII. Headings.

Headings are inserted in this Plan for convenience of reference only and are to be ignored in the construction of the provisions of the Plan.

XIX. Gender, Singular and Plural.

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require.  As the context may require, the singular may read as the plural and the plural as the singular.

XX. Notice.

Any notice or filing required or permitted to be given to the Committee (or its designee) under the Plan shall be sufficient if in writing and mailed to the Senior Vice President, Chief Human Resources Officer  at TE Connectivity Ltd., 1050 Westlakes Drive, Berwyn, Pa. 19312, or to such other entity as the Committee (or its designee) may designate from time to time.  Such notice shall be deemed given as to the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

XXI. Overpayments.

In the event that a Participant receives payment for an Award under this Plan that exceeds the amount that the Participant should have received under this Plan (as determined by the Committee or its designee), the Participant shall be required immediately to repay to the Company the excess amount, provided that the Committee or its designee may instead offset such Participant’s future Awards or other forms of compensation including but not limited to base pay, under the Plan to the extent necessary to recoup the amount owed.

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Terrence R. Curtin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of TE Connectivity Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 29, 2020
	/s/ Terrence R. Curtin
	Terrence R. Curtin
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Heath A. Mitts, certify that:

1. I have reviewed this Quarterly Report on Form 10‑Q of TE Connectivity Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 29, 2020
	/s/ Heath A. Mitts
	Heath A. Mitts
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

TE CONNECTIVITY LTD.

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002

The undersigned officers of TE Connectivity Ltd. (the “Company”) hereby certify to their knowledge that the Company’s Quarterly Report on Form 10‑Q for the quarterly period ended December 27, 2019 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Terrence R. Curtin

Terrence R. Curtin

Chief Executive Officer

January 29, 2020

/s/ Heath A. Mitts

Heath A. Mitts

Executive Vice President and Chief Financial Officer

January 29, 2020

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Leases - Future Minimum Lease Payments Under Non-cancelable Operating Lease Obligations (Details) $ in Millions	Sep. 27, 2019 USD ($)
Lease payment obligations
Fiscal 2020	$ 117
Fiscal 2021	102
Fiscal 2022	81
Fiscal 2023	67
Fiscal 2024	55
Thereafter	118
Total	$ 540

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Leases - Components of Lease Cost (Details) $ in Millions	3 Months Ended
	Dec. 27, 2019 USD ($)
Leases
Operating lease cost	$ 27
Variable lease cost	11
Total lease cost	$ 38

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Dec. 27, 2019	Sep. 27, 2019
Current assets:
Cash and cash equivalents	$ 742	$ 927
Accounts receivable, net of allowance for doubtful accounts of $29 and $25, respectively	2,338	2,320
Inventories	2,003	1,836
Prepaid expenses and other current assets	483	471
Total current assets	5,566	5,554
Property, plant, and equipment, net	3,659	3,574
Goodwill	5,846	5,740
Intangible assets, net	1,602	1,596
Deferred income taxes	2,360	2,776
Other assets	943	454
Total assets	19,976	19,694
Current liabilities:
Short-term debt	561	570
Accounts payable	1,433	1,357
Accrued and other current liabilities	1,410	1,613
Total current liabilities	3,404	3,540
Long-term debt	3,412	3,395
Long-term pension and postretirement liabilities	1,365	1,367
Deferred income taxes	142	156
Income taxes	247	239
Other liabilities	849	427
Total liabilities	9,419	9,124
Commitments and contingencies (Note 10)
Shareholders' equity:
Common shares, CHF 0.57 par value, 350,951,381 shares authorized and issued	154	154
Accumulated earnings	12,206	12,256
Treasury shares, at cost, 16,520,951 and 15,862,337 shares, respectively	(1,389)	(1,337)
Accumulated other comprehensive loss	(414)	(503)
Total shareholders' equity	10,557	10,570
Total liabilities and shareholders' equity	$ 19,976	$ 19,694

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Financial Instruments (Tables)

3 Months Ended

Dec. 27, 2019

Cash flow hedges

Schedule of impacts of hedging program

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Gains recorded in other comprehensive income (loss)	$	4	$	19
Gains (losses) excluded from the hedging relationship(1)		(22)		17

(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.

Net investment hedges

Schedule of impacts of hedging program

		For the
		Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Foreign currency exchange gains (losses) on intercompany loans and external borrowings(1)	$	(65)	$	76
Losses on cross-currency swap contracts designated as hedges of net investment(2)		(33)		(5)

(1) Foreign currency exchange gains and losses on intercompany loans and external borrowings are recorded as currency translation, a component of accumulated other comprehensive income (loss), and are offset by changes attributable to the translation of the net investment.

(2) Gains and losses on cross-currency swap contracts designated as hedges of net investment are recorded as currency translation.

Cross-currency swap contracts | Cash flow hedges

Summary of fair value of derivative instruments

	December 27,		September 27,
	2019		2019
	(in millions)
Other assets	$	6	$	19
Other liabilities		5		—

Cross-currency swap contracts | Net investment hedges

Summary of fair value of derivative instruments

	December 27,		September 27,
	2019		2019
	(in millions)
Prepaid expenses and other current assets	$	16	$	27
Other assets		26		46
Accrued and other current liabilities		7		2
Other liabilities		—		1

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Share Plans (Tables)

3 Months Ended

Dec. 27, 2019

Share Plans

Share-based compensation expense

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Share-based compensation expense	$	22	$	23

Summary of share-based award activity

		Grant-Date
	Shares	Fair Value
	(in millions)
Share options	1.5	$	15.52
Restricted share awards	0.5		93.63
Performance share awards	0.2		93.63

Weighted-average assumptions

Expected share price volatility		21	%
Risk-free interest rate		1.8	%
Expected annual dividend per share	$	1.84
Expected life of options (in years)		5.1

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Basis of Presentation and Accounting Policies

3 Months Ended

Dec. 27, 2019

Basis of Presentation and Accounting Policies

Basis of Presentation and Accounting Policies

1. Basis of Presentation and Accounting Policies

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 27, 2019.

Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2020 and fiscal 2019 are to our fiscal years ending September 25, 2020 and ended September 27, 2019, respectively.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2016-02 which codified Accounting Standards Codification (“ASC”) 842, Leases. This guidance, as subsequently amended, requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for most leases. We adopted ASC 842, as amended, in the quarter ended December 27, 2019 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 Condensed Consolidated Balance Sheet. Adoption did not have a material impact on our results of operations or cash flows. See Note 9 for additional information regarding leases.

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Financial Instruments

3 Months Ended

Dec. 27, 2019

Financial Instruments

Financial Instruments

11. Financial Instruments

Foreign Currency Exchange Rate Risk

During fiscal 2015, we entered into cross-currency swap contracts with an aggregate notional value of €1,000 million to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. 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 5.33% per annum. Upon the maturity of these contracts in fiscal 2022, we will pay the notional value of the contracts in 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.

At December 27, 2019 and September 27, 2019, these cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Other assets	$	6	$	19
Other liabilities		5		—

At December 27, 2019 and September 27, 2019, 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 27,		December 28,
	2019		2018
	(in millions)
Gains recorded in other comprehensive income (loss)	$	4	$	19
Gains (losses) excluded from the hedging relationship(1)		(22)		17

(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 $3,296 million and $3,374 million at December 27, 2019 and September 27, 2019, 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 $2,283 million and $1,844 million at December 27, 2019 and September 27, 2019, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 2.76% per annum and pay no interest. Upon the maturity of these contracts at various dates through fiscal 2023, 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.

At December 27, 2019 and September 27, 2019, these cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Prepaid expenses and other current assets	$	16	$	27
Other assets		26		46
Accrued and other current liabilities		7		2
Other liabilities		—		1

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

		For the
		Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Foreign currency exchange gains (losses) on intercompany loans and external borrowings(1)	$	(65)	$	76
Losses on cross-currency swap contracts designated as hedges of net investment(2)		(33)		(5)

(1) Foreign currency exchange gains and losses on intercompany loans and external borrowings are recorded as currency translation, a component of accumulated other comprehensive income (loss), and are offset by changes attributable to the translation of the net investment.

(2) Gains and losses on cross-currency swap contracts designated as hedges of net investment are recorded as currency translation.

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Intangible Assets, Net

3 Months Ended

Dec. 27, 2019

Intangible Assets, Net

Intangible Assets, Net

7. Intangible Assets, Net

Intangible assets consisted of the following:

	December 27, 2019						September 27, 2019
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
	(in millions)
Customer relationships	$	1,561	$	(486)	$	1,075	$	1,513	$	(459)	$	1,054
Intellectual property		1,269		(758)		511		1,260		(734)		526
Other		33		(17)		16		33		(17)		16
Total	$	2,863	$	(1,261)	$	1,602	$	2,806	$	(1,210)	$	1,596

Intangible asset amortization expense was $45 million for both the quarters ended December 27, 2019 and December 28, 2018.

At December 27, 2019, the aggregate amortization expense on intangible assets is expected to be as follows:

	(in millions)
Remainder of fiscal 2020	$	137
Fiscal 2021		180
Fiscal 2022		180
Fiscal 2023		179
Fiscal 2024		149
Fiscal 2025		129
Thereafter		648
Total	$	1,602

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Discontinued Operations

3 Months Ended

Dec. 27, 2019

Discontinued Operations

Discontinued Operations

3. Discontinued Operations

During the quarter ended December 28, 2018, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $288 million and incurred a pre-tax loss on sale of $96 million, related primarily to the recognition of cumulative translation adjustment losses of $67 million and certain guarantee liabilities. The SubCom business met the held for sale and discontinued operations criteria and was reported as such in all periods presented on the Condensed Consolidated Financial Statements. Prior to reclassification to discontinued operations, the SubCom business was included in the Communications Solutions segment.

In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed as of the date of sale. These guarantees had a combined value of approximately $1.2 billion as of December 27, 2019 and are expected to expire at various dates through fiscal 2025. Also, under the terms of the definitive agreement, we are required to issue up to $300 million of new performance guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of up to three years. As of December 27, 2019, there were no such new performance guarantees outstanding. We have contractual recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do not anticipate having to perform.

The following table presents the summarized components of loss from discontinued operations, net of income taxes for the quarter ended December 28, 2018:

	(in millions)
Net sales	$	41
Cost of sales		(50)
Operating expenses		(10)
Pre-tax loss from discontinued operations		(19)
Pre-tax loss on sale of discontinued operations		(96)
Income tax benefit		8
Loss from discontinued operations, net of income taxes	$	(107)

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Basis of Presentation and Accounting Policies (Policies)

3 Months Ended

Dec. 27, 2019

Basis of Presentation and Accounting Policies

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2016-02 which codified Accounting Standards Codification (“ASC”) 842, Leases. This guidance, as subsequently amended, requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset for most leases. We adopted ASC 842, as amended, in the quarter ended December 27, 2019 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 Condensed Consolidated Balance Sheet. Adoption did not have a material impact on our results of operations or cash flows. See Note 9 for additional information regarding leases.

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Shareholders' Equity

3 Months Ended

Dec. 27, 2019

Shareholders' Equity

Shareholders' Equity

15. Shareholders’ Equity

Dividends

We paid cash dividends to shareholders as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
Dividends paid per common share	$	0.46	$	0.44

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to shareholders’ equity. At December 27, 2019 and September 27, 2019, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $154 million and $308 million, respectively.

Share Repurchase Program

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

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Number of common shares repurchased		2		6
Repurchase value	$	143	$	495

At December 27, 2019, we had $1.4 billion of availability remaining under our share repurchase authorization.

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Tyco Electronics Group S.A. - Operations (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Statement of Operations Detail:
Net sales	$ 3,168	$ 3,347
Cost of sales	2,138	2,233
Gross margin	1,030	1,114
Selling, general, and administrative expenses, net	367	389
Research, development, and engineering expenses	161	161
Acquisition and integration costs	7	5
Restructuring and other charges, net	24	75
Operating income	471	484
Interest income	6	5
Interest expense	(12)	(27)
Other income (expense), net	5	(1)
Income from continuing operations before income taxes	470	461
Income tax expense	(447)	(78)
Income from continuing operations	23	383
Income (loss) from discontinued operations, net of income taxes	3	(107)
Net income	26	276
Other comprehensive income	89	49
Comprehensive income	115	325
Consolidating Adjustments
Statement of Operations Detail:
Equity in net income of subsidiaries	(175)	(830)
Equity in net income (loss) of subsidiaries of discontinued operations	(3)	156
Income from continuing operations before income taxes	(178)	(674)
Income from continuing operations	(178)	(674)
Net income	(178)	(674)
Other comprehensive income	(197)	(84)
Comprehensive income	(375)	(758)
TE Connectivity Ltd. | Reportable entities
Statement of Operations Detail:
Selling, general, and administrative expenses, net	26	35
Acquisition and integration costs	1
Operating income	(27)	(35)
Equity in net income of subsidiaries	74	441
Equity in net income (loss) of subsidiaries of discontinued operations	3	(107)
Intercompany interest income (expense), net	(24)	(23)
Income from continuing operations before income taxes	26	276
Income from continuing operations	26	276
Net income	26	276
Other comprehensive income	89	49
Comprehensive income	115	325
Intercompany transaction gains (losses)	14
TEGSA | Reportable entities
Statement of Operations Detail:
Selling, general, and administrative expenses, net	16	(107)
Operating income	(16)	107
Interest expense	(10)	(27)
Equity in net income of subsidiaries	101	389
Equity in net income (loss) of subsidiaries of discontinued operations		(49)
Intercompany interest income (expense), net	(1)	(28)
Income from continuing operations before income taxes	74	392
Income from continuing operations	74	392
Income (loss) from discontinued operations, net of income taxes	3	(58)
Net income	77	334
Other comprehensive income	89	49
Comprehensive income	166	383
Intercompany transaction gains (losses)	(13)	110
Other Subsidiaries | Reportable entities
Statement of Operations Detail:
Net sales	3,168	3,347
Cost of sales	2,138	2,233
Gross margin	1,030	1,114
Selling, general, and administrative expenses, net	325	461
Research, development, and engineering expenses	161	161
Acquisition and integration costs	6	5
Restructuring and other charges, net	24	75
Operating income	514	412
Interest income	6	5
Interest expense	(2)
Other income (expense), net	5	(1)
Intercompany interest income (expense), net	25	51
Income from continuing operations before income taxes	548	467
Income tax expense	(447)	(78)
Income from continuing operations	101	389
Income (loss) from discontinued operations, net of income taxes		(49)
Net income	101	340
Other comprehensive income	108	35
Comprehensive income	$ 209	$ 375

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Segment and Geographic Data - Net Sales by Segment and Industry End Market (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Segment and Geographic Data
Net sales	$ 3,168	$ 3,347
Transportation Solutions
Segment and Geographic Data
Net sales	1,868	1,986
Transportation Solutions | Automotive
Segment and Geographic Data
Net sales	1,405	1,469
Transportation Solutions | Commercial transportation
Segment and Geographic Data
Net sales	258	297
Transportation Solutions | Sensors
Segment and Geographic Data
Net sales	205	220
Industrial Solutions
Segment and Geographic Data
Net sales	927	928
Industrial Solutions | Aerospace, defense, oil, and gas
Segment and Geographic Data
Net sales	309	285
Industrial Solutions | Industrial equipment
Segment and Geographic Data
Net sales	263	315
Industrial Solutions | Medical
Segment and Geographic Data
Net sales	179	168
Industrial Solutions | Energy
Segment and Geographic Data
Net sales	176	160
Communications Solutions
Segment and Geographic Data
Net sales	373	433
Communications Solutions | Data and devices
Segment and Geographic Data
Net sales	219	257
Communications Solutions | Appliances
Segment and Geographic Data
Net sales	$ 154	$ 176

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Income Taxes
Income tax expense	$ 447	$ 78
Income tax expense related to tax impacts of Swiss Tax Reform	355
Unrecognized income tax benefits, approximate amount that could be resolved in next twelve months	$ 100
Liabilities sharing percent, entity	31.00%
Liabilities sharing percent, Tyco International	27.00%
Liabilities sharing percent, Covidien	42.00%

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Restructuring and Other Charges, Net - Actions (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Restructuring Charges
Charges Incurred	$ 24	$ 75
Fiscal 2020 Actions
Restructuring Charges
Charges Incurred	15
Remaining Expected Charges	5
Fiscal 2019 Actions
Restructuring Charges
Charges Incurred	7	67
Remaining Expected Charges	25
Pre-Fiscal 2019 Actions
Restructuring Charges
Charges Incurred	$ 2	$ 8

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Acquisitions (Details) € in Millions, $ in Millions	3 Months Ended
	Dec. 27, 2019 USD ($) item	Sep. 25, 2020 EUR (€)
Acquisitions
Net cash paid	$ 115
2020 Acquisitions
Acquisitions
Net cash paid	$ 112
Number of businesses acquired | item	2
Expected | First Sensor AG
Acquisitions
Percentage of voting interest acquired		72.00%
Total transaction value | €		€ 330

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Restructuring and Other Charges, Net (Tables)

3 Months Ended

Dec. 27, 2019

Restructuring and Other Charges, Net

Net restructuring charges by segment

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	4	$	21
Industrial Solutions		15		35
Communications Solutions		5		19
Restructuring charges, net	$	24	$	75

Summary of activity in restructuring reserves

	Balance at										Currency		Balance at
	September 27,				Changes in		Cash		Non-Cash		Translation		December 27,
	2019		Charges		Estimate		Payments		Items		and Other		2019
	(in millions)
Fiscal 2020 Actions:
Employee severance	$	—	$	15	$	—	$	(1)	$	—	$	—	$	14
Fiscal 2019 Actions:
Employee severance		188		5		(3)		(23)		(1)		3		169
Facility and other exit costs		1		1		—		(2)		—		2		2
Property, plant, and equipment		—		4		—		—		(4)		—		—
Total		189		10		(3)		(25)		(5)		5		171
Pre-Fiscal 2019 Actions:
Employee severance		73		1		(3)		(18)		—		1		54
Facility and other exit costs		2		4		—		(5)		—		—		1
Total		75		5		(3)		(23)		—		1		55
Total Activity	$	264	$	30	$	(6)	$	(49)	$	(5)	$	6	$	240

Restructuring reserves included on Consolidated Balance Sheets

	December 27,		September 27,
	2019		2019
	(in millions)
Accrued and other current liabilities	$	215	$	245
Other liabilities		25		19
Restructuring reserves	$	240	$	264

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Share Plans

3 Months Ended

Dec. 27, 2019

Share Plans

Share Plans

16. Share Plans

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

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Share-based compensation expense	$	22	$	23

As of December 27, 2019, there was $176 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 2.4 years.

During the quarter ended December 27, 2019, we granted the following share-based awards as part of our annual incentive plan grant:

		Grant-Date
	Shares	Fair Value
	(in millions)
Share options	1.5	$	15.52
Restricted share awards	0.5		93.63
Performance share awards	0.2		93.63

As of December 27, 2019, we had 15 million shares available for issuance under our stock and incentive plans, of which the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of March 8, 2017, was the primary plan.

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		21	%
Risk-free interest rate		1.8	%
Expected annual dividend per share	$	1.84
Expected life of options (in years)		5.1

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Segment and Geographic Data - Net Sales by Geographic Region and Segment (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Segment and Geographic Data
Net sales	$ 3,168	$ 3,347
Transportation Solutions
Segment and Geographic Data
Net sales	1,868	1,986
Industrial Solutions
Segment and Geographic Data
Net sales	927	928
Communications Solutions
Segment and Geographic Data
Net sales	373	433
Total Europe/Middle East/Africa
Segment and Geographic Data
Net sales	1,097	1,171
Total Europe/Middle East/Africa | Transportation Solutions
Segment and Geographic Data
Net sales	702	756
Total Europe/Middle East/Africa | Industrial Solutions
Segment and Geographic Data
Net sales	340	350
Total Europe/Middle East/Africa | Communications Solutions
Segment and Geographic Data
Net sales	55	65
Total Asia-Pacific
Segment and Geographic Data
Net sales	1,113	1,173
Total Asia-Pacific | Transportation Solutions
Segment and Geographic Data
Net sales	742	764
Total Asia-Pacific | Industrial Solutions
Segment and Geographic Data
Net sales	145	155
Total Asia-Pacific | Communications Solutions
Segment and Geographic Data
Net sales	226	254
Total Americas
Segment and Geographic Data
Net sales	958	1,003
Total Americas | Transportation Solutions
Segment and Geographic Data
Net sales	424	466
Total Americas | Industrial Solutions
Segment and Geographic Data
Net sales	442	423
Total Americas | Communications Solutions
Segment and Geographic Data
Net sales	$ 92	$ 114

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Earnings Per Share (Details) - shares shares in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Earnings Per Share
Basic (in shares)	335	342
Dilutive impact of share-based compensation arrangements (in shares)	2	2
Diluted (in shares)	337	344
Share options
Antidilutive shares excluded from computation of earnings per share
Antidilutive share options	3	1

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Tyco Electronics Group S.A. - Balance Sheet (Details) - USD ($) $ in Millions	Dec. 27, 2019	Sep. 27, 2019	Dec. 28, 2018	Sep. 28, 2018
Current assets:
Cash and cash equivalents	$ 742	$ 927
Accounts receivable, net	2,338	2,320
Inventories	2,003	1,836
Prepaid expenses and other current assets	483	471
Total current assets	5,566	5,554
Property, plant, and equipment, net	3,659	3,574
Goodwill	5,846	5,740
Intangible assets, net	1,602	1,596
Deferred income taxes	2,360	2,776
Other assets	943	454
Total assets	19,976	19,694
Current liabilities:
Short-term debt	561	570
Accounts payable	1,433	1,357
Accrued and other current liabilities	1,410	1,613
Total current liabilities	3,404	3,540
Long-term debt	3,412	3,395
Long-term pension and postretirement liabilities	1,365	1,367
Deferred income taxes	142	156
Income taxes	247	239
Other liabilities	849	427
Total liabilities	9,419	9,124
Total shareholders' equity	10,557	10,570	$ 10,236	$ 10,831
Total liabilities and shareholders' equity	19,976	19,694
Consolidating Adjustments
Current assets:
Intercompany receivables	(3,366)	(3,068)
Total current assets	(3,366)	(3,068)
Investment in subsidiaries	(42,338)	(42,201)
Intercompany loans receivable	(18,784)	(18,595)
Total assets	(64,488)	(63,864)
Current liabilities:
Intercompany payables	(3,366)	(3,068)
Total current liabilities	(3,366)	(3,068)
Intercompany loans payable	(18,784)	(18,595)
Total liabilities	(22,150)	(21,663)
Total shareholders' equity	(42,338)	(42,201)
Total liabilities and shareholders' equity	(64,488)	(63,864)
TE Connectivity Ltd. | Reportable entities
Current assets:
Intercompany receivables	51	49
Prepaid expenses and other current assets	6	4
Total current assets	57	53
Investment in subsidiaries	13,994	13,865
Total assets	14,051	13,918
Current liabilities:
Accounts payable	1	1
Accrued and other current liabilities	178	328
Intercompany payables	3,315	3,019
Total current liabilities	3,494	3,348
Total liabilities	3,494	3,348
Total shareholders' equity	10,557	10,570
Total liabilities and shareholders' equity	14,051	13,918
TEGSA | Reportable entities
Current assets:
Intercompany receivables	3,253	2,959
Prepaid expenses and other current assets	29	36
Total current assets	3,282	2,995
Investment in subsidiaries	28,344	28,336
Intercompany loans receivable	2,595	2,562
Other assets	38	72
Total assets	34,259	33,965
Current liabilities:
Short-term debt	559	568
Accrued and other current liabilities	66	57
Total current liabilities	625	625
Long-term debt	3,412	3,395
Intercompany loans payable	16,189	16,033
Other liabilities	39	47
Total liabilities	20,265	20,100
Total shareholders' equity	13,994	13,865
Total liabilities and shareholders' equity	34,259	33,965
Other Subsidiaries | Reportable entities
Current assets:
Cash and cash equivalents	742	927
Accounts receivable, net	2,338	2,320
Inventories	2,003	1,836
Intercompany receivables	62	60
Prepaid expenses and other current assets	448	431
Total current assets	5,593	5,574
Property, plant, and equipment, net	3,659	3,574
Goodwill	5,846	5,740
Intangible assets, net	1,602	1,596
Deferred income taxes	2,360	2,776
Intercompany loans receivable	16,189	16,033
Other assets	905	382
Total assets	36,154	35,675
Current liabilities:
Short-term debt	2	2
Accounts payable	1,432	1,356
Accrued and other current liabilities	1,166	1,228
Intercompany payables	51	49
Total current liabilities	2,651	2,635
Intercompany loans payable	2,595	2,562
Long-term pension and postretirement liabilities	1,365	1,367
Deferred income taxes	142	156
Income taxes	247	239
Other liabilities	810	380
Total liabilities	7,810	7,339
Total shareholders' equity	28,344	28,336
Total liabilities and shareholders' equity	$ 36,154	$ 35,675

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Restructuring and Other Charges, Net - Restructuring Reserve Activity (Details) $ in Millions	3 Months Ended
	Dec. 27, 2019 USD ($)
Restructuring reserve
Restructuring reserve at the beginning of the period	$ 264
Charges	30
Changes in Estimate	(6)
Cash Payments	(49)
Non-Cash Items	(5)
Currency Translation and Other	6
Restructuring reserve at the end of the period	240
Fiscal 2020 Actions | Employee severance
Restructuring reserve
Charges	15
Cash Payments	(1)
Restructuring reserve at the end of the period	14
Fiscal 2019 Actions
Restructuring reserve
Restructuring reserve at the beginning of the period	189
Charges	10
Changes in Estimate	(3)
Cash Payments	(25)
Non-Cash Items	(5)
Currency Translation and Other	5
Restructuring reserve at the end of the period	171
Fiscal 2019 Actions | Employee severance
Restructuring reserve
Restructuring reserve at the beginning of the period	188
Charges	5
Changes in Estimate	(3)
Cash Payments	(23)
Non-Cash Items	(1)
Currency Translation and Other	3
Restructuring reserve at the end of the period	169
Fiscal 2019 Actions | Facility and other exit costs
Restructuring reserve
Restructuring reserve at the beginning of the period	1
Charges	1
Cash Payments	(2)
Currency Translation and Other	2
Restructuring reserve at the end of the period	2
Fiscal 2019 Actions | Property, plant, and equipment
Restructuring reserve
Charges	4
Non-Cash Items	(4)
Pre-Fiscal 2019 Actions
Restructuring reserve
Restructuring reserve at the beginning of the period	75
Charges	5
Changes in Estimate	(3)
Cash Payments	(23)
Currency Translation and Other	1
Restructuring reserve at the end of the period	55
Pre-Fiscal 2019 Actions | Employee severance
Restructuring reserve
Restructuring reserve at the beginning of the period	73
Charges	1
Changes in Estimate	(3)
Cash Payments	(18)
Currency Translation and Other	1
Restructuring reserve at the end of the period	54
Pre-Fiscal 2019 Actions | Facility and other exit costs
Restructuring reserve
Restructuring reserve at the beginning of the period	2
Charges	4
Cash Payments	(5)
Restructuring reserve at the end of the period	$ 1

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Discontinued Operations - Summary Information (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Income (loss) from discontinued operations, net of income taxes
Net sales		$ 41
Cost of sales		(50)
Operating expenses		(10)
Pre-tax loss from discontinued operations		(19)
Pre-tax loss on sale of discontinued operations		(96)
Income tax benefit		8
Income (loss) from discontinued operations, net of income taxes	$ 3	$ (107)

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Tyco Electronics Group S.A. - Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities	$ 411	$ 328
Net cash used in discontinued operating activities		(31)
Net cash provided by operating activities	411	297
Cash flows from investing activities:
Capital expenditures	(176)	(210)
Acquisition of businesses, net of cash acquired	(115)
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation		288
Other	2	4
Net cash provided by (used in) continuing investing activities	(289)	82
Net cash used in discontinued investing activities		(2)
Net cash provided by (used in) investing activities	(289)	80
Cash flows from financing activities:
Net increase (decrease) in commercial paper	(9)	63
Proceeds from issuance of debt		350
Repayment of debt		(441)
Proceeds from exercise of share options	14	7
Repurchase of common shares	(139)	(519)
Payment of common share dividends to shareholders	(154)	(150)
Transfers to discontinued operations		(33)
Other	(26)	(29)
Net cash used in continuing financing activities	(314)	(752)
Net cash provided by discontinued financing activities		33
Net cash used in financing activities	(314)	(719)
Effect of currency translation on cash	7	(1)
Net decrease in cash, cash equivalents, and restricted cash	(185)	(343)
Cash, cash equivalents, and restricted cash at beginning of period	927	848
Cash, cash equivalents, and restricted cash at end of period	742	505
Consolidating Adjustments
Cash flows from operating activities:
Net cash provided by operating activities	(458)
Cash flows from investing activities:
Change in intercompany loans	149	25
Net cash provided by (used in) continuing investing activities		25
Net cash provided by (used in) investing activities	149	25
Cash flows from financing activities:
Intercompany distributions	458
Loan activity with parent	(149)	(25)
Net cash used in continuing financing activities		(25)
Net cash used in financing activities	309	(25)
TE Connectivity Ltd. | Reportable entities
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities		(73)
Net cash provided by operating activities	(69)	(73)
Cash flows from financing activities:
Changes in parent company equity	46	23
Repurchase of common shares	(119)	(519)
Payment of common share dividends to shareholders	(154)	(150)
Loan activity with parent	296	719
Net cash used in continuing financing activities		73
Net cash used in financing activities	69	73
TEGSA | Reportable entities
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities		(9)
Net cash provided by operating activities	462	(9)
Cash flows from investing activities:
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation		303
Change in intercompany loans	(149)	(25)
Net cash provided by (used in) continuing investing activities		278
Net cash provided by (used in) investing activities	(149)	278
Cash flows from financing activities:
Changes in parent company equity	(304)	(240)
Net increase (decrease) in commercial paper	(9)	63
Proceeds from issuance of debt		350
Repayment of debt		(441)
Other		(1)
Net cash used in continuing financing activities		(269)
Net cash used in financing activities	(313)	(269)
Other Subsidiaries | Reportable entities
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities		410
Net cash used in discontinued operating activities		(31)
Net cash provided by operating activities	476	379
Cash flows from investing activities:
Capital expenditures	(176)	(210)
Acquisition of businesses, net of cash acquired	(115)
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation		(15)
Other	2	4
Net cash provided by (used in) continuing investing activities		(221)
Net cash used in discontinued investing activities		(2)
Net cash provided by (used in) investing activities	(289)	(223)
Cash flows from financing activities:
Changes in parent company equity	258	217
Proceeds from exercise of share options	14	7
Repurchase of common shares	(20)
Intercompany distributions	(458)
Loan activity with parent	(147)	(694)
Transfers to discontinued operations		(33)
Other	(26)	(28)
Net cash used in continuing financing activities		(531)
Net cash provided by discontinued financing activities		33
Net cash used in financing activities	(379)	(498)
Effect of currency translation on cash	7	(1)
Net decrease in cash, cash equivalents, and restricted cash	(185)	(343)
Cash, cash equivalents, and restricted cash at beginning of period	927	848
Cash, cash equivalents, and restricted cash at end of period	$ 742	$ 505

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Commitments and Contingencies (Details) $ in Millions	Dec. 27, 2019 USD ($)
Loss Contingencies
Accrual environmental loss contingency, estimate of probable loss	$ 18
Minimum
Loss Contingencies
Accrual environmental loss contingency, estimate of probable loss	14
Maximum
Loss Contingencies
Accrual environmental loss contingency, estimate of probable loss	45
Outstanding Letters of Credit, Letters of Guarantee, and Surety Bonds
Guarantees
Guarantor obligations, maximum exposure	$ 279

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Leases - Balance Sheet Information (Details) $ in Millions	Dec. 27, 2019 USD ($)
Leases
Operating lease ROU assets	$ 506
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other Assets, Noncurrent
Operating lease liabilities, current	$ 122
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other Liabilities, Current
Operating lease liabilities, non-current	$ 397
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent
Total operating lease liabilities	$ 519
Weighted-average remaining lease term (in years) - Operating leases	6 years 1 month 6 days
Weighted-average discount rate (as a percent) - Operating leases	1.30%

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Leases (Tables)

3 Months Ended

Dec. 27, 2019

Leases

Schedule of components of lease cost

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Operating lease cost	$	27
Variable lease cost		11
Total lease cost	$	38

Schedule of Balance Sheet information related to leases

	December 27,
	2019
	($ in millions)
Operating lease ROU assets:
Other assets	$	506
Operating lease liabilities:
Accrued and other current liabilities	$	122
Other liabilities		397
Total operating lease liabilities	$	519
Weighted-average remaining lease term (in years)		6.1
Weighted-average discount rate		1.3	%

Schedule of Cash Flow information, including significant non-cash transactions, related to leases

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)	$	26
ROU assets obtained in exchange for new operating lease liabilities(2)		525

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

(2) Includes ROU assets obtained in connection with the adoption of ASC 842.

Schedule of maturities of operating lease liabilities

	(in millions)
Remainder of fiscal 2020	$	91
Fiscal 2021		105
Fiscal 2022		85
Fiscal 2023		72
Fiscal 2024		60
Thereafter		126
Total lease payments		539
Less: interest		(20)
Present value of lease liabilities	$	519

Schedule of minimum lease payment obligations under ASC 840

The following table, which was included in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019 and presented in accordance with the previous lease accounting standard, presents the future minimum lease payments under non-cancelable operating lease obligations as of September 27, 2019:

	(in millions)
Fiscal 2020	$	117
Fiscal 2021		102
Fiscal 2022		81
Fiscal 2023		67
Fiscal 2024		55
Thereafter		118
Total	$	540

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Restructuring and Other Charges, Net

3 Months Ended

Dec. 27, 2019

Restructuring and Other Charges, Net

Restructuring and Other Charges, Net

2. Restructuring and Other Charges, Net

Net restructuring charges by segment were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	4	$	21
Industrial Solutions		15		35
Communications Solutions		5		19
Restructuring charges, net	$	24	$	75

Activity in our restructuring reserves was as follows:

	Balance at										Currency		Balance at
	September 27,				Changes in		Cash		Non-Cash		Translation		December 27,
	2019		Charges		Estimate		Payments		Items		and Other		2019
	(in millions)
Fiscal 2020 Actions:
Employee severance	$	—	$	15	$	—	$	(1)	$	—	$	—	$	14
Fiscal 2019 Actions:
Employee severance		188		5		(3)		(23)		(1)		3		169
Facility and other exit costs		1		1		—		(2)		—		2		2
Property, plant, and equipment		—		4		—		—		(4)		—		—
Total		189		10		(3)		(25)		(5)		5		171
Pre-Fiscal 2019 Actions:
Employee severance		73		1		(3)		(18)		—		1		54
Facility and other exit costs		2		4		—		(5)		—		—		1
Total		75		5		(3)		(23)		—		1		55
Total Activity	$	264	$	30	$	(6)	$	(49)	$	(5)	$	6	$	240

Fiscal 2020 Actions

During fiscal 2020, we initiated a restructuring program associated with footprint consolidation and structural improvements across all segments. In connection with this program, during the quarter ended December 27, 2019, we recorded restructuring charges of $15 million. We expect to complete all restructuring actions commenced during the quarter ended December 27, 2019 by the end of fiscal 2021 and to incur additional charges of approximately $5 million.

Fiscal 2019 Actions

During fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural improvements impacting all segments. In connection with this program, during the quarters ended December 27, 2019 and December 28, 2018, we recorded net restructuring charges of $7 million and $67 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2019 by the end of fiscal 2021 and to incur additional charges of approximately $25 million related primarily to employee severance and facility exit costs in the Transportation Solutions and Industrial Solutions segments.

Pre-Fiscal 2019 Actions

Prior to fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural improvements primarily impacting the Industrial Solutions and Transportation Solutions segments. Also prior to fiscal 2019, we initiated a restructuring program associated with footprint consolidation related to recent acquisitions and structural improvements impacting all segments. During the quarters ended December 27, 2019 and December 28, 2018, we recorded net restructuring charges of $2 million and $8 million, respectively, related to pre-fiscal 2019 actions. We expect additional charges related to pre-fiscal 2019 actions to be insignificant.

Total Restructuring Reserves

Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:

	December 27,		September 27,
	2019		2019
	(in millions)
Accrued and other current liabilities	$	215	$	245
Other liabilities		25		19
Restructuring reserves	$	240	$	264

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Shareholders' Equity (Tables)

3 Months Ended

Dec. 27, 2019

Shareholders' Equity

Schedule of cash dividends to shareholders

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
Dividends paid per common share	$	0.46	$	0.44

Schedule of common shares repurchased

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Number of common shares repurchased		2		6
Repurchase value	$	143	$	495

XML

Document and Entity Information - shares	3 Months Ended
	Dec. 27, 2019	Jan. 24, 2020
Document and Entity Information
Entity Registrant Name	TE CONNECTIVITY LTD.
Entity Central Index Key	0001385157
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 27, 2019
Document Transition Report	false
Entity File Number	001-33260
Entity Incorporation, State or Country Code	V8
Entity Tax Identification Number	98-0518048
Entity Address, Address Line One	Mühlenstrasse 26
Entity Address, City or Town	Schaffhausen
Entity Address, Country	CH
Entity Address, Postal Zip Code	CH-8200
Country Region	+41
City Area Code	(0)52
Local Phone Number	633 66 61
Title of 12(b) Security	Common Shares, Par Value CHF 0.57
Trading Symbol	TEL
Security Exchange Name	NYSE
Amendment Flag	false
Current Fiscal Year End Date	--09-25
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		334,142,101
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) $ in Millions	Dec. 27, 2019 SFr / shares	Dec. 27, 2019 USD ($) shares	Sep. 27, 2019 SFr / shares	Sep. 27, 2019 USD ($) shares
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars) | $		$ 29		$ 25
Common shares, par value (in currency per share) | SFr / shares	SFr 0.57		SFr 0.57
Common shares, shares authorized		350,951,381		350,951,381
Common shares, shares issued		350,951,381		350,951,381
Treasury shares		16,520,951		15,862,337

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Debt

3 Months Ended

Dec. 27, 2019

Debt

Debt

8. Debt

As of December 27, 2019, Tyco Electronics Group S.A. (“TEGSA’), our 100%-owned subsidiary, had $210 million of commercial paper outstanding at a weighted-average interest rate of 1.85%. TEGSA had $219 million of commercial paper outstanding at a weighted-average interest rate of 2.20% at September 27, 2019.

The fair value of our debt, based on indicative valuations, was approximately $4,292 million and $4,278 million at December 27, 2019 and September 27, 2019, respectively.

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Acquisitions

3 Months Ended

Dec. 27, 2019

Acquisitions

Acquisitions

4. Acquisitions

During the quarter ended December 27, 2019, we acquired two businesses for a combined cash purchase price of $112 million, net of cash acquired. The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

Pending Acquisition

During fiscal 2019, we entered into a business combination agreement and commenced a voluntary public tender offer for all outstanding shares of First Sensor AG (“First Sensor”), a provider of sensing solutions based in Germany. The

offer was accepted for approximately 72% of First Sensor’s shares. The transaction, including the assumption of First Sensor’s outstanding net debt, is valued at approximately €330 million, based on the tendered shares and an estimated premium for untendered shares. Completion of the offer will be subject to customary closing conditions, including receipt of any outstanding regulatory approvals. We expect to complete the transaction in fiscal 2020.

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Retirement Plans

3 Months Ended

Dec. 27, 2019

Retirement Plans

Retirement Plans

12. 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 27,		December 28,		December 27,		December 28,
	2019		2018		2019		2018
	(in millions)
Operating expense:
Service cost	$	13	$	12	$	3	$	3
Other (income) expense:
Interest cost		6		11		9		12
Expected return on plan assets		(15)		(16)		(15)		(14)
Amortization of net actuarial loss		10		6		2		4
Amortization of prior service credit		(2)		(2)		—		—
Net periodic pension benefit cost (credit)	$	12	$	11	$	(1)	$	5

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Inventories (Tables)

3 Months Ended

Dec. 27, 2019

Inventories

Schedule of inventories

	December 27,		September 27,
	2019		2019
	(in millions)
Raw materials	$	282	$	260
Work in progress		817		739
Finished goods		904		837
Inventories	$	2,003	$	1,836

XML

Tyco Electronics Group S.A.

3 Months Ended

Dec. 27, 2019

Tyco Electronics Group S.A.

Tyco Electronics Group S.A.

18. Tyco Electronics Group S.A.

Tyco Electronics Group S.A. (“TEGSA”), a Luxembourg company and our 100%-owned subsidiary, is a holding company that owns, directly or indirectly, all of our operating subsidiaries. TEGSA is the obligor under our senior notes, commercial paper, and five-year unsecured senior revolving credit facility, which are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd. The following tables present condensed consolidating financial information for TE Connectivity Ltd., TEGSA, and all other subsidiaries that are not providing a guarantee of debt but which represent assets of TEGSA, using the equity method of accounting.

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,168	$	—	$	3,168
Cost of sales		—		—		2,138		—		2,138
Gross margin		—		—		1,030		—		1,030
Selling, general, and administrative expenses, net(1)		26		16		325		—		367
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		1		—		6		—		7
Restructuring and other charges, net		—		—		24		—		24
Operating income (loss)		(27)		(16)		514		—		471
Interest income		—		—		6		—		6
Interest expense		—		(10)		(2)		—		(12)
Other income, net		—		—		5		—		5
Equity in net income of subsidiaries		74		101		—		(175)		—
Equity in net income of subsidiaries of discontinued operations		3		—		—		(3)		—
Intercompany interest income (expense), net		(24)		(1)		25		—		—
Income from continuing operations before income taxes		26		74		548		(178)		470
Income tax expense		—		—		(447)		—		(447)
Income from continuing operations		26		74		101		(178)		23
Income from discontinued operations, net of income taxes		—		3		—		—		3
Net income		26		77		101		(178)		26
Other comprehensive income		89		89		108		(197)		89
Comprehensive income	$	115	$	166	$	209	$	(375)	$	115

(1) TE Connectivity Ltd. and TEGSA selling, general, and administrative expenses include gains of $14 million and losses of $13 million, respectively, related to intercompany transactions. These gains and losses are offset by corresponding net losses recorded by other subsidiaries.

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,347	$	—	$	3,347
Cost of sales		—		—		2,233		—		2,233
Gross margin		—		—		1,114		—		1,114
Selling, general, and administrative expenses, net(1)		35		(107)		461		—		389
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		—		—		5		—		5
Restructuring and other charges, net		—		—		75		—		75
Operating income (loss)		(35)		107		412		—		484
Interest income		—		—		5		—		5
Interest expense		—		(27)		—		—		(27)
Other expense, net		—		—		(1)		—		(1)
Equity in net income of subsidiaries		441		389		—		(830)		—
Equity in net loss of subsidiaries of discontinued operations		(107)		(49)		—		156		—
Intercompany interest income (expense), net		(23)		(28)		51		—		—
Income from continuing operations before income taxes		276		392		467		(674)		461
Income tax expense		—		—		(78)		—		(78)
Income from continuing operations		276		392		389		(674)		383
Loss from discontinued operations, net of income taxes		—		(58)		(49)		—		(107)
Net income		276		334		340		(674)		276
Other comprehensive income		49		49		35		(84)		49
Comprehensive income	$	325	$	383	$	375	$	(758)	$	325

(1) TEGSA selling, general, and administrative expenses include gains of $110 million related to intercompany transactions. These gains are offset by corresponding losses recorded by other subsidiaries.

Condensed Consolidating Balance Sheet (unaudited)

As of December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	742	$	—	$	742
Accounts receivable, net		—		—		2,338		—		2,338
Inventories		—		—		2,003		—		2,003
Intercompany receivables		51		3,253		62		(3,366)		—
Prepaid expenses and other current assets		6		29		448		—		483
Total current assets		57		3,282		5,593		(3,366)		5,566
Property, plant, and equipment, net		—		—		3,659		—		3,659
Goodwill		—		—		5,846		—		5,846
Intangible assets, net		—		—		1,602		—		1,602
Deferred income taxes		—		—		2,360		—		2,360
Investment in subsidiaries		13,994		28,344		—		(42,338)		—
Intercompany loans receivable		—		2,595		16,189		(18,784)		—
Other assets		—		38		905		—		943
Total assets	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	559	$	2	$	—	$	561
Accounts payable		1		—		1,432		—		1,433
Accrued and other current liabilities		178		66		1,166		—		1,410
Intercompany payables		3,315		—		51		(3,366)		—
Total current liabilities		3,494		625		2,651		(3,366)		3,404
Long-term debt		—		3,412		—		—		3,412
Intercompany loans payable		—		16,189		2,595		(18,784)		—
Long-term pension and postretirement liabilities		—		—		1,365		—		1,365
Deferred income taxes		—		—		142		—		142
Income taxes		—		—		247		—		247
Other liabilities		—		39		810		—		849
Total liabilities		3,494		20,265		7,810		(22,150)		9,419
Total shareholders’ equity		10,557		13,994		28,344		(42,338)		10,557
Total liabilities and shareholders’ equity	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976

Condensed Consolidating Balance Sheet (unaudited)

As of September 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	927	$	—	$	927
Accounts receivable, net		—		—		2,320		—		2,320
Inventories		—		—		1,836		—		1,836
Intercompany receivables		49		2,959		60		(3,068)		—
Prepaid expenses and other current assets		4		36		431		—		471
Total current assets		53		2,995		5,574		(3,068)		5,554
Property, plant, and equipment, net		—		—		3,574		—		3,574
Goodwill		—		—		5,740		—		5,740
Intangible assets, net		—		—		1,596		—		1,596
Deferred income taxes		—		—		2,776		—		2,776
Investment in subsidiaries		13,865		28,336		—		(42,201)		—
Intercompany loans receivable		—		2,562		16,033		(18,595)		—
Other assets		—		72		382		—		454
Total assets	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	568	$	2	$	—	$	570
Accounts payable		1		—		1,356		—		1,357
Accrued and other current liabilities		328		57		1,228		—		1,613
Intercompany payables		3,019		—		49		(3,068)		—
Total current liabilities		3,348		625		2,635		(3,068)		3,540
Long-term debt		—		3,395		—		—		3,395
Intercompany loans payable		—		16,033		2,562		(18,595)		—
Long-term pension and postretirement liabilities		—		—		1,367		—		1,367
Deferred income taxes		—		—		156		—		156
Income taxes		—		—		239		—		239
Other liabilities		—		47		380		—		427
Total liabilities		3,348		20,100		7,339		(21,663)		9,124
Total shareholders’ equity		10,570		13,865		28,336		(42,201)		10,570
Total liabilities and shareholders’ equity	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) operating activities(1)	$	(69)	$	462	$	476	$	(458)	$	411
Cash flows from investing activities:
Capital expenditures		—		—		(176)		—		(176)
Acquisition of businesses, net of cash acquired		—		—		(115)		—		(115)
Change in intercompany loans		—		(149)		—		149		—
Other		—		—		2		—		2
Net cash used in investing activities		—		(149)		(289)		149		(289)
Cash flows from financing activities:
Changes in parent company equity(2)		46		(304)		258		—		—
Net decrease in commercial paper		—		(9)		—		—		(9)
Proceeds from exercise of share options		—		—		14		—		14
Repurchase of common shares		(119)		—		(20)		—		(139)
Payment of common share dividends to shareholders		(154)		—		—		—		(154)
Intercompany distributions(1)		—		—		(458)		458		—
Loan activity with parent		296		—		(147)		(149)		—
Other		—		—		(26)		—		(26)
Net cash provided by (used in) financing activities		69		(313)		(379)		309		(314)
Effect of currency translation on cash		—		—		7		—		7
Net decrease in cash, cash equivalents, and restricted cash		—		—		(185)		—		(185)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		927		—		927
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	742	$	—	$	742

(1) Other subsidiaries made distributions to TEGSA in the amount of $458 million. Cash flows are presented based upon the nature of the distributions.

(2) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities	$	(73)	$	(9)	$	410	$	—	$	328
Net cash used in discontinued operating activities		—		—		(31)		—		(31)
Net cash provided by (used in) operating activities		(73)		(9)		379		—		297
Cash flows from investing activities:
Capital expenditures		—		—		(210)		—		(210)
Proceeds from divestiture of business, net of cash retained by sold business		—		303		(15)		—		288
Change in intercompany loans		—		(25)		—		25		—
Other		—		—		4		—		4
Net cash provided by (used in) continuing investing activities		—		278		(221)		25		82
Net cash used in discontinued investing activities		—		—		(2)		—		(2)
Net cash provided by (used in) investing activities		—		278		(223)		25		80
Cash flows from financing activities:
Changes in parent company equity(1)		23		(240)		217		—		—
Net increase in commercial paper		—		63		—		—		63
Proceeds from issuance of debt		—		350		—		—		350
Repayment of debt		—		(441)		—		—		(441)
Proceeds from exercise of share options		—		—		7		—		7
Repurchase of common shares		(519)		—		—		—		(519)
Payment of common share dividends to shareholders		(150)		—		—		—		(150)
Loan activity with parent		719		—		(694)		(25)		—
Transfers to discontinued operations		—		—		(33)		—		(33)
Other		—		(1)		(28)		—		(29)
Net cash provided by (used in) continuing financing activities		73		(269)		(531)		(25)		(752)
Net cash provided by discontinued financing activities		—		—		33		—		33
Net cash provided by (used in) financing activities		73		(269)		(498)		(25)		(719)
Effect of currency translation on cash		—		—		(1)		—		(1)
Net decrease in cash, cash equivalents, and restricted cash		—		—		(343)		—		(343)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		848		—		848
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	505	$	—	$	505

(1) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

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Earnings Per Share

3 Months Ended

Dec. 27, 2019

Earnings Per Share

Earnings Per Share

14. 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 27,	December 28,
	2019	2018
	(in millions)
Basic	335	342
Dilutive impact of share-based compensation arrangements	2	2
Diluted	337	344

The following 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:

	For the
	Quarters Ended
	December 27,	December 28,
	2019	2018
	(in millions)
Antidilutive share options	3	1

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Basis of Presentation and Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Sep. 28, 2019
Recently Adopted Accounting Pronouncements
Practical Expedient, Package	true
Practical Expedient, Hindsight	true
ROU assets	$ 506
Lease liabilities	$ 519
ASU 2016-02
Recently Adopted Accounting Pronouncements
ROU assets		$ 520
Lease liabilities		$ 520

XML

Restructuring and Other Charges, Net - Restructuring Reserve Balances (Details) - USD ($) $ in Millions	Dec. 27, 2019	Sep. 27, 2019
Restructuring reserves included on the Consolidated Balance Sheets
Accrued and other current liabilities	$ 215	$ 245
Other liabilities	25	19
Restructuring reserves	$ 240	$ 264

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Inventories (Details) - USD ($) $ in Millions	Dec. 27, 2019	Sep. 27, 2019
Inventories
Raw materials	$ 282	$ 260
Work in progress	817	739
Finished goods	904	837
Inventories	$ 2,003	$ 1,836

XML

Tyco Electronics Group S.A. - Narrative (Details)	3 Months Ended
	Dec. 27, 2019
Ownership percentage in TEGSA	100.00%
Five-Year Credit Facility
Revolving credit facility term	5 years

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Share Plans (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Share Based Compensation Arrangements:
Share-based compensation expense	$ 22	$ 23
Shares available for issuance	15.0
Share Based Compensation Expenses Not Recognized
Share-based compensation, share-based awards, total compensation expense not yet recognized	$ 176
Share-based compensation, share-based awards, total compensation expense not yet recognized, expected period for recognition	2 years 4 months 24 days
Share options
Share Based Compensation Arrangements:
Share options granted	1.5
Options granted, grant-date fair value (in dollars per share)	$ 15.52
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology
Expected share price volatility (as a percent)	21.00%
Risk-free interest rate (as a percent)	1.80%
Expected annual dividend per share	$ 1.84
Expected life of options (in years)	5 years 1 month 6 days
Restricted share awards
Share Based Compensation Arrangements:
Shares granted	0.5
Shares granted, grant-date fair value (in dollars per share)	$ 93.63
Performance share awards
Share Based Compensation Arrangements:
Shares granted	0.2
Shares granted, grant-date fair value (in dollars per share)	$ 93.63

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Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Non-U.S. Plans
Defined Benefit Plan, Net Periodic Pension Benefit Cost
Service cost	$ 13	$ 12
Interest cost	6	11
Expected return on plan assets	(15)	(16)
Amortization of net actuarial loss	10	6
Amortization of prior service credit	(2)	(2)
Net periodic pension benefit cost (credit)	12	11
U.S. Plans
Defined Benefit Plan, Net Periodic Pension Benefit Cost
Service cost	3	3
Interest cost	9	12
Expected return on plan assets	(15)	(14)
Amortization of net actuarial loss	2	4
Net periodic pension benefit cost (credit)	$ (1)	$ 5

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Leases - Maturities of Lease Liabilities (Details) $ in Millions	Dec. 27, 2019 USD ($)
Operating Leases
Remainder of fiscal 2020	$ 91
Fiscal 2021	105
Fiscal 2022	85
Fiscal 2023	72
Fiscal 2024	60
Thereafter	126
Total lease payments	539
Less: interest	(20)
Present value of lease liabilities	$ 519

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Debt (Details) - USD ($) $ in Millions	Dec. 27, 2019	Sep. 27, 2019
Debt
Ownership percentage in TEGSA	100.00%
Fair value of debt	$ 4,292	$ 4,278
Commercial paper
Debt
Commercial paper	$ 210	$ 219
Weighted-average interest rate (as a percent)	1.85%	2.20%

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Commitments and Contingencies

3 Months Ended

Dec. 27, 2019

Commitments and Contingencies

Commitments and Contingencies

10. 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.

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 27, 2019, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $14 million to $45 million, and we accrued $18 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 27, 2019, we had outstanding letters of credit, letters of guarantee, and surety bonds of $279 million.

We sold our SubCom business during fiscal 2019. In connection with the sale, we contractually agreed to honor certain performance guarantees and letters of credit related to the SubCom business. See Note 3 for additional information regarding these guarantees and the divestiture of the SubCom business.

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Goodwill

3 Months Ended

Dec. 27, 2019

Goodwill

Goodwill

6. Goodwill

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

	Transportation		Industrial		Communications
	Solutions		Solutions		Solutions		Total
	(in millions)
September 27, 2019(1)	$	2,124	$	3,039	$	577	$	5,740
Acquisitions		50		9		—		59
Currency translation		19		24		4		47
December 27, 2019(1)	$	2,193	$	3,072	$	581	$	5,846

(1) At December 27, 2019 and September 27, 2019, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $2,191 million, $669 million, and $489 million, respectively.

During the quarter ended December 27, 2019, we recognized goodwill in the Transportation Solutions and Industrial Solutions segments in connection with recent acquisitions. See Note 4 for additional information regarding acquisitions.

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Goodwill (Tables)

3 Months Ended

Dec. 27, 2019

Goodwill

Changes in the carrying amount of goodwill by segment

	Transportation		Industrial		Communications
	Solutions		Solutions		Solutions		Total
	(in millions)
September 27, 2019(1)	$	2,124	$	3,039	$	577	$	5,740
Acquisitions		50		9		—		59
Currency translation		19		24		4		47
December 27, 2019(1)	$	2,193	$	3,072	$	581	$	5,846

(1) At December 27, 2019 and September 27, 2019, accumulated impairment losses for the Transportation Solutions, Industrial Solutions, and Communications Solutions segments were $2,191 million, $669 million, and $489 million, respectively.

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Retirement Plans (Tables)

3 Months Ended

Dec. 27, 2019

Retirement Plans

Net periodic pension benefit cost

	Non-U.S. Plans				U.S. Plans
	For the				For the
	Quarters Ended				Quarters Ended
	December 27,		December 28,		December 27,		December 28,
	2019		2018		2019		2018
	(in millions)
Operating expense:
Service cost	$	13	$	12	$	3	$	3
Other (income) expense:
Interest cost		6		11		9		12
Expected return on plan assets		(15)		(16)		(15)		(14)
Amortization of net actuarial loss		10		6		2		4
Amortization of prior service credit		(2)		(2)		—		—
Net periodic pension benefit cost (credit)	$	12	$	11	$	(1)	$	5

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 26	$ 276
Other comprehensive income:
Currency translation	50	19
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes	8	6
Gains on cash flow hedges, net of income taxes	31	24
Other comprehensive income	89	49
Comprehensive income	$ 115	$ 325

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Segment and Geographic Data (Tables)

3 Months Ended

Dec. 27, 2019

Segment and Geographic Data

Schedule of net sales by segment

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions:
Automotive	$	1,405	$	1,469
Commercial transportation		258		297
Sensors		205		220
Total Transportation Solutions		1,868		1,986
Industrial Solutions:
Aerospace, defense, oil, and gas		309		285
Industrial equipment		263		315
Medical(3)		179		168
Energy		176		160
Total Industrial Solutions		927		928
Communications Solutions:
Data and devices		219		257
Appliances		154		176
Total Communications Solutions		373		433
Total	$	3,168	$	3,347

(1) Intersegment sales were not material and were recorded at selling prices that approximated market prices.

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

(3) Effective for fiscal 2020, we are separately presenting net sales in the medical end market. Such amounts were previously included in net sales in the industrial equipment end market.

Schedule of net sales by geographic region and segment

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Europe/Middle East/Africa (“EMEA”):
Transportation Solutions	$	702	$	756
Industrial Solutions		340		350
Communications Solutions		55		65
Total EMEA		1,097		1,171
Asia–Pacific:
Transportation Solutions		742		764
Industrial Solutions		145		155
Communications Solutions		226		254
Total Asia–Pacific		1,113		1,173
Americas:
Transportation Solutions		424		466
Industrial Solutions		442		423
Communications Solutions		92		114
Total Americas		958		1,003
Total	$	3,168	$	3,347

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

Schedule of operating income by segment

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	316	$	332
Industrial Solutions		115		100
Communications Solutions		40		52
Total	$	471	$	484

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Cash flows from operating activities:
Net income	$ 26	$ 276
(Income) loss from discontinued operations, net of income taxes	(3)	107
Income from continuing operations	23	383
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	174	168
Deferred income taxes	394	(11)
Non-cash lease cost	27
Provision for losses on accounts receivable and inventories	20	23
Share-based compensation expense	22	23
Other	10	18
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net	(24)	(26)
Inventories	(176)	(119)
Prepaid expenses and other current assets	(23)	67
Accounts payable	94	(9)
Accrued and other current liabilities	(185)	(190)
Income taxes	10	15
Other	45	(14)
Net cash provided by continuing operating activities	411	328
Net cash used in discontinued operating activities		(31)
Net cash provided by operating activities	411	297
Cash flows from investing activities:
Capital expenditures	(176)	(210)
Acquisition of businesses, net of cash acquired	(115)
Proceeds from divestiture of discontinued operation, net of cash retained by sold operation		288
Other	2	4
Net cash provided by (used in) continuing investing activities	(289)	82
Net cash used in discontinued investing activities		(2)
Net cash provided by (used in) investing activities	(289)	80
Cash flows from financing activities:
Net increase (decrease) in commercial paper	(9)	63
Proceeds from issuance of debt		350
Repayment of debt		(441)
Proceeds from exercise of share options	14	7
Repurchase of common shares	(139)	(519)
Payment of common share dividends to shareholders	(154)	(150)
Transfers to discontinued operations		(33)
Other	(26)	(29)
Net cash used in continuing financing activities	(314)	(752)
Net cash provided by discontinued financing activities		33
Net cash used in financing activities	(314)	(719)
Effect of currency translation on cash	7	(1)
Net decrease in cash, cash equivalents, and restricted cash	(185)	(343)
Cash, cash equivalents, and restricted cash at beginning of period	927	848
Cash, cash equivalents, and restricted cash at end of period	$ 742	$ 505

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Leases - Cash Flow Information (Details) $ in Millions	3 Months Ended
	Dec. 27, 2019 USD ($)
Leases
Payments for operating leases	$ 26
ROU asset obtained in exchange for operating lease liability	$ 525

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Intangible Assets, Net (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018	Sep. 27, 2019
Finite-Lived Intangible Assets
Gross Carrying Amount	$ 2,863		$ 2,806
Accumulated Amortization	(1,261)		(1,210)
Net Carrying Amount	1,602		1,596
Finite-lived intangible assets, amortization expense	45	$ 45
Aggregate amortization expense on intangible assets
Remainder of fiscal 2020	137
Fiscal 2021	180
Fiscal 2022	180
Fiscal 2023	179
Fiscal 2024	149
Fiscal 2025	129
Thereafter	648
Customer relationships
Finite-Lived Intangible Assets
Gross Carrying Amount	1,561		1,513
Accumulated Amortization	(486)		(459)
Net Carrying Amount	1,075		1,054
Intellectual property
Finite-Lived Intangible Assets
Gross Carrying Amount	1,269		1,260
Accumulated Amortization	(758)		(734)
Net Carrying Amount	511		526
Other
Finite-Lived Intangible Assets
Gross Carrying Amount	33		33
Accumulated Amortization	(17)		(17)
Net Carrying Amount	$ 16		$ 16

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Financial Instruments (Details) € in Millions, $ in Millions	3 Months Ended		12 Months Ended
	Dec. 27, 2019 USD ($)	Dec. 28, 2018 USD ($)	Sep. 27, 2019 USD ($)	Sep. 25, 2015 EUR (€)
Cash flow hedges | Cross-currency swap contracts
Financial Instruments
Notional amount | €				€ 1,000
Interest paid in foreign currency, fixed interest rate				3.50%
Interest received in U.S. dollars, weighted-average fixed interest rate				5.33%
Gains recorded in other comprehensive income (loss)	$ 4	$ 19
Gains (losses) excluded from the hedging relationship	(22)	17
Net investment hedges | Intercompany loans and external borrowings
Financial Instruments
Notional amount of non-derivative instruments	3,296		$ 3,374
Foreign currency exchange gains (losses) on intercompany loans and external borrowings	(65)	76
Net investment hedges | Cross-currency swap contracts
Financial Instruments
Notional amount	$ 2,283		1,844
Interest paid in foreign currency, fixed interest rate	0.00%
Interest received in U.S. dollars, weighted-average fixed interest rate	2.76%
Losses on cross-currency swap contracts designated as hedges of net investment	$ (33)	$ (5)
Prepaid expenses and other current assets | Net investment hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Asset Positions	16		27
Other assets | Cash flow hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Asset Positions	6		19
Other assets | Net investment hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Asset Positions	26		46
Accrued and other current liabilities | Net investment hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Liability Positions	7		2
Other liabilities | Cash flow hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Liability Positions	$ 5
Other liabilities | Net investment hedges | Cross-currency swap contracts
Financial Instruments
Fair Value of Liability Positions			$ 1

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Leases

3 Months Ended

Dec. 27, 2019

Leases

Leases

9. Leases

We have facility, land, vehicle, and equipment leases that expire at various dates. We determine if a contract qualifies as a lease at inception. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the identified asset and the right to direct the use of the identified asset.

Lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of remaining lease payments over the lease term. Lease ROU assets represent our right to use the underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. We do not recognize ROU assets or lease liabilities that arise from short-term leases. Since our lease contracts do not contain a readily determinable implicit rate, we determine a fully-collateralized incremental borrowing rate that reflects a similar term to the lease and the economic environment of the applicable country or region in which the asset is leased.

We have elected to account for lease and non-lease components in our real estate leases as a single lease component; other leases generally do not contain non-lease components. The non-lease components in our real estate leases include logistics services, warehousing, and other operational costs. Many of these costs are variable, fluctuating based on services provided, such as pallets shipped in and out of a location or square footage of space occupied. These costs, and any other variable rental costs, are excluded from our ROU assets and lease liabilities, and instead are expensed as incurred. Some of our leases may include options to either renew or early terminate the lease. The exercise of these options is generally at our sole discretion and would only occur if there is an economic, financial, or business reason to do so. Such options are included in the lease term if we determine it is reasonably certain they will be exercised.

The components of lease cost were as follows:

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Operating lease cost	$	27
Variable lease cost		11
Total lease cost	$	38

Amounts recognized on the Condensed Consolidated Balance Sheet were as follows:

	December 27,
	2019
	($ in millions)
Operating lease ROU assets:
Other assets	$	506
Operating lease liabilities:
Accrued and other current liabilities	$	122
Other liabilities		397
Total operating lease liabilities	$	519
Weighted-average remaining lease term (in years)		6.1
Weighted-average discount rate		1.3	%

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

	For the
	Quarter Ended
	December 27,
	2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)	$	26
ROU assets obtained in exchange for new operating lease liabilities(2)		525

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

(2) Includes ROU assets obtained in connection with the adoption of ASC 842.

At December 27, 2019, the maturities of operating lease liabilities were as follows:

	(in millions)
Remainder of fiscal 2020	$	91
Fiscal 2021		105
Fiscal 2022		85
Fiscal 2023		72
Fiscal 2024		60
Thereafter		126
Total lease payments		539
Less: interest		(20)
Present value of lease liabilities	$	519

The following table, which was included in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019 and presented in accordance with the previous lease accounting standard, presents the future minimum lease payments under non-cancelable operating lease obligations as of September 27, 2019:

	(in millions)
Fiscal 2020	$	117
Fiscal 2021		102
Fiscal 2022		81
Fiscal 2023		67
Fiscal 2024		55
Thereafter		118
Total	$	540

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Inventories

3 Months Ended

Dec. 27, 2019

Inventories

Inventories

5. Inventories

Inventories consisted of the following:

	December 27,		September 27,
	2019		2019
	(in millions)
Raw materials	$	282	$	260
Work in progress		817		739
Finished goods		904		837
Inventories	$	2,003	$	1,836

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 3,168	$ 3,347
Cost of sales	2,138	2,233
Gross margin	1,030	1,114
Selling, general, and administrative expenses	367	389
Research, development, and engineering expenses	161	161
Acquisition and integration costs	7	5
Restructuring and other charges, net	24	75
Operating income	471	484
Interest income	6	5
Interest expense	(12)	(27)
Other income (expense), net	5	(1)
Income from continuing operations before income taxes	470	461
Income tax expense	(447)	(78)
Income from continuing operations	23	383
Income (loss) from discontinued operations, net of income taxes	3	(107)
Net income	$ 26	$ 276
Basic earnings per share:
Income from continuing operations (in dollars per share)	$ 0.07	$ 1.12
Income (loss) from discontinued operations (in dollars per share)	0.01	(0.31)
Net income (in dollars per share)	0.08	0.81
Diluted earnings per share:
Income from continuing operations (in dollars per share)	0.07	1.11
Income (loss) from discontinued operations (in dollars per share)	0.01	(0.31)
Net income (in dollars per share)	$ 0.08	$ 0.80
Weighted-average number of shares outstanding:
Basic (in shares)	335	342
Diluted (in shares)	337	344

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY - USD ($) shares in Millions, $ in Millions	Common Shares	Treasury Shares	Contributed Surplus	Accumulated Earnings	Accumulated Other Comprehensive Loss	Total
Balance at at Sep. 28, 2018	$ 157	$ (1,134)		$ 12,114	$ (306)	$ 10,831
Balance (in shares) at at Sep. 28, 2018	357	(12)
Increase (Decrease) in Equity:
Adoption of ASU No. 2016-16 | ASU 2016-16				(443)		(443)
Net income				276		276
Other comprehensive income					49	49
Share-based compensation expense			$ 23			23
Exercise of share options		$ 7				7
Restricted share award vestings and other activity		72	(23)	(61)		(12)
Repurchase of common shares		$ (495)				$ (495)
Repurchase of common shares (in shares)		(6)				(6)
Balance at at Dec. 28, 2018	$ 157	$ (1,550)		11,886	(257)	$ 10,236
Balance (in shares) at at Dec. 28, 2018	357	(18)
Balance at at Sep. 27, 2019	$ 154	$ (1,337)		12,256	(503)	10,570
Balance (in shares) at at Sep. 27, 2019	351	(16)
Increase (Decrease) in Equity:
Net income				26		26
Other comprehensive income					89	89
Share-based compensation expense			22			22
Exercise of share options		$ 14				14
Restricted share award vestings and other activity		$ 77	$ (22)	(76)		(21)
Restricted share award vestings and other activity (in shares)		1
Repurchase of common shares		$ (143)				$ (143)
Repurchase of common shares (in shares)		(2)				(2)
Balance at at Dec. 27, 2019	$ 154	$ (1,389)		$ 12,206	$ (414)	$ 10,557
Balance (in shares) at at Dec. 27, 2019	351	(17)

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Tyco Electronics Group S.A. (Tables)

3 Months Ended

Dec. 27, 2019

Tyco Electronics Group S.A.

Condensed Consolidating Statements of Operations

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,168	$	—	$	3,168
Cost of sales		—		—		2,138		—		2,138
Gross margin		—		—		1,030		—		1,030
Selling, general, and administrative expenses, net(1)		26		16		325		—		367
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		1		—		6		—		7
Restructuring and other charges, net		—		—		24		—		24
Operating income (loss)		(27)		(16)		514		—		471
Interest income		—		—		6		—		6
Interest expense		—		(10)		(2)		—		(12)
Other income, net		—		—		5		—		5
Equity in net income of subsidiaries		74		101		—		(175)		—
Equity in net income of subsidiaries of discontinued operations		3		—		—		(3)		—
Intercompany interest income (expense), net		(24)		(1)		25		—		—
Income from continuing operations before income taxes		26		74		548		(178)		470
Income tax expense		—		—		(447)		—		(447)
Income from continuing operations		26		74		101		(178)		23
Income from discontinued operations, net of income taxes		—		3		—		—		3
Net income		26		77		101		(178)		26
Other comprehensive income		89		89		108		(197)		89
Comprehensive income	$	115	$	166	$	209	$	(375)	$	115

(1) TE Connectivity Ltd. and TEGSA selling, general, and administrative expenses include gains of $14 million and losses of $13 million, respectively, related to intercompany transactions. These gains and losses are offset by corresponding net losses recorded by other subsidiaries.

Condensed Consolidating Statement of Operations (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Net sales	$	—	$	—	$	3,347	$	—	$	3,347
Cost of sales		—		—		2,233		—		2,233
Gross margin		—		—		1,114		—		1,114
Selling, general, and administrative expenses, net(1)		35		(107)		461		—		389
Research, development, and engineering expenses		—		—		161		—		161
Acquisition and integration costs		—		—		5		—		5
Restructuring and other charges, net		—		—		75		—		75
Operating income (loss)		(35)		107		412		—		484
Interest income		—		—		5		—		5
Interest expense		—		(27)		—		—		(27)
Other expense, net		—		—		(1)		—		(1)
Equity in net income of subsidiaries		441		389		—		(830)		—
Equity in net loss of subsidiaries of discontinued operations		(107)		(49)		—		156		—
Intercompany interest income (expense), net		(23)		(28)		51		—		—
Income from continuing operations before income taxes		276		392		467		(674)		461
Income tax expense		—		—		(78)		—		(78)
Income from continuing operations		276		392		389		(674)		383
Loss from discontinued operations, net of income taxes		—		(58)		(49)		—		(107)
Net income		276		334		340		(674)		276
Other comprehensive income		49		49		35		(84)		49
Comprehensive income	$	325	$	383	$	375	$	(758)	$	325

(1) TEGSA selling, general, and administrative expenses include gains of $110 million related to intercompany transactions. These gains are offset by corresponding losses recorded by other subsidiaries.

Condensed Consolidating Balance Sheets

Condensed Consolidating Balance Sheet (unaudited)

As of December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	742	$	—	$	742
Accounts receivable, net		—		—		2,338		—		2,338
Inventories		—		—		2,003		—		2,003
Intercompany receivables		51		3,253		62		(3,366)		—
Prepaid expenses and other current assets		6		29		448		—		483
Total current assets		57		3,282		5,593		(3,366)		5,566
Property, plant, and equipment, net		—		—		3,659		—		3,659
Goodwill		—		—		5,846		—		5,846
Intangible assets, net		—		—		1,602		—		1,602
Deferred income taxes		—		—		2,360		—		2,360
Investment in subsidiaries		13,994		28,344		—		(42,338)		—
Intercompany loans receivable		—		2,595		16,189		(18,784)		—
Other assets		—		38		905		—		943
Total assets	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	559	$	2	$	—	$	561
Accounts payable		1		—		1,432		—		1,433
Accrued and other current liabilities		178		66		1,166		—		1,410
Intercompany payables		3,315		—		51		(3,366)		—
Total current liabilities		3,494		625		2,651		(3,366)		3,404
Long-term debt		—		3,412		—		—		3,412
Intercompany loans payable		—		16,189		2,595		(18,784)		—
Long-term pension and postretirement liabilities		—		—		1,365		—		1,365
Deferred income taxes		—		—		142		—		142
Income taxes		—		—		247		—		247
Other liabilities		—		39		810		—		849
Total liabilities		3,494		20,265		7,810		(22,150)		9,419
Total shareholders’ equity		10,557		13,994		28,344		(42,338)		10,557
Total liabilities and shareholders’ equity	$	14,051	$	34,259	$	36,154	$	(64,488)	$	19,976

Condensed Consolidating Balance Sheet (unaudited)

As of September 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—	$	927	$	—	$	927
Accounts receivable, net		—		—		2,320		—		2,320
Inventories		—		—		1,836		—		1,836
Intercompany receivables		49		2,959		60		(3,068)		—
Prepaid expenses and other current assets		4		36		431		—		471
Total current assets		53		2,995		5,574		(3,068)		5,554
Property, plant, and equipment, net		—		—		3,574		—		3,574
Goodwill		—		—		5,740		—		5,740
Intangible assets, net		—		—		1,596		—		1,596
Deferred income taxes		—		—		2,776		—		2,776
Investment in subsidiaries		13,865		28,336		—		(42,201)		—
Intercompany loans receivable		—		2,562		16,033		(18,595)		—
Other assets		—		72		382		—		454
Total assets	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	—	$	568	$	2	$	—	$	570
Accounts payable		1		—		1,356		—		1,357
Accrued and other current liabilities		328		57		1,228		—		1,613
Intercompany payables		3,019		—		49		(3,068)		—
Total current liabilities		3,348		625		2,635		(3,068)		3,540
Long-term debt		—		3,395		—		—		3,395
Intercompany loans payable		—		16,033		2,562		(18,595)		—
Long-term pension and postretirement liabilities		—		—		1,367		—		1,367
Deferred income taxes		—		—		156		—		156
Income taxes		—		—		239		—		239
Other liabilities		—		47		380		—		427
Total liabilities		3,348		20,100		7,339		(21,663)		9,124
Total shareholders’ equity		10,570		13,865		28,336		(42,201)		10,570
Total liabilities and shareholders’ equity	$	13,918	$	33,965	$	35,675	$	(63,864)	$	19,694

Condensed Consolidating Statements of Cash Flows

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 27, 2019

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) operating activities(1)	$	(69)	$	462	$	476	$	(458)	$	411
Cash flows from investing activities:
Capital expenditures		—		—		(176)		—		(176)
Acquisition of businesses, net of cash acquired		—		—		(115)		—		(115)
Change in intercompany loans		—		(149)		—		149		—
Other		—		—		2		—		2
Net cash used in investing activities		—		(149)		(289)		149		(289)
Cash flows from financing activities:
Changes in parent company equity(2)		46		(304)		258		—		—
Net decrease in commercial paper		—		(9)		—		—		(9)
Proceeds from exercise of share options		—		—		14		—		14
Repurchase of common shares		(119)		—		(20)		—		(139)
Payment of common share dividends to shareholders		(154)		—		—		—		(154)
Intercompany distributions(1)		—		—		(458)		458		—
Loan activity with parent		296		—		(147)		(149)		—
Other		—		—		(26)		—		(26)
Net cash provided by (used in) financing activities		69		(313)		(379)		309		(314)
Effect of currency translation on cash		—		—		7		—		7
Net decrease in cash, cash equivalents, and restricted cash		—		—		(185)		—		(185)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		927		—		927
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	742	$	—	$	742

(1) Other subsidiaries made distributions to TEGSA in the amount of $458 million. Cash flows are presented based upon the nature of the distributions.

(2) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

Condensed Consolidating Statement of Cash Flows (unaudited)

For the Quarter Ended December 28, 2018

	TE
	Connectivity				Other		Consolidating
	Ltd.		TEGSA		Subsidiaries		Adjustments		Total
	(in millions)
Cash flows from operating activities:
Net cash provided by (used in) continuing operating activities	$	(73)	$	(9)	$	410	$	—	$	328
Net cash used in discontinued operating activities		—		—		(31)		—		(31)
Net cash provided by (used in) operating activities		(73)		(9)		379		—		297
Cash flows from investing activities:
Capital expenditures		—		—		(210)		—		(210)
Proceeds from divestiture of business, net of cash retained by sold business		—		303		(15)		—		288
Change in intercompany loans		—		(25)		—		25		—
Other		—		—		4		—		4
Net cash provided by (used in) continuing investing activities		—		278		(221)		25		82
Net cash used in discontinued investing activities		—		—		(2)		—		(2)
Net cash provided by (used in) investing activities		—		278		(223)		25		80
Cash flows from financing activities:
Changes in parent company equity(1)		23		(240)		217		—		—
Net increase in commercial paper		—		63		—		—		63
Proceeds from issuance of debt		—		350		—		—		350
Repayment of debt		—		(441)		—		—		(441)
Proceeds from exercise of share options		—		—		7		—		7
Repurchase of common shares		(519)		—		—		—		(519)
Payment of common share dividends to shareholders		(150)		—		—		—		(150)
Loan activity with parent		719		—		(694)		(25)		—
Transfers to discontinued operations		—		—		(33)		—		(33)
Other		—		(1)		(28)		—		(29)
Net cash provided by (used in) continuing financing activities		73		(269)		(531)		(25)		(752)
Net cash provided by discontinued financing activities		—		—		33		—		33
Net cash provided by (used in) financing activities		73		(269)		(498)		(25)		(719)
Effect of currency translation on cash		—		—		(1)		—		(1)
Net decrease in cash, cash equivalents, and restricted cash		—		—		(343)		—		(343)
Cash, cash equivalents, and restricted cash at beginning of period		—		—		848		—		848
Cash, cash equivalents, and restricted cash at end of period	$	—	$	—	$	505	$	—	$	505

(1) Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

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Intangible Assets, Net (Tables)

3 Months Ended

Dec. 27, 2019

Intangible Assets, Net

Schedule of finite-lived intangible assets

	December 27, 2019						September 27, 2019
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
	(in millions)
Customer relationships	$	1,561	$	(486)	$	1,075	$	1,513	$	(459)	$	1,054
Intellectual property		1,269		(758)		511		1,260		(734)		526
Other		33		(17)		16		33		(17)		16
Total	$	2,863	$	(1,261)	$	1,602	$	2,806	$	(1,210)	$	1,596

Schedule of finite-lived intangible assets, future amortization expense

At December 27, 2019, the aggregate amortization expense on intangible assets is expected to be as follows:

	(in millions)
Remainder of fiscal 2020	$	137
Fiscal 2021		180
Fiscal 2022		180
Fiscal 2023		179
Fiscal 2024		149
Fiscal 2025		129
Thereafter		648
Total	$	1,602

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Earnings Per Share (Tables)

3 Months Ended

Dec. 27, 2019

Earnings Per Share

Schedule of weighted-average shares outstanding, basic and diluted

	For the
	Quarters Ended
	December 27,	December 28,
	2019	2018
	(in millions)
Basic	335	342
Dilutive impact of share-based compensation arrangements	2	2
Diluted	337	344

Schedule of antidilutive securities excluded from computation of earnings per share

	For the
	Quarters Ended
	December 27,	December 28,
	2019	2018
	(in millions)
Antidilutive share options	3	1

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Segment and Geographic Data

3 Months Ended

Dec. 27, 2019

Segment and Geographic Data

Segment and Geographic Data

17. Segment and Geographic Data

Net sales by segment⁽¹⁾ and industry end market⁽²⁾ were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions:
Automotive	$	1,405	$	1,469
Commercial transportation		258		297
Sensors		205		220
Total Transportation Solutions		1,868		1,986
Industrial Solutions:
Aerospace, defense, oil, and gas		309		285
Industrial equipment		263		315
Medical(3)		179		168
Energy		176		160
Total Industrial Solutions		927		928
Communications Solutions:
Data and devices		219		257
Appliances		154		176
Total Communications Solutions		373		433
Total	$	3,168	$	3,347

(1) Intersegment sales were not material and were recorded at selling prices that approximated market prices.

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

(3) Effective for fiscal 2020, we are separately presenting net sales in the medical end market. Such amounts were previously included in net sales in the industrial equipment end market.

Net sales by geographic region⁽¹⁾ and segment were as follows:

	For the
	Quarters Ended
	December 27,		December 28,
	2019		2018
	(in millions)
Europe/Middle East/Africa (“EMEA”):
Transportation Solutions	$	702	$	756
Industrial Solutions		340		350
Communications Solutions		55		65
Total EMEA		1,097		1,171
Asia–Pacific:
Transportation Solutions		742		764
Industrial Solutions		145		155
Communications Solutions		226		254
Total Asia–Pacific		1,113		1,173
Americas:
Transportation Solutions		424		466
Industrial Solutions		442		423
Communications Solutions		92		114
Total Americas		958		1,003
Total	$	3,168	$	3,347

(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 27,		December 28,
	2019		2018
	(in millions)
Transportation Solutions	$	316	$	332
Industrial Solutions		115		100
Communications Solutions		40		52
Total	$	471	$	484

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Income Taxes

3 Months Ended

Dec. 27, 2019

Income Taxes

Income Taxes

13. Income Taxes

We recorded income tax expense of $447 million and $78 million for the quarters ended December 27, 2019 and December 28, 2018, respectively. The income tax expense for the quarter ended December 27, 2019 included $355 million of income tax expense related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”). See “Swiss Tax Reform” below for additional information.

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

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 27, 2019.

Swiss Tax Reform

The Federal Act on Tax Reform and AHV Financing eliminates certain preferential tax items and implements new tax rates at both the federal and cantonal levels. During fiscal 2019, Switzerland enacted the federal provisions of Swiss Tax Reform, and the federal tax authority issued guidance abolishing certain interest deductions. The impacts of these measures were reflected in our fiscal 2019 Consolidated Financial Statements.

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law, including reductions in tax rates. During the quarter ended December 27, 2019, we recognized $355 million of income tax expense related primarily to cantonal implementation and the resulting write-down of certain deferred tax assets to the lower tax rates.

Tax Sharing Agreement

Under a Tax Sharing Agreement entered into upon our separation from Tyco International plc (“Tyco International”) in fiscal 2007, we, Tyco International, and Covidien plc (“Covidien”) share 31%, 27%, and 42%, respectively, of income tax liabilities that arise from adjustments made by tax authorities to the collective income tax returns for periods prior to and including June 29, 2007. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and indemnifications with Tyco International and Covidien. As a result of subsequent transactions, Tyco International and Covidien now operate as part of Johnson Controls International plc and Medtronic plc, respectively.

We have substantially settled all U.S. federal income tax matters with the Internal Revenue Service for periods covered under the Tax Sharing Agreement. Certain shared U.S. state and non-U.S. income tax matters remain open. We expect resolution of these matters and the termination of the Tax Sharing Agreement in fiscal 2020. We do not expect these matters or the termination of the TSA to have a material effect on our results of operations, financial position, or cash flows.

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Discontinued Operations (Tables)

3 Months Ended

Dec. 27, 2019

Discontinued Operations

Schedule of components of loss from discontinued operations, net of income taxes

The following table presents the summarized components of loss from discontinued operations, net of income taxes for the quarter ended December 28, 2018:

	(in millions)
Net sales	$	41
Cost of sales		(50)
Operating expenses		(10)
Pre-tax loss from discontinued operations		(19)
Pre-tax loss on sale of discontinued operations		(96)
Income tax benefit		8
Loss from discontinued operations, net of income taxes	$	(107)

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Goodwill (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Sep. 27, 2019
Goodwill:
Goodwill, beginning balance	$ 5,740
Acquisitions	59
Currency translation	47
Goodwill, ending balance	5,846
Transportation Solutions
Goodwill:
Goodwill, beginning balance	2,124
Acquisitions	50
Currency translation	19
Goodwill, ending balance	2,193
Accumulated impairment losses	2,191	$ 2,191
Industrial Solutions
Goodwill:
Goodwill, beginning balance	3,039
Acquisitions	9
Currency translation	24
Goodwill, ending balance	3,072
Accumulated impairment losses	669	669
Communications Solutions
Goodwill:
Goodwill, beginning balance	577
Currency translation	4
Goodwill, ending balance	581
Accumulated impairment losses	$ 489	$ 489

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Restructuring and Other Charges, Net - Restructuring and Other Charges (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Restructuring and other charges, net
Restructuring charges, net	$ 24	$ 75
Transportation Solutions
Restructuring and other charges, net
Restructuring charges, net	4	21
Industrial Solutions
Restructuring and other charges, net
Restructuring charges, net	15	35
Communications Solutions
Restructuring and other charges, net
Restructuring charges, net	$ 5	$ 19

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Discontinued Operations - Subsea (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Discontinued Operations
Net cash proceeds		$ 288
Pre-tax loss on sale		(96)
Discontinued Operations, Disposed of by Sale | Subsea Communications
Discontinued Operations
Net cash proceeds		288
Pre-tax loss on sale		(96)
Cumulative translation adjustment losses		$ 67
Existing guarantees value	$ 1,200
New performance guarantees outstanding	0
Discontinued Operations, Disposed of by Sale | Subsea Communications | Maximum
Discontinued Operations
New performance guarantees issuable amount	$ 300
Period for issuance of new performance guarantees	3 years

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Segment and Geographic Data - Operating Income by Segment (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018
Segment and Geographic Data
Operating income	$ 471	$ 484
Transportation Solutions
Segment and Geographic Data
Operating income	316	332
Industrial Solutions
Segment and Geographic Data
Operating income	115	100
Communications Solutions
Segment and Geographic Data
Operating income	$ 40	$ 52

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Shareholders' Equity (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Dec. 27, 2019	Dec. 28, 2018	Sep. 27, 2019
Shareholders' Equity
Dividends paid per common share	$ 0.46	$ 0.44
Unpaid portion of the dividend payment recorded in accrued and other current liabilities	$ 154		$ 308
Number of common shares repurchased	2	6
Repurchase value	$ 143	$ 495
Amount available for repurchase, at end of period	$ 1,400