2015 ANNUAL REPORT
WHEEL SPEED
SENSOR
TE’S DEUTSCH
RUGGED CONNECTORS
HIGH-SPEED
INPUT/OUTPUT CONNECTORS
THE CONNECTED WORLD
TE’s connectivity and sensor solutions are key enablers in our increasingly
connected world. Smarter factories, connected vehicles, safer and more
advanced medical devices, and data everywhere are underlying market trends
creating significant opportunities for TE. Our dedication to innovation, focus on
solutions for harsh environments, and commitment to delivering extraordinary
customer experiences allows us to capitalize on these opportunities and more.
GROWING
6%*
ANNUALLY
$170 BILLION
Connectivity and Sensor Market
*6% estimated annual market growth rate over the next 5 years
2016
6.4 BILLION
CONNECTED THINGS*
BY 2020
20.8 BILLION
CONNECTED THINGS*
*Source: Gartner, “Gartner Says 6.4 Billion Connected
‘Things’ Will Be in Use in 2016, Up 30 Percent From 2015”
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MESSAGE TO OUR STAKEHOLDERS
The trends making our connected world safer, greener, smarter, and more connected
are driving greater demand for electronics and TE Connectivity’s leading connectivity
and sensor solutions. Globally, this demand represents a $170 billion market opportunity
for TE, with strong underlying growth drivers. As the world leader in connectivity and a
leader in sensors, we are in a great position to capitalize on this significant and growing
market opportunity.
It was a very good year for TE despite another year of global uncertainty. TE led our
industry, with $12.2 billion in sales, up 4 percent on an organic basis, and up 10 percent
on a constant currency basis. Adjusted earnings per share (EPS) of $3.60 were up 9
percent and up 19 percent on a constant currency basis. Adjusted operating margins
exceeded 16 percent for the first time in our history, reflecting our strong portfolio mix
and productivity improvements generated from our TE Operating Advantage (TEOA)
business system.
We also continued our balanced and disciplined approach to capital allocation. We
completed four acquisitions and returned $1.7 billion to our shareholders. We raised
our dividend by 14 percent, making it the fifth consecutive year of double-digit
dividend increase, and repurchased 18 million shares. Since 2007, we have reduced our
outstanding share count by approximately 20 percent.
A Strong Portfolio
A World Leader in Sensors
During Fiscal Year (FY) 2015, we continued the
consistent execution of our strategy to strengthen
our position as the world leader in connectivity
and establish a leadership position in sensors.
We strengthened our connectivity and sensor
portfolio with four acquisitions and the $3 billion
divestiture of the Broadband Network Solutions
(BNS) business. As a result, we established TE
as a leader in the very attractive sensors market
and expanded our position in harsh environment
applications. Today, over 90 percent of our sales
are focused on connectivity and sensor solutions,
and 80 percent of our portfolio addresses harsh
environment applications, a 40 percent increase
over five years.
The Industry Leader in
Harsh Environments
TE is the industry leader in harsh environment
applications – applications that cannot fail even
under the most extreme conditions. For example,
in our medical business, our products are used
in life saving procedures and improve patient
outcomes. Our customers rely on our engineering
depth, breadth of high-quality products, and
unique ability to work side-by-side during the
design process to develop their next generation
of products for these critical applications.
During the year we expanded our position in
harsh environment applications with a deep
pipeline of design wins across our portfolio,
most notably in our automotive business. In our
medical business, which is part of our Industrial
Solutions segment, we broadened our business
through the acquisition of AdvancedCath, giving
TE an even larger position in the medical device
market in the growing minimally invasive catheter
applications.
90% CONNECTIVITY AND
SENSOR SOLUTIONS
SALES
I n F Y 201 5 , we esta blish e d th e co m pa ny
as a leading sensor supplier, with sales of
approximately $750 million. With the acquisitions
of Measurement Specialties and American Sensor
Technologies, TE now has an unmatched range
of technology in the sensor industry.
During the year, we won strategic programs
across several industries. For example, TE’s
sensors are designed into the next generation of
thermostats to detect motion and are monitoring
blood temperatures and patient safety during
surgery. In our automotive business, we doubled
our content opportunity in the vehicle, and
leveraged our leadership position to win several
new programs. And in our aerospace business,
we won new customers and expanded existing
relationships due to our leading sensors that
measure pressure, load, and monitor flap
positions in aircraft.
We expect above-market sales growth going
forward, as we leverage our global leadership
position across the markets we serve, our broad
range of sensor technologies, and our deep
industry and application expertise. Also, as
customers demand more functionality in smaller
packaging, we believe that integrated solutions
leveraging our connector and sensor portfolios
will be a competitive advantage and a significant
opportunity for TE.
Delivering Extraordinary
Customer Experiences
Delivering an Extraordinary Customer Experience
(ECE) is our mission, and TEOA is a key driver of
our performance to achieve that mission. Since
its launch several years ago, TEOA enabled our
industry leadership in innovation, quality, delivery,
and service and support. TEOA efforts drive
continuous improvements in safety, productivity,
and financial performance throughout the
c o m p a ny. D e e p l y e n t r e n c h e d a c ro s s a l l
businesses and functions, TEOA strengthens TE’s
“We continued the consistent execution
of our strategy to strengthen our position
as the world leader in connectivity and
establish a leadership position in sensors.”
competitive advantage with customers as we
improve on-time delivery and speed-to-market.
Innovating for Our Customers
Innovation is a TE core value, and FY 2015
was another year of progress for TE and our
customers. We received several awards in FY
2015, including the prestigious Thomson Reuters
Top 100 Global Innovators award for the fifth
consecutive year and Best Innovation Practices
from a Multinational Company recognition from
the Shanghai government. We also announced
a partnership with Andretti Technologies, the
technology incubation and advanced engineering
business of Andretti Autosport, to develop
and test new technologies that perform at
greater speeds and promote clean energy and
sustainability for the transportation and mobility
industries. Finally, in its eighth and best year
yet, TE’s annual engineer conference – TEchCon
– brought together over 500 TE engineers to
advance innovation globally. These advancements
are important for our customers and our efforts
to recruit the best new talent for TE.
Our Commitment to
Inclusion and Diversity
TE’s Inclusion and Diversity program surfaces
the best ideas and is a key strategic commitment
across the company, and our suppor t for
inclusion and diversity expands to individuals at
all levels in the company.
In FY 2015, we launched several investments and
efforts to accelerate our progress and increase
the representation of women in leadership
and engineering. We expanded TE’s Women’s
Network globally, hosted a series of Women’s
Leadership Forums around the world, kicked off
a sponsorship program for women called “eXcel,”
and co-founded a consortium effort to focus on
early- to mid-career women’s development with
the launch scheduled for early 2016.
Since 2010, the percentage of women
in senior leadership roles has doubled.
Looking Forward
The underlying trends driving growth in our
markets remain strong, even as markets ebb and
flow. We believe these trends will continue for a
very long time. The world continues to demand
safer products, cleaner environments, greater
energy efficiency, and smarter, more connected
technology. TE has never been better positioned
to capitalize on these trends. We have the world’s
leading portfolio of connectivity and sensor
solutions, are the clear leader in attractive harsh
environment markets, and have the financial
strength to make the investments to meet our
customers’ needs.
These are very exciting times for TE. I want
to thank our customers and shareholders for
their continued support, and our employees
for their commitment to our customers and the
communities in which they live.
Tom Lynch
Chairman and Chief Executive Officer
See non-GAAP measures for descriptions and reconciliations
of Organic Sales Growth, Sales in Constant Currency, Adjusted
Operating Margin, Adjusted Earnings Per Share, and Adjusted
Earnings Per Share in Constant Currency.
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CONTENT GROWTH
The continued acceleration of connected things
creates significant opportunities for our customers
to grow their businesses, drive innovation, and
remain competitive. In FY 2015, we broadened our
product range to capture these opportunities by
aggressively expanding our sensor portfolio and
making acquisitions in high-growth markets such
as Medical. Demand for TE content is rising with the
increasing demand for innovation and connectivity in
our end markets. Some examples:
In aerospace, the demand for inflight entertainment
and avionics systems that enable passengers, aircrafts,
and crew to be connected is growing. In addition,
composite airframes to improve fuel efficiency have
increased the requirement for innovative approaches
to aircraft grounding systems. Combined, these
advances increase the opportunity for TE content
- including our weight- and space-saving sensors,
high-speed connectors, and fiber optic solutions - on
emerging platforms up to 25 percent.
opportunity per car from $200 to almost $400 per
vehicle. We expect the demand for TE content to
continue to rise as automotive OEMs increase their
production of smarter, more fuel efficient, and semi-
autonomous vehicles in the future.
In today’s factory, TE products address approximately
five percent of the content in the factory. As more
factories transition into digitally smart environments,
we expect our content opportunity to increase to 15
percent due to the need for advanced and flexible
manufacturing systems, and the increased use of
sensors in robots that will drive higher levels of
connections.
We believe the market opportunity is significant for
TE. We expect these opportunities, coupled with
our technology leadership, will lead to above market
growth as TE content per application increases in the
end markets we serve.
Terrence Curtin
In our automotive business, the expansion of our
sensors product line has doubled our content
President
INNOVATION LEADERSHIP
13,500*
$625M
PATENTS
granted or pending
invested in R&D
and Engineering
FY 15
7,000+
ENGINEERS
globally
ENGINEERING CLOSE TO OUR CUSTOMERS
The success of our innovation culture has led to numerous recognitions. For the fifth
consecutive year, Thomson Reuters named TE Connectivity as a top global innovator. This
recognition confirms the value we provide to our customers — and boosts our capacity to
attract and recruit the best new engineering talent.
20
015 THOMSON REUTERS
G
GLOBAL INNOVATORS
2015
BEST INNOVATION
PRACTICES FROM A
MULTINATIONAL COMPANY
Recognition from the Shanghai government
* Excludes patent information for our Circuit Protection business unit
CONNE
C
250M Redefining convenience, re-engineering travel. The connected
car is transforming how we experience daily travel. When equipped
with TE’s connectivity and sensor solutions, automobiles are using
TE’s advanced technology to enhance communication, safety,
and performance – within the car, between vehicles, and to other
devices and machines.
TE connectors and sensors are automating anti-lock brake systems
(ABS) to optimize traction and steering control. For in-vehicle
electronics, our solutions help detect and report potential
mechanical failures before these occur and avoid accidents by
detecting vehicle surroundings. TE’s innovations are enabling
automobiles to transmit information outside of the vehicle – to
the connected home – enabling entirely new conveniences to the
consumer. TE’s commitment to lighter, smaller, and more efficient
technology makes these conveniences possible while also improving
fuel efficiency and lowering emissions.
Connected vehicles on
the roadways by 2020*
4-6%
TE content growth
per year as a result of
electronification
*Gartner, “Predicts 2015: The Internet of Things”
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1.
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3.
TE products inside:
ANTI-LOCK BRAKE SYSTEM (ABS)
1. Wheel Speed Sensors
These sensors monitor and send speed data to the engine control system and
ABS, to improve ride, handling, and safety.
2. Press-fit Technology
This technique mechanically connects a terminal to a printed circuit board,
eliminates the solder process and provides better mechanical and electrical
performance in harsh environments. Our technique offers added capacity for
interconnections even when space in the vehicle is limited.
3. Mechatronic Solutions
TE helps to integrate mechanical components and electrical hardware – including
sensors – into a single unit. The result is reliable, versatile vehicle applications,
including ABS and crash sensor assemblies.
CONNE
FACTORY
20%
Efficiency improvement
expected from smart
factories
15%
Increase in robotics
installations expected
between 2016 and 2018*
Fast, precise, and safe. Inside the always-on smart factory, people
and robots collaborate to transform assembly lines into self-
monitoring, adaptive learning systems. When equipped with TE’s
connectivity and sensor solutions, these systems can reliably and
efficiently generate and transmit – in real-time, to other machines
anywhere – data, power, and signal. The result is a new level of
interoperability, capable of providing customized on-demand
production, while reducing manufacturing costs.
In the factory, robots make factories smarter and more efficient.
In a connected factory with sensors, robots can learn tasks and
predict human behavior by copying – and repeating – human action.
This leads to an infrastructure which can respond to changing
production volumes and needs. TE solutions for the connected
factory enable industrial machines to quickly leverage vast amounts
of real-time production data to immediately adjust production, in
ways that strategically achieve efficiency, output, quality, and cost
improvements.
*International Federation of Robotics, “World Robotics: Industrial Robotics 2015”
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1.
3.
TE products inside:
ROBOTIC ARM
1. ARISO Contactless Connectivity
Traditional connectors require a physical connection to transfer power. TE’s
hybrid ARISO interconnection system offers fast, wireless connectivity for power,
data, and signal. With more than 360° in rotational freedom, ARISO reliably
delivers power, data, and signal – in harsh environments and without disruptions
from water, dust, or vibration. This enables customers to position connections
without physical wires and in places not previously possible.
2. Heavy Duty Connectors (HDC)
HDCs offer reliable performance in the most demanding and harshest
environments. Configurable to meet any combination of power and signal
connections that customers require, these connectors offer power, signal, and
data transmission in one connector.
3. M8/M12 Connector System
This M8/M12 system safely and reliably enables secure, high-speed connections
in mission-critical industrial machines, operating under the harshest conditions.
CONNE
MEDICAL
0.0015"
Smaller devices, minimizing risk, recovery, and cost. Custom-
engineered, miniaturized medical devices are transforming
healthcare. Equipped with pressure sensors and kink-resistant
braids, TE’s high-performance solutions for single-use catheters
enable surgeons to accurately perform complex and life-saving
procedures – such as replacing heart valves – with minimally
invasive techniques. For patients, this means less trauma, shorter
recovery time, and less risk of infection. For healthcare facilities, the
result is lower operating costs and better performance in delivering
critical patient services.
Wall thickness of TE’s
tubing for cardiovascular
applications
7%
Market growth rate
of minimally invasive
procedures due to
increased access and
affordability
When an integrated catheter is engineered end-to-end by a single
source, healthcare providers can seamlessly capture, record, and
process critical patient data. With TE’s customized, end-to-end
medical-device solutions, physicians can perform complex
procedures with greater ease, speed, and precision – at a lower cost.
2.
1.
3.
TE products inside:
INTEGRATED CATHETER
1. Custom-Calibrated Sensors
For any point in the body, from concept to production, TE custom sensors are
manufactured to exact specifications. In catheters, this technology improves
therapy precision and accuracy in small areas, enabling surgeons to perform
complex procedures with minimally invasive techniques.
2. Custom-Manufactured Catheters and Guidewires
TE catheters and guidewires are developed using advanced technology to meet
customers’ tight tolerances for a number of mechanical properties. Available in
a variety of materials, our custom catheters and guidewires offer multiple tip
configurations to meet extremely precise performance criteria. These enable
life-saving procedures by allowing access to very narrow areas of the body.
3. Laser Processing
As specialists in laser welding and cutting for precision medical devices, TE can
manufacture precise components for surgical instruments, catheters, connectors,
and other medical devices for coronary, neurovascular, and orthopedic uses. This
includes miniaturized devices designed to minimize trauma for patients, resulting
in reduced recovery times, shorter hospital stays, and lower medical costs.
CONNE
DATA CENTERS
2.4M Accelerating data transmission, with more reliability and less
power. In today’s data center, machines must transfer data at
unprecedented speeds. TE’s connectivity solutions for the data
center optimize the technology powering always-on operations,
including today’s clouds and big-data applications. Our high-
performance connectors increase a data center’s capacity to
process, store, and transmit large volumes of data across a
complex network of servers, routers, and storage devices – quickly,
continuously, and efficiently.
Emails sent per second,
globally*
25-56
Gigabits per second of
data transfer with TE’s
STRADA Whisper
<1
DECIBEL (dB) OF
INSERTION LOSS
Offered in TE’s STRADA Whisper
Backplane Connector
*World Wide Web Consortium (W3C), “1 Second – Internet Live Stats”
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TE products inside:
SERVERS, STORAGE, SWITCHING,
AND ROUTERS
1. STRADA Whisper Connectors
As demand for data rises, so does the need for higher speeds in the data center,
and backplane connectors are critical to achieving those high data-transfer
speeds. STRADA Whisper backplane connectors transfer data at 25 Gigabits per
second (Gbps), offering scalability up to 56 Gbps. The connectors are designed to
optimize data integrity by reducing noise and other inefficiencies in the data center.
2. Power for Open Compute Project (OCP)
This plug-and-play power cable assembly is the only solution fully compatible
with Open Compute Project (OCP) specifications. It reduces the number of bus
bar connectors in a data-center rack – and streamlines the distribution of power.
3. High-Speed Input/Output Connectors
TE stands out in the marketplace for our broad portfolio of interconnect products
that can deliver data 2.5 times faster than conventional solutions and future-proof
technology that enables easier data center upgrades.
STRONG FINANCIAL PERFORMANCE
NET SALES
IN US$ BILLIONS
$
$11.4
$
$12.0
$
$12.2
ADJUSTED OPERATING
MARGIN*
16.3%
15.5%
14.2%
FY 13
FY 13 FY 14 FY 15
FY 14
FY 15
FY 13 FY 14 FY 15
*See Non-GAAP Measures
TE SALES BY SEGMENT
FY 15 SALES
TRANSPORTATION
SOLUTIONS
INDUSTRIAL
SOLUTIONS
COMMUNICATIONS
SOLUTIONS
$6.3B $3.2B $2.7B
DEPLOYMENT OF CASH**
FY 08 THROUGH FY 15
DIVIDENDS PAID PER SHARE
$1.24
$5.8B
ACQUISITIONS
$1.08
$
$0.92
$5.4B
SHARE
REPURCHASES
$2.8B
DIVIDENDS
**Select uses of cash. Represents capital returned to
shareholders and acquisition activity.
FY 13 FY 14 FY 15
ADJUSTED EARNINGS
PER SHARE*
$3.60
$3.31
$2.79
FREE CASH FLOW*
IN US$ BILLIONS
$1.5
$1.2
$1.1
FY 13 FY 14 FY 15
FY 13 FY 14 FY 15
*See Non-GAAP Measures
*See Non-GAAP Measures
TE CONNECTIVITY SHARE PERFORMANCE
OVER 5 YEARS (NYSE: TEL)
APPROX.
120%*
* As of September 25, 2015 and adjusted for dividends
CONNE
CO U
TE employees are committed to making a difference in their communities. Worldwide, our employees support many
non-profit organizations and causes, such as the United Way in the United States, including its annual “Day of Caring.”
TE is committed to building stronger communities, engaging our employees, celebrating
inclusion and diversity, and being mindful stewards of the environment. Notable TE
achievements include:
• Named one of the World’s Most Ethical Companies by The Ethisphere® Institute.
• Reduced greenhouse gas emissions 27 percent* and reduced water usage 34 percent.*
•
•
Scored 90 out of 100 in the Human Rights Campaign Equality Index.
Listed fourth in Assent Compliance’s “Top 100 Conflict Minerals Influence Leaders.”
• Established the Community Ambassador Program with over 100 TE employees, who
are providing local leadership with our stakeholders, including employees, government
officials, and community partners.
*FY 2010-2015, represents absolute reductions, and does not include sites related to our divested Broadband Network
Solutions business or sites related to our recent acquisition of Measurement Specialties.
ECTED
OUR CORE VALUES
At TE, we believe that it takes more than
strong performance to build a great company.
It also requires an unwavering commitment to
our core values and the highest standards of
ethics and integrity.
INTEGRITY
ACCOUNTABILITY
TEAMWORK
INNOVATION
2015 RECOGNITION
TE employees regularly participate in fund-raising activities
for non-profit organizations, including the Special Olympics.
TE encourages problem solving in new ways, by supporting
initiatives that inspire TE engineers to innovate.
Ethisphere® Institute’s World’s Most Ethical
Companies designation recognizes those
organizations that have had a material impact
on the way business is conducted by fostering
a culture of ethics and transparency at every
level of the company. In 2015, the designation
was granted to only 132 companies globally,
including TE Connectivity.
fourth consecutive year
1,400
CHARITABLE
ORGANIZATIONS
SUPPORTED
UNMATCHED RESOURCES
CLOSE TO OUR CUSTOMERS
TE designs, manufactures, and delivers connectivity and sensor
solutions to customers in nearly 150 countries. Our global reach
enables us to work closely with our customers, identify and meet
their local needs, and advance our mission to deliver extraordi nary
customer experiences.
AMERICAS
9
41
2,250
CHINA
3
14
2,170
DESIGN CENTERS
MANUFACTURING SITES
ENGINEERS
DESIGN CENTERS
MANUFACTURING SITES
ENGINEERS
ASIA* (EXCLUDING CHINA)
3
10
760
DESIGN CENTERS
MANUFACTURING SITES
ENGINEERS
EUROPE, MIDDLE EAST,
AFRICA (EMEA)
5
30
2,020
DESIGN CENTERS
MANUFACTURING SITES
ENGINEERS
*Including India
$4.1B
AMERICAS
$3.9B
EMEA
ASIA*
(EXCLUDING CHINA)
$2.4B
$1.8B
CHINA
$12.2B
FY 15 SALES WORLDWIDE
•
•
•
NON-GAAP MEASURES
“Organic Sales Growth,” “Sales in Constant Currency,” “Adjusted
Operating Income,” “Adjusted Operating Margin,” “Adjusted
Earnings Per Share,” “Adjusted Earnings Per Share in Constant
Currency” and “Free Cash Flow” are non-GAAP measures and
should not be considered replacements for results in accordance
with accounting principles generally accepted in the U.S. (“GAAP”).
These non-GAAP measures may not be comparable to similarly-
titled measures reported by other companies. The primary
limitation of these measures is that they exclude the financial
impact of items that would otherwise either increase or decrease
our reported results. This limitation is best addressed by using
these non-GAAP measures in combination with the most directly
comparable GAAP measures in order to better understand the
amounts, character and impact of any increase or decrease in
reported amounts. The following provides additional information
regarding these non-GAAP measures:
•
•
•
•
Organic Sales Growth – is a useful measure of our underlying
results and trends in the business. It is also a significant
component in our incentive compensation plans. The
difference between reported net sales growth (the most
comparable GAAP measure) and Organic Sales Growth
consists of the impact from foreign currency exchange rates
and acquisitions and divestitures, if any. Organic Sales Growth
is a useful measure of our performance because it excludes
items that: i) are not completely under management’s control,
such as the impact of changes in foreign currency exchange
rates; or ii) do not reflect the underlying growth of the
company, such as acquisition and divestiture activity.
Sales in Constant Currency – represents net sales (the
most comparable GAAP measure) excluding the impact of
fluctuations in foreign currency exchange rates between
periods. We believe constant currency information provides
valuable supplemental information regarding our net sales.
Adjusted Operating Income – represents operating income
(the most comparable GAAP measure) before special items
including charges or income related to restructuring and other
charges, acquisition related charges, impairment charges, and
other income or charges, if any. We utilize Adjusted Operating
Income to assess segment level core operating performance
and to provide insight to management in evaluating segment
operating plan execution and underlying market conditions. It
also is a significant component in our incentive compensation
plans. Adjusted Operating Income is a useful measure for
investors because it provides insight into our underlying
operating results, trends, and the comparability of these
results between periods.
Adjusted Operating Margin – represents operating margin
(the most comparable GAAP measure) before special items
including charges or income related to restructuring and other
charges, acquisition related charges, impairment charges,
and other income or charges, if any. We present Adjusted
Operating Margin before special items to give investors a
perspective on the underlying business results. This measure
should be considered in conjunction with operating margin
calculated using our GAAP results in order to understand the
amounts, character and impact of adjustments to operating
margin.
Adjusted Earnings Per Share – represents diluted earnings
per share from continuing operations attributable to TE
Connectivity Ltd. (the most comparable GAAP measure)
before special items, including charges or income related to
restructuring and other charges, acquisition related charges,
impairment charges, tax sharing income related to certain
proposed adjustments to prior period tax returns and other
tax items, certain significant special tax items, other income
or charges, if any, and, if applicable, the related tax effects.
We present Adjusted Earnings Per Share because we believe
that it is appropriate for investors to consider results excluding
these items in addition to results in accordance with GAAP.
We believe such a measure provides a picture of our results
that is more comparable among periods since it excludes
the impact of special items, which may recur, but tend to be
irregular as to timing, thereby making comparisons between
periods more difficult. It also is a significant component in our
incentive compensation plans.
Adjusted Earnings Per Share in Constant Currency –
represents Adjusted Earnings Per Share excluding the impact
of fluctuations in foreign currency exchange rates between
periods. We believe constant currency information provides
valuable supplemental information regarding our earnings
per share.
Free Cash Flow (FCF) – is a useful measure of our ability to
generate cash. The difference between net cash provided
by continuing operating activities (the most comparable
GAAP measure) and Free Cash Flow consists mainly of
significant cash outflows and inflows that we believe are
useful to identify. We believe Free Cash Flow provides
useful information to investors as it provides insight into the
primary cash flow metric used by management to monitor
and evaluate cash flows generated from our operations.
Free Cash Flow is defined as net cash provided by continuing
operating activities excluding voluntary pension contributions
and the cash impact of special items, if any, minus net capital
expenditures. Net capital expenditures consist of capital
expenditures less proceeds from the sale of property, plant,
and equipment. These items are subtracted because they
represent long-term commitments. Voluntary pension
contributions are excluded from the GAAP measure because
this activity is driven by economic financing decisions rather
than operating activity. Certain special items, including net
payments related to pre-separation tax matters, also are
considered by management in evaluating Free Cash Flow.
Free Cash Flow subtracts certain cash items that are ultimately
within management’s and the Board of Directors’ discretion to
direct and may imply that there is less or more cash available
for our programs than the most comparable GAAP measure
indicates. It should not be inferred that the entire Free Cash
Flow amount is available for future discretionary expenditures,
as our definition of Free Cash Flow does not consider certain
non-discretionary expenditures, such as debt payments. In
addition, we may have other discretionary expenditures, such
as discretionary dividends, share repurchases, and business
acquisitions, that are not considered in the calculation of Free
Cash Flow.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
US$ IN MILLIONS, EXCEPT PER SHARE DATA
FISCAL YEAR 2015
ADJUSTMENTS
Operating Income
Operating Margin
U.S. GAAP
Acquisition
Related
Charges (1)
Restructuring
and Other
Charges, Net
Tax Items (2)
Adjusted
(Non-GAAP) (3)
$
1,749
$
94
$
149
$
-
$
1,992
14.3%
16.3%
Diluted Earnings per Share from Continuing Operations
Attributable to TE Connectivity Ltd.
$
3.01
$
0.18
$
0.29
$
0.12
$
3.60
(1) Includes $55 million of acquisition and integration costs, $36 million of
non-cash amortization associated with fair value adjustments related to
acquired inventories and customer order backlog recorded in cost of sales,
and $3 million of restructuring costs.
(2) Includes $264 million of income tax benefits associated with the
settlement of audits of prior year income tax returns as well as the related
impact of $84 million to other expense pursuant to the tax sharing
agreement with Tyco International and Covidien. Also includes $216
million of income tax charges associated with the tax impacts of certain
intercompany legal entity restructurings made in connection with our
integration of Measurement Specialties, Inc. and $29 million of income tax
charges for the tax impacts of certain intercompany dividends related to
the restructuring and sale of the Broadband Network Solutions business.
(3) See description of non-GAAP measures contained in this report.
FISCAL YEAR 2014
ADJUSTMENTS
Operating Income
Operating Margin
U.S. GAAP
Acquisition
Related
Charges (1)
Restructuring
and Other
Charges, Net
Tax Items (2)
Adjusted
(Non-GAAP) (3)
$
1,805
$
35
$
19
$
-
$
1,859
15.1%
15.5%
Diluted Earnings per Share from Continuing Operations
Attributable to TE Connectivity Ltd.
$
3.87
$
0.07
$
0.04
$
(0.67)
$
3.31
(1) Includes $31 million of acquisition and integration costs and $4 million
of non-cash amortization associated with fair value adjustments primarily
related to acquired inventories and customer order backlog recorded in
cost of sales.
(2) Includes income tax benefits of $282 million recognized in connection
with a reduction in the valuation allowance associated with certain tax
loss carryforwards and income tax expense related to adjustments to
prior year income tax returns. In addition, includes other income related
to reimbursements by Tyco International and Covidien in connection with
pre-separation tax matters, including $18 million related to our share of
a settlement agreement entered into by Tyco International with a former
subsidiary.
(3) See description of non-GAAP measures contained in this report.
FISCAL YEAR 2013
ADJUSTMENTS
Operating Income
Operating Margin
U.S. GAAP
Acquisition
Related
Charges
Restructuring
and Other
Charges, Net
Tax Items (1)
Adjusted
(Non-GAAP) (2)
$
1,385
$
14
$
222
$
-
$
1,621
12.2%
14.2%
Diluted Earnings per Share from Continuing Operations
Attributable to TE Connectivity Ltd.
$
2.73
$
0.02
$
0.38
$
(0.33)
$
2.79
(1) Includes $331 million of income tax benefits associated with the
settlement of an audit of prior year income tax returns as well as the
related impact of $231 million to other expense pursuant to the tax sharing
agreement with Tyco International and Covidien. Also includes income
tax expense related to adjustments to prior year income tax returns,
income tax benefits recognized in connection with a reduction in the
valuation allowance associated with certain tax loss carryforwards, and
income tax benefits recognized in connection with the lapse of statutes of
limitations for examinations of prior year income tax returns. In addition,
includes other income related to reimbursements by Tyco International
and Covidien in connection with pre-separation tax matters.
(2) See description of non-GAAP measures contained in this report.
RECONCILIATION OF FREE CASH FLOW
US$ IN MILLIONS
FISCAL YEAR
Net cash provided by continuing operating activities
Capital expenditures
Proceeds from sale of property, plant and equipment
Payments related to pre-separation U.S. tax matters, net
2015
2014 2013
$
1,619
$
1,804
$
1,775
(600)
(635)
(581)
17
40
129
179
22
28
Free cash flow (1)
$
1,076
$
1,477
$
1,244
(1) See description of non-GAAP measures contained in this report.
IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES
US$ IN MILLIONS, EXCEPT PER SHARE DATA
Fiscal year 2014
Impact of changes in foreign currency exchange rates
Operational performance
Fiscal year 2015
(1) See description of non-GAAP measures contained in this report.
(2) Includes $46 million impact of changes in foreign currency exchange rates on sales from acquisitions.
RECONCILIATION OF NET SALES GROWTH
US$ IN MILLIONS
CHANGES TO NET SALES FOR FISCAL YEAR 2015 VERSUS NET SALES FOR FISCAL YEAR 2014
Net Sales
Adjusted
EPS (1)
$
11,973
$
3.31
(955)
(2)
1,215
(0.33)
0.62
$
12,233
$
3.60
Organic(1)
Translation(2)
Acquisitions
Total
Net Sales
$
460
3.8%
$
(909)
$
709
$
260
2.2%
(1) Represents the change in net sales resulting from volume and price
changes, before consideration of acquisitions, divestitures and the impact
of changes in foreign currency exchange rates. Organic net sales growth is
a non-GAAP measure. See description of non-GAAP measures contained
in this report.
(2) Represents the change in net sales resulting from changes in foreign
currency exchange rates.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This report contains certain “forward-looking statements” within
the meaning of the U.S. Private Securities Litigation Reform Act
of 1995. These statements are based on management’s current
expectations and are subject to risks, uncertainty and changes
in circumstances, which may cause actual results, performance,
financial condition or achievements to differ materially from
anticipated results , per formance, financial condition or
achievements. All statements contained herein that are not clearly
historical in nature are forward-looking and the words “anticipate,”
“believe,” “expect,” “estimate,” “plan,” and similar expressions are
generally intended to identify forward-looking statements. We
have no intention and are under no obligation to update or alter
(and expressly disclaim any such intention or obligation to do
so) our forward-looking statements whether as a result of new
information, future events or otherwise, except to the extent
required by law. The forward-looking statements in this report
include statements addressing our future financial condition and
operating results. Examples of factors that could cause actual
results to differ materially from those described in the forward-
looking statements include, among others, business, economic,
competitive and regulatory risks, such as conditions affecting
demand for products, particularly in the automotive and data and
devices industries; competition and pricing pressure; fluctuations
in foreign currency exchange rates and commodity prices;
natural disasters and political, economic and military instability in
countries in which we operate; developments in the credit markets;
future goodwill impairment; compliance with current and future
environmental and other laws and regulations; the possible effects
on us of changes in tax laws, tax treaties and other legislation;
and the risk that we do not realize the anticipated benefits from
the sale of the Broadband Network Solutions business. More
detailed information about these and other factors is set forth in TE
Connectivity Ltd.’s Annual Report on Form 10-K for the fiscal year
ended Sept. 25, 2015 as well as in our Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and other reports filed by us
with the U.S. Securities and Exchange Commission.
TE CONNECTIVITY LTD.
ANNUAL REPORT
TABLE OF CONTENTS
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss Statutory Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss Statutory Compensation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
1
11
14
15
39
41
41
43
113
129
i
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this Annual Report, including in the sections entitled
‘‘Business,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations,’’ and ‘‘Quantitative and Qualitative Disclosures about Market Risk,’’ that 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, 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,’’ ‘‘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. You should not put 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 risk factors identified in this Annual Report and those discussed in our Annual Report on
Form 10-K for the fiscal year ended September 25, 2015 filed with the United States Securities and
Exchange Commission (the ‘‘SEC’’) could cause our results to differ materially from those expressed in
forward-looking statements. 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.
ii
General
BUSINESS
TE Connectivity Ltd. (‘‘TE Connectivity’’ or the ‘‘Company,’’ which may be referred to as ‘‘we,’’
‘‘us,’’ or ‘‘our’’) is a global technology leader. We design and manufacture connectivity and sensors
solutions that are essential in today’s increasingly connected world. We help our customers solve the
need for intelligent, efficient, and high-performing products and solutions.
We operate through three reportable segments: Transportation Solutions, Industrial Solutions, and
Communications Solutions. Our segments manufacture and distribute our products and solutions to a
number of end markets. The table below provides a summary of our reportable segments and the key
products and industry end markets that we serve:
Segment
Key Products
Key Markets
Transportation Solutions
Industrial Solutions
Communications Solutions
• Terminals and connector systems
• Sensors
• Relays
• Application tooling
• Wire and heat shrink tubing
• Terminals and connector systems
• Heat shrink tubing
• Relays
• Wire and cable
• Terminals and connector systems
• Undersea telecommunication systems
• Circuit protection devices
• Antennas
• Relays
• Heat shrink tubing
• Automotive
• Commercial transportation
• Sensors
• Industrial equipment
• Aerospace, defense, oil, and gas
• Energy
• Data and devices
• Subsea communications
• Appliances
Our Competitive Strengths
We believe that we have the following competitive strengths:
• Portfolio of market-leading connectivity and sensors businesses. We are a leader in many of the
markets we serve, and the opportunity for growth in those markets is significant. We believe our
three segments serve a combined market of approximately $170 billion that is expected to grow
at an estimated annual growth rate of approximately 6% over the next five years.
• Global leader in passive components. With net sales of $12.2 billion in fiscal 2015, we are
significantly larger than many of our competitors. In the fragmented connector industry, which
we estimated to be approximately $50 billion in fiscal 2015, our net sales were approximately
$8.4 billion. We have established a global leadership position in the connector industry.
Our scale provides us the opportunity to accelerate our sales growth by making larger
investments in existing and new technologies and businesses in our core markets, and to expand
our presence in emerging markets. Our leadership position also provides us the opportunity to
lower our purchasing costs by developing lower cost sources of supply and to maintain a flexible
manufacturing footprint worldwide that is close to our customers’ locations.
• Strong customer relationships. As an industry leader, we have established close working
relationships with many of our customers. These relationships allow us to better anticipate and
respond to customer needs when designing new products and new technical solutions. By
working with our customers in developing new products and technologies, we believe we are able
1
to identify and act on trends and leverage knowledge about next-generation technology across
our products.
• Process and product technology leadership. We employ approximately 7,200 engineers dedicated to
product research, development, and engineering. Our investment of over $625 million in product
and process engineering and development and our capital spending of $600 million in fiscal 2015
enable us to consistently provide innovative, high-quality products with efficient manufacturing
methods. In fiscal 2015, we derived approximately 20% of our net sales from new products,
including product extensions, introduced within the previous three fiscal years.
• Diverse product mix and customer base. We manufacture and sell a broad portfolio of products to
customers in various industries. Our customers include many of the leaders in their respective
industries, and our relationships with them typically date back many years. We believe that this
diversified customer base provides us an opportunity to leverage our skills and experience across
markets and reduce our exposure to individual end markets, thereby reducing the variability of
our financial performance. Additionally, we believe that the diversity of our customer base
reduces the level of cyclicality in our results and distinguishes us from our competitors.
• Global presence. We have an established manufacturing presence in over 20 countries and global
sales distribution. Our global coverage positions us near our customers’ locations and allows us
to assist them in consolidating their supply base and lowering their production costs. We believe
our balanced sales distribution lowers our exposure to any particular geography and improves
our financial profile.
• Strong management team and employee base. We believe our management team has the
experience necessary to effectively execute our strategy and advance our product and technology
leadership. Our chief executive officer, president, and segment leaders average approximately
25 years of industry experience. They are supported by an experienced and talented management
team who is dedicated to maintaining and expanding our position as a global leader in the
industry.
We have employees located throughout the world. We continue to emphasize employee
development and training, and we embrace diversity and inclusion. Our strong employee base,
along with their commitment to uncompromising values, provides the foundation of our
company’s success.
Segments
During fiscal 2015, we reorganized our management structure and segments to better align the
organization around our strategy. Prior period segment results have been revised to conform to the
current segment reporting structure. See Notes 1 and 22 to the Consolidated Financial Statements for
additional segment and geographic information relating to our business. Below is a description of our
reportable segments and the primary products sold by each segment.
Transportation Solutions
The Transportation Solutions segment is a leader in connectivity and sensor technologies. Our
products, which must withstand harsh conditions, are used in the automotive, commercial
transportation, and sensors markets. The following are the primary product families sold by the
segment:
• Terminals and connector systems and components. We offer an extensive range of electrical and
electronic interconnection products. These connectors include a wide variety of pin and socket,
terminal, USB, coaxial, input/output, fiber optic, power, and circular connectors, as well as
ambient lighting assemblies, special purpose cable assemblies, sophisticated interconnection
2
products used in complex commercial equipment, and custom connectivity solutions for harsh
environment applications. This product family represents approximately 80% of the segment’s
net sales.
• Sensors. We offer a customized engineered portfolio of non-contact position and speed sensor
technologies mainly for the automotive and commercial vehicle industries that include high
measurement standards, robust housing technologies, and temperature stable designs for a
variety of powertrain, safety, and chassis applications.
• Relays. Our relay products can be used in a wide range of applications in the automotive and
commercial vehicle industries, including electric sunroofs, anti-lock braking systems, and fuel
injection coils.
• Application tooling. We offer a broad portfolio of hand tools, semi-automatic bench machines,
and fully-automatic machine systems for processing terminal products.
• Wire and heat shrink tubing. We provide a complete solution of reliable, cost-effective products
to seal, connect, insulate, protect, hold, and bundle high-performance electrical harnesses. We
also provide high temperature wire for harsh environments on passenger and commercial
vehicles.
Industrial Solutions
The Industrial Solutions segment is a leading supplier of products that connect and distribute
power, data, and signals. Our products are used in the industrial equipment; aerospace, defense, oil,
and gas; and energy markets. The following are the primary product families sold by the segment:
• Terminals and connector systems and components. We offer connector products including a wide
variety of pin and socket, terminal, USB, coaxial, input/output, fiber optic, and power
connectors, as well as sophisticated interconnection products used in equipment offered to the
aerospace, defense, oil, gas, and medical industries. Additionally, we serve the aerospace,
defense, oil, and gas industries by offering custom connectivity solutions for harsh environment
applications.
• Heat shrink tubing. We provide a complete solution of reliable, cost-effective products to seal,
connect, insulate, protect, hold, and bundle high-performance electrical harnesses. We also
provide customized harnessing design, prototype, and build services.
• Relays. Our relay products can be used in a wide range of applications in the industrial and
aerospace, defense, oil, and gas industries, including high-performance applications used in harsh
environments.
• Wire and cable. We provide highly-engineered cable and wire products and a broad range of
cables suitable for use in rugged applications within the aerospace, defense, oil, and gas
industries. Additionally, we provide wire and cable for extreme environment applications,
including copper and fiber optic distribution cables, shielded and unshielded twisted-pair cables,
and armored cable.
Communications Solutions
The Communications Solutions segment is a top supplier of electronic components for the data
and devices and appliances markets. We are also a leader in developing, manufacturing, installing, and
3
maintaining some of the world’s most advanced subsea fiber optic communications systems. The
following are the primary product families sold by the segment:
• Terminals and connector systems and components. We provide connector products including a
broad range of electronic grounding, shielding, and contact; SIM memory card; terminal; USB;
input/output; and a variety of board level signal and power connectors as well as memory and
CPU sockets. Also, we design and manufacture power cables and cable assemblies for high data
rate transmission and sophisticated interconnection products used in smartphone, computing,
tablet computer, appliances, and consumer electronics OEM products.
• Undersea telecommunication systems. We design, build, maintain, and test undersea fiber optic
networks for the telecommunication and oil and gas markets.
• Circuit protection devices. We offer a diverse range of circuit protection devices, which limit the
flow of current during fault conditions and automatically reset after the fault is cleared and
power to the circuit is restored. We also offer surface-mount chip fuses, gas discharge tubes for
overvoltage protection, electrostatic discharge protection devices, and hybrid protection devices.
• Antennas. We offer application specific and standard antenna products in a variety of structures
to enable our customers to complete the transmission of wireless voice and data over a full
range of protocols.
• Relays. We provide relay products for a wide range of applications in the data and devices and
appliances markets.
• Heat shrink tubing. We offer hundreds of reliable, cost-effective products to seal, connect,
insulate, protect, hold, and bundle high-performance electrical harnesses.
Markets
We sell our products to manufacturers and distributors in a number of major markets. The
approximate percentage of our total net sales by end market in fiscal 2015 was as follows:
Markets
Automotive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Data and Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aerospace, Defense, Oil, and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sensors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsea Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage
39%
11
11
9
7
6
6
6
5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
Our major markets are as follows:
• Automotive. We are one of the leading providers of advanced automobile connectivity solutions.
The automotive industry uses our products in automotive technologies for body and chassis
systems, convenience applications, driver information, infotainment solutions, miniaturization
solutions, motor and powertrain applications, and safety and security systems. Hybrid and
electronic mobility solutions include in-vehicle technologies, battery technologies, and charging
solutions.
4
• Data and devices. We deliver a range of connectivity solutions for the Internet of Things,
wearables, smart phones, tablet computers, and notebooks to help our customers meet their
current challenges and future innovations. In addition, our products and solutions are used in a
variety of equipment architectures within the networking equipment, data center equipment, and
wireless infrastructure industries.
• Industrial equipment. Our products are used in factory automation and process control systems
such as industrial controls, robotics, human machine interface, industrial communication, and
power distribution. Our intelligent building products are used to connect lighting, HVAC,
elevators/escalators, and security. Our rail products are used in high-speed trains, metros, light
rail vehicles, locomotives, and signaling switching equipment. The medical industry uses our
products in diagnostic, therapeutic, surgical, and interventional applications. Also, our products
are used by the solar and lighting industry.
• Aerospace, defense, oil, and gas. We provide components and solutions for the commercial
aerospace industry, from the initial stages of aircraft design to aftermarket support. Our defense
products include ruggedized electronic interconnects serving military aviation, marine, and
ground vehicles including electronic warfare and space systems. Our oil and gas products include
cables and electronics used for harsh subsea environments in the offshore oil and gas and civil
marine industries and in shipboard, subsea, and sonar applications.
• Commercial transportation. We deliver reliable connectivity products designed to withstand harsh
environmental conditions for on- and off-highway vehicles and recreational transportation,
including construction, agriculture, buses, and other recreational vehicles.
• Sensors. We offer a portfolio of intelligent, efficient, and high-performing sensor solutions that
are used by customers across multiple industries, from automotive, industrial and commercial
transportation, and aerospace and defense, to medical solutions and consumer applications.
• Subsea communications. Our products are used in undersea fiber optic telecommunication
systems. With vertically integrated undersea communications systems and services, we support
the telecommunications and oil and gas industries and other customers seeking marine services.
• Energy. Our products are used by OEMs and utility companies in the electrical power industry
and include a wide range of solutions for the electrical power generation, transmission,
distribution, and industrial markets.
• Appliances. We provide solutions to meet the daily demands of home appliances. Our products
are used in many household appliances, including washers, dryers, refrigerators, air conditioners,
dishwashers, cooking appliances, water heaters, and microwaves. Our expansive range of
standard products is supplemented by an array of custom-designed solutions.
Customers
We collaborate closely with our customers to meet their product needs. Our approach to our
customers is driven by our dedication to further develop our product families and ensure that we are
globally positioned to best provide our customers with sales and engineering support. We believe that
as electronic component technologies continue to proliferate, our broad product portfolio and
engineering capability give us a potential competitive advantage when addressing the needs of our
global customers.
5
We maintain a strong local presence in each of the geographic regions in which we operate. Our
net sales by geographic region(1) as a percentage of our total net sales were as follows:
Americas(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia–Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe/Middle East/Africa (‘‘EMEA’’) . . . . . . . . . . . . . . . . . . . . . .
34% 30% 30%
35
33
35
33
35
35
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
Fiscal
2015
2014
2013
(1) Net sales to external customers are attributed to individual countries based on the legal entity that records the
sale.
(2) The Americas includes our subsea communications business.
There is no single customer that accounted for a significant amount of our net sales in fiscal 2015,
2014, or 2013.
Sales, Marketing, and Distribution
We sell our products into approximately 150 countries primarily through direct selling efforts to
manufacturers. We also sell some of our products indirectly via third-party distributors. In fiscal 2015,
our direct sales represented 80% of net sales.
We maintain distribution centers around the world. Products are generally delivered to these
distribution centers by our manufacturing facilities and then subsequently delivered to the customer. In
some instances, product is delivered directly from our manufacturing facility to the customer. We
contract with a wide range of transport providers to deliver our products via road, rail, sea, and air.
Seasonality and Backlog
We experience a slight seasonal pattern to our business. Overall, the third fiscal quarter is typically
the strongest quarter of our fiscal year, whereas the first and fourth fiscal quarters are negatively
affected by winter holidays and European holidays, respectively. The second fiscal quarter may be
affected by adverse winter weather conditions in some of our markets.
Certain of our end markets experience some seasonality. Our sales into the automotive market are
dependent upon global automotive production, and seasonal declines in European production may
negatively impact net sales in the fourth fiscal quarter. Also, our sales into the energy market typically
increase in the third and fourth fiscal quarters as customer activity increases.
6
Customer orders typically fluctuate from quarter to quarter based upon business conditions and
cancellation of unfilled orders prior to shipment of goods. Backlog by reportable segment was as
follows:
Fiscal Year End
2015
2014
(in millions)
Transportation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,208
814
1,310
$ 989
850
1,158
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,332
$2,997
(1)
Includes our subsea communications business’ backlog of $995 million and $774 million at fiscal year end 2015 and
2014, respectively.
We expect that the majority of our backlog at September 25, 2015 will be filled during fiscal 2016.
Competition
The industries in which we operate are highly competitive, and we compete with thousands of
companies that range from large multinational corporations to local manufacturers. Competition is
generally on the basis of breadth of product offering, product innovation, price, quality, delivery, and
service. Our markets have generally been growing but with downward pressure on prices. The following
is a listing of our major competitors by segment:
• Transportation Solutions. This segment’s major competitors include Yazaki, Delphi, Sumitomo,
Sensata, Honeywell, Molex, and Amphenol.
• Industrial Solutions. This segment competes primarily against Amphenol, Esterline, Molex,
Belden, Phoenix Contact, Hubbell, and Carlisle Companies.
• Communications Solutions. This segment’s major competitors include Amphenol, Molex, FCI
Electronics, JST, Korea Electric Terminal (KET), and Bourns. Also, the subsea communications
business competes against Alcatel-Lucent and NEC.
Raw Materials
We use a wide variety of raw materials in the manufacture of our products. The principal raw
materials that we use include plastic resins for molding, precious metals such as gold and silver for
plating, and other metals such as copper, aluminum, brass, and steel for manufacturing cable, contacts,
and other parts that are used for cable and component bodies and inserts. Many of these raw materials
are produced in a limited number of countries around the world or are only available from a limited
number of suppliers. The prices of these materials are driven by global supply and demand.
Research and Development
We are engaged in both internal and external research and development in an effort to introduce
new products to enhance the effectiveness, ease of use, safety, and reliability of our existing products,
and to expand the applications for which the uses of our products are appropriate. We continually
evaluate developing technologies in areas where we may have technological or marketing expertise for
possible investment or acquisition.
7
Our research and development expense was as follows:
Transportation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal
2014
2015
(in millions)
$196
128
160
$262
128
150
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$540
$484
2013
$199
121
174
$494
Intellectual Property
Patents and other proprietary rights are important to our business. We also rely upon trade secrets,
manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain
and improve our competitive position. We review third-party proprietary rights, including patents and
patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid
infringement of third-party proprietary rights, identify licensing opportunities, and monitor the
intellectual property claims of others.
We own a large portfolio of patents that relate principally to electrical, optical, and electronic
products. We also own a portfolio of trademarks and are a licensee of various patents and trademarks.
Patents for individual products extend for varying periods according to the date of patent filing or grant
and the legal term of patents in the various countries where patent protection is obtained. Trademark
rights may potentially extend for longer periods of time and are dependent upon national laws and use
of the trademarks.
While we consider our patents and trademarks to be valued assets, we do not believe that our
competitive position or our operations are dependent upon or would be materially impacted by any
single patent or group of related patents.
Employees
As of September 25, 2015, we employed approximately 72,000 people worldwide, of whom 22,000
were in the Americas region, 25,000 were in the Asia–Pacific region, and 25,000 were in the EMEA
region. Of our total employees, approximately 45,000 were employed in manufacturing.
Government Regulation and Supervision
The import and export of products are subject to regulation by the United States (‘‘U.S.’’) and
other countries. A small portion of our products, including defense-related products, may require
governmental import and export licenses, whose issuance may be influenced by geopolitical and other
events. We have a trade compliance organization and other systems in place to apply for licenses and
otherwise comply with such regulations. Any failure to maintain compliance with domestic and foreign
trade regulation could limit our ability to import and export raw materials and finished goods into or
from the relevant jurisdiction.
Environmental
Our operations are subject to numerous environmental, health, and safety laws and regulations,
including those regulating the discharge of materials into the environment, greenhouse gas emissions,
hazardous materials in products, and chemical usage. We are committed to complying with these laws
and to the protection of our employees and the environment. We maintain a global environmental,
health, and safety program that includes appropriate policies and standards; staff dedicated to
8
environmental, health, and safety issues; periodic compliance auditing; training; and other measures.
We also have a program for compliance with the European Union (‘‘EU’’) Restriction of Hazardous
Substances and Waste Electrical and Electronics Equipment Directives, the China Restriction of
Hazardous Substances law, the EU Registration, Evaluation, Authorization, and Restriction of
Chemicals (‘‘REACH’’) Regulation, and similar laws.
Compliance with these laws has increased our costs of doing business in a variety of ways and may
continue to do so in the future. For example, laws regarding product content and chemical registration
require extensive and costly data collection, management, and reporting, and laws regulating
greenhouse gas emissions are likely to increase our costs for energy and certain materials and products.
We also have projects underway at a number of current and former manufacturing facilities to
investigate and remediate environmental contamination resulting from past operations. Based upon our
experience, current information, and applicable laws, we believe that it is probable that we will incur
remedial costs in the range of $16 million to $38 million, and that the best estimate within this range is
$19 million. We do not anticipate any material capital expenditures during fiscal 2016 for environmental
control facilities or other costs of compliance with laws or regulations relating to greenhouse gas
emissions.
Corporate History
We are organized under the laws of Switzerland. The rights of holders of our shares are governed
by Swiss law, our Swiss articles of association, and our Swiss organizational regulations.
Our business was formed principally through a series of acquisitions, from fiscal 1999 through
fiscal 2002, of established electronics companies and divisions, including AMP Incorporated, Raychem
Corporation, the Electromechanical Components Division of Siemens, and the OEM Division of
Thomas & Betts. These companies each had more than 50 years of history in engineering and
innovation excellence. We operated as a segment of Tyco International plc (‘‘Tyco International’’) prior
to our separation.
Tyco Electronics Ltd. was incorporated in fiscal 2000 as a wholly-owned subsidiary of Tyco
International. Effective June 29, 2007, Tyco International distributed all of our shares, as well as its
shares of its former healthcare businesses (‘‘Covidien’’), to its common shareholders (referred to in this
report as the ‘‘separation’’). We became an independent, publicly traded company owning the former
electronics businesses of Tyco International. On January 26, 2015, Covidien was acquired and now
operates as a subsidiary of Medtronic plc.
In March 2011, our shareholders approved an amendment to our articles of association to change
our name from ‘‘Tyco Electronics Ltd.’’ to ‘‘TE Connectivity Ltd.’’ The name change was effective
March 10, 2011. Our ticker symbol ‘‘TEL’’ on the New York Stock Exchange (‘‘NYSE’’) remained
unchanged.
We acquired Measurement Specialties, Inc. (‘‘Measurement Specialties’’) and divested our
Broadband Network Solutions (‘‘BNS’’) business in fiscal 2015. See Notes 4 and 5 to the Consolidated
Financial Statements for additional information regarding discontinued operations and acquisitions.
Available Information
All periodic and current reports, registration filings, and other filings that we are required to file
with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) are available free of charge through
our internet website at www.te.com. Such documents are available as soon as reasonably practicable
after electronic filing or furnishing of the material with the SEC.
9
The public may also read and copy any document that we file, including this Annual Report, at the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Investors may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains an internet site at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC, from which
investors can electronically access our SEC filings.
TE Connectivity and TE Connectivity (logo) are trademarks. (cid:2) 2015 TE Connectivity Ltd. All
Rights Reserved.
10
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common shares are listed and traded on the NYSE under the symbol ‘‘TEL.’’ The following
table sets forth the high and low closing sales prices of our common shares as reported by the NYSE
for the quarterly periods during the fiscal years ended September 25, 2015 and September 26, 2014.
Market Price Range
Fiscal
2015
2014
High
Low
High
Low
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$65.00
73.42
71.73
64.36
$51.47
61.19
66.12
55.53
$54.58
60.16
62.24
64.97
$49.91
54.45
56.66
58.47
The number of registered holders of our common shares at November 5, 2015 was 26,317.
Dividends and Cash Distributions to Shareholders
The following table sets forth the dividends and cash distributions to shareholders paid on our
common shares during the quarterly periods presented below.
Fiscal
2015
2014
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.29 (CHF 0.26)(1) $ 0.25 (CHF 0.24)(1)
$ 0.29 (CHF 0.26)(1) $ 0.25 (CHF 0.24)(1)
$ 0.33 (CHF 0.32)(2) $ 0.29 (CHF 0.26)(1)
$ 0.33 (CHF 0.32)(2) $ 0.29 (CHF 0.26)(1)
(1)
(2)
Payments were declared in Swiss francs (‘‘CHF’’) and paid in U.S. dollars based on a U.S. dollar/Swiss franc exchange rate
shortly before shareholder approval.
Payments were declared in U.S. dollars. The CHF equivalent is based on a U.S. dollar/Swiss franc exchange rate on the
date of shareholder approval.
Future dividends on our common shares or reductions of registered share capital for distribution to
shareholders, if any, must be approved by our shareholders. In exercising their discretion to recommend
to the shareholders that such dividends or distributions be approved, our board of directors will
consider our results of operations, cash requirements and surplus, financial condition, statutory
requirements of applicable law, contractual restrictions, and other factors that they may deem relevant.
We may from time to time enter into financing agreements that contain financial covenants and
restrictions, some of which may limit our ability to pay dividends or to distribute capital reductions.
11
Performance Graph
Set forth below is a graph comparing the cumulative total shareholder return on our common
shares against the cumulative return on the S&P 500 Index and the Dow Jones Electrical Components
and Equipment Index. The graph assumes the investment of $100 in our common shares and in each
index on September 24, 2010 and assumes the reinvestment of all dividends and distributions. The
graph shows the cumulative total return as of the fiscal years ended September 30, 2011, September 28,
2012, September 27, 2013, September 26, 2014, and September 25, 2015. The comparisons in the graph
below are based upon historical data and are not indicative of, nor intended to forecast, future
performance of our common shares.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG TE CONNECTIVITY LTD., S&P 500 INDEX, AND
DOW JONES ELECTRICAL COMPONENTS AND EQUIPMENT INDEX
S
R
A
L
L
O
D
250
200
150
100
50
Fiscal 2010
Fiscal 2011
Fiscal 2012
Fiscal 2013
Fiscal 2014
Fiscal 2015
TE Connectivity Ltd.
S&P 500 Index
Dow Jones Electrical Components and Equipment Index
9DEC201521094292
TE Connectivity Ltd. . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . .
Dow Jones Electrical Components and
Fiscal
2010(1)
2011
2012
2013
2014
2015
$100.00
100.00
$ 98.10
100.52
$121.36
130.88
$189.53
157.13
$218.52
187.99
$221.28
186.88
Equipment Index . . . . . . . . . . . . . . . . .
100.00
95.68
126.75
174.12
194.25
178.41
(1)
$100 invested on September 24, 2010 in TE Connectivity’s common shares and in indexes. Indexes calculated on month-end
basis.
12
Issuer Purchases of Equity Securities
The following table presents information about our purchases of our common shares during the
quarter ended September 25, 2015:
Period
Total Number
of Shares
Purchased(1)
Average Price
Paid Per
Share(1)
June 27–July 24, 2015 . . . . . . . . . . . . .
July 25–August 28, 2015 . . . . . . . . . . .
August 29–September 25, 2015 . . . . . .
2,173,915
2,679,413
5,479,859
Total . . . . . . . . . . . . . . . . . . . . . . . .
10,333,187
$62.90
61.01
59.96
$60.85
Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans or
Programs(2)
2,173,200
2,652,400
5,475,000
10,300,600
Maximum
Approximate
Dollar Value
of Shares that May
Yet Be Purchased
Under the Plans
or Programs(2)
$3,201,410,350
3,039,551,253
2,711,277,446
(1) These columns include the following transactions which occurred during the quarter ended September 25, 2015:
(i)
(ii)
the acquisition of 32,587 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
open market purchases totaling 10,300,600 common shares, summarized on a trade-date basis, in conjunction with the
share repurchase program announced in September 2007.
(2)
In January 2015, our board of directors authorized a $3.0 billion increase in the share repurchase program. 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.
13
SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data. The data presented below should
be read in conjunction with our Consolidated Financial Statements and accompanying notes and
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ included
elsewhere in this Annual Report. Our consolidated financial information may not be indicative of our
future performance.
2015(1)
As of or for Fiscal
2013(3)
(in millions, except per share data)
2014(2)
2012(4)
2011
Statement of Operations Data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . . . . . . . . . . . . . .
Restructuring and other charges, net . . . . . . . . . . . .
Amounts attributable to TE Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . .
Income from discontinued operations, net of
$12,233
55
152
$11,973
31
19
$11,390
14
222
$11,325
27
104
$11,754
—
88
1,238
1,614
1,154
1,003
1,089
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,182
$ 2,420
167
$ 1,781
122
$ 1,276
109
$ 1,112
156
$ 1,245
Per Share Data
Basic earnings per share attributable to TE
Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share attributable to TE
Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and cash distributions paid per common
$
$
3.06
5.98
3.01
5.89
$
$
3.94
4.34
3.87
4.27
$
$
2.76
3.05
2.73
3.02
$
$
2.35
2.61
2.33
2.59
$
$
2.48
2.84
2.46
2.81
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.24
$
1.08
$
0.92
$
0.78
$
0.68
Balance Sheet Data
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,608
7,446
$ 9,585
$20,152
7,146
$ 9,013
$18,461
6,015
$ 8,386
$19,306
7,182
$ 7,977
$17,723
6,680
$ 7,484
(1) Fiscal 2015 results include $216 million of income tax charges associated with the tax impacts of certain intercompany legal
entity restructurings made in connection with our integration of Measurement Specialties; $201 million of income tax
benefits associated with the effective settlement of all undisputed tax matters for the years 2001 through 2007 and the
related impact of $84 million to other expense pursuant to the Tax Sharing Agreement with Tyco International and
Covidien; and $63 million of income tax benefits associated with the effective settlement of all undisputed tax matters for
the years 2008 through 2010. In addition, in fiscal 2015, income from discontinued operations, net of income taxes includes
the gain on the sale of our BNS business. (See Notes 4, 13, 16, and 17 to the Consolidated Financial Statements.)
(2) Fiscal 2014 results include $282 million of income tax benefits recognized in connection with a reduction in the valuation
allowance associated with certain tax loss carryforwards relating to ADC Telecommunications, Inc. (‘‘ADC’’). (See Note 16
to the Consolidated Financial Statements.)
(3) Fiscal 2013 results include $331 million of income tax benefits associated with the effective settlement of all undisputed tax
matters for the years 1997 through 2000 and the related impact of $231 million to other expense pursuant to the Tax
Sharing Agreement with Tyco International and Covidien. (See Notes 13, 16, and 17 to the Consolidated Financial
Statements.)
(4) Fiscal 2012 results include $75 million of charges from the amortization of acquisition-related fair value adjustments related
primarily to acquired inventories and customer order backlog associated with Deutsch Group SAS (‘‘Deutsch’’) and
$107 million of income tax benefits recognized in connection with a reduction in the valuation allowance associated with tax
loss carryforwards in certain non-U.S. locations.
14
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be
read in conjunction with our Consolidated Financial Statements and the accompanying notes included
elsewhere in this Annual Report. The following discussion may contain forward-looking statements that
reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed
in these forward-looking statements. Factors that could cause or contribute to these differences include
those factors discussed below and elsewhere in this Annual Report, particularly in ‘‘Forward-Looking
Information,’’ and in ‘‘Part I. Item 1A. Risk Factors’’ of our Annual Report on Form 10-K for the fiscal
year ended September 25, 2015 filed with the SEC.
Our Consolidated Financial Statements have been prepared in U.S. dollars, in accordance with
accounting principles generally accepted in the U.S. (‘‘GAAP’’).
The following discussion includes organic net sales growth and free cash flow which are
non-GAAP financial measures. We believe these non-GAAP financial measures, together with GAAP
financial measures, provide useful information to investors because they reflect the financial measures
that management uses in evaluating the underlying results of our operations. See ‘‘Non-GAAP
Financial Measures’’ for more information about these non-GAAP financial measures, including our
reasons for including the measures and material limitations with respect to the usefulness of the
measures.
Overview
We are a global technology leader. We design and manufacture connectivity and sensors solutions
that are essential in today’s increasingly connected world. We help our customers solve the need for
intelligent, efficient, and high-performing products and solutions.
During fiscal 2015, we reorganized our management structure and segments to better align the
organization around our strategy. We now operate through three reportable segments: Transportation
Solutions, Industrial Solutions, and Communications Solutions. See Notes 1 and 22 to the Consolidated
Financial Statements for additional information regarding our segments. Prior period segment results
have been restated to conform to the current segment reporting structure.
Fiscal 2015 highlights included the following:
• Overall, our net sales increased 2.2% in fiscal 2015 as compared to fiscal 2014, due to increased
net sales in the Transportation Solutions and Communications Solutions segments, partially
offset by sales declines in the Industrial Solutions segment.
• On an organic basis, net sales increased 3.8% during fiscal 2015 as compared to fiscal 2014. Our
organic net sales by segment were as follows:
• Transportation Solutions—Our net sales increased 4.1% on an organic basis during fiscal
2015 due primarily to increases in the automotive end market.
• Industrial Solutions—Our organic net sales were flat in fiscal 2015.
• Communications Solutions—Our organic net sales increased 8.4% in fiscal 2015, due
primarily to sales increases in the subsea communications end market, partially offset by
declines in the data and devices end market.
• During fiscal 2015, our shareholders approved a dividend payment to shareholders of $1.32 per
issued share payable in four quarterly installments of $0.33 beginning with the third fiscal
quarter of 2015 and ending in the second fiscal quarter of 2016.
• During fiscal 2015, we acquired Measurement Specialties and divested our BNS business.
15
Outlook
In the first quarter of fiscal 2016, we expect net sales to be between $2.7 billion and $2.9 billion.
This reflects sales decreases in all segments relative to the first quarter of fiscal 2015. Additional
information regarding expectations for our reportable segments for the first quarter of fiscal 2016 is as
follows:
• Transportation Solutions—We expect our sales declines in the automotive and commercial
transportation end markets to be partially offset by sales growth in the sensors end market in
the first quarter of fiscal 2016. We expect global automotive production to decline 2% in the
first quarter of fiscal 2016 as compared to the same period of fiscal 2015.
• Industrial Solutions—We expect our sales to decrease during the first quarter of 2016 as a result
of the slowdown in China, inventory reductions in the supply chain, and continued weakness in
the oil and gas market.
• Communications Solutions—In the first quarter of fiscal 2016, we expect our sales growth in the
subsea communications end market to be more than offset by our sales declines in the data and
devices and appliances end markets resulting from continued weakness in China, inventory
reductions in the supply chain, and the exit of certain product lines.
We expect diluted earnings per share to be in the range of $0.62 to $0.70 per share in the first quarter
of fiscal 2016. This outlook reflects continued market weakness in China. Also, it reflects the negative
impact of foreign currency exchange rates on net sales and earnings per share of approximately
$167 million and $0.05 per share, respectively, in the first quarter of fiscal 2016 as compared to the first
quarter of fiscal 2015.
For fiscal 2016, which will be 53 weeks in length, we expect net sales to be between $12.0 billion
and $12.8 billion, primarily reflecting sales increases in the Transportation Solutions segment offset by
sales declines in the Communications Solutions segment from fiscal 2015 levels. Additional information
regarding expectations for our reportable segments for fiscal 2016 is as follows:
• Transportation Solutions—During fiscal 2016, we expect our sales to increase in the automotive
end market while we expect global automotive production to be flat as compared to fiscal 2015.
Also, we expect our sales growth in the sensors end market to be partially offset by sales
declines in the commercial transportation end market in fiscal 2016.
• Industrial Solutions—Within the aerospace, defense, oil, and gas end market, we expect our sales
growth, primarily in the commercial aerospace market, to be offset by sales declines in the oil
and gas market due to continued market weakness in fiscal 2016. We anticipate that the negative
impact of inventory adjustments in the supply chain will continue during the first half of fiscal
2016.
• Communications Solutions—In fiscal 2016, we expect our sales growth in the subsea
communications end market to be more than offset by our sales declines in the data and devices
end market resulting from the exit of certain product lines and continued weakness in China.
We expect diluted earnings per share to be in the range of $3.61 to $4.01 per share in fiscal 2016. This
outlook includes approximately $200 million in net sales and $0.05 earnings per share resulting from
the additional week in fiscal 2016. Also, this outlook reflects the negative impact of foreign currency
exchange rates on net sales and earnings per share of approximately $262 million and $0.10 per share,
respectively, in fiscal 2016 as compared to fiscal 2015.
The above outlook is based on foreign exchange rates and commodity prices that are consistent
with current levels.
We are monitoring the current macroeconomic environment, including the uncertain market
conditions in China, and its potential effects on our customers and the end markets we serve.
Additionally, we continue to closely manage our costs in line with economic conditions. We are also
16
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.’’
Acquisition
On October 9, 2014, we acquired 100% of the outstanding shares of Measurement Specialties, a
leading global designer and manufacturer of sensors and sensor-based systems, for $86.00 in cash per
share. The total value paid was approximately $1.7 billion, net of cash acquired, and included
$225 million for the repayment of Measurement Specialties’ debt and accrued interest. This business
has been reported as part of our Transportation Solutions segment from the date of acquisition. See
additional information regarding acquisitions in Note 5 to the Consolidated Financial Statements.
Discontinued Operations
During fiscal 2015, we sold our BNS business for $3.0 billion in cash and recognized a pre-tax gain
of $1,105 million on the transaction.
The BNS business met the discontinued operations criteria and has been reported as such in all
periods presented on the Consolidated Financial Statements. Prior to reclassification to discontinued
operations, the BNS business was a component of the former Network Solutions segment.
See Note 4 to the Consolidated Financial Statements for additional information regarding
discontinued operations.
Planned Divestiture
On November 7, 2015, we entered into a definitive agreement to sell our Circuit Protection
Devices (‘‘CPD’’) business for $350 million in cash, subject to a final working capital adjustment. The
transaction is expected to close during the second quarter of fiscal 2016 pending customary closing
conditions and regulatory approvals. The net assets of the CPD business were approximately
$200 million at September 25, 2015. The CPD business is currently reported as part of the Data and
Devices business within our Communications Solutions segment.
Net Sales
Results of Operations
The following table presents our net sales and the percentage of total net sales by segment:
2015
Fiscal
2014
($ in millions)
2013
Transportation Solutions . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . . . . . . .
$ 6,351
3,179
2,703
52% $ 6,090
3,302
26
2,581
22
51% $ 5,485
3,100
28
2,805
21
48%
27
25
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,233
100% $11,973
100% $11,390
100%
The following table provides an analysis of the change in our net sales compared to the prior fiscal
year by segment:
2015
2014
Fiscal
Change in Net Sales versus Prior Fiscal Year
Change in Net Sales versus Prior Fiscal Year
Organic
Translation Acquisitions
Total
Organic
Acquisitions
Translation (Divestitures)
Total
Transportation Solutions .
Industrial Solutions
.
Communications Solutions
.
.
Total .
.
.
.
.
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4.1%
. $250
.
.
217
(7) (0.2)
8.4
. $460
3.8%
$(556)
(258)
(95)
$(909)
$567
142
—
$709
$ 261
($ in millions)
4.3% $ 570 10.4%
161
5.2
(174) (6.2)
(123) (3.7)
4.7
122
$ 260
2.2% $ 557
4.9%
$ 33
10
(11)
$ 32
$ 2
31
(39)
$ (6)
$ 605 11.0%
6.5
202
(224) (8.0)
$ 583
5.1%
17
Net sales increased $260 million, or 2.2%, in fiscal 2015 as compared to fiscal 2014. The increase
in net sales resulted from sales contributions from acquisitions of 5.9% and organic sales growth of
3.8%, partially offset by the negative impact of foreign currency translation of 7.5% due to the
weakening of certain foreign currencies. Measurement Specialties contributed net sales of $548 million
during fiscal 2015.
On an organic basis, net sales increased $460 million, or 3.8%, in fiscal 2015 as compared to 2014,
primarily as a result of sales increases in the Transportation Solutions and Communications Solutions
segments. Price erosion adversely affected organic sales by $208 million in fiscal 2015.
Net sales increased $583 million, or 5.1%, in fiscal 2014 as compared to fiscal 2013. The increase
in net sales was primarily the result of organic growth of 4.9% and the positive impact of foreign
currency translation of 0.3% due to the strengthening of certain foreign currencies.
On an organic basis, net sales increased $557 million, or 4.9%, during fiscal 2014 as compared to
fiscal 2013 as increased net sales in the Transportation Solutions segment and, to a lesser degree, the
Industrial Solutions segment were partially offset by sales decreases in the Communications Solutions
segment. Price erosion adversely affected organic sales by $194 million in fiscal 2014.
See further discussion of organic net sales below under ‘‘Segment Results.’’
Net Sales by Geographic Region. Our business operates in three geographic regions—the Americas,
Asia–Pacific, and EMEA—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. We sell our products into approximately 150 countries, and approximately 52% of
our net sales were invoiced in currencies other than the U.S. dollar in fiscal 2015. The percentage of
net sales in fiscal 2015 by major currencies invoiced was as follows:
Currencies
U.S. dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chinese renminbi
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage
48%
27
9
5
11
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
The following table presents our net sales and the percentage of total net sales by geographic
region:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia–Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,138
4,103
3,992
34% $ 3,515
4,234
33
4,224
33
30% $ 3,456
3,986
35
3,948
35
30%
35
35
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,233
100% $11,973
100% $11,390
100%
2015
Fiscal
2014
($ in millions)
2013
18
The following table provides an analysis of the change in our net sales compared to the prior fiscal
year by geographic region:
2015
2014
Fiscal
Change in Net Sales versus Prior Fiscal Year
Change in Net Sales versus Prior Fiscal Year
Organic
Translation Acquisitions
Total
Organic
Acquisitions
Translation (Divestitures)
Total
.
.
.
.
.
.
.
.
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. $361 10.3%
.
.
(31) (0.7)
3.1
130
. $460
3.8%
$ (72)
(188)
(649)
$(909)
$334
88
287
$709
($ in millions)
$ 623 17.7% $ 58
349
150
(131) (3.1)
(232) (5.5)
1.7%
8.8
3.8
$ 260
2.2% $557
4.9%
$ (33)
(67)
132
$ 32
$ 34
(34)
(6)
$ (6)
$ 59 1.7%
248 6.2
276 7.0
$583 5.1%
.
Americas .
.
Asia–Pacific .
.
EMEA .
.
.
Total
.
.
.
.
Cost of Sales and Gross Margin
The following table presents cost of sales and gross margin in dollars and as a percentage of net
sales, as well as the changes from the prior fiscal year:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As a percentage of net sales . . . . . . . . . . . . . . . . . . . .
$8,146
$8,001
$7,739
$ 145
$ 262
66.6% 66.8% 67.9% (0.2)% (1.1)%
2015
Fiscal
2014
2013
($ in millions)
Fiscal
2015
versus
2014
Fiscal
2014
versus
2013
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As a percentage of net sales . . . . . . . . . . . . . . . . . . . .
$4,087
$3,972
$3,651
33.4% 33.2% 32.1% 0.2% 1.1%
$ 115
$ 321
Gross margin increased $115 million in fiscal 2015 as compared to fiscal 2014. In fiscal 2015, gross
margin included charges of $36 million from the amortization of acquisition-related fair value
adjustments to acquired inventories and customer order backlog associated primarily with Measurement
Specialties. Excluding these charges, gross margin increased in fiscal 2015 primarily as a result of higher
volume and improved manufacturing productivity, partially offset by the negative impact of changes in
foreign currency exchange rates and price erosion.
In fiscal 2014, gross margin increased $321 million as compared to fiscal 2013. The increase in
gross margin resulted primarily from improved manufacturing productivity and, to a lesser degree,
higher volume, partially offset by price erosion.
Cost of sales and gross margin are subject to variability in raw material prices, and the price of
many of our raw materials continues to fluctuate. In fiscal 2015, we purchased approximately
160 million pounds of copper, 123,000 troy ounces of gold, and 2.5 million troy ounces of silver. The
following table sets forth the average prices incurred related to copper, gold, and silver.
Copper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lb.
Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Troy oz.
Silver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Troy oz.
$ 3.06
1,267
18.51
Measure
2015
Fiscal
2014
$ 3.33
1,405
23.43
2013
$ 3.51
1,613
29.18
In fiscal 2016, we expect to purchase copper, gold, and silver in quantities similar 2015 levels.
19
Operating Expenses
The following table presents operating expenses in dollars and selling, general, and administrative
expenses as a percentage of net sales, as well as the changes from the prior fiscal year:
Selling, general, and administrative expenses . . . . . . . . . . .
As a percentage of net sales . . . . . . . . . . . . . . . . . . . . .
2015
$1,504
Fiscal
2014
2013
($ in millions)
$1,440
$1,534
Fiscal
2015
versus
2014
Fiscal
2014
versus
2013
$ (30)
$ 94
12.3% 12.8% 12.6% (0.5)% 0.2%
Research, development, and engineering expenses . . . . . . .
Acquisition and integration costs . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Restructuring and other charges, net
$ 627
$
55
$ 152
$ 583
31
$
19
$
$ 590
$
14
$ 222
$ 44
$ 24
$ 133
$
(7)
$ 17
$(203)
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses
decreased $30 million in fiscal 2015 as compared to fiscal 2014. The decrease resulted primarily from
cost control measures and saving attributable to restructuring actions, partially offset by additional
expenses associated with Measurement Specialties.
In fiscal 2014, selling, general, and administrative expenses increased $94 million as compared to
fiscal 2013. The increase resulted primarily from increased selling expenses to support higher sales
levels, partially offset by savings attributable to restructuring actions and a gain on the sale of real
estate.
Research, Development, and Engineering Expenses. Research, development, and engineering
expenses increased $44 million in fiscal 2015 as compared to fiscal 2014 as a result of additional
expenses related to acquisitions and growth initiatives, primarily in the Transportation Solutions
segment.
Acquisition and Integration Costs.
In fiscal 2015, we incurred acquisition and integration costs of
$55 million, related primarily to the acquisitions of Measurement Specialties and the SEACON Group
(‘‘SEACON’’). In fiscal 2014, we incurred acquisition and integration costs of $31 million, primarily in
connection with the acquisition of SEACON. In connection with the acquisition of Deutsch, we
incurred acquisition and integration costs of $14 million during fiscal 2013.
Restructuring and Other Charges, Net. We are committed to continuous productivity improvements
and consistently 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 2015, we initiated a restructuring program associated with headcount
reductions and product line closures, primarily impacting the Communications Solutions and Industrial
Solutions segments. During fiscal 2014, we initiated a restructuring program associated primarily with
headcount reductions and manufacturing site and product line closures in the Communications
Solutions segment. During fiscal 2013, we initiated a restructuring program associated with headcount
reductions and manufacturing site closures impacting all segments.
In connection with these initiatives, we recorded net restructuring charges of $93 million,
$23 million, and $225 million in fiscal 2015, 2014, and 2013, respectively. We expect to incur net
restructuring charges of approximately $75 million during fiscal 2016, and we expect total spending,
which will be funded with cash from operations, to be approximately $90 million in fiscal 2016.
Annualized cost savings related to actions initiated in fiscal 2015 are estimated to be approximately
20
$80 million and are expected to be realized by the end of fiscal 2017. Cost savings will be reflected
primarily in cost of sales and selling, general, and administrative expenses.
During fiscal 2015, we incurred net other charges of $59 million, primarily in connection with the
divestiture of BNS.
See Note 3 to the Consolidated Financial Statements for additional information regarding net
restructuring and other charges.
Operating Income
The following table presents operating income and operating margin, as well as the changes from
the prior fiscal year:
2015
Fiscal
2014
2013
($ in millions)
Fiscal
2015
versus
2014
Fiscal
2014
versus
2013
Operating income . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . .
$1,749
$1,805
$1,385
14.3% 15.1% 12.2% (0.8)% 2.9%
$(56)
$420
Operating income included the following special items:
Fiscal
2015
2014
2013
(in millions)
Acquisition related charges:
Acquisition and integration costs . . . . . . . . . . . . . . . . . . . . . .
Charges associated with the amortization of acquisition-
$ 55
$31
$ 14
related fair value adjustments . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges related to acquisitions . . . . . . . . . . . . .
36
4
3 —
Restructuring and other charges, net
. . . . . . . . . . . . . . . . . . . .
149
94
35
19
—
—
14
222
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$243
$54
$236
See further discussion of operating income below under ‘‘Segment Results.’’
Non-Operating Items
The following table presents select non-operating items, as well as the changes from the prior fiscal
year:
Fiscal
2014
2015
2013
Fiscal
2015
versus
2014
Fiscal
2014
versus
2013
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . .
$ 136
$127
$ (55) $ 63
($ in millions)
$ 139
$ (12)
$
$(183) $ (118) $ 246
9
Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 337
$146
$ (75) $ 191
$ 221
21.4% 8.3% NM(1)
13.1% NM(1)
Income from discontinued operations, net of income taxes . . .
$1,182
$167
$ 122
$1,015
$ 45
(1) Not meaningful.
21
Interest Expense. The increase in interest expense of $9 million in fiscal 2015 from fiscal 2014 was
due to higher average debt levels. The decrease of $12 million in fiscal 2014 from fiscal 2013 was due
to a lower average cost of debt.
Other Income (Expense), Net.
In fiscal 2015, 2014, and 2013, we recorded net other income
(expense) primarily pursuant to the Tax Sharing Agreement with Tyco International and Covidien. See
Note 12 to the Consolidated Financial Statements for further information regarding the Tax Sharing
Agreement.
Net other expense in fiscal 2015 included $84 million related to the effective settlement of
undisputed tax matters for the years 2001 through 2007. Net other income in fiscal 2014 included
$18 million of income related to our share of a settlement agreement entered into by Tyco
International with a former subsidiary, CIT Group Inc., which arose from a pre-separation claim for
which we were entitled to 31% once resolved. Net other expense in fiscal 2013 included $231 million
related to the effective settlement of all undisputed tax matters for the years 1997 through 2000. See
Note 13 to the Consolidated Financial Statements for additional information regarding the effective
settlement of undisputed tax matters.
Income Taxes. The tax provision for fiscal 2015 reflects an income tax benefit of $264 million
related to the effective settlement of all undisputed tax matters for the years 2001 through 2010,
partially offset by $216 million of income tax charges associated with the tax impacts of certain
intercompany legal entity restructurings made in connection with our integration of Measurement
Specialties. Also, the tax provision for fiscal 2015 reflects an income tax charge of $29 million
associated with the tax impacts of certain intercompany dividends related to the restructuring and sale
of BNS.
The tax provision for fiscal 2014 reflects income tax benefits of $282 million recognized in
connection with a reduction in the valuation allowance associated with certain ADC tax loss
carryforwards, partially offset by an income tax charge related to adjustments to prior year income tax
returns.
In fiscal 2014, we acquired SEACON, and its U.S. operations were combined with our ADC U.S.
federal consolidated tax group. In addition, the ADC U.S. tax group was combined with other U.S.
legal entities and assets. We reassessed the realization of the revised ADC U.S. tax group’s tax loss and
credit carryforwards. Based upon management’s review of forecasted future taxable income of the
reorganized combined tax group, we believed it was more likely than not that a tax benefit would be
realized on additional U.S. federal and state net operating losses. Accordingly, we reduced the
valuation allowance and recorded a tax benefit of $282 million.
The tax benefit for fiscal 2013 reflects an income tax benefit of $331 million related to the
effective settlement of all undisputed tax matters for the years 1997 through 2000. In addition, the tax
benefit for fiscal 2013 reflects $23 million of net tax benefits consisting primarily of income tax benefits
recognized in connection with a reduction in the valuation allowance associated with certain ADC tax
loss carryforwards and income tax benefits recognized in connection with the lapse of statutes of
limitations for examinations of prior year income tax returns, partially offset by income tax expense
related to adjustments to prior year income tax returns.
The valuation allowance for deferred tax assets of $3,237 million and $1,706 million at fiscal year
end 2015 and 2014, respectively, relates principally to the uncertainty of the utilization of certain
deferred tax assets, primarily tax loss, capital loss, and credit carryforwards in various jurisdictions.
During fiscal 2015, the valuation allowance increased due primarily to tax losses of $1,381 million (tax
effected) generated in connection with the write-down of investments in subsidiaries in certain
jurisdictions where future utilization is uncertain. We believe that we will generate sufficient future
22
taxable income to realize the income tax benefits related to the remaining net deferred tax assets on
the Consolidated Balance Sheet.
We have provided income taxes for earnings that are currently distributed as well as the taxes
associated with several subsidiaries’ earnings that are expected to be distributed in the future. No
additional provision has been made for Swiss or non-Swiss income taxes on the undistributed earnings
of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis
differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested,
the investments are essentially permanent in duration, or we have concluded that no additional tax
liability will arise as a result of the distribution of such earnings. As of September 25, 2015, certain
subsidiaries had approximately $19 billion of cumulative undistributed earnings that have been retained
indefinitely and reinvested in our global manufacturing operations, including working capital; property,
plant, and equipment; intangible assets; and research and development activities. A liability could arise
if our intention to permanently reinvest such earnings were to change and amounts are distributed by
such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the
additional income taxes related to permanently reinvested earnings or the basis differences related to
investments in subsidiaries.
Transportation Solutions
Segment Results
Net Sales. The following table presents the Transportation Solutions segment’s net sales and the
percentage of total net sales by primary industry end market(1):
2015
Fiscal
2014
($ in millions)
2013
Automotive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Transportation . . . . . . . . . . . . . . . . . . . . .
Sensors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,795
807
749
75% $5,011
879
13
200
12
82% $4,571
725
15
189
3
83%
13
4
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,351
100% $6,090
100% $5,485
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 compared to the prior fiscal year by primary industry end market:
2015
2014
Fiscal
Change in Net Sales versus Prior Fiscal Year
Change in Net Sales versus Prior Fiscal Year
Organic
Translation Acquisitions
Total
Organic
Translation Acquisition
Total
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$256
(9)
3
5.1% $(472)
(63)
(1.0)
(21)
1.5
$250
4.1% $(556)
$ —
—
567
$567
(4.3)% $413
$(216)
153
(8.2)
(72)
4
549 274.5
9.0% $27
1
5
20.8
1.6
$ 261
4.3% $570
10.4% $33
$—
—
2
$ 2
$440
9.6%
154 21.2
5.8
11
$605 11.0%
($ in millions)
Automotive .
.
.
Commercial Transportation .
.
.
Sensors
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total .
.
.
.
.
. .
.
.
.
.
.
.
Net sales in the Transportation Solutions segment increased $261 million, or 4.3%, in fiscal 2015 as
compared to fiscal 2014 as a result of sales contributions from acquisitions of 9.3% and organic sales
growth of 4.1%, partially offset by the negative impact of foreign currency translation of 9.1%.
23
Measurement Specialties contributed net sales of $548 million during fiscal 2015. Our organic net sales
by primary industry end market were as follows:
• Automotive—Our organic net sales increased 5.1% in fiscal 2015 with growth of 8.2% in the
Asia–Pacific region, 4.4% in the EMEA region, and 0.8% in the Americas region. Growth in the
Asia–Pacific and EMEA regions and North America was driven primarily by increased content
per vehicle. This growth was partially offset by weakness in South America driven by lower
production volumes in Brazil.
• Commercial transportation—Our organic net sales decreased 1.0% in fiscal 2015 due to lower
demand in the agriculture market across all regions, partially offset by growth in the heavy truck
market in developed countries.
• Sensors—Our organic net sales increased 1.5% in fiscal 2015 due to new product launches in
China and increased volume in Japan, partially offset by market weakness in Korea and Eastern
Europe.
In fiscal 2014, net sales in the Transportation Solutions segment increased $605 million, or 11.0%,
from fiscal 2013 primarily as a result of organic sales growth of 10.4% and the positive impact of
foreign currency translation of 0.6%. Our organic net sales by primary industry end market were as
follows:
• Automotive—Our organic net sales increased 9.0% in fiscal 2014. The increase was due primarily
to growth of 11.6% in the Asia–Pacific region, 7.8% in the EMEA region, and 7.0% in the
Americas region. In the Asia–Pacific region, growth was driven by increased demand in China
and, to a lesser degree, Japan, partially offset by declines in certain southeastern Asia–Pacific
areas. In the EMEA region, growth resulted primarily from increased demand for exports to
other regions and, to a lesser degree, increased local demand. Growth in the Americas region
was driven by strong consumer demand in North America, partially offset by weaker economic
conditions in South America.
• Commercial transportation—Our organic net sales increased 20.8% in fiscal 2014 due to stronger
market conditions, strength in the North America truck market, and the acceleration of
purchases related to emission standard changes in China and the EMEA region.
• Sensors—Our organic net sales increased 1.6% in fiscal 2014 due to growth in the Americas and
EMEA regions, partially offset by a decline in the Asia–Pacific region.
Operating Income. The following table presents the Transportation Solutions segment’s operating
income and operating margin, as well as the changes from the prior fiscal year:
Fiscal
2014
2015
2013
($ in millions)
Fiscal
2015
versus
2014
Fiscal
2014
versus
2013
$1,193
$1,245
$ 934
18.8% 20.4% 17.0% (1.6)% 3.4%
$ (52) $311
Operating income . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . .
24
The Transportation Solutions segment’s operating income included the following special items:
Acquisition related charges:
Acquisition and integration costs . . . . . . . . . . . . . . . . . . . . . .
Charges associated with the amortization of acquisition-related
fair value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges related to acquisitions . . . . . . . . . . . . . .
Restructuring and other charges, net . . . . . . . . . . . . . . . . . . . . .
Fiscal
2015
2014
2013
(in millions)
$ 28
$ 4
$ 7
30 — —
3 — —
61
39
4
4
7
39
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$100
$ 8
$46
In fiscal 2015, operating income in the Transportation Solutions segment decreased $52 million as
compared to fiscal 2014. Excluding the charges presented in the table above, operating income
increased in fiscal 2015 due primarily to higher volume and, to a lesser degree, improved manufacturing
productivity, partially offset by the negative impact of changes in foreign currency exchange rates and
price erosion.
Operating income in the Transportation Solutions segment increased $311 million in fiscal 2014 as
compared to fiscal 2013. Excluding the charges presented in the table above, operating income
increased in fiscal 2014 primarily as a result of higher volume and improved manufacturing
productivity, partially offset by price erosion.
Industrial Solutions
Net Sales. The following table presents the Industrial Solutions segment’s net sales and the
percentage of total net sales by primary industry end market(1):
2015
Fiscal
2014
($ in millions)
2013
Industrial Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Aerospace, Defense, Oil, and Gas . . . . . . . . . . . . . . . .
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,323
1,151
705
42% $1,364
1,140
36
798
22
41% $1,284
1,019
35
797
24
41%
33
26
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,179
100% $3,302
100% $3,100
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 Industrial Solutions segment’s net
sales compared to the prior fiscal year by primary industry end market:
Industrial Equipment .
.
Aerospace, Defense, Oil, and Gas .
.
.
.
Energy .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2015
2014
Fiscal
Change in Net Sales versus Prior Fiscal Year
Change in Net Sales versus Prior Fiscal Year
Organic
Translation Acquisitions
Total
Organic
Acquisitions
Translation (Divestiture)
Total
.
.
.
.
$ 12
(17) (1.5)
(2) (0.3)
0.9% $ (96)
(71)
(91)
$ (7) (0.2)% $(258)
$ 43
99
—
$142
($ in millions)
(3.0)% $ 77
$ (41)
67
11
1.0
17
(93) (11.7)
6.0% $ 3
8
6.5
(1)
2.1
$(123)
(3.7)% $161
5.2% $10
$ —
46
(15)
$ 31
$ 80
121
1
$202
6.2%
11.9
0.1
6.5%
25
In the Industrial Solutions segment, net sales decreased $123 million, or 3.7%, in fiscal 2015 from
fiscal 2014 due primarily to the negative impact of foreign currency translation of 7.8%, partially offset
by sales contributions from acquisitions of 4.3%. Our organic net sales by primary industry end market
were as follows:
• Industrial equipment—Our organic net sales were flat in fiscal 2015 as growth in the Asia–Pacific
and EMEA regions was offset by lower demand in the Americas region.
• Aerospace, defense, oil, and gas—Our organic net sales decreased 1.5% in fiscal 2015 due
primarily to weakness in the oil and gas market resulting from oil price declines and market
uncertainty, partially offset by continued strength in our commercial aviation business.
• Energy—Our organic net sales were flat in fiscal 2015 as growth in the Americas region was
offset by declines in the Asia–Pacific region.
Net sales in the Industrial Solutions segment increased $202 million, or 6.5%, in fiscal 2014 as
compared to fiscal 2013 primarily as a result of organic sales growth of 5.2% and the net sales impact
from acquisitions and a divestiture of 1.0%. Our organic net sales by primary industry end market were
as follows:
• Industrial equipment—Our organic net sales increased 6.0% in fiscal 2014 as a result of market
recovery, particularly in the Asia–Pacific region and, to a lesser degree, the EMEA region.
• Aerospace, defense, oil, and gas—Our organic net sales increased 6.5% in fiscal 2014. The
increase was attributable to continued strength in the commercial aviation business and growth
in the oil and gas market, partially offset by continued weakness in the defense market.
• Energy—Our organic net sales increased 2.1% in fiscal 2014 primarily as a result of growth in
the Asia–Pacific and Americas regions, partially offset by a decline in the EMEA region.
Operating Income. The following table presents the Industrial Solutions segment’s operating
income and operating margin, as well as the changes from the prior fiscal year:
Operating income . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . .
Fiscal
2014
2013
Fiscal
2015
versus
2014
($ in millions)
$ 344
$ 431
$ (79)
Fiscal
2014
versus
2013
$ 87
2015
$ 352
11.1% 13.1% 11.1% (2.0)% 2.0%
The Industrial Solutions segment’s operating income included the following special items:
Acquisition related charges:
Acquisition and integration costs . . . . . . . . . . . . . . . . . . . . . . .
Charges associated with the amortization of acquisition-related
fair value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges, net . . . . . . . . . . . . . . . . . . . . . .
Fiscal
2015
2014
2013
(in millions)
$27
$27
$ 7
6
33
44
4 —
31
7
7
63
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$77
$38
$70
In fiscal 2015, operating income in the Industrial Solutions segment decreased $79 million as
compared to fiscal 2014. Excluding the charges presented in the table above, operating income
26
decreased in fiscal 2015 as a result of the negative impact of changes in foreign currency exchange rates
and price erosion, partially offset by higher volume.
Operating income in the Industrial Solutions segment increased $87 million in fiscal 2014 as
compared to fiscal 2013. Excluding the charges presented in the table above, operating income
increased in fiscal 2014 due to higher volume and improved manufacturing productivity, partially offset
by price erosion.
Communications Solutions
Net Sales. The following table presents the Communications Solutions segment’s net sales and the
percentage of total net sales by primary industry end market(1):
2015
Fiscal
2014
($ in millions)
2013
Data and Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsea Communications . . . . . . . . . . . . . . . . . . . . . . .
Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,357
709
637
50% $1,641
283
26
657
24
64% $1,790
397
11
618
25
64%
14
22
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,703
100% $2,581
100% $2,805
100%
(1)
Industry end market information is presented consistently with our internal management reporting and may be revised
periodically as management deems necessary.
The following table provides an analysis of the change in the Communications Solutions segment’s
net sales compared to the prior fiscal year by primary industry end market:
2015
2014
Fiscal
Change in Net Sales versus Prior Fiscal Year
Change in Net Sales versus Prior Fiscal Year
Organic
Translation
Total
Organic
Translation Divestiture
Total
($ in millions)
.
Data and Devices .
Subsea Communications
.
Appliances .
.
.
.
.
.
.
Total
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$(224)
426
15
$ 217
(13.6)% $(60)
—
150.5
(35)
2.3
8.4%
$(95)
$(284)
426
(20)
$ 122
(17.3)% $ (99)
150.5
(3.0)
(114) (28.7)
6.3
(5.5)% $(11)
—
—
39
4.7% $(174)
(6.2)% $(11)
$(39)
—
—
$(39)
$(149)
(8.3)%
(114) (28.7)
6.3
39
$(224)
(8.0)%
Net sales in the Communications Solutions segment increased $122 million, or 4.7%, in fiscal 2015
as compared to fiscal 2014 as a result of organic sales growth of 8.4%, partially offset by the negative
impact of foreign currency translation of 3.7%. Our organic net sales by primary industry end market
were as follows:
• Data and devices—Our organic net sales decreased 13.6% in fiscal 2015 due to continued
declines in our sales in the feature phone and tablet computer markets, weak demand in the
smartphone business, and the exit of certain low margin product lines.
• Subsea communications—Our organic net sales increased 150.5% in fiscal 2015 as a result of
increased levels of project activity.
• Appliances—Our organic net sales increased 2.3% in fiscal 2015 with increased demand in the
EMEA region and a rebound in the U.S. market, partially offset by lower demand in the
Asia–Pacific region.
In fiscal 2014, net sales in the Communications Solutions segment decreased $224 million, or 8.0%,
as compared to fiscal 2013 due to declines in organic sales of 6.2%, sales declines resulting from a
27
divestiture of 1.4%, and the negative impact of foreign currency translation of 0.4%. Our organic net
sales by primary industry end market were as follows:
• Data and devices—Our organic net sales decreased 5.5% in fiscal 2014 due to the exit of certain
product lines and weak demand in the datacenter, mobile phone, and personal computer
markets, partially offset by increased demand and new product launches in the tablet computer
market.
• Subsea communications—Our organic net sales decreased 28.7% in fiscal 2014 due to lower
project volume.
• Appliances—Our organic net sales increased 6.3% in fiscal 2014 due primarily to increased
demand and share gains in the Asia–Pacific region and, to a lesser degree, the Americas region.
Operating Income. The following table presents the Communications Solutions segment’s
operating income and operating margin, as well as the changes from the prior fiscal year:
Operating income . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . .
Fiscal
2014
2013
Fiscal
2015
versus
2014
($ in millions)
$107
$ 75
$129
Fiscal
2014
versus
2013
$ 22
2015
$204
7.5% 5.0% 3.8% 2.5% 1.2%
The Communications Solutions segment’s operating income included the following special items:
Fiscal
2015
2014
2013
Restructuring and other charges, net . . . . . . . . . . . . . . . . . . . . .
$66
(in millions)
$8
$120
In fiscal 2015, operating income in the Communications Solutions segment increased $75 million as
compared to fiscal 2014. Excluding the charges presented in the table above, operating income
increased in fiscal 2015, due primarily to improved manufacturing productivity, partially offset by price
erosion.
Operating income in the Communications Solutions segment increased $22 million fiscal 2014 as
compared to fiscal 2013. Excluding the charges presented in the table above, operating income
decreased in fiscal 2014 as a result of lower volume and price erosion, partially offset by improved
manufacturing productivity.
The following table summarizes our cash flow from operating, investing, and financing activities, as
reflected on the Consolidated Statements of Cash Flows:
Liquidity and Capital Resources
Net cash provided by operating activities . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . .
Net cash provided by (used in) financing activities . . . .
Effect of currency translation on cash . . . . . . . . . . . . .
2015
Fiscal
2014
$ 1,913
636
(1,606)
(71)
(in millions)
$ 2,083
(1,075)
65
(19)
2013
$ 2,046
(545)
(1,678)
(9)
Net increase (decrease) in cash and cash equivalents .
$
872
$ 1,054
$ (186)
28
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 $500 million of senior floating rate notes due in January 2016. We may use
excess cash to reduce our outstanding debt, including through the possible repurchase of our debt in
accordance with applicable law, to purchase a portion of our common shares pursuant to our
authorized share repurchase program, to pay distributions or dividends on our common shares, or to
acquire strategic businesses or product lines. 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.
As of September 25, 2015, our cash and cash equivalents were held in subsidiaries which are
located in various countries throughout the world. Under current applicable laws, substantially all of
these amounts can be repatriated to Tyco Electronics Group S.A. (‘‘TEGSA’’), our Luxembourg
subsidiary, which is the obligor of substantially all of our debt, and to TE Connectivity Ltd., our Swiss
parent company; however, the repatriation of these amounts could subject us to additional tax costs.
We provide for tax liabilities on the Consolidated Financial Statements with respect to amounts that we
expect to repatriate; however, no tax liabilities are recorded for amounts that we consider to be
retained indefinitely and reinvested in our global manufacturing operations. As of September 25, 2015,
we had approximately $5.2 billion of cash, cash equivalents, and intercompany deposits, principally in
our subsidiaries, that we have the ability to distribute to TEGSA, our Luxembourg subsidiary, and TE
Connectivity Ltd., our Swiss parent company, but we consider to be permanently reinvested. We
estimate that up to approximately $1.7 billion of tax expense would be recognized on the Consolidated
Financial Statements if our intention to permanently reinvest these amounts were to change. Our
current plans do not demonstrate a need to repatriate cash, cash equivalents, and intercompany
deposits that are designated as permanently reinvested in order to fund our operations, including
investing and financing activities.
Cash Flows from Operating Activities
Net cash provided by continuing operating activities decreased $185 million to $1,619 million in
fiscal 2015 as compared to $1,804 million in fiscal 2014. The decrease resulted primarily from the
unfavorable effects of changes in working capital levels, partially offset by a decrease in net payments
made in relation to pre-separation tax matters.
Net cash provided by continuing operating activities was $1,804 million in fiscal 2014 as compared
to $1,775 million in fiscal 2013. The increase resulted primarily from higher income levels, partially
offset by higher accounts receivable levels and net payments made in relation to pre-separation tax
matters.
Pension and postretirement benefit contributions in fiscal 2015, 2014, and 2013 were $68 million,
$89 million, and $95 million, respectively. We expect pension and postretirement benefit contributions
to be $75 million in fiscal 2016, before consideration of any voluntary contributions. There were no
voluntary pension contributions in fiscal 2015, 2014, and 2013.
The amount of income taxes paid, net of refunds, during fiscal 2015, 2014, and 2013 was
$350 million, $259 million, and $299 million, respectively. In fiscal 2015 and 2013, these payments
included $47 million and $67 million, respectively, for tax deficiencies related to pre-separation tax
matters. Also during fiscal 2015 and 2013, we received net reimbursements of $7 million and
$39 million, respectively, from Tyco International and Covidien pursuant to their indemnifications for
pre-separation U.S. tax matters. During fiscal 2014, we made net payments of $179 million to Tyco
29
International and Covidien pursuant to our indemnifications for pre-separations U.S. tax matters. See
Note 13 to the Consolidated Financial Statements for additional information related to pre-separation
tax matters.
In addition to net cash provided by operating activities, we use free cash flow, a non-GAAP
financial measure, as a useful measure of our ability to generate cash. Free cash flow was
$1,076 million in fiscal 2015 as compared to $1,477 million in fiscal 2014 and $1,244 million in fiscal
2013. The following table sets forth a reconciliation of net cash provided by continuing operating
activities, the most comparable GAAP financial measure, to free cash flow.
Net cash provided by continuing operating activities . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant, and equipment . . . .
Payments related to pre-separation U.S. tax matters, net . .
2015
Fiscal
2014
2013
(in millions)
$1,804
(635)
129
179
$1,619
(600)
17
40
$1,775
(581)
22
28
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,076
$1,477
$1,244
Cash Flows from Investing Activities
Capital expenditures were $600 million, $635 million, and $581 million in fiscal 2015, 2014, and
2013, respectively. We expect fiscal 2016 capital spending levels to be approximately 5% 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.
Proceeds from the sale of property, plant, and equipment for fiscal 2014 included approximately
$100 million related to the sale of real estate.
During fiscal 2015, we acquired Measurement Specialties. The total value paid for the transaction
was approximately $1.7 billion, net of cash acquired, and included $225 million for the repayment of
Measurement Specialties’ debt and accrued interest. Also during fiscal 2015, we acquired three
additional companies for $241 million in cash, net of cash acquired. During fiscal 2014, we acquired
five companies for $522 million in cash, net of cash acquired. See additional information in Note 5 to
the Consolidated Financial Statements.
During fiscal 2015, we received net cash proceeds of $3.0 billion related to the sale of our BNS
business. See additional information in Note 4 to the Consolidated Financial Statements.
Cash Flows from Financing Activities and Capitalization
Total debt at fiscal year end 2015 and 2014 was $3,903 million and $3,858 million, respectively. See
Note 11 to the Consolidated Financial Statements for additional information regarding debt.
During February 2015, TEGSA, our 100%-owned subsidiary, repaid, at maturity, $250 million of
1.60% senior notes due 2015.
In February 2015, TEGSA issued A550 million aggregate principal amount of 1.100% senior notes
due March 1, 2023. The notes are TEGSA’s unsecured senior obligations and rank equally in right of
payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated
indebtedness that TEGSA may incur.
TEGSA has a five-year unsecured senior revolving credit facility (‘‘Credit Facility’’) with total
commitments of $1,500 million. The Credit Facility was amended in August 2013 primarily to extend
the maturity date from June 2016 to August 2018 and reduce borrowing costs. TEGSA had no
borrowings under the Credit Facility at September 25, 2015 and September 26, 2014.
30
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 September 25, 2015, 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.
Periodically, TEGSA issues commercial paper to U.S. institutional accredited investors and
qualified institutional buyers in accordance with available exemptions from the registration
requirements of the Securities Act of 1933 as part of our ongoing effort to maintain financial flexibility
and to potentially decrease the cost of borrowings. Borrowings under the commercial paper program
are backed by the Credit Facility.
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 and cash distributions to shareholders were $502 million,
$443 million, and $384 million in fiscal 2015, 2014, and 2013, respectively. See Note 19 to the
Consolidated Financial Statements for additional information regarding dividends and cash distributions
on our common shares.
Future dividends on our common shares or reductions of registered share capital for distribution to
shareholders, if any, must be approved by our shareholders. In exercising their discretion to recommend
to the shareholders that such dividends or distributions be approved, our board of directors will
consider our results of operations, cash requirements and surplus, financial condition, statutory
requirements of applicable law, contractual restrictions, and other factors that they may deem relevant.
During fiscal 2015, our board of directors authorized an increase of $3.0 billion in the share
repurchase program. We repurchased approximately 18 million of our common shares for
$1,163 million, approximately 11 million of our common shares for $604 million, and approximately
20 million of our common shares for $829 million during fiscal 2015, 2014, and 2013, respectively. At
September 25, 2015, we had $2.7 billion of availability remaining under our share repurchase
authorization.
Commitments and Contingencies
The following table provides a summary of our contractual obligations and commitments for debt,
minimum lease payment obligations under non-cancelable leases, and other obligations at fiscal year
end 2015:
Payments Due by Fiscal Year
Total
2016
2017
2018
2019
2020 Thereafter
(in millions)
Long-term debt, including current maturities . . . . . . . . $3,903 $ 500 $ — $718 $574 $ — $2,111
Interest on long-term debt(1) . . . . . . . . . . . . . . . . . . . .
681
37
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . .
10
1,245
344
341
140
98
300
116
59
3
140
76
24
89
44
2
79
30
2
Total contractual cash obligations(3)(4)(5)
. . . . . . . . . . $5,833 $1,038 $240 $896 $709 $111
$2,839
(1)
(2)
Interest payments exclude the impact of our interest rate swaps.
Purchase obligations consist primarily of commitments for purchases of goods and services.
31
(3) The table above does not reflect unrecognized income tax benefits of $1,368 million and related accrued interest and
penalties of $1,076 million, the timing of which is uncertain. See Note 16 to the Consolidated Financial Statements for
additional information regarding unrecognized income tax benefits, interest, and penalties.
(4) The table above does not reflect pension and postretirement benefit obligations to certain employees and former
employees. We are obligated to make contributions to our pension plans and postretirement benefit plans; however, we are
unable to determine the amount of plan contributions due to the inherent uncertainties of obligations of this type, including
timing, interest rate charges, investment performance, and amounts of benefit payments. We expect to contribute
$75 million to pension and postretirement benefit plans in fiscal 2016, before consideration of voluntary contributions.
These plans and our estimates of future contributions and benefit payments are more fully described in Note 15 to the
Consolidated Financial Statements.
(5) Other long-term liabilities of $433 million are excluded from the table above as we are unable to estimate the timing of
payment for these items.
Legal Proceedings
In the ordinary 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. However, the proceedings discussed below in ‘‘Income Tax
Matters’’ could have a material effect on our results of operations, financial position, or cash flows. See
‘‘Part I. Item 3. Legal Proceedings’’ of our Annual Report on Form 10-K for the fiscal year ended
September 25, 2015 filed with the SEC for further information regarding legal proceedings.
As previously reported, we had a contingent purchase price commitment of $80 million related to
our fiscal 2001 acquisition of Com-Net. This represented the maximum amount payable to the former
shareholders of Com-Net only after the construction and installation of a communications system was
completed for and approved by the State of Florida in accordance with guidelines set forth in the
contract. Under the terms of the purchase and sale agreement, we did not believe we had any
obligation to the sellers. However, the sellers contested our position and initiated a lawsuit in June
2006 in the Court of Common Pleas in Allegheny County, Pennsylvania. Trial began in March 2015 and
culminated in the entry of final judgment on October 8, 2015, in favor of the sellers and against us for
$127 million plus costs. The judgment represents the $80 million contingent purchase price plus
pre-judgment interest, which will continue to accrue until the judgment is paid in full. We are
proceeding with an appeal. In connection with this case, we recorded a reserve and pre-tax charges of
$127 million in fiscal 2015. These charges are reflected in income from discontinued operations on the
Consolidated Statement of Operations as the Com-Net case was associated with our former Wireless
Systems business which was sold in fiscal 2009.
Income Tax Matters
In connection with the separation from Tyco International in 2007, we entered into a Tax Sharing
Agreement that generally governs our, Tyco International’s, and Covidien’s respective rights,
responsibilities, and obligations with respect to taxes for periods prior to and including June 29, 2007.
See Note 12 to the Consolidated Financial Statements for additional information regarding the Tax
Sharing Agreement. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee
commitments and indemnifications with Tyco International and Covidien. See ‘‘Income Tax Matters’’ in
Note 13 to the Consolidated Financial Statements for further information regarding income tax
matters, including the disputed issue related to the tax treatment of certain intercompany debt
transactions.
32
Off-Balance Sheet Arrangements
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 2016 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 September 25, 2015, we had outstanding letters of credit, letters of guarantee, and surety bonds
in the amount of $360 million.
In the normal course of business, we are liable for contract completion and product performance.
In the opinion of management, such obligations will not significantly affect our results of operations,
financial position, or cash flows.
Critical Accounting Policies and Estimates
The preparation of the 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 significant accounting policies are summarized in Note 2 to the Consolidated Financial
Statements. The following accounting policies are considered to be the most critical as they require
significant judgments and assumptions that involve inherent risks and uncertainties. Management’s
estimates are based on the relevant information available at the end of each period.
Revenue Recognition
Our revenue recognition policies are in accordance with ASC 605, Revenue Recognition. Our
revenues are generated principally from the sale of our products. Revenue from the sale of products is
recognized at the time title and the risks and rewards of ownership pass to the customer. This generally
occurs when the products reach the shipping point, the sales price is fixed and determinable, and
collection is reasonably assured. A reserve for estimated returns is established at the time of sale based
on historical return experience and is recorded as a reduction of sales. Other allowances include
customer quantity and price discrepancies. A reserve for other allowances is generally established at the
time of sale based on historical experience and also is recorded as a reduction of sales.
Contract revenues for construction related projects, which are generated in the Communications
Solutions segment, are recorded primarily using the percentage-of-completion method. Profits
recognized on contracts in process are based upon estimated contract revenue and related cost to
complete. Percentage-of-completion is measured based on the ratio of actual costs incurred to total
estimated costs. Revisions in cost estimates as contracts progress have the effect of increasing or
decreasing profits in the current period. Provisions for anticipated losses are made in the period in
which they first become determinable. In addition, provisions for credit losses related to construction
related projects are recorded as reductions of revenue in the period in which they first become
determinable.
33
Goodwill and Other Intangible Assets
Intangible assets include both indeterminable-lived residual goodwill and determinable-lived
identifiable intangible assets. Intangible assets with a determinable life primarily include intellectual
property, consisting of patents, trademarks, and unpatented technology, as well as customer
relationships. Recoverability estimates range from 1 to 50 years and costs are generally amortized on a
straight-line basis. An evaluation of the remaining useful life of determinable-lived intangible assets is
performed on a periodic basis and when events and circumstances warrant an evaluation.
We test for goodwill impairment at the reporting unit level. A reporting unit is generally an
operating segment or one level below an operating segment that constitutes a business for which
discrete financial information is available and regularly reviewed by segment management. At fiscal
year end 2015, we had seven reporting units, six of which contained goodwill. There are two reporting
units in each of the Transportation Solutions and Industrial Solutions segments, and three reporting
units in the Communications Solutions segment. When changes occur in the composition of one or
more reporting units, goodwill is reassigned to the reporting units affected based on their relative fair
values. We review our reporting unit structure each year as part of our annual goodwill impairment
test, or more frequently based on changes in our structure.
Goodwill impairment is evaluated by comparing the carrying value of each reporting unit to its fair
value on the first day of the fourth fiscal quarter of each year or whenever we believe a triggering
event requiring a more frequent assessment has occurred. In assessing the existence of a triggering
event, management relies on a number of reporting-unit-specific factors including operating results,
business plans, economic projections, anticipated future cash flows, transactions, and market place data.
There are inherent uncertainties related to these factors and management’s judgment in applying these
factors to the impairment analysis.
When testing for goodwill impairment, we perform a step I goodwill impairment test to identify
potential impairment by comparing the fair value of a reporting unit with its carrying amount. If the
carrying amount of a reporting unit exceeds its fair value, goodwill may be impaired and a step II
goodwill impairment test is performed to measure the amount of impairment, if any. In the step II
goodwill impairment test, we compare the implied fair value of reporting unit goodwill with the
carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The
implied fair value of goodwill is determined in a manner consistent with how goodwill is recognized in
a business combination. We allocate the fair value of a reporting unit to all of the assets and liabilities
of that unit, including intangible assets, as if the reporting unit had been acquired in a business
combination. Any excess of the fair value of a reporting unit over the amounts assigned to its assets
and liabilities is the implied fair value of goodwill.
Fair value estimates used in the step I goodwill impairment tests are calculated using an income
approach based on the present value of future cash flows of each reporting unit. The income approach
generally has been supported by guideline analyses (a market approach). These approaches incorporate
a number of assumptions including future growth rates, discount rates, income tax rates, and market
activity in assessing fair value and are reporting unit specific. Changes in economic and operating
conditions impacting these assumptions could result in goodwill impairments in future periods.
We completed our annual goodwill impairment test in the fourth quarter of fiscal 2015 and
determined that no impairment existed.
Income Taxes
In determining income for financial statement purposes, we must make certain estimates and
judgments. These estimates and judgments affect the calculation of certain tax liabilities and the
34
determination of the recoverability of certain deferred tax assets, which arise from temporary
differences between the income tax return and financial statement recognition of revenue and expense.
In evaluating our ability to recover our deferred tax assets, we consider all available positive and
negative evidence including our past operating results, the existence of cumulative losses in the most
recent years, and our forecast of future taxable income. In estimating future taxable income, we
develop assumptions including the amount of future state, federal, and non-U.S. pre-tax operating
income, the reversal of temporary differences, and the implementation of feasible and prudent tax
planning strategies. These assumptions require significant judgment about the forecasts of future
taxable income and are consistent with the plans and estimates we are using to manage the underlying
businesses.
We currently have recorded significant valuation allowances that we intend to maintain until it is
more likely than not the deferred tax assets will be realized. Our income tax expense recorded in the
future will be reduced to the extent of decreases in our valuation allowances. The realization of our
remaining deferred tax assets is dependent primarily on future taxable income in the appropriate
jurisdictions. Any reduction in future taxable income including any future restructuring activities may
require that we record an additional valuation allowance against our deferred tax assets. An increase in
the valuation allowance would result in additional income tax expense in such period and could have a
significant impact on our future earnings. Any changes in a valuation allowance that was established in
connection with an acquisition will be reflected in the income tax provision.
Changes in tax laws and rates also could affect recorded deferred tax assets and liabilities in the
future. Management is not aware of any such changes that would have a material effect on our results
of operations, financial position, or cash flows.
In addition, the calculation of our tax liabilities includes estimates for uncertainties in the
application of complex tax regulations across multiple global jurisdictions where we conduct our
operations. Under the uncertain tax position provisions of ASC 740, Income Taxes, we recognize
liabilities for tax and related interest for issues in the U.S. and other tax jurisdictions based on our
estimate of whether, and the extent to which, additional taxes and related interest will be due. In
addition, management reviews with tax counsel various issues raised by certain taxing authorities and
the adequacy of recorded amounts. These tax liabilities and related interest are reflected net of the
impact of related tax loss carryforwards, as such tax loss carryforwards will be applied against these tax
liabilities and will reduce the amount of cash tax payments due upon the eventual settlement with the
tax authorities. These estimates may change due to changing facts and circumstances. Due to the
complexity of these uncertainties, the ultimate resolution may result in a settlement that differs from
our current estimate of the tax liabilities and related interest. These tax liabilities and related interest
are recorded in income taxes and accrued and other current liabilities on the Consolidated Balance
Sheets.
Pension and Postretirement Benefits
Our pension expense and obligations are developed from actuarial assumptions. The funded status
of our defined benefit pension and postretirement benefit plans is recognized on the Consolidated
Balance Sheets and is measured as the difference between the fair value of plan assets and the benefit
obligation at the measurement date. For defined benefit pension plans, the benefit obligation is the
projected benefit obligation, which represents the actuarial present value of benefits expected to be
paid upon retirement factoring in estimated future compensation levels. For the postretirement benefit
plans, the benefit obligation is the accumulated postretirement benefit obligation, which represents the
actuarial present value of postretirement benefits attributed to employee services already rendered. The
fair value of plan assets represents the current market value of cumulative company and participant
contributions made to irrevocable trust funds, held for the sole benefit of participants, which are
invested by the trustee of the funds. The benefits under pension and postretirement plans are based on
various factors, such as years of service and compensation.
35
Net periodic pension benefit cost is based on the utilization of the projected unit credit method of
calculation and is charged to earnings on a systematic basis over the expected average remaining
service lives of current participants.
Two critical assumptions in determining pension expense and obligations are the discount rate and
expected long-term return on plan assets. We evaluate these assumptions at least annually. Other
assumptions reflect demographic factors such as retirement, mortality, and employee turnover. These
assumptions are evaluated periodically and updated to reflect our actual experience. Actual results may
differ from actuarial assumptions. The discount rate represents the market rate for high-quality fixed
income investments and is used to calculate the present value of the expected future cash flows for
benefit obligations to be paid under our pension plans. A decrease in the discount rate increases the
present value of pension benefit obligations. At fiscal year end 2015, a 25 basis point decrease in the
discount rate would have increased the present value of our pension obligations by $136 million; a 25
basis point increase would have decreased the present value of our pension obligations by $122 million.
We consider the current and expected asset allocations of our pension plans, as well as historical and
expected long-term rates of return on those types of plan assets, in determining the expected long-term
rate of return on plan assets. A 50 basis point decrease or increase in the expected long-term return on
plan assets would have increased or decreased, respectively, our fiscal 2015 pension expense by
$11 million.
The long-term target asset allocation in our U.S. plans’ master trust is 10% equity and 90% fixed
income. Asset re-allocation to meet that target is occurring over a multi-year period based on the
funded status, as defined by the Pension Protection Act of 2006 (the ‘‘Pension Act Funded Status’’), of
the U.S. plans’ master trust and market conditions. We expect to reach our target allocation when the
Pension Act Funded Status exceeds 105%. Based on the Pension Act Funded Status as of
September 25, 2015, our target asset allocation is 45% equity and 55% fixed income.
Recently Issued Accounting Pronouncements
Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for information regarding recently issued
accounting pronouncements.
Non-GAAP Financial Measures
Organic net sales growth and free cash flow are non-GAAP measures and should not be
considered replacements for results in accordance with GAAP. These non-GAAP measures may not be
comparable to similarly-titled measures reported by other companies. The primary limitation of these
measures is that they exclude the financial impact of items that would otherwise either increase or
decrease our reported results. This limitation is best addressed by using these non-GAAP measures in
combination with the most directly comparable GAAP measures in order to better understand the
amounts, character, and impact of any increase or decrease in reported amounts. The following
provides additional information regarding these non-GAAP measures.
Organic Net Sales Growth
Organic net sales growth is a useful measure of our underlying results and trends in the business.
It is also a significant component in our incentive compensation plans. The difference between reported
net sales growth (the most comparable GAAP measure) and organic net sales growth consists of the
impact from foreign currency exchange rates, and acquisitions and divestitures, if any. Organic net sales
growth 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.
36
Management uses organic net sales growth to monitor and evaluate performance. Also, management
uses organic net sales growth together with GAAP measures such as net sales growth and operating
income in its decision making processes related to the operations of our reportable segments and our
overall company. 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’’ above provide reconciliations of organic net sales growth to net sales growth
calculated under GAAP.
Free Cash Flow
Free cash flow is a useful measure of our ability to generate cash. The difference between net cash
provided by continuing operating activities (the most comparable GAAP measure) and free cash flow
consists mainly of significant cash outflows and inflows that we believe are useful to identify. We
believe free cash flow provides useful information to investors as it provides insight into the primary
cash flow metric used by management to monitor and evaluate cash flows generated from our
operations.
Free cash flow is defined as net cash provided by continuing operating activities excluding
voluntary pension contributions and the cash impact of special items, if any, minus net capital
expenditures. Net capital expenditures consist of capital expenditures less proceeds from the sale of
property, plant, and equipment. These items are subtracted because they represent long-term
commitments. Voluntary pension contributions are excluded because this activity is driven by economic
financing decisions rather than operating activity. Certain special items, including net payments related
to pre-separation tax matters, are also considered by management in evaluating free cash flow. We
believe investors also should consider these items in evaluating our free cash flow.
Free cash flow subtracts certain cash items that are ultimately within management’s and the board
of directors’ discretion to direct and may imply that there is less or more cash available for our
programs than the most comparable GAAP measure indicates. It should not be inferred that the entire
free cash flow amount is available for future discretionary expenditures, as our definition of free cash
flow does not consider certain non-discretionary expenditures, such as debt payments. In addition, we
may have other discretionary expenditures, such as discretionary dividends, share repurchases, and
business acquisitions, that are not considered in the calculation of free cash flow.
The tables presented in ‘‘Liquidity and Capital Resources’’ above provide reconciliations of free
cash flow to cash flows from continuing operating activities calculated under GAAP.
Forward-Looking Information
Certain statements in this report 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, 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,’’ ‘‘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. You should not put 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.
37
The following and other risks, which are described in greater detail in ‘‘Part I. Item 1A. Risk
Factors’’ of our Annual Report on Form 10-K for the fiscal year ended September 25, 2015 filed with
the SEC, as well as other risks described in this Annual Report, 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 new product introductions and product innovations and product life cycles;
• raw material availability, quality, and cost;
• fluctuations in foreign currency exchange rates;
• 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 and political, economic, and
military instability;
• 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;
• risks relating to our separation on June 29, 2007 from Tyco International;
• the possible effects on us of various U.S. and non-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;
• 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.
38
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, our financial position is routinely subject to a variety of risks,
including market risks associated with interest rate and currency movements on outstanding debt and
non-U.S. dollar denominated assets and liabilities and commodity price movements. We utilize
established risk management policies and procedures in executing derivative financial instrument
transactions to manage a portion of these risks.
We do not execute transactions or hold derivative financial instruments for trading or speculative
purposes. Substantially all counterparties to derivative financial instruments are limited to major
financial institutions with at least an A/A2 credit rating. There is no significant concentration of
exposures with any one counterparty.
Foreign Currency Exposures
As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-
currency swap contracts, foreign currency forward contracts, and foreign currency swap contracts, a
portion of which are designated as cash flow hedges. The objective of these contracts is to minimize
impacts to cash flows and profitability due to changes in foreign currency exchange rates on
intercompany and other cash transactions. A 10% appreciation or depreciation of the underlying
currency in our cross-currency swap contracts, foreign currency forward contracts, or foreign currency
swap contracts from the September 25, 2015 market rates would have changed the unrealized value of
our contracts by $109 million. A 10% appreciation or depreciation of the underlying currency in our
foreign currency forward or swap contracts from the September 26, 2014 market rates would have
changed the unrealized value of our contracts by $16 million. Such gains or losses on these contracts
would generally be offset by the gains or losses on the revaluation or settlement of the underlying
transactions.
Interest Rate and Investment Exposures
We issue debt, as needed, to fund our operations and capital requirements. Such borrowings can
result in interest rate exposure. To manage the interest rate exposure, we use interest rate swaps to
convert a portion of fixed-rate debt into variable-rate debt. We use forward starting interest rate swaps
and options to enter into interest rate swaps to manage interest rate exposure in periods prior to the
anticipated issuance of fixed-rate debt. We also utilize investment swaps to manage earnings exposure
on certain nonqualified deferred compensation liabilities.
Based on our floating rate debt balances of approximately $800 million at September 25, 2015 and
$950 million at September 26, 2014, an increase in the levels of the U.S. dollar interest rates by 0.5%,
with all other variables held constant, would have resulted in an increase of annual interest expense of
approximately $4 million and $5 million in fiscal 2015 and 2014, respectively.
Commodity Exposures
Our worldwide operations and product lines may expose us to risks from fluctuations in commodity
prices. To limit the effects of fluctuations in the future market price paid and related volatility in cash
flows, we utilize commodity swap contracts designated as cash flow hedges. We continually evaluate the
commodity market with respect to our forecasted usage requirements over the next eighteen months
and periodically enter into commodity swap contracts in order to hedge a portion of usage
requirements over that period. At September 25, 2015, our commodity hedges, which related to
expected purchases of gold, silver, and copper, were in a net loss position of $33 million and had a
notional value of $260 million. At September 26, 2014, our commodity hedges, which related to
expected purchases of gold, silver, and copper, were in a net loss position of $21 million and had a
notional value of $307 million. A 10% appreciation or depreciation of the price of a troy ounce of gold,
39
a troy ounce of silver, and a pound of copper, from the September 25, 2015 prices would have changed
the unrealized value of our forward contracts by $23 million. A 10% appreciation or depreciation of
the price of a troy ounce of gold, a troy ounce of silver, and a pound of copper, from the
September 26, 2014 prices would have changed the unrealized value of our forward contracts by
$29 million.
See Note 14 to the Consolidated Financial Statements for additional information on financial
instruments.
40
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Evaluation of Disclosure Controls and Procedures
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 Exchange Act) as of September 25, 2015. Based on that evaluation, our chief executive
officer and chief financial officer concluded that our disclosure controls and procedures were effective
as of September 25, 2015.
Measurement Specialties Acquisition
We acquired Measurement Specialties on October 9, 2014. For additional information regarding
the acquisition, see Note 5 to the Consolidated Financial Statements included in this Annual Report.
SEC guidance permits management to omit an assessment of an acquired business’ internal control
over financial reporting from management’s assessment of internal control over financial reporting for a
period not to exceed one year from the date of acquisition. We are in the process of integrating the
Measurement Specialties operations within our internal control structure. Accordingly, we have
excluded Measurement Specialties from our annual assessment of internal control over financial
reporting as of September 25, 2015.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management, with the
participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our
internal control over financial reporting based on the framework in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management has concluded our internal control over financial reporting was
effective as of September 25, 2015.
As discussed above, management has excluded Measurement Specialties from the assessment of
internal control over financial reporting. Measurement Specialties represented 9% of total assets and
4% of total net sales on the Consolidated Financial Statements as of and for the fiscal year ended
September 25, 2015.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with policies and procedures may deteriorate.
Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation
report on our internal control over financial reporting as of September 25, 2015, which is included in
this Annual Report.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 25, 2015, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
41
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42
TE CONNECTIVITY LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
44
Consolidated Statements of Operations for the Fiscal Years Ended September 25, 2015,
September 26, 2014, and September 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended September 25,
2015, September 26, 2014, and September 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of September 25, 2015 and September 26, 2014 . . . . . . . . . . . . .
48
49
Consolidated Statements of Equity for the Fiscal Years Ended September 25, 2015,
September 26, 2014, and September 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
Consolidated Statements of Cash Flows for the Fiscal Years Ended September 25, 2015,
September 26, 2014, and September 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
52
Schedule II—Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
109
Report of the Statutory Auditor on the Consolidated Financial Statements of TE
Connectivity Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of TE Connectivity Ltd.:
We have audited the accompanying consolidated balance sheets of TE Connectivity Ltd. and
subsidiaries (the ‘‘Company’’) as of September 25, 2015 and September 26, 2014, and the related
consolidated statements of operations, comprehensive income, equity, and cash flows for each of the
three fiscal years in the period ended September 25, 2015. Our audits also included the financial
statement schedule listed in the Index. These consolidated financial statements and financial statement
schedule are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of September 25, 2015 and September 26, 2014, and the results of
its operations and its cash flows for each of the three fiscal years in the period ended September 25,
2015, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial reporting as of
September 25, 2015, based on the criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated November 10, 2015 expressed an unqualified opinion on the Company’s internal control over
financial reporting.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
November 10, 2015
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of TE Connectivity Ltd.:
We have audited the internal control over financial reporting of TE Connectivity Ltd. and
subsidiaries (the ‘‘Company’’) as of September 25, 2015, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. As described in Management’s Report on Internal Control Over Financial
Reporting, management excluded from its assessment the internal control over financial reporting of
Measurement Specialties, Inc. (‘‘Measurement Specialties’’), which was acquired on October 9, 2014
and whose financial statements constitute 9% of total assets and 4% of total net sales of the
consolidated financial statement amounts as of and for the year ended September 25, 2015.
Accordingly, our audit did not include the internal control over financial reporting at Measurement
Specialties. The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the
supervision of, the company’s principal executive and principal financial officers, or persons performing
similar functions, and effected by the company’s board of directors, management, and other personnel
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.
A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation
of the effectiveness of the internal control over financial reporting to future periods are subject to the
risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of September 25, 2015, based on the criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
45
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and financial statement schedule
of the Company as of and for the fiscal year ended September 25, 2015, and our report dated
November 10, 2015 expressed an unqualified opinion on those consolidated financial statements and
financial statement schedule.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
November 10, 2015
46
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended September 25, 2015, September 26, 2014, and September 27, 2013
2015
Fiscal
2014
2013
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses . . . . . . . . . . . . . . . . . . . . .
Research, development, and engineering expenses . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of income taxes . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: net income attributable to noncontrolling interests . . . . . . . . . . . . .
(in millions, except
per share data)
$11,973
8,001
$11,390
7,739
$12,233
8,146
4,087
1,504
627
55
152
1,749
17
(136)
(55)
1,575
(337)
1,238
1,182
2,420
—
3,972
1,534
583
31
19
1,805
19
(127)
63
1,760
(146)
1,614
167
1,781
—
3,651
1,440
590
14
222
1,385
17
(139)
(183)
1,080
75
1,155
122
1,277
(1)
Net income attributable to TE Connectivity Ltd.
. . . . . . . . . . . . . . . .
$ 2,420
$ 1,781
$ 1,276
Amounts attributable to TE Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,238
1,182
$ 1,614
167
$ 1,154
122
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,420
$ 1,781
$ 1,276
Basic earnings per share attributable to TE Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share attributable to TE Connectivity Ltd.:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3.06
2.92
5.98
3.01
2.88
5.89
$
$
3.94
0.41
4.34
3.87
0.40
4.27
$
$
2.76
0.29
3.05
2.73
0.29
3.02
Dividends and cash distributions paid per common share . . . . . . . . . . .
$
1.24
$
1.08
$
0.92
Weighted-average number of shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405
411
410
417
418
423
See Notes to Consolidated Financial Statements.
47
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Years Ended September 25, 2015, September 26, 2014, and September 27, 2013
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to unrecognized pension and postretirement benefit costs,
2015
Fiscal
2014
2013
(in millions)
$1,781
$2,420
$1,277
(312)
(211)
(28)
net of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on cash flow hedges, net of income taxes . . . . . . . . . . . . . .
(46)
2
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(356)
(123)
14
(320)
131
(29)
74
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: comprehensive income attributable to noncontrolling interests . . . . . . .
2,064
—
1,461
—
1,351
(1)
Comprehensive income attributable to TE Connectivity Ltd.
. . . . . . . . . . . .
$2,064
$1,461
$1,350
See Notes to Consolidated Financial Statements.
48
TE CONNECTIVITY LTD.
CONSOLIDATED BALANCE SHEETS
As of September 25, 2015 and September 26, 2014
Fiscal Year End
2015
2014
(in millions, except
share data)
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of $18 and $14, respectively . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,329
2,120
1,615
478
345
—
$ 2,457
2,057
1,509
519
324
2,013
Total current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment, net
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from Tyco International plc and Covidien plc . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,887
2,920
4,824
1,555
2,144
964
314
8,879
2,920
3,726
1,087
2,047
1,037
456
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,608
$20,152
Liabilities and Equity
Current liabilities:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term pension and postretirement liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
500
1,143
1,749
185
—
3,577
3,403
1,327
329
1,954
433
$
577
1,230
1,594
176
416
3,993
3,281
1,280
229
2,044
312
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,023
11,139
Commitments and contingencies (Note 13)
Equity:
TE Connectivity Ltd. shareholders’ equity:
Common shares, 414,064,381 shares authorized and issued, CHF 0.57 par value, and
419,070,781 shares authorized and issued, CHF 0.57 par value, respectively . . . . . . . . .
Contributed surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost, 20,071,089 and 11,383,631 shares, respectively . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total TE Connectivity Ltd. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
182
4,359
6,673
(1,256)
(373)
9,585
—
9,585
184
5,231
4,253
(644)
(17)
9,007
6
9,013
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,608
$20,152
See Notes to Consolidated Financial Statements.
49
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF EQUITY
Fiscal Years Ended September 25, 2015, September 26, 2014, and September 27, 2013
Common
Shares
Treasury
Shares
Shares Amount Shares Amount
Accumulated Connectivity
Other
Non-
TE
Ltd.
Contributed Accumulated Comprehensive Shareholders’ controlling Total
Interests Equity
Income (Loss)
Earnings
Surplus
Equity
(16) $ (484)
—
—
—
—
$6,837
—
—
(in millions)
$1,196
1,276
—
$ 229
—
74
Balance at September 28, 2012 .
439
Net income . . . . . . . . . . . . —
Other comprehensive income . . —
Share-based compensation
expense . . . . . . . . . . . . . —
Dividends approved . . . . . . . —
Exercise of share options . . . . —
Restricted share award vestings
and other activity
. . . . . . . —
Repurchase of common shares . —
(10)
Cancellation of treasury shares .
Dividends to noncontrolling
$193
—
—
—
—
—
—
—
6
—
3
— (20)
10
(4)
—
1
214
11
(829)
367
78
(413)
—
(3)
—
(363)
interests . . . . . . . . . . . . . —
—
—
—
—
Balance at September 27, 2013 .
429
$189
(17) $ (720)
$6,136
Net income . . . . . . . . . . . . —
Other comprehensive loss . . . . —
Share-based compensation
expense . . . . . . . . . . . . . —
Dividends approved . . . . . . . —
Exercise of share options . . . . —
Restricted share award vestings
and other activity
. . . . . . . —
Repurchase of common shares . —
(10)
Cancellation of treasury shares .
—
—
—
—
—
—
—
—
—
5
—
—
—
—
156
2
—
— (11)
10
(5)
125
(604)
399
—
—
84
(473)
—
(122)
—
(394)
Balance at September 26, 2014 .
419
$184
(11) $ (644)
$5,231
Net income . . . . . . . . . . . . —
Other comprehensive loss . . . . —
Share-based compensation
expense . . . . . . . . . . . . . —
Dividends approved . . . . . . . —
Exercise of share options . . . . —
Restricted share award vestings
and other activity
. . . . . . . —
Repurchase of common shares . —
(5)
Cancellation of treasury shares .
—
—
—
—
—
—
—
—
—
3
—
—
—
—
103
—
1
— (18)
5
(2)
143
(1,163)
305
—
—
95
(526)
—
(138)
—
(303)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$2,472
1,781
—
$ 303
—
(320)
—
—
—
—
—
—
—
—
—
—
—
—
$4,253
2,420
—
$ (17)
—
(356)
—
—
—
—
—
—
—
—
—
—
—
—
$ 7,971
1,276
74
78
(412)
214
8
(829)
—
$ 6
1
—
—
—
—
—
—
—
$ 7,977
1,277
74
78
(412)
214
8
(829)
—
—
(1)
(1)
$ 8,380
$ 6
$ 8,386
1,781
(320)
84
(473)
156
3
(604)
—
—
—
—
—
—
—
—
—
1,781
(320)
84
(473)
156
3
(604)
—
$ 9,007
$ 6
$ 9,013
2,420
(356)
95
(526)
103
5
(1,163)
—
—
—
—
—
—
(6)
—
—
2,420
(356)
95
(526)
103
(1)
(1,163)
—
Balance at September 25, 2015 .
414
$182
(20) $(1,256)
$4,359
$6,673
$(373)
$ 9,585
$—
$ 9,585
See Notes to Consolidated Financial Statements.
50
TE CONNECTIVITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended September 25, 2015, September 26, 2014, and September 27, 2013
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for losses on accounts receivable and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax sharing (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by continuing operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by discontinued operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows From Investing Activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures
Proceeds from sale of property, plant, and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestiture of discontinued operations, net of cash retained by sold operations . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Net cash provided by (used in) continuing investing activities . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows From Financing Activities:
Net increase (decrease) in commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of share options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of common share dividends and cash distributions to shareholders . . . . . . . . . . . . . . . . . . .
Transfers from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) continuing financing activities
. . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency translation on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal
2014
2013
2015
(in millions)
$ 2,420
(1,182)
$ 1,781
(167)
$ 1,277
(122)
1,238
1,614
1,155
616
21
40
36
52
89
105
(210)
(220)
36
(22)
(155)
12
(52)
33
1,619
294
1,913
(600)
17
(1,725)
2,957
12
661
(25)
636
(328)
617
(473)
103
(1,023)
(502)
269
—
(1,337)
(269)
(1,606)
(71)
872
2,457
551
16
(281)
34
(65)
77
50
(182)
(98)
(14)
71
(280)
113
167
31
1,804
279
2,083
(635)
129
(522)
—
(10)
(1,038)
(37)
(1,075)
(23)
1,322
(360)
156
(578)
(443)
242
(9)
307
(242)
65
(19)
1,054
1,403
536
60
14
39
181
71
56
(65)
(28)
13
143
(13)
(50)
(387)
50
1,775
271
2,046
(581)
22
(6)
14
23
(528)
(17)
(545)
50
—
(714)
214
(844)
(384)
254
—
(1,424)
(254)
(1,678)
(9)
(186)
1,589
Cash and cash equivalents at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,329
$ 2,457
$ 1,403
Supplemental Cash Flow Information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid, net of refunds
$
128
350
$
118
259
$
151
299
See Notes to Consolidated Financial Statements.
51
TE CONNECTIVITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The Consolidated Financial Statements reflect the consolidated operations of TE Connectivity Ltd.
and its subsidiaries and have been prepared in United States (‘‘U.S.’’) dollars in accordance with
accounting principles generally accepted in the U.S. (‘‘GAAP’’).
Description of the Business
TE Connectivity Ltd. (‘‘TE Connectivity’’ or the ‘‘Company,’’ which may be referred to as ‘‘we,’’
‘‘us,’’ or ‘‘our’’) is a global technology leader. We design and manufacture connectivity and sensors
solutions that are essential in today’s increasingly connected world. We help our customers solve the
need for intelligent, efficient, and high-performing products and solutions.
We consist of three reportable segments:
• Transportation Solutions. The Transportation Solutions segment is a leader in connectivity and
sensor technologies. Our products, which must withstand harsh conditions, are used in the
automotive, commercial transportation, and sensors markets.
• Industrial Solutions. The Industrial Solutions segment is a leading supplier of products that
connect and distribute power, data, and signals. Our products are used in the industrial
equipment; aerospace, defense, oil, and gas; and energy markets.
• Communications Solutions. The Communications Solutions segment is a top supplier of
electronic components for the data and devices and appliances markets. We are also a leader in
developing, manufacturing, installing, and maintaining some of the world’s most advanced subsea
fiber optic communications systems.
Use of Estimates
The preparation of the 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 revenues and
expenses. Significant estimates in these Consolidated Financial Statements include restructuring and
other charges, assets acquired and liabilities assumed in acquisitions, allowances for doubtful accounts
receivable, estimates of future cash flows and discount rates associated with asset impairments, useful
lives for depreciation and amortization, loss contingencies, net realizable value of inventories, estimated
contract revenue and related costs, legal contingencies, tax reserves and deferred tax asset valuation
allowances, and the determination of discount and other rate assumptions for pension and
postretirement employee benefit expenses. Actual results could differ materially from these estimates.
Fiscal Year
We have a 52 or 53-week fiscal year that ends on the last Friday of September. Fiscal 2015, 2014,
and 2013 were 52 weeks and ended on September 25, 2015, September 26, 2014, and September 27,
2013, respectively. For fiscal years in which there are 53 weeks, the fourth quarter reporting period will
include 14 weeks with the next occurrence taking place in fiscal 2016.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies
Principles of Consolidation
We consolidate entities in which we own or control more than 50% of the voting shares or
otherwise have the ability to control through similar rights. All intercompany transactions have been
eliminated. The results of companies acquired or disposed of are included on the Consolidated
Financial Statements from the effective date of acquisition or up to the date of disposal.
Revenue Recognition
Our revenues are generated principally from the sale of our products. Revenue from the sale of
products is recognized at the time title and the risks and rewards of ownership pass to the customer.
This generally occurs when the products reach the shipping point, the sales price is fixed and
determinable, and collection is reasonably assured.
Contract revenues for construction related projects, which are generated in the Communications
Solutions segment, are recorded primarily using the percentage-of-completion method. Profits
recognized on contracts in process are based upon estimated contract revenue and related cost to
complete. Percentage-of-completion is measured based on the ratio of actual costs incurred to total
estimated costs. Revisions in cost estimates as contracts progress have the effect of increasing or
decreasing profits in the current period. Provisions for anticipated losses are made in the period in
which they first become determinable. In addition, provisions for credit losses related to construction
related projects are recorded as reductions of revenue in the period in which they first become
determinable.
We generally warrant that our products will conform to our, or mutually agreed to, specifications
and that our products will be free from material defects in materials and workmanship for a limited
time. We limit our warranty to the replacement or repair of defective parts, or a refund or credit of the
price of the defective product. We accept returned goods only when the customer makes a verified
claim and we have authorized the return. Generally, a reserve for estimated returns is established at
the time of sale based on historical return experience and is recorded as a reduction of sales.
Additionally, certain of our long-term contracts in the Communications Solutions segment have
warranty obligations. Estimated warranty costs for each contract are determined based on the contract
terms and technology-specific considerations. These costs are included in total estimated contract costs
and are accrued over the construction period of the respective contracts under
percentage-of-completion accounting.
We provide certain distributors with an inventory allowance for returns or scrap equal to a
percentage of qualified purchases. A reserve for estimated returns and scrap allowances is established
at the time of the sale, based on an agreed upon fixed percentage of sales to distributors, and is
recorded as a reduction of sales.
Other allowances include customer quantity and price discrepancies. A reserve for other
allowances is generally established at the time of sale based on historical experience and is recorded as
a reduction of sales. We believe we can reasonably and reliably estimate the amounts of future
allowances.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
Inventories
Inventories are recorded at the lower of cost or market value using the first-in, first-out cost
method, except for inventoried costs incurred in the performance of long-term contracts primarily by
the Communications Solutions segment.
Property, Plant, and Equipment, Net
Property, plant, and equipment is recorded at cost less accumulated depreciation. Maintenance and
repair expenditures are charged to expense when incurred. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, which are 10 to 20 years for land
improvements, 5 to 40 years for buildings and improvements, and 1 to 15 years for machinery and
equipment.
We periodically evaluate, when events and circumstances warrant, the net realizable value of
property, plant, and equipment and other long-lived assets, relying on a number of factors including
operating results, business plans, economic projections, and anticipated future cash flows. When
indicators of potential impairment are present, the carrying values of the asset group are evaluated in
relation to the operating performance and estimated future undiscounted cash flows of the underlying
asset group. Impairment of the carrying value is recognized whenever anticipated future undiscounted
cash flow estimates are less than the carrying value of the asset. Fair value estimates are based on
assumptions concerning the amount and timing of estimated future cash flows and discount rates,
reflecting varying degrees of perceived risk.
Goodwill and Other Intangible Assets
Intangible assets include both indeterminable-lived residual goodwill and determinable-lived
identifiable intangible assets. Intangible assets with a determinable life primarily include intellectual
property, consisting of patents, trademarks, and unpatented technology, as well as customer
relationships. Recoverability estimates range from 1 to 50 years and costs are generally amortized on a
straight-line basis. An evaluation of the remaining useful life of determinable-lived intangible assets is
performed on a periodic basis and when events and circumstances warrant an evaluation.
At fiscal year end 2015, we had seven reporting units, six of which contained goodwill. There are
two reporting units in each of the Transportation Solutions and Industrial Solutions segments, and
three reporting units in the Communications Solutions segment. When changes occur in the
composition of one or more reporting units, goodwill is reassigned to the reporting units affected based
on their relative fair values.
Goodwill impairment is evaluated by comparing the carrying value of each reporting unit to its fair
value on the first day of the fourth fiscal quarter of each year or whenever we believe a triggering
event requiring a more frequent assessment has occurred. In assessing the existence of a triggering
event, management relies on a number of reporting-unit-specific factors including operating results,
business plans, economic projections, anticipated future cash flows, transactions, and market place data.
There are inherent uncertainties related to these factors and management’s judgment in applying these
factors to the impairment analysis.
When testing for goodwill impairment, we perform a step I goodwill impairment test to identify
potential impairment by comparing the fair value of a reporting unit with its carrying amount. If the
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
carrying amount of a reporting unit exceeds its fair value, goodwill may be impaired and a step II
goodwill impairment test is performed to measure the amount of impairment, if any. In the step II
goodwill impairment test, we compare the implied fair value of reporting unit goodwill with the
carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The
implied fair value of goodwill is determined in a manner consistent with how goodwill is recognized in
a business combination. We allocate the fair value of a reporting unit to all of the assets and liabilities
of that unit, including intangible assets, as if the reporting unit had been acquired in a business
combination. Any excess of the fair value of a reporting unit over the amounts assigned to its assets
and liabilities is the implied fair value of goodwill.
Fair value estimates used in the step I goodwill impairment tests are calculated using an income
approach based on the present value of future cash flows of each reporting unit. The income approach
generally has been supported by guideline analyses (a market approach). These approaches incorporate
a number of assumptions including future growth rates, discount rates, income tax rates, and market
activity in assessing fair value and are reporting unit specific. Changes in economic and operating
conditions impacting these assumptions could result in goodwill impairments in future periods.
Research and Development
Research and development expenditures are expensed when incurred and are included in research,
development, and engineering expenses on the Consolidated Statements of Operations. Research and
development expenses include salaries, direct costs incurred, and building and overhead expenses. The
amounts expensed in fiscal 2015, 2014, and 2013 were $540 million, $484 million, and $494 million,
respectively.
Income Taxes
Income taxes are computed in accordance with the provisions of Accounting Standards
Codification (‘‘ASC’’) 740, Income Taxes. Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been reflected on the Consolidated Financial
Statements. Deferred tax liabilities and assets are determined based on the differences between the
book and tax bases of particular assets and liabilities and operating loss carryforwards using tax rates in
effect for the years in which the differences are expected to reverse. A valuation allowance is provided
to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
The calculation of our tax liabilities includes estimates for uncertainties in the application of
complex tax regulations across multiple global jurisdictions where we conduct our operations. Under
the uncertain tax position provisions of ASC 740, we recognize liabilities for tax and related interest for
issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which,
additional taxes and related interest will be due. In addition, management reviews with tax counsel
various issues raised by certain taxing authorities and the adequacy of recorded amounts. These tax
liabilities and related interest are reflected net of the impact of related tax loss carryforwards, as such
tax loss carryforwards will be applied against these tax liabilities and will reduce the amount of cash tax
payments due upon the eventual settlement with the tax authorities. These estimates may change due
to changing facts and circumstances. Due to the complexity of these uncertainties, the ultimate
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
resolution may result in a settlement that differs from our current estimate of the tax liabilities and
related interest.
Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable,
accounts payable, debt, and derivative financial instruments.
We account for derivative financial instrument contracts on the Consolidated Balance Sheets at fair
value. For instruments not designated as hedges under ASC 815, Derivatives and Hedging, the changes
in the instruments’ fair value are recognized currently in earnings. For instruments designated as cash
flow hedges, the effective portion of changes in the fair value of a derivative is recorded in other
comprehensive income (loss) and reclassified into earnings in the same period or periods during which
the underlying hedged item affects earnings. Ineffective portions of a cash flow hedge, including
amounts excluded from the hedging relationship, are recognized currently in earnings. Changes in the
fair value of instruments designated as fair value hedges affect the carrying value of the asset or
liability hedged, with changes in both the derivative instrument and the hedged asset or liability being
recognized currently in earnings.
We determine the fair value of our financial instruments by using methods and assumptions that
are based on market conditions and risks existing at each balance sheet date. Standard market
conventions are used to determine the fair value of financial instruments, including derivatives.
The cash flows related to derivative financial instruments are reported in the operating activities
section of the Consolidated Statements of Cash Flows.
Our derivative financial instruments present certain market and counterparty risks. Concentration
of counterparty risk is mitigated, however, by our use of financial institutions worldwide, substantially
all of which have long-term Standard & Poor’s, Moody’s, and/or Fitch credit ratings of A/A2 or higher.
In addition, we utilize only conventional derivative financial instruments. We are exposed to potential
losses if a counterparty fails to perform according to the terms of its agreement. With respect to
counterparty net asset positions recognized at September 25, 2015, we have assessed the likelihood of
counterparty default as remote. We currently provide guarantees from a wholly-owned subsidiary to the
counterparties to our commodity swap derivatives and exchange cash collateral with the counterparties
to our cross-currency swap contracts. The likelihood of performance on the guarantees has been
assessed as remote. For all other derivative financial instruments, we are not required to provide, nor
do we require counterparties to provide, collateral or other security.
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, specifies a fair value hierarchy based upon the
observable inputs utilized in valuation of certain assets and liabilities. Observable inputs (highest level)
reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect
internally developed market assumptions. Fair value measurements are classified under the following
hierarchy:
• Level 1. Quoted prices in active markets for identical assets and liabilities.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
• Level 2. Quoted prices in active markets for similar assets and liabilities, or other inputs that are
observable for the asset or liability, either directly or indirectly, for substantially the full term of
the asset or liability.
• Level 3. Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets and liabilities. This includes certain pricing models,
discounted cash flows methodologies, and similar techniques that use significant unobservable
inputs.
Financial assets and liabilities measured at fair value on a recurring basis are generally valued
using level 2 inputs.
Financial instruments other than derivative instruments include cash and cash equivalents, accounts
receivable, accounts payable, and debt. These instruments are recorded on the Consolidated Balance
Sheets at book value. For cash and cash equivalents, accounts receivable, and accounts payable, we
believe book value approximates fair value due to the short-term nature of these instruments. See
Note 11 for disclosure of the fair value of debt. The following is a description of the valuation
methodologies used for the respective financial instruments:
• Cash and cash equivalents. Cash and cash equivalents are valued at book value, which we
consider to be equivalent to unadjusted quoted prices (level 1).
• Accounts receivable. Accounts receivable are valued based on the net value expected to be
realized. The net realizable value generally represents an observable contractual agreement
(level 2).
• Accounts payable. Accounts payable are valued based on the net value expected to be paid,
generally supported by an observable contractual agreement (level 2).
• Long-term debt. The fair value of long-term debt, including both current and non-current
maturities, is derived from quoted market prices or other pricing determinations based on the
results of market approach valuation models using observable market data such as recently
reported trades, bid and offer information, and benchmark securities (level 2).
Pension and Postretirement Benefits
The funded status of our defined benefit pension and postretirement benefit plans is recognized on
the Consolidated Balance Sheets and is measured as the difference between the fair value of plan
assets and the benefit obligation at the measurement date. For defined benefit pension plans, the
benefit obligation is the projected benefit obligation, which represents the actuarial present value of
benefits expected to be paid upon retirement factoring in estimated future compensation levels. For the
postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit
obligation, which represents the actuarial present value of postretirement benefits attributed to
employee services already rendered. The fair value of plan assets represents the current market value
of cumulative company and participant contributions made to irrevocable trust funds, held for the sole
benefit of participants, which are invested by the trustee of the funds. The benefits under pension and
postretirement plans are based on various factors, such as years of service and compensation.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
Net periodic pension benefit cost is based on the utilization of the projected unit credit method of
calculation and is charged to earnings on a systematic basis over the expected average remaining
service lives of current participants.
The measurement of benefit obligations and net periodic benefit cost is based on estimates and
assumptions determined by our management. These valuations reflect the terms of the plans and use
participant-specific information such as compensation, age, and years of service, as well as certain
assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation
increases, interest crediting rates, and mortality rates.
Share-Based Compensation
We determine the fair value of share awards on the date of grant. Share options are valued using
the Black-Scholes-Merton valuation model; restricted share awards and performance awards are valued
using our end-of-day share price on the date of grant. The fair value is expensed ratably over the
expected service period, with an allowance made for estimated forfeitures based on historical employee
activity. Estimates regarding the attainment of performance criteria are reviewed periodically; the
cumulative impact of a change in estimate regarding the attainment of performance criteria is recorded
in the period in which that change is made.
Earnings Per Share
Basic earnings per share attributable to TE Connectivity Ltd. is computed by dividing net income
attributable to TE Connectivity Ltd. by the basic weighted-average number of common shares
outstanding. Diluted earnings per share attributable to TE Connectivity Ltd. is computed by dividing
net income attributable to TE Connectivity Ltd. by the weighted-average number of common shares
outstanding adjusted for the potentially dilutive impact of share-based compensation arrangements.
Currency Translation
For our non-U.S. dollar functional currency subsidiaries, assets and liabilities are translated into
U.S. dollars using fiscal year end exchange rates. Sales and expenses are translated at average monthly
exchange rates. Foreign currency translation gains and losses are included as a component of
accumulated other comprehensive income (loss) within equity.
Gains and losses resulting from foreign currency transactions, which are included in earnings, were
immaterial in fiscal 2015, 2014, and 2013.
Restructuring Charges
Restructuring activities involve employee-related termination costs, facility exit costs, and asset
impairments resulting from reductions-in-force, migration of facilities or product lines from higher-cost
to lower-cost countries, or consolidation of facilities within countries. We recognize termination costs
based on requirements established by severance policy, government law, or previous actions. Facility
exit costs generally reflect the cost to terminate a facility lease before the end of its term (measured at
fair value at the time we cease using the facility) or costs that will continue to be incurred under the
facility lease without future economic benefit to us. Restructuring activities often result in the disposal
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
2. Summary of Significant Accounting Policies (Continued)
or abandonment of assets that require an acceleration of depreciation or impairment reflecting the
excess of the assets’ carrying values over fair value.
The recognition of restructuring costs require that we make certain judgments and estimates
regarding the nature, timing, and amount of costs associated with the planned exit activity. To the
extent our actual results differ from our estimates and assumptions, we may be required to revise the
estimated liabilities, requiring the recognition of additional restructuring costs or the reduction of
liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued
balances to ensure these balances are properly stated and the utilization of the reserves are for their
intended purpose in accordance with developed exit plans.
Acquisitions
We account for acquired businesses using the acquisition method of accounting. This method
requires, among other things, that most assets acquired and liabilities assumed be recognized at fair
value as of the acquisition date. We allocate the purchase price of acquired businesses to the tangible
and intangible assets acquired and liabilities assumed based on estimated fair values, or as required by
ASC 805, Business Combinations. The excess of the purchase price over the identifiable assets acquired
and liabilities assumed is recorded as goodwill. We may engage independent third-party appraisal firms
to assist us in determining the fair values of assets acquired and liabilities assumed. Such valuations
require management to make significant estimates and assumptions, especially with respect to
intangible assets.
Contingent Liabilities
We record a loss contingency when the available information indicates it is probable that we have
incurred a liability and the amount of the loss is reasonably estimable. When a range of possible losses
with equal likelihood exists, we record the low end of the range. The likelihood of a loss with respect
to a particular contingency is often difficult to predict, and determining a meaningful estimate of the
loss or a range of loss may not be practicable based on information available. In addition, it is not
uncommon for such matters to be resolved over many years, during which time relevant developments
and new information must continuously be evaluated to determine whether a loss is probable and a
reasonable estimate of that loss can be made. When a loss is probable but a reasonable estimate cannot
be made, or when a loss is at least reasonably possible, disclosure is provided.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued ASC 606, Revenue from
Contracts with Customers. This guidance supersedes ASC 605, Revenue Recognition, and introduces a
single, comprehensive, five-step revenue recognition model. ASC 606 also enhances disclosures related
to revenue recognition. In August 2015, the FASB deferred the effective date of ASC 606 by one year.
ASC 606 will be effective for us in the first quarter of fiscal 2019 and allows for either a full
retrospective or a modified retrospective approach at adoption. We are continuing to assess the impact
of adopting ASC 606, but do not expect adoption to have a material impact on our results of
operations or financial position.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
3. Restructuring and Other Charges, Net
Net restructuring and other charges consisted of the following:
Fiscal
2015
2014
2013
(in millions)
$23
(4)
$ 93
59
$225
(3)
$152
$19
$222
Fiscal
2015
2014
2013
(in millions)
$ 7
7
9
$ 39
62
124
$23
$225
$ 6
29
58
$93
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges (credits), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring Charges, Net
Net restructuring charges by segment were as follows:
Transportation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
3. Restructuring and Other Charges, Net (Continued)
Activity in our restructuring reserves is summarized as follows:
Balance at
Beginning
of Fiscal
Year
Changes in
Charges Estimate
Cash
Payments
Non-Cash
Items
(in millions)
Currency Balance at
Translation
and
Other(1)
End
of Fiscal
Year
Fiscal 2015 Activity:
Fiscal 2015 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Property, plant, and equipment . . . .
$ —
—
—
$ 68
3
21
$ —
—
—
Total
. . . . . . . . . . . . . . . . . . . .
Fiscal 2014 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . .
Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . .
Pre-Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . .
—
16
1
17
61
1
62
14
21
35
92
—
—
—
—
2
2
2
1
3
—
—
—
—
(1)
—
(1)
(3)
—
(3)
$ (23)
(2)
—
(25)
$ —
—
(21)
(21)
$ —
—
—
—
(7)
(1)
(8)
(42)
(3)
(45)
(5)
(9)
(14)
—
—
—
—
—
—
—
—
—
(5)
—
(5)
(4)
—
(4)
(2)
1
(1)
$ 45
1
—
46
4
—
4
14
—
14
6
14
20
Total fiscal 2015 activity . . . . . . . . . . .
$114
$ 97
$ (4)
$ (92)
$(21)
$(10)
$ 84
Fiscal 2014 Activity:
Fiscal 2014 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Property, plant, and equipment . . . .
Total
. . . . . . . . . . . . . . . . . . . .
Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Property, plant, and equipment . . . .
Total
. . . . . . . . . . . . . . . . . . . .
Pre-Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
159
1
—
160
51
26
77
$ 10
—
9
19
8
4
7
19
2
2
4
$ —
—
—
—
(10)
—
—
(10)
(10)
1
(9)
$ (13)
—
—
(13)
$ —
—
(9)
(9)
(105)
(5)
—
(110)
(29)
(8)
(37)
—
—
(7)
(7)
—
—
—
$ 19
1
—
$ 16
1
—
20
9
1
—
10
—
—
—
17
61
1
—
62
14
21
35
Total fiscal 2014 activity . . . . . . . . . . .
$237
$ 42
$(19)
$(160)
$(16)
$ 30
$114
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
3. Restructuring and Other Charges, Net (Continued)
Balance at
Beginning
of Fiscal
Year
Changes in
Charges Estimate
Cash
Payments
Non-Cash
Items
(in millions)
Currency Balance at
Translation
and
Other(1)
End
of Fiscal
Year
Fiscal 2013 Activity:
Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Property, plant, and equipment . . . .
Total
. . . . . . . . . . . . . . . . . . . .
Pre-Fiscal 2013 Actions:
Employee severance . . . . . . . . . . .
Facility and other exit costs . . . . . . .
Property, plant, and equipment . . . .
Total
. . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
130
31
—
161
Total fiscal 2013 activity . . . . . . . . . . .
$161
$185
5
58
248
7
2
2
11
$259
$ (8)
—
—
(8)
(27)
1
—
(26)
$ (79)
(4)
—
(83)
(58)
(10)
—
(68)
$ —
—
(58)
(58)
—
—
(2)
(2)
$ 61
—
—
61
(1)
2
—
1
$159
1
—
160
51
26
—
77
$(34)
$(151)
$(60)
$ 62
$237
(1)
Includes net charges (credits) associated with discontinued operations of $(1) million, $36 million, and $65 million in fiscal
2015, 2014, and 2013, respectively.
Fiscal 2015 Actions
During fiscal 2015, we initiated a restructuring program associated with headcount reductions and
product line closures, primarily impacting the Communications Solutions and Industrial Solutions
segments. In connection with this program, during fiscal 2015, we recorded net restructuring charges of
$92 million. We expect to complete all restructuring actions commenced in fiscal 2015 by the end of
fiscal 2016 and to incur total charges of approximately $98 million.
Fiscal 2014 Actions
During fiscal 2014, we initiated a restructuring program associated primarily with headcount
reductions and manufacturing site and product line closures in the Communications Solutions segment.
In connection with this program, we recorded net restructuring charges of $19 million in fiscal 2014.
We do not expect to incur significant additional expense related to restructuring programs commenced
in fiscal 2014.
Fiscal 2013 Actions
During fiscal 2013, we initiated a restructuring program associated with headcount reductions and
manufacturing site closures impacting all segments. In connection with this program, during fiscal 2015,
2014, and 2013, we recorded net restructuring charges of $1 million, $9 million, and $240 million,
respectively. We do not expect to incur significant additional expense related to restructuring programs
commenced in fiscal 2013.
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
3. Restructuring and Other Charges, Net (Continued)
Pre-Fiscal 2013 Actions
During fiscal 2012, we initiated a restructuring program to reduce headcount across all segments.
Also, during fiscal 2012, we initiated a restructuring program in the Transportation Solutions and
Industrial Solutions segments associated with the acquisition of Deutsch Group SAS. During fiscal 2014
and 2013, we recorded net restructuring credits of $5 million and $15 million, respectively, related to
pre-fiscal 2013 actions. We do not expect to incur any additional charges related to pre-fiscal 2013
actions.
Total Restructuring Reserves
Restructuring reserves included on the Consolidated Balance Sheets were as follows:
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year
End
2015
2014
(in millions)
$ 83
$60
31
24
Restructuring reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$84
$114
Other Charges (Credits), Net
During fiscal 2015, in connection with the sale our Broadband Network Solutions (‘‘BNS’’)
business, we incurred costs of $61 million, consisting primarily of $36 million of legal and professional
fees and $18 million of charges associated with the exit of a facility. These amounts are not directly
related to the business sold, and accordingly have been recorded in continuing operations. See Note 4
for additional information regarding the divestiture of BNS.
4. Discontinued Operations
During fiscal 2015, we sold our BNS business for $3.0 billion in cash and recognized a pre-tax gain
of $1,105 million on the transaction. In the U.S., income taxes associated with the gain on the sale of
assets were largely offset by income tax benefits realized on the sale of several subsidiaries. In certain
non-U.S. jurisdictions, the sale was exempt from income taxes.
Pre-tax income from discontinued operations for fiscal 2015 included pre-tax charges of
$127 million recorded in connection with the Com-Net case related to our former Wireless Systems
business which was sold in fiscal 2009. See Note 13 for additional information regarding the Com-Net
case.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
4. Discontinued Operations (Continued)
The following table presents information regarding certain components of income from
discontinued operations, net of income taxes:
2015
Fiscal
2014
2013
Net sales from discontinued operations . . . . . . . . . . . . . .
$1,595
(in millions)
$1,939
$1,890
Pre-tax income from discontinued operations . . . . . . . . . .
Pre-tax gain (loss) on sale of discontinued operations . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 118
1,105
(41)
$ 224
—
(57)
$ 167
(4)
(41)
Income from discontinued operations, net of income taxes
$1,182
$ 167
$ 122
The following table presents balance sheet information for assets and liabilities held for sale fiscal
year end 2014; there were no such balances at fiscal year end 2015:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year End
2014
(in millions)
$ 382
236
206
869
242
78
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,013
Current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
90
161
165
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 416
The BNS and Wireless Systems businesses met the discontinued operations criteria and have been
reported as such in all periods presented on the Consolidated Financial Statements. Prior to
reclassification to discontinued operations, the BNS and Wireless Systems businesses were included in
the former Network Solutions and Wireless Systems segments, respectively.
5. Acquisitions
Measurement Specialties, Inc.
On October 9, 2014, we acquired 100% of the outstanding shares of Measurement Specialties, Inc.
(‘‘Measurement Specialties’’), a leading global designer and manufacturer of sensors and sensor-based
systems, for $86.00 in cash per share. The total value paid was approximately $1.7 billion, net of cash
acquired, and included $225 million for the repayment of Measurement Specialties’ debt and accrued
interest. Measurement Specialties offers a broad portfolio of technologies including pressure, vibration,
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
5. Acquisitions (Continued)
force, temperature, humidity, ultrasonics, position, and fluid sensors, for a wide range of applications
and industries. This business has been reported as part of our Transportation Solutions segment from
the date of acquisition.
During the second quarter of fiscal 2015, we finalized the valuation of identifiable intangible assets,
fixed assets, and pre-acquisition contingencies.
The following table summarizes the allocation of the purchase price to the fair value of identifiable
assets acquired and liabilities assumed at the date of acquisition, in accordance with the acquisition
method of accounting:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
$
37
84
110
20
95
1,064
547
9
1,966
20
48
67
203
98
9
445
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents acquired . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,521
(37)
Net cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,484
The fair values assigned to intangible assets were determined through the use of the income
approach, specifically the relief from royalty and the multi-period excess earnings methods. Both
valuation methods rely on management judgment, including expected future cash flows resulting from
existing customer relationships, customer attrition rates, contributory effects of other assets utilized in
the business, peer group cost of capital and royalty rates, and other factors. The valuation of tangible
assets was derived using a combination of the income, market, and cost approaches. Significant
judgments used in valuing tangible assets include estimated reproduction or replacement cost, useful
lives of assets, estimated selling prices, costs to complete, and reasonable profit. Useful lives for
intangible assets were determined based upon the remaining useful economic lives of the intangible
assets that are expected to contribute directly or indirectly to future cash flows.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
5. Acquisitions (Continued)
Intangible assets acquired consisted of the following:
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names and trademarks . . . . . . . . . . . . . . . . . . . .
Customer order backlog . . . . . . . . . . . . . . . . . . . . . . .
Amount
(in millions)
$370
161
4
12
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$547
Weighted-Average
Amortization
Period
(in years)
18
9
1
<1
15
The acquired intangible assets are being amortized on a straight-line basis over their expected
useful lives.
Goodwill of $1,064 million was recognized in the transaction, representing the excess of the
purchase price over the fair value of the tangible and intangible assets acquired and liabilities assumed.
This goodwill is attributable primarily to cost savings and other synergies related to operational
efficiencies including the consolidation of manufacturing, marketing, and general and administrative
functions. The goodwill has been allocated to the Transportation Solutions segment and is not
deductible for tax purposes. However, prior to its merger with us, Measurement Specialties completed
certain acquisitions that resulted in goodwill with an estimated value of $23 million that is deductible
primarily for U.S. tax purposes, which we will deduct through 2030.
During fiscal 2015, Measurement Specialties contributed net sales of $548 million to our
Consolidated Statement of Operations. Due to the commingled nature of our operations, it is not
practicable to separately identify operating income of Measurement Specialties on a stand-alone basis.
The following unaudited pro forma financial information reflects our consolidated results of
operations had the Measurement Specialties acquisition occurred at the beginning of fiscal 2014:
Pro Forma for Fiscal
2015
2014
(in millions, except
per share data)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Net income attributable to TE Connectivity Ltd.
.
Diluted earnings per share attributable to TE Connectivity Ltd.
$12,252
2,440
5.94
$
$12,429
1,744
4.18
$
The pro forma financial information is based on our final allocation of the purchase price. The
significant pro forma adjustments, which are described below, are net of income tax expense (benefit)
at the statutory rate.
Pro forma results for fiscal 2015 were adjusted to exclude $16 million of acquisition costs,
$15 million of share-based compensation expense incurred by Measurement Specialties as a result of
the change in control of Measurement Specialties, $11 million of charges related to the fair value
adjustment to acquisition-date inventories, $7 million of charges related to acquired customer order
backlog, $6 million of income tax expense based on the estimated impact of combining Measurement
Specialties into our global tax position, and $1 million of charges related to the amortization of the fair
value of acquired intangible assets. In addition, pro forma results for fiscal 2015 were adjusted to
include $3 million of interest expense based on pro forma changes in our capital structure.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
5. Acquisitions (Continued)
Pro forma results for fiscal 2014 were adjusted to include $20 million of charges related to the
amortization of the fair value of acquired intangible assets, $19 million of income tax expense based on
the estimated impact of combining Measurement Specialties into our global tax position, $14 million of
interest expense based on pro forma changes in our capital structure, $11 million of charges related to
the fair value adjustment to acquisition-date inventories, $7 million of charges related to acquired
customer order backlog, and $2 million in depreciation expense.
Pro forma results do not include any anticipated synergies or other anticipated benefits of the
acquisition. Accordingly, the unaudited pro forma financial information is not necessarily indicative of
either future results of operations or results that might have been achieved had the Measurement
Specialties acquisition occurred at the beginning of fiscal 2014.
Other Acquisitions
During fiscal 2015, we acquired three additional companies for $241 million in cash, net of cash
acquired. During fiscal 2014, we acquired five companies, including the SEACON Group (‘‘SEACON’’),
a leading provider of underwater connector technology and systems, for $522 million in cash, net of
cash acquired.
6. Inventories
Inventories consisted of the following:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 261
581
773
$ 211
562
736
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,615
$1,509
Fiscal Year End
2015
2014
(in millions)
7. Property, Plant, and Equipment, Net
Net property, plant, and equipment consisted of the following:
Fiscal Year End
2015
2014
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(in millions)
163
1,261
6,692
521
185
1,244
6,787
550
Gross property, plant, and equipment . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,637
(5,717)
8,766
(5,846)
Property, plant, and equipment, net
. . . . . . . . . . . . . . . . . . . .
$ 2,920
$ 2,920
Depreciation expense was $463 million, $467 million, and $456 million in fiscal 2015, 2014, and
2013, respectively.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
8. Goodwill
The changes in the carrying amount of goodwill by segment were as follows(1):
Transportation
Solutions
Industrial
Solutions
Communications
Solutions
Total
(in millions)
September 27, 2013(2)
. . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other . . . . . . . . . . . . . . .
September 26, 2014(2)
. . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . .
$ 797
46
(9)
834
1,066
(37)
$1,919
265
(19)
2,165
145
(57)
September 25, 2015(2)
. . . . . . . . . . . . . . . . . . . . . . .
$1,863
$2,253
$736
—
(9)
727
—
(19)
$708
$3,452
311
(37)
3,726
1,211
(113)
$4,824
(1)
In connection with the realignment of certain businesses during fiscal 2015, goodwill was re-allocated to reporting units
using a relative fair value approach. See Note 22 for additional information regarding our current segment structure.
(2) At fiscal year end 2015, 2014, and 2013, accumulated impairment losses for the Transportation Solutions, Industrial
Solutions, and Communications Solutions segments were $2,191 million, $669 million, and $1,626 million, respectively.
During fiscal 2015, we completed the acquisition of Measurement Specialties and recognized
goodwill of $1,064 million, which benefited the Transportation Solutions segment. See Note 5 for
additional information regarding acquisitions.
We completed our annual goodwill impairment test in the fourth quarter of fiscal 2015 and
determined that no impairment existed.
9. Intangible Assets, Net
Intangible assets consisted of the following:
2015
Gross
Carrying
Amount
Accumulated
Amortization
Intellectual property . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . .
$1,150
1,053
37
Total . . . . . . . . . . . . . . . . . . . . . . .
$2,240
$(524)
(148)
(13)
$(685)
Fiscal Year End
Net
Carrying
Amount
Gross
Carrying
Amount
(in millions)
$ 626
905
24
$ 986
614
35
$1,555
$1,635
2014
Accumulated
Amortization
$(453)
(83)
(12)
$(548)
Net
Carrying
Amount
$ 533
531
23
$1,087
During fiscal 2015, the gross carrying amount of intangible assets increased by $547 million as a
result of the Measurement Specialties acquisition. Intangible asset amortization expense was
$153 million, $84 million, and $80 million for fiscal 2015, 2014, and 2013, respectively.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
9. Intangible Assets, Net (Continued)
The aggregate amortization expense on intangible assets is expected to be as follows:
Fiscal 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
$ 141
137
137
135
131
874
$1,555
10. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following:
Fiscal Year End
2015
2014
(in millions)
Accrued payroll and employee benefits . . . . . . . . . . . . . . . . . . . . .
Dividends payable to shareholders . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share repurchase program payable . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 424
260
198
177
60
53
33
544
$ 470
236
158
37
83
50
26
534
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . .
$1,749
$1,594
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
11. Debt
Debt was as follows:
Current maturities of long-term debt:
1.60% senior notes due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior floating rate notes due 2016(1) . . . . . . . . . . . . . . . . . . . . .
Commercial paper, at a weighted-average interest rate of 0.30%
at September 26, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt:
Senior floating rate notes due 2016(1) . . . . . . . . . . . . . . . . . . . . .
6.55% senior notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.375% senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .
2.35% senior notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.875% senior notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . .
3.50% senior notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.100% senior notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . .
3.45% senior notes due 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.125% senior notes due 2037 . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year End
2015
2014
(in millions)
$ — $ 250
—
500
—
500
—
718
324
250
263
511
612
249
475
1
327
577
500
723
324
250
261
499
—
249
475
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,403
3,281
$3,903
$3,858
(1) The senior floating rate notes due 2016 bear interest at a rate of three-month London interbank offered rate
(‘‘LIBOR’’) plus 0.20% per year.
(2)
Senior notes are presented at face amount and, if applicable, are net of unamortized discount and the effects of
interest rate swaps designated as fair value hedges.
In February 2015, Tyco Electronics Group S.A. (‘‘TEGSA’’), our 100%-owned subsidiary, issued
A550 million aggregate principal amount of 1.100% senior notes due March 1, 2023. The notes are
TEGSA’s unsecured senior obligations and rank equally in right of payment with all existing and any
future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may
incur.
TEGSA has a five-year unsecured senior revolving credit facility (‘‘Credit Facility’’) with total
commitments of $1,500 million. The Credit Facility was amended in August 2013 primarily to extend
the maturity date from June 2016 to August 2018 and reduce borrowing costs. TEGSA had no
borrowings under the Credit Facility at September 25, 2015 and September 26, 2014.
Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of
TEGSA, (1) LIBOR plus an applicable margin based upon the senior, unsecured, long-term debt rating
of TEGSA, or (2) an alternate base rate equal to the highest of (i) Deutsche Bank AG New York
branch’s base rate, (ii) the federal funds effective rate plus 1⁄2 of 1%, and (iii) one-month LIBOR plus
1%, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
11. Debt (Continued)
TEGSA. TEGSA is required to pay an annual facility fee ranging from 7.5 to 25.0 basis points based
upon the amount of the lenders’ commitments under the Credit Facility and the applicable credit
ratings of TEGSA.
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.
Periodically, TEGSA issues commercial paper to U.S. institutional accredited investors and
qualified institutional buyers in accordance with available exemptions from the registration
requirements of the Securities Act of 1933 as part of our ongoing effort to maintain financial flexibility
and to potentially decrease the cost of borrowings. Borrowings under the commercial paper program
are backed by the Credit Facility.
TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are
fully and unconditionally guaranteed by its parent, TE Connectivity Ltd.
The aggregate amounts of total debt maturing are as follows:
Fiscal 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
$ 500
—
718
574
—
2,111
$3,903
The fair value of our debt, based on indicative valuations, was approximately $4,115 million and
$4,125 million at fiscal year end 2015 and 2014, respectively.
12. Guarantees
Tax Sharing Agreement
Effective June 29, 2007, we became the parent company of the former electronics businesses of
Tyco International plc (‘‘Tyco International’’). On June 29, 2007, Tyco International distributed all of
our shares, as well as its shares of its former healthcare businesses (‘‘Covidien’’), to its common
shareholders (the ‘‘separation’’). On January 26, 2015, Covidien was acquired and now operates as a
subsidiary of Medtronic plc.
Upon separation, we entered into a Tax Sharing Agreement, under which we share responsibility
for certain of our, Tyco International’s, and Covidien’s income tax liabilities based on a sharing formula
for periods prior to and including June 29, 2007. We, Tyco International, and Covidien share 31%,
27%, and 42%, respectively, of U.S. income tax liabilities that arise from adjustments made by tax
authorities to our, Tyco International’s, and Covidien’s U.S. income tax returns. The effect of the Tax
Sharing Agreement is to indemnify us for 69% of certain liabilities settled in cash by us with respect to
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
12. Guarantees (Continued)
unresolved pre-separation tax matters. Pursuant to that indemnification, we have made similar
indemnifications to Tyco International and Covidien with respect to 31% of certain liabilities settled in
cash by the companies relating to unresolved pre-separation tax matters. All costs and expenses
associated with the management of these shared tax liabilities are shared equally among the parties.
All of the tax liabilities that are associated with our businesses, including liabilities that arose prior
to our separation from Tyco International, became our tax liabilities. Although we have agreed to share
certain of these tax liabilities with Tyco International and Covidien, we remain primarily liable for all of
these liabilities. If Tyco International and Covidien default on their obligations to us, we would be
liable for the entire amount of these liabilities.
If any party to the Tax Sharing Agreement were to default in its obligation to another party to pay
its share of the distribution taxes that arise as a result of no party’s fault, each non-defaulting party
would be required to pay, equally with any other non-defaulting party, the amounts in default. In
addition, if another party to the Tax Sharing Agreement that is responsible for all or a portion of an
income tax liability were to default in its payment of such liability to a taxing authority, we could be
legally liable under applicable tax law for such liabilities and required to make additional tax payments.
Accordingly, under certain circumstances, we may be obligated to pay amounts in excess of our
agreed-upon share of our, Tyco International’s, and Covidien’s tax liabilities.
Indemnification
Our indemnification created under the Tax Sharing Agreement qualifies as a guarantee of a third
party entity’s debt under ASC 460, Guarantees. In the event that we are required, due to bankruptcy or
other business interruption on the part of Tyco International or Covidien, to pay more than the
contractually determined 31%, we retain the right to seek payment from the effected entity. At
September 25, 2015 and September 26, 2014, we had a liability representing the indemnifications made
to Tyco International and Covidien pursuant to the Tax Sharing Agreement of $17 million and
$21 million, respectively. See additional information in Note 13.
Other Matters
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 September 25, 2015, we had outstanding letters of credit, letters of guarantee, and surety bonds
in the amount of $360 million.
In the normal course of business, we are liable for contract completion and product performance.
In the opinion of management, such obligations will not significantly affect our results of operations,
financial position, or cash flows.
We generally record estimated product warranty costs when contract revenues are recognized
under the percentage-of-completion method for construction related contracts; other warranty reserves
are not significant. The estimation is based primarily on historical experience and actual warranty
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
12. Guarantees (Continued)
claims. Amounts accrued for warranty claims at fiscal year end 2015 and 2014 were $35 million and
$29 million, respectively.
13. Commitments and Contingencies
General Matters
We have facility, land, vehicle, and equipment leases that expire at various dates. Rental expense
under these leases was $141 million, $130 million, and $133 million for fiscal 2015, 2014, and 2013,
respectively. At fiscal year end 2015, the minimum lease payment obligations under non-cancelable
lease obligations were as follows:
Fiscal 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 98
76
59
44
30
37
$344
(in millions)
Legal Proceedings
In the ordinary 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. However, the proceedings discussed below in ‘‘Income Tax
Matters’’ could have a material effect on our results of operations, financial position, or cash flows.
As previously reported, we had a contingent purchase price commitment of $80 million related to
our fiscal 2001 acquisition of Com-Net. This represented the maximum amount payable to the former
shareholders of Com-Net only after the construction and installation of a communications system was
completed for and approved by the State of Florida in accordance with guidelines set forth in the
contract. Under the terms of the purchase and sale agreement, we did not believe we had any
obligation to the sellers. However, the sellers contested our position and initiated a lawsuit in June
2006 in the Court of Common Pleas in Allegheny County, Pennsylvania. Trial began in March 2015 and
culminated in the entry of final judgment on October 8, 2015, in favor of the sellers and against us for
$127 million plus costs. The judgment represents the $80 million contingent purchase price plus
pre-judgment interest, which will continue to accrue until the judgment is paid in full. We are
proceeding with an appeal. In connection with this case, we recorded a reserve and pre-tax charges of
$127 million in fiscal 2015. These charges are reflected in income from discontinued operations on the
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
13. Commitments and Contingencies (Continued)
Consolidated Statement of Operations as the Com-Net case was associated with our former Wireless
Systems business which was sold in fiscal 2009.
Income Tax Matters
Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and
indemnifications with Tyco International and Covidien. See Note 12 for additional information
regarding the Tax Sharing Agreement.
Prior to separation, certain of our subsidiaries filed combined income tax returns with Tyco
International. Those and other of our subsidiaries’ income tax returns are examined periodically by
various tax authorities. In connection with these examinations, tax authorities, including the Internal
Revenue Service (‘‘IRS’’), have raised issues and proposed tax adjustments. Tyco International, as the
U.S. income tax audit controlling party under the Tax Sharing Agreement, is reviewing and contesting
certain of the proposed tax adjustments. Amounts related to these tax adjustments and other tax
contingencies and related interest that management has assessed under the uncertain tax position
provisions of ASC 740, Income Taxes, which relate specifically to our entities have been recorded on the
Consolidated Financial Statements. In addition, we may be required to fund portions of Tyco
International’s and Covidien’s tax obligations. Estimates of these guarantees have also been recognized
on the Consolidated Financial Statements.
In October 2012, the IRS issued special agreement Forms 870-AD, effectively settling its audit of
all tax matters for the years 1997 through 2000, excluding one issue that remains in dispute as
described below. As a result of these developments, in fiscal 2013, we recognized an income tax benefit
of $331 million, representing a reduction in tax reserves for the matters that were effectively settled,
and other expense of $231 million, representing a reduction of associated indemnification receivables,
pursuant to the Tax Sharing Agreement with Tyco International and Covidien.
The disputed issue involves the tax treatment of certain intercompany debt transactions. The IRS
field examination asserted that certain intercompany loans originated during the years 1997 through
2000 did not constitute debt for U.S. federal income tax purposes and disallowed approximately
$2.7 billion of related interest deductions recognized during the period on Tyco International’s U.S.
income tax returns. In addition, if the IRS is ultimately successful in asserting its claim, it is likely to
disallow an additional $6.6 billion of interest deductions reflected on U.S. income tax returns in years
subsequent to fiscal 2000. Tyco International contends that the intercompany financing qualified as debt
for U.S. income tax purposes and that the interest deductions reflected on the income tax returns were
appropriate. The IRS and Tyco International were unable to resolve this matter through the IRS
appeals process. On June 20, 2013, Tyco International advised us that it had received Notices of
Deficiency from the IRS for certain former U.S. subsidiaries of Tyco International increasing taxable
income by approximately $2.9 billion in connection with the audit of Tyco International’s fiscal years
1997 through 2000. The Notices of Deficiency assert that Tyco International owes additional taxes
totaling $778 million, associated penalties of $154 million, and withholding taxes of $105 million. In
addition, Tyco International received Final Partnership Administrative Adjustments for certain U.S.
partnerships owned by former U.S. subsidiaries with respect to which Tyco International estimates an
additional tax deficiency of approximately $30 million will be asserted. The amounts asserted by the
IRS exclude any applicable deficiency interest, and do not reflect any impact to subsequent period tax
liabilities in the event that the IRS were to prevail on some or all of its assertions. We understand that
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
13. Commitments and Contingencies (Continued)
Tyco International strongly disagrees with the IRS position and has filed petitions in the U.S. Tax Court
contesting the IRS’s proposed adjustments. Tyco International has advised us that it believes there are
meritorious defenses for the tax filings in question and that the IRS position with regard to this matter
is inconsistent with the applicable tax laws and existing U.S. Treasury regulations.
The previously set U.S. Tax Court trial date of February 29, 2016 has been delayed at the request
of the IRS, and trial is expected to commence during October 2016. The parties remain engaged in
discovery. We do not expect any payments to the IRS with respect to this matter until it is fully and
finally resolved. In accordance with the Tax Sharing Agreement, we, Tyco International, and Covidien
would share 31%, 27%, and 42%, respectively, of any payments made in connection with this matter.
If the IRS were to prevail on its assertions, our share of the assessed tax, deficiency interest, and
applicable withholding taxes and penalties could have a material adverse impact on our results of
operations, financial position, and cash flows. We have reviewed the Notices of Deficiency, the relevant
facts surrounding the intercompany debt transactions, relevant tax regulations, and applicable case law,
and we continue to believe that we are appropriately reserved for this matter.
During fiscal 2015, the IRS issued general agreement Forms 870, effectively settling its audits of
tax matters for the years 2001 through 2007, excluding the disputed issue discussed above. As a result
of these developments, we recognized an income tax benefit of $201 million, representing a reduction
in tax reserves for the matters that were effectively settled, and other expense of $84 million,
representing a reduction of associated indemnification receivables, pursuant to the Tax Sharing
Agreement with Tyco International and Covidien.
Also during fiscal 2015, the IRS issued general agreement Forms 870, effectively settling its audits
of tax matters for the years 2008 through 2010, excluding the disputed issue discussed above. As of
result of these developments, we recognized an income tax benefit of $63 million, representing a
reduction in tax reserves for the matters that were effectively settled.
We made net payments of $40 million, $179 million, and $28 million related to pre-separation U.S.
tax matters during fiscal 2015, 2014, and 2013, respectively.
At September 25, 2015 and September 26, 2014, we have reflected $17 million and $51 million,
respectively, of income tax liabilities related to the audits of Tyco International’s and our income tax
returns in accrued and other current liabilities as certain of these matters could be resolved within the
next twelve months.
We believe that the amounts recorded on the Consolidated Financial Statements relating to the
matters discussed above are appropriate. However, the ultimate resolution is uncertain and could result
in a material impact to 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 fiscal year end 2015, we concluded that it was
probable that we would incur remedial costs in the range of $16 million to $38 million, and that the
best estimate within this range was $19 million. We believe that any potential payment of such
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
13. Commitments and Contingencies (Continued)
estimated amounts will not have a material adverse effect on our results of operations, financial
position, or cash flows.
14. Financial Instruments and Fair Value Measurements
We use derivative and non-derivative financial instruments to manage certain exposures to foreign
currency, interest rate, investment, and commodity risks.
The effects of derivative instruments on the Consolidated Statements of Operations were
immaterial for fiscal 2015, 2014, and 2013.
Foreign Exchange Risks and Hedges of Net Investment
As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-
currency swap contracts, foreign currency forward contracts, and foreign currency swap contracts, a
portion of which are designated as cash flow hedges. The objective of these contracts is to minimize
impacts to cash flows and profitability due to changes in foreign currency exchange rates on
intercompany and other cash transactions. We expect that significantly all of the balance in
accumulated other comprehensive income (loss) associated with the cash flow hedge-designated
instruments addressing foreign exchange risks will be reclassified into the Consolidated Statements of
Operations within the next twelve months.
During fiscal 2015, we entered into cross-currency swap contracts with an aggregate notional value
of A1,000 million to reduce our exposure to foreign currency exchange risk associated with certain
intercompany loans. Under the terms of these contracts, which have been designated as cash flow
hedges, we will make quarterly 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 maturities of these contracts in
fiscal 2022, we will pay the principal amount of the loans in euros and receive U.S. dollars from our
counterparties.
We hedge our net investment in certain foreign operations using intercompany non-derivative
financial instruments denominated in the same currencies. The aggregate notional value of these
hedges was $3,880 million and $2,893 million at September 25, 2015 and September 26, 2014,
respectively. Foreign exchange gains of $353 million and $156 million in fiscal 2015 and 2014,
respectively, were recorded as currency translation, a component of accumulated other comprehensive
income (loss), offsetting foreign exchange losses attributable to the translation of the net investment.
Foreign exchange gains and losses recorded as currency translation in fiscal 2013 were immaterial. See
Note 20 for additional information.
Interest Rate and Investment Risk Management
We issue debt, as needed, to fund our operations and capital requirements. Such borrowings can
result in interest rate exposure. To manage the interest rate exposure, we use interest rate swaps to
convert a portion of fixed-rate debt into variable-rate debt. We use forward starting interest rate swaps
and options to enter into interest rate swaps to manage interest rate exposure in periods prior to the
anticipated issuance of fixed-rate debt. We also utilize investment swaps to manage earnings exposure
on certain nonqualified deferred compensation liabilities.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
14. Financial Instruments and Fair Value Measurements (Continued)
Commodity Hedges
As part of managing the exposure to certain commodity price fluctuations, we utilize commodity
swap contracts designated as cash flow hedges. The objective of these contracts is to minimize impacts
to cash flows and profitability due to changes in prices of commodities used in production.
At September 25, 2015 and September 26, 2014, our commodity hedges had notional values of
$260 million and $307 million, respectively. We expect that significantly all of the balance in
accumulated other comprehensive income (loss) associated with the commodity hedges will be
reclassified into the Consolidated Statements of Operations within the next twelve months.
Fair Value Measurements
Financial instruments recorded at fair value on a recurring basis, which consist of derivative
instruments and marketable securities, were immaterial at September 25, 2015 and September 26, 2014.
15. Retirement Plans
Defined Benefit Pension Plans
We have a number of contributory and noncontributory defined benefit retirement plans covering
certain of our U.S. and non-U.S. employees, designed in accordance with local customs and practice.
The net periodic pension benefit cost for all U.S. and non-U.S. defined benefit pension plans was
as follows:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Expected return on plan assets . . . . . . . . . . . . . . .
Amortization of net actuarial loss . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Plans
Fiscal
2014
$
7
50
(63)
25
—
2015
$
9
48
(67)
25
—
Non-U.S. Plans
2013
2015
($ in millions)
$
6
46
(60)
36
—
$ 45
58
(72)
33
(5)
Fiscal
2014
$ 46
71
(67)
23
(3)
2013
$ 50
68
(65)
32
(18)
Net periodic pension benefit cost
. . . . . . . . . . .
$ 15
$ 19
$ 28
$ 59
$ 70
$ 67
Weighted-average assumptions used to determine net
pension benefit cost during the fiscal year:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . .
4.34% 4.84% 3.98% 2.77% 3.38% 3.27%
7.20% 7.16% 6.65% 6.46% 5.96% 6.29%
—% —% —% 2.86% 2.84% 2.86%
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
The following table represents the changes in benefit obligation and plan assets and the net
amount recognized on the Consolidated Balance Sheets for all U.S. and non-U.S. defined benefit
pension plans:
Change in benefit obligation:
Benefit obligation at beginning of fiscal year . . . . . . . . . . . . .
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits and administrative expenses paid . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Plans
Fiscal
Non-U.S. Plans
Fiscal
2015
2014
2015
2014
($ in millions)
$1,143
9
48
42
(74)
—
2
$1,074
7
50
90
(77)
—
(1)
$ 2,276
45
58
87
(71)
(213)
6
$ 2,106
46
71
256
(75)
(94)
(34)
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . .
1,170
1,143
2,188
2,276
Change in plan assets:
Fair value of plan assets at beginning of fiscal year . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits and administrative expenses paid . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of fiscal year . . . . . . . . . . . . .
978
(26)
1
(74)
—
—
879
931
123
2
(77)
—
(1)
978
1,177
72
65
(71)
(90)
14
1,167
1,113
97
85
(75)
(32)
(11)
1,177
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (291)
$ (165)
$(1,021)
$(1,099)
Amounts recognized on the Consolidated Balance Sheets:
Accrued and other current liabilities . . . . . . . . . . . . . . . . . . .
Long-term pension and postretirement liabilities . . . . . . . . . .
$
(5)
(286)
$
(4)
(161)
$
(19)
(1,002)
$
(21)
(1,078)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (291)
$ (165)
$(1,021)
$(1,099)
Weighted-average assumptions used to determine pension benefit
obligation at fiscal year end:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . .
4.38% 4.34%
—%
—%
2.50%
2.81%
2.77%
2.86%
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
The pre-tax amounts recognized in accumulated other comprehensive income (loss) for all U.S.
and non-U.S. defined benefit pension plans were as follows:
Change in net loss:
Unrecognized net loss at beginning of fiscal year . . . . . . . . . . . . . . . . . .
Current year change recorded in accumulated other comprehensive
U.S. Plans
Non-U.S. Plans
Fiscal
Fiscal
2015
2014
2015
2014
(in millions)
$325
$320
$748
$592
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization reclassified to earnings . . . . . . . . . . . . . . . . . . . . . . . . .
136
(25)
30
(25)
18
(55)
180
(24)
Unrecognized net loss at end of fiscal year . . . . . . . . . . . . . . . . . . . . . .
$436
$325
$711
$748
Change in prior service credit:
Unrecognized prior service credit at beginning of fiscal year . . . . . . . . .
Current year change recorded in accumulated other comprehensive
$ — $ — $ (67)
$ (68)
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization reclassified to earnings . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(4)
5
(4)
5
Unrecognized prior service credit at end of fiscal year . . . . . . . . . . . . . .
$ — $ — $ (66)
$ (67)
In fiscal 2015, unrecognized actuarial losses recorded in accumulated other comprehensive income
(loss) for U.S. defined benefit pension plans are due primarily to a change in the mortality assumption
and lower than expected asset performance. Unrecognized actuarial losses recorded in accumulated
other comprehensive income (loss) for non-U.S. defined benefit pension plans in fiscal 2015 are
principally the result of lower discount rates as compared to fiscal 2014. In fiscal 2014, unrecognized
actuarial losses recorded in accumulated other comprehensive income (loss) are primarily the result of
changes in mortality assumptions and decreasing discount rates for U.S. defined benefit pension plans
and attributable primarily to lower discount rates for non-U.S. defined benefit pension plans as
compared to fiscal 2013. Amortization of prior service credit is included in other in the above table
summarizing the components of net periodic pension benefit cost.
The estimated amortization of actuarial losses from accumulated other comprehensive income
(loss) into net periodic pension benefit cost for U.S. and non-U.S. defined benefit pension plans in
fiscal 2016 is expected to be $40 million and $36 million, respectively. The estimated amortization of
prior service credit from accumulated other comprehensive income (loss) into net periodic pension
benefit cost for non-U.S. defined benefit pension plans in fiscal 2016 is expected to be $6 million.
In determining the expected return on plan assets, we consider the relative weighting of plan assets
by class and individual asset class performance expectations.
The investment strategy for the U.S. pension plans is governed by our investment committee;
investment strategies for non-U.S. pension plans are governed locally. Our investment strategy for our
pension plans is to manage the plans on a going concern basis. Current investment policy is to achieve
a reasonable return on assets, subject to a prudent level of portfolio risk, for the purpose of enhancing
the security of benefits for participants. Projected returns are based primarily on pro forma asset
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
allocation, expected long-term returns, and forward-looking estimates of active portfolio and investment
management.
The long-term target asset allocation in our U.S. plans’ master trust is 10% equity and 90% fixed
income. Asset re-allocation to meet that target is occurring over a multi-year period based on the
funded status, as defined by the Pension Protection Act of 2006 (the ‘‘Pension Act Funded Status’’), of
the U.S. plans’ master trust and market conditions. We expect to reach our target allocation when the
Pension Act Funded Status exceeds 105%. Based on the Pension Act Funded Status as of
September 25, 2015, our target asset allocation is 45% equity and 55% fixed income.
Target weighted-average asset allocation and weighted-average asset allocation for U.S. and
non-U.S. pension plans were as follows:
U.S. Plans
Non-U.S. Plans
Fiscal
Year End
2015
Fiscal
Year End
2014
Target
Fiscal
Year End
2015
Fiscal
Year End
2014
Target
Asset category:
Equity securities . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts and other investments . . . .
Real estate investments . . . . . . . . . . . . . . . . . .
45%
55
—
—
45%
55
—
—
45%
55
—
—
45%
29
24
2
45%
29
24
2
45%
30
23
2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100%
100% 100% 100%
100%
Our common shares are not a direct investment of our pension funds; however, the pension funds
may indirectly include our shares. The aggregate amount of our common shares would not be
considered material relative to the total pension fund assets.
Our funding policy is to make contributions in accordance with the laws and customs of the
various countries in which we operate as well as to make discretionary voluntary contributions from
time to time. We expect to make the minimum required contributions of $5 million and $68 million to
our U.S. and non-U.S. pension plans, respectively, in fiscal 2016. We may also make voluntary
contributions at our discretion.
Benefit payments, which reflect future expected service, as appropriate, are expected to be paid as
follows:
U.S. Plans
Non-U.S. Plans
(in millions)
Fiscal 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2021-2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 71
69
70
71
72
375
$ 67
70
72
77
80
464
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
Set forth below is the accumulated benefit obligation for all U.S. and non-U.S. pension plans as
well as additional information related to plans with an accumulated benefit obligation in excess of plan
assets and plans with a projected benefit obligation in excess of plan assets.
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plans with accumulated benefit obligations in excess of
plan assets:
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plans with projected benefit obligations in excess of plan
assets:
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Plans
Non-U.S. Plans
Fiscal Year End
Fiscal Year End
2015
2014
2015
2014
(in millions)
$1,170
$1,143
$2,041
$2,121
1,170
879
1,143
978
1,994
1,119
2,120
1,177
1,170
879
1,143
978
2,188
1,167
2,276
1,177
We value our pension assets based on the fair value hierarchy of ASC 820, Fair Value
Measurements and Disclosures. Details of the fair value hierarchy are described in Note 2. The following
table presents our defined benefit pension plans’ asset categories and their associated fair value within
the fair value hierarchy:
Fiscal Year End 2015
U.S. Plans
Non-U.S. Plans
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Total
(in millions)
Equity:
U.S. equity securities(1) . . . . . . . . . . . . . .
Non-U.S. equity securities(1)
. . . . . . . . . .
Commingled equity funds(2)
. . . . . . . . . .
$245
149
—
$ — $— $245
— 149
—
—
—
—
Fixed income:
$ — $— $
$ 60
—
54
— 421
Government bonds(3)
. . . . . . . . . . . . . . .
Corporate bonds(4) . . . . . . . . . . . . . . . . .
Commingled bond funds(5)
. . . . . . . . . . .
Other(6) . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
64
— 404
—
—
3
—
—
64
— 404
—
—
3
—
— 202
13
—
— 171
— 142
60
54
421
202
13
171
226
—
—
—
—
—
84
Subtotal
. . . . . . . . . . . . . . . . . . . . . . . . . .
$394
$471
$— 865
$114
$949
$84
1,147
Items to reconcile to fair value of plan
assets(7)
. . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . .
14
$879
20
$1,167
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
Fiscal Year End 2014
U.S. Plans
Non-U.S. Plans
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Total
(in millions)
Equity:
U.S. equity securities(1) . . . . . . . . . . . . . .
Non-U.S. equity securities(1)
. . . . . . . . . .
Commingled equity funds(2)
. . . . . . . . . .
$210
209
—
$ — $— $210
— 209
—
—
—
—
Fixed income:
$ — $— $
$ 54
—
65
— 434
Government bonds(3)
. . . . . . . . . . . . . . .
Corporate bonds(4) . . . . . . . . . . . . . . . . .
Commingled bond funds(5)
. . . . . . . . . . .
Other(6) . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
87
— 445
—
—
13
—
—
87
— 445
—
—
13
—
— 211
19
—
— 203
85
—
54
65
434
211
19
203
163
—
—
—
—
—
78
Subtotal
. . . . . . . . . . . . . . . . . . . . . . . . . .
$419
$545
$— 964
$119
$952
$78
1,149
Items to reconcile to fair value of plan
assets(7)
. . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . .
14
$978
28
$1,177
(1) U.S. and non-U.S. equity securities are valued at the closing price reported on the stock exchange on which the individual
securities are traded.
(2) Commingled equity funds are pooled investments in multiple equity-type securities. Fair value is calculated as the closing
price of the underlying investments, an observable market condition, divided by the number of shares of the fund
outstanding.
(3) Government bonds are marked to fair value based on quoted market prices or market approach valuation models using
observable market data such as quotes, spreads, and data points for yield curves.
(4) Corporate bonds are marked to fair value based on quoted market prices or market approach valuation models using
observable market data such as quotes, spreads, and data points for yield curves.
(5) Commingled bond funds are pooled investments in multiple debt-type securities. Fair value is calculated as the closing price
of the underlying investments, an observable market condition, divided by the number of shares of the fund outstanding.
(6) Other investments are composed of insurance contracts, derivatives, short-term investments, structured products such as
collateralized obligations and mortgage- and asset-backed securities, real estate investments, and hedge funds. Insurance
contracts are valued using cash surrender value, or face value of the contract if a cash surrender value is unavailable
(level 2), as these values represent the amount that the plan would receive on termination of the underlying contract.
Derivatives, short-term investments, and structured products are marked to fair value using models that are supported by
observable market based data (level 2). Real estate investments include investments in commingled real estate funds and
are valued at net asset value which is calculated using unobservable inputs that are supported by little or no market activity
(level 3). Hedge funds are valued at their net asset value which is calculated using unobservable inputs that are supported
by little or no market activity (level 3).
(7)
Items to reconcile to fair value of plan assets include amounts receivable for securities sold, amounts payable for securities
purchased, and any cash balances, considered to be carried at book value, that are held in the plans.
Changes in Level 3 assets in non-U.S. plans were primarily the result of purchases in fiscal 2015
and positive returns in fiscal 2014.
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
15. Retirement Plans (Continued)
Defined Contribution Retirement Plans
We maintain several defined contribution retirement plans, the most significant of which is located
in the U.S. These plans include 401(k) matching programs, as well as qualified and nonqualified profit
sharing and share bonus retirement plans. Expense for the defined contribution plans is computed as a
percentage of participants’ compensation and was $60 million, $61 million, and $61 million for fiscal
2015, 2014, and 2013, respectively.
Deferred Compensation Plans
We maintain nonqualified deferred compensation plans, which permit eligible employees to defer a
portion of their compensation. A record keeping account is set up for each participant and the
participant chooses from a variety of measurement funds for the deemed investment of their accounts.
The measurement funds correspond to a number of funds in our 401(k) plans and the account balance
fluctuates with the investment returns on those funds. Total deferred compensation liabilities were
$118 million and $108 million at fiscal year end 2015 and 2014, respectively. See Note 14 for additional
information regarding our risk management strategy related to deferred compensation liabilities.
Postretirement Benefit Plans
In addition to providing pension and 401(k) benefits, we also provide certain health care coverage
continuation for qualifying retirees from the date of retirement to age 65. The accumulated
postretirement benefit obligation was $40 million and $44 million at fiscal year end 2015 and 2014,
respectively, and the underfunded status of the postretirement benefit plans was included primarily in
long-term pension and postretirement liabilities on the Consolidated Balance Sheets. Activity during
fiscal 2015, 2014, and 2013 was not significant.
16. Income Taxes
Our operations are conducted through our various subsidiaries in a number of countries
throughout the world. We have provided for income taxes based upon the tax laws and rates in the
countries in which our operations are conducted and income and loss from operations is subject to
taxation.
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
Significant components of the income tax provision (benefit) were as follows:
2015
Fiscal
2014
2013
(in millions)
Current income tax provision (benefit):
U.S.:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S.
$ (67) $ 128
(3)
302
12
352
$ (296)
(85)
292
Deferred income tax provision (benefit):
U.S.:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S.
297
427
(89)
87
5
(52)
40
(311)
(3)
33
(281)
31
(4)
(13)
14
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . .
$ 337
$ 146
$ (75)
The U.S. and non-U.S. components of income from continuing operations before income taxes
were as follows:
U.S.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
Fiscal
2014
2013
(in millions)
$ (31) $ (133) $ (354)
1,434
1,893
1,606
Income from continuing operations before income taxes
$1,575
$1,760
$1,080
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
The reconciliation between U.S. federal income taxes at the statutory rate and provision (benefit)
for income taxes on continuing operations was as follows:
Notional U.S. federal income tax provision at the statutory rate . . . . . . . . . . . .
Adjustments to reconcile to the income tax provision (benefit):
U.S. state income tax provision (benefit), net
. . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense—Tax Sharing Agreement . . . . . . . . . . . . . . . . . . . .
Tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits
Non-U.S. net earnings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accrued income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal entity restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal
2014
2013
2015
(in millions)
$ 616
$ 551
$ 378
11
18
10
(9)
(275)
2
(183)
(3)
211
4
(4)
(23)
(1)
(8)
(287)
3
112
(239)
—
(23)
(58)
64
—
(10)
(256)
—
(164)
(30)
—
1
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 337
$ 146
$ (75)
(1) Excludes nondeductible charges and other items which are broken out separately in the table.
The tax provision for fiscal 2015 reflects an income tax benefit of $264 million related to the
effective settlement of all undisputed tax matters for the years 2001 through 2010, partially offset by
$216 million of income tax charges associated with the tax impacts of certain intercompany legal entity
restructurings made in connection with our integration of Measurement Specialties. Also, the tax
provision for fiscal 2015 reflects an income tax charge of $29 million associated with the tax impacts of
certain intercompany dividends related to the restructuring and sale of BNS.
The tax provision for fiscal 2014 reflects income tax benefits of $282 million recognized in
connection with a reduction in the valuation allowance associated with certain tax loss carryforwards
relating to ADC Telecommunications, Inc. (‘‘ADC’’), partially offset by an income tax charge related to
adjustments to prior year income tax returns.
In fiscal 2014, we acquired SEACON, and its U.S. operations were combined with our ADC U.S.
federal consolidated tax group. In addition, the ADC U.S. tax group was combined with other U.S.
legal entities and assets. We reassessed the realization of the revised ADC U.S. tax group’s tax loss and
credit carryforwards. Based upon management’s review of forecasted future taxable income of the
reorganized combined tax group, we believed it was more likely than not that a tax benefit would be
realized on additional U.S. federal and state net operating losses. Accordingly, we reduced the
valuation allowance and recorded a tax benefit of $282 million.
The tax benefit for fiscal 2013 reflects an income tax benefit of $331 million related to the
effective settlement of all undisputed tax matters for the years 1997 through 2000. In addition, the tax
benefit for fiscal 2013 reflects $23 million of net tax benefits consisting primarily of income tax benefits
recognized in connection with a reduction in the valuation allowance associated with certain ADC tax
loss carryforwards and income tax benefits recognized in connection with the lapse of statutes of
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
limitations for examinations of prior year income tax returns, partially offset by income tax expense
related to adjustments to prior year income tax returns.
Deferred income taxes result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes. The components of the net deferred
income tax asset were as follows:
Deferred tax assets:
Accrued liabilities and reserves . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss and credit carryforwards . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and postretirement benefits . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized income tax benefits . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year End
2015
2014
(in millions)
$
262
4,856
57
295
17
394
378
4
6,263
$
262
3,356
52
282
12
358
391
27
4,740
(809)
(1)
(89)
(899)
(835)
(10)
(73)
(918)
Net deferred tax asset before valuation allowance . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,364
(3,237)
3,822
(1,706)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,127
$ 2,116
During fiscal 2015, tax loss and credit carryforwards increased due primarily to tax losses of
$1,381 million (tax effected) generated in connection with the write-down of investments in subsidiaries
in certain jurisdictions. The valuation allowance was increased by a corresponding amount due to the
uncertainty of the future realization of these tax losses.
At fiscal year end 2015, we had approximately $1,363 million of U.S. federal and $125 million of
U.S. state net operating loss carryforwards (tax effected) which will expire in future years through 2035.
In addition, at fiscal year end 2015, we had approximately $194 million of U.S. federal tax credit
carryforwards, of which $63 million have no expiration and $131 million will expire in future years
through 2035, and $40 million of U.S. state tax credits carryforwards which will expire in future years
through 2030. Also, at fiscal year end 2015, we had were $20 million of U.S federal capital loss
carryforwards (tax effected) which will expire in future years through 2020.
At fiscal year end 2015, we had approximately $3,068 million of net operating loss carryforwards
(tax effected) in certain non-U.S. jurisdictions, of which $3,005 million have no expiration and
$63 million will expire in future years through 2035. Also, at fiscal year end 2015, there were $1 million
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
of non-U.S. tax credit carryforwards which have no expiration. In addition, we had approximately
$45 million of non-U.S. capital loss carryforwards (tax effected), of which $38 million have no
expiration and $7 million will expire in future years through 2020.
The valuation allowance for deferred tax assets of $3,237 million and $1,706 million at fiscal year
end 2015 and 2014, respectively, relates principally to the uncertainty of the utilization of certain
deferred tax assets, primarily tax loss, capital loss, and credit carryforwards in various jurisdictions. We
believe that we will generate sufficient future taxable income to realize the income tax benefits related
to the remaining net deferred tax assets on the Consolidated Balance Sheet. At fiscal year end 2015,
approximately $151 million of the valuation allowance relates to share-based compensation and will be
recorded to equity if certain net operating losses and tax credit carryforwards are utilized.
We have provided income taxes for earnings that are currently distributed as well as the taxes
associated with several subsidiaries’ earnings that are expected to be distributed in the future. No
additional provision has been made for Swiss or non-Swiss income taxes on the undistributed earnings
of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis
differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested,
the investments are essentially permanent in duration, or we have concluded that no additional tax
liability will arise as a result of the distribution of such earnings. As of September 25, 2015, certain
subsidiaries had approximately $19 billion of cumulative undistributed earnings that have been retained
indefinitely and reinvested in our global manufacturing operations, including working capital; property,
plant, and equipment; intangible assets; and research and development activities. A liability could arise
if our intention to permanently reinvest such earnings were to change and amounts are distributed by
such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the
additional income taxes related to permanently reinvested earnings or the basis differences related to
investments in subsidiaries. As of September 25, 2015, we had approximately $5.2 billion of cash, cash
equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to
distribute to TEGSA, our Luxembourg subsidiary, which is the obligor of substantially all of our debt,
and to TE Connectivity Ltd., our Swiss parent company, but we consider to be permanently reinvested.
We estimate that up to approximately $1.7 billion of tax expense would be recognized on the
Consolidated Financial Statements if our intention to permanently reinvest these amounts were to
change. Our current plans do not demonstrate a need to repatriate cash, cash equivalents, and
intercompany deposits that are designated as permanently reinvested in order to fund our operations,
including investing and financing activities.
Uncertain Tax Position Provisions of ASC 740
As of September 25, 2015, we had total unrecognized income tax benefits of $1,368 million. If
recognized in future years, $1,291 million of these currently unrecognized income tax benefits would
impact the income tax provision and effective tax rate. As of September 26, 2014, we had total
unrecognized income tax benefits of $1,595 million. If recognized in future years, $1,450 million of
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
these unrecognized income tax benefits would impact the income tax provision and effective tax rate.
The following table summarizes the activity related to unrecognized income tax benefits:
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . .
Additions related to prior periods tax positions . . . . . . .
Reductions related to prior periods tax positions . . . . . .
Additions related to current period tax positions . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of
2015
Fiscal
2014
(in millions)
$1,617
22
(57)
32
7
(14)
$1,595
24
(291)
97
—
(29)
2013
$1,794
88
(271)
87
—
(8)
limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(28)
(12)
(73)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . .
$1,368
$1,595
$1,617
We record accrued interest as well as penalties related to uncertain tax positions as part of the
provision for income taxes. As of September 25, 2015, we had recorded $1,076 million of accrued
interest and penalties related to uncertain tax positions on the Consolidated Balance Sheet, of which
$1,073 million was recorded in income taxes and the remainder was recorded in accrued and other
current liabilities. As of September 26, 2014, the balance of accrued interest and penalties was
$1,136 million, of which $1,115 million was recorded in income taxes and the remainder was recorded
in accrued and other current liabilities. During fiscal 2015, 2014, and 2013, we recognized expense of
$7 million, expense of $99 million, and benefits of $247 million, respectively, related to interest and
penalties on the Consolidated Statements of Operations.
We file income tax returns on a unitary, consolidated, or stand-alone basis in multiple state and
local jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years. Various state
and local income tax returns are currently in the process of examination or administrative appeal.
Our non-U.S. subsidiaries file income tax returns in the countries in which they have operations.
Generally, these countries have statutes of limitations ranging from 3 to 10 years. Various non-U.S.
subsidiary income tax returns are currently in the process of examination by taxing authorities.
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
16. Income Taxes (Continued)
As of September 25, 2015, under applicable statutes, the following tax years remained subject to
examination in the major tax jurisdictions indicated:
Jurisdiction
Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.—federal and state and local . . . . . . . . . . . . . . . . . . . . . . .
Open Years
2014 through 2015
2010 through 2015
2008 through 2015
2005 through 2015
2010 through 2015
2012 through 2015
2008 through 2015
2009 through 2015
2009 through 2015
2008 through 2015
2009 through 2015
2009 through 2015
2007 through 2015
2010 through 2015
2009 through 2015
2011 through 2015
2012 through 2015
2010 through 2015
2011 through 2015
2010 through 2015
2013 through 2015
1997 through 2015
In most jurisdictions, taxing authorities retain the ability to review prior tax years and to adjust any
net operating loss and tax credit carryforwards from these years that are utilized in a subsequent
period.
Although it is difficult to predict the timing or results of our worldwide examinations, we estimate
that up to approximately $60 million of unrecognized income tax benefits, excluding the impact relating
to accrued interest and penalties, could be resolved within the next twelve months. See Note 13 for
additional information regarding the status of IRS examinations.
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 Consolidated Balance Sheet as of September 25,
2015.
17. Other Income (Expense), Net
In fiscal 2015, 2014, and 2013, we recorded net other expense of $55 million, net other income of
$63 million, and net other expense of $183 million, respectively, primarily pursuant to the Tax Sharing
Agreement with Tyco International and Covidien. See Note 12 for further information regarding the
Tax Sharing Agreement. The net other expense in fiscal 2015 included $84 million related to the
effective settlement of undisputed tax matters for the years 2001 through 2007. The net other income in
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
17. Other Income (Expense), Net (Continued)
fiscal 2014 included $18 million of income related to our share of a settlement agreement entered into
by Tyco International with a former subsidiary, CIT Group Inc., which arose from a pre-separation
claim for which we were entitled to 31% once resolved. The net other expense in fiscal 2013 included
$231 million related to the effective settlement of all undisputed tax matters for the years 1997 through
2000. See Note 13 for additional information regarding the effective settlement of undisputed tax
matters.
18. Earnings Per Share
The weighted-average number of shares outstanding used in the computation of basic and diluted
earnings per share was as follows:
Fiscal
2015
2014
2013
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive impact of share-based compensation arrangements . . . .
(in millions)
410
7
418
5
405
6
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
411
417
423
There were one million and three million share options that were not included in the computation
of diluted earnings per share for fiscal 2015 and 2013, respectively, because the instruments’ underlying
exercise prices were greater than the average market prices of our common shares and inclusion would
be antidilutive.
19. Equity
Common Shares
We are organized under the laws of Switzerland. The rights of holders of our shares are governed
by Swiss law, our Swiss articles of association, and our Swiss organizational regulations. Accordingly,
the par value of our common shares is stated in Swiss francs (‘‘CHF’’). We continue to use the U.S.
dollar, however, as our reporting currency on the Consolidated Financial Statements.
Subject to certain conditions specified in our articles of association, we are authorized to increase
our conditional share capital by issuing new shares in aggregate not exceeding 50% of our authorized
shares.
Common Shares Held in Treasury
At September 25, 2015, approximately 20 million common shares were held in treasury, of which
6 million were owned by one of our subsidiaries. At September 26, 2014, approximately 11 million
common shares were held in treasury, of which 9 million were owned by one of our subsidiaries. Shares
held both directly by us and by our subsidiary are presented as treasury shares on the Consolidated
Balance Sheets.
In fiscal 2015, 2014, and 2013, our shareholders approved the cancellation of five million, ten
million, and ten million shares, respectively, purchased under our share repurchase program. These
capital reductions by cancellation of shares were subject to a notice period and filing with the
commercial register in Switzerland.
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
19. Equity (Continued)
Contributed Surplus
Contributed surplus established for Swiss tax and statutory purposes (‘‘Swiss Contributed Surplus’’),
subject to certain conditions, is a freely distributable reserve. Distributions to shareholders from Swiss
Contributed Surplus are free from withholding tax. As of September 25, 2015 and September 26, 2014,
Swiss Contributed Surplus was CHF 8,392 million and CHF 8,907 million, respectively (equivalent to
$7,505 million and $8,036 million, respectively).
Dividends and Distributions to Shareholders
Under Swiss law, subject to certain conditions, distributions to shareholders made in the form of a
reduction of registered share capital or from reserves from capital contributions (equivalent to Swiss
Contributed Surplus) are exempt from Swiss withholding tax. See ‘‘Contributed Surplus’’ for additional
information regarding our ability to make distributions free from withholding tax from contributed
surplus. Distributions or dividends on our shares must be approved by our shareholders.
Our shareholders approved the following dividends and cash distributions on our common shares:
Approval Date
Payment Type
Annual Payment Per Share
Payment Dates
March 2012 . . . .
Cash
distribution(1)
CHF 0.80 (equivalent to $0.84),
payable in four quarterly
installments of $0.21
March 2013 . . . .
March 2014 . . . .
March 2015 . . . .
Dividend
payment out of
contributed
surplus
Dividend
payment out of
contributed
surplus
Dividend
payment out of
contributed
surplus
CHF 0.96 (equivalent to $1.00),
payable in four quarterly
installments of $0.25
CHF 1.04 (equivalent to $1.16),
payable in four quarterly
installments of $0.29
$1.32 (equivalent to CHF 1.27),
payable in four quarterly
installments of $0.33
Third quarter of fiscal 2012
Fourth quarter of fiscal 2012
First quarter of fiscal 2013
Second quarter of fiscal 2013
Third quarter of fiscal 2013
Fourth quarter of fiscal 2013
First quarter of fiscal 2014
Second quarter of fiscal 2014
Third quarter of fiscal 2014
Fourth quarter of fiscal 2014
First quarter of fiscal 2015
Second quarter of fiscal 2015
Third quarter of fiscal 2015
Fourth quarter of fiscal 2015
First quarter of fiscal 2016
Second quarter of fiscal 2016
(1) The cash distribution in the form of a capital reduction reduced the par value of our common shares from CHF 1.37
(equivalent to $1.28) to CHF 0.57 (equivalent to $0.44).
Upon approval by the shareholders of a dividend payment or cash distribution in the form of a
capital reduction, we record a liability with a corresponding charge to contributed surplus or common
shares. At September 25, 2015 and September 26, 2014, the unpaid portion of the dividends recorded
in accrued and other current liabilities on the Consolidated Balance Sheets totaled $260 million and
$236 million, respectively.
91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
19. Equity (Continued)
Share Repurchase Program
During fiscal 2015, our board of directors authorized an increase of $3.0 billion in the share
repurchase program. Common shares repurchased under the share repurchase program were as follows:
Fiscal
2015
2014
2013
(in millions)
Number of common shares repurchased . . . . . . . . . . . . . . . .
Amount repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
$1,163
11
$604
20
$829
At September 25, 2015, we had $2.7 billion of availability remaining under our share repurchase
authorization.
20. Accumulated Other Comprehensive Income (Loss)
The changes in each component of accumulated other comprehensive income (loss) were as
follows:
Currency
Translation(1)
Unrecognized
Pension and
Postretirement
Benefit Costs
Gains (Losses)
on Cash
Flow
Hedges
Accumulated
Other
Comprehensive
Income (Loss)
(in millions)
Balance at September 28, 2012 . . . . . . . . . . .
Net other comprehensive income (loss) . . . .
Income tax (expense) benefit . . . . . . . . . . .
Net other comprehensive income (loss),
net of tax . . . . . . . . . . . . . . . . . . . . . .
Balance at September 27, 2013 . . . . . . . . . . .
Other comprehensive loss before
$ 959
(28)
—
(28)
931
reclassifications . . . . . . . . . . . . . . . . . . .
(216)
Amounts reclassified from accumulated
other comprehensive income (loss) . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . .
Net other comprehensive income (loss),
net of tax . . . . . . . . . . . . . . . . . . . . . .
Balance at September 26, 2014 . . . . . . . . . . .
Other comprehensive loss before
reclassifications . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive income (loss) . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . .
Net other comprehensive income (loss),
net of tax . . . . . . . . . . . . . . . . . . . . . .
Balance at September 25, 2015 . . . . . . . . . . .
5
—
(211)
720
(536)
224(2)
—
$(700)
204
(73)
131
(569)
(211)
44
44
(123)
(692)
(147)
75
26
(312)
$ 408
(46)
$(738)
$(30)
(36)
7
(29)
(59)
(35)
49
—
14
(45)
(44)
45
1
2
$(43)
$ 229
140
(66)
74
303
(462)
98
44
(320)
(17)
(727)
344
27
(356)
$(373)
(1)
Includes hedges of net investment foreign exchange gains or losses which offset foreign exchange gains or losses attributable
to the translation of the net investments.
92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
20. Accumulated Other Comprehensive Income (Loss) (Continued)
(2) Represents net currency translation reclassified as a result of the sale of BNS. This net loss is included in income from
discontinued operations on the Consolidated Statement of Operations. See Note 4 for additional information regarding the
divestiture of BNS.
21. Share Plans
Equity awards (primarily restricted share awards, performance share awards, and share options)
granted by us are administered by the management development and compensation committee of our
board of directors, which consists exclusively of independent directors. Our plans, of which the TE
Connectivity Ltd. 2007 Stock and Incentive Plan, as amended and restated, is the primary plan, provide
for the award of annual performance bonuses and long-term performance awards, including share
options, restricted and performance units, deferred stock units, and other share-based awards
(collectively, ‘‘Awards’’) and allow for the use of unissued shares or treasury shares to be used to satisfy
such Awards. As of September 25, 2015, our plans provided for a maximum of 67 million shares to be
issued as Awards, subject to adjustment as provided under the terms of the plans. A total of 19 million
shares remained available for issuance under our plans as of September 25, 2015.
Share-Based Compensation Expense
Total share-based compensation expense, which was included primarily in selling, general, and
administrative expenses on the Consolidated Statements of Operations, was as follows:
Fiscal
2015
2014
2013
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .
$89
(in millions)
$77
$71
We recognized a related tax benefit associated with our share-based compensation arrangements of
$29 million, $24 million, and $22 million in fiscal 2015, 2014, and 2013, respectively.
Restricted Share Awards
Restricted share awards, which are generally in the form of restricted share units, are granted
subject to certain restrictions. Conditions of vesting are determined at the time of grant. All restrictions
on an award will lapse upon death or disability of the employee. If the employee satisfies retirement
requirements, a portion of the award may vest, depending on the terms and conditions of the particular
grant. Recipients of restricted units have no voting rights, but do receive dividend equivalents. For
grants that vest through passage of time, the fair value of the award at the time of the grant is
amortized to expense over the period of vesting. The fair value of restricted share awards is determined
based on the closing value of our shares on the grant date. Restricted share awards generally vest in
increments over a period of four years as determined by the management development and
compensation committee.
93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
21. Share Plans (Continued)
A summary of restricted share award activity is presented below:
Nonvested at September 26, 2014 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
3,397,828
1,359,144
(1,485,763)
(480,275)
Nonvested at September 25, 2015 . . . . . . . . . . . . . . . .
2,790,934
Weighted-Average
Grant-Date
Fair Value
$40.79
62.45
38.80
48.43
$51.01
The weighted-average grant-date fair value of restricted share awards granted during fiscal 2015,
2014, and 2013 was $62.45, $52.21, and $34.69, respectively.
The total fair value of restricted share awards that vested during fiscal 2015, 2014, and 2013 was
$58 million, $52 million, and $51 million, respectively.
As of September 25, 2015, there was $87 million of unrecognized compensation cost related to
nonvested restricted share awards. The cost is expected to be recognized over a weighted-average
period of 1.6 years.
Performance Share Awards
Performance share awards, which are generally in the form of performance share units, are granted
with pay-out subject to vesting requirements and certain performance conditions that are determined at
the time of grant. Based on our performance, the pay-out of performance share units can range from
0% to 200% of the number of units originally granted. The grant-date fair value of performance share
awards is expensed over the period of performance once achievement of the performance criteria is
deemed probable. Recipients of performance share units have no voting rights but do receive dividend
equivalents. Performance share awards generally vest after a period of three years as determined by the
management development and compensation committee.
A summary of performance share award activity is presented below:
Outstanding at September 26, 2014 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
510,488
220,272
(1,285)
(28,647)
Outstanding at September 25, 2015 . . . . . . . . . . . . . . . . .
700,828
Weighted-Average
Grant-Date
Fair Value
$41.53
61.65
34.05
42.63
$47.32
The weighted-average grant-date fair value of performance share awards granted during fiscal
2015, 2014, and 2013 was $61.65, $51.63, and $34.16, respectively.
As of September 25, 2015, there was $15 million of unrecognized compensation cost related to
nonvested performance share awards. The cost is expected to be recognized over a weighted-average
period of 1.0 years.
94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
21. Share Plans (Continued)
Share Options
Share options are granted to purchase our common shares at prices which are equal to or greater
than the market price of the common shares on the date the option is granted. Conditions of vesting
are determined at the time of grant. All restrictions on the award will lapse upon death or disability of
the employee. If the employee satisfies retirement requirements, a portion of the award may vest,
depending on the terms and conditions of the particular grant. Options generally vest and become
exercisable in equal annual installments over a period of four years and expire ten years after the date
of grant.
A summary of share option award activity is presented below:
Weighted-Average
Exercise
Price
Shares
Weighted-Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in years)
(in millions)
Outstanding at September 26, 2014 . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . .
11,948,584
1,735,750
(3,072,275)
(91,021)
(396,163)
Outstanding at September 25, 2015 . . . . . . .
10,124,875
Vested and expected to vest at
September 25, 2015 . . . . . . . . . . . . . . . . .
Exercisable at September 25, 2015 . . . . . . .
9,822,310
5,758,402
$35.41
61.70
32.84
52.93
46.10
$40.05
$39.79
$33.71
6.0
6.0
4.6
$192
$188
$142
The weighted-average exercise price of share option awards granted during fiscal 2015, 2014, and
2013 were $61.70, $51.78, and $34.27, respectively.
The total intrinsic value of options exercised during fiscal 2015, 2014, and 2013 was $107 million,
$136 million, and $69 million, respectively. We received cash related to the exercise of options of
$103 million, $156 million, and $214 million in fiscal 2015, 2014, and 2013, respectively. The related
excess cash tax benefit classified as a financing cash inflow on the Consolidated Statements of Cash
Flows for fiscal 2015, 2014, and 2013 was not material.
As of September 25, 2015, there was $39 million of unrecognized compensation cost related to
nonvested share options granted under our share option plans. The cost is expected to be recognized
over a weighted-average period of 1.4 years.
Share-Based Compensation Assumptions
The grant-date fair value of each share option grant was estimated using the Black-Scholes-Merton
option pricing model. Use of a valuation model requires management to make certain assumptions with
respect to selected model inputs. We employ our historical share volatility when calculating the
grant-date fair value of our share option grants using the Black-Scholes-Merton option pricing model.
Currently, we do not have exchange-traded options of sufficient duration to employ an implied volatility
assumption in the calculation and therefore rely solely on the historical volatility calculation. For fiscal
2013, we calculated the grant-date fair value of our share option awards utilizing the historical share
volatility of a composite of our peers and implied volatility derived from exchange-traded options on
95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
21. Share Plans (Continued)
that same composite of peers since we did not have historical share price information for a period of
time equal to our expected option life assumption. The change in methodology did not have a
significant impact on share-based compensation expense during fiscal 2015 or 2014. The average
expected life was based on the contractual term of the option and expected employee exercise and
post-vesting employment termination behavior. The risk-free interest rate was based on U.S. Treasury
zero-coupon issues with a remaining term that approximated the expected life assumed at the date of
grant. The expected annual dividend per share was based on our expected dividend rate. The
recognized share-based compensation expense was net of estimated forfeitures, which are based on
voluntary termination behavior as well as an analysis of actual option forfeitures.
The weighted-average grant-date fair value of options granted and the weighted-average
assumptions we used in the Black-Scholes-Merton option pricing model were as follows:
Fiscal
2014
2015
2013
Weighted-average grant-date fair value . . . . . . . . . . . . . . .
$18.77
$16.81
$8.62
Assumptions:
Expected share price volatility . . . . . . . . . . . . . . . . . . . . . .
Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected annual dividend per share . . . . . . . . . . . . . . . . .
Expected life of options (in years) . . . . . . . . . . . . . . . . . . .
36%
39% 34%
2.0% 1.8% 0.9%
$ 1.16
6.0
$ 1.00
6.0
$0.84
6.0
22. Segment and Geographic Data
During fiscal 2015, we reorganized our management structure and segments to better align the
organization around our strategy. Our businesses in the former Consumer Solutions segment and our
continuing businesses in the former Network Solutions segment have been moved into the newly
created Communications Solutions segment. (See Note 4 for information regarding discontinued
operations.) In addition, the former Data Communications and Consumer Devices businesses have
been combined to form the Data and Devices business. We now operate through three reportable
segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. See Note 1 for
a description of the segments in which we operate. We aggregate our operating segments into
reportable segments based upon similar economic characteristics and business groupings of products,
services, and customers.
Segment performance is evaluated based on net sales and operating income. Generally, we
consider all expenses to be of an operating nature and, accordingly, allocate them to each reportable
segment. Costs specific to a segment are charged to the segment. Corporate expenses, such as
headquarters administrative costs, are allocated to the segments based on segment operating income.
Intersegment sales were not material and were recorded at selling prices that approximate market
prices. Corporate assets are allocated to the segments based on segment assets.
96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
22. Segment and Geographic Data (Continued)
The following segment information reflects our current segment reporting structure. Prior period
segment results have been restated to conform to the current segment reporting structure.
Net sales and operating income by segment were as follows:
Net Sales
Fiscal
2014
2015
Operating Income
2013
2015
(in millions)
Fiscal
2014
2013
Transportation Solutions . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . .
$ 6,351
3,179
2,703
$ 6,090
3,302
2,581
$ 5,485
3,100
2,805
$1,193
352
204
$1,245
431
129
$ 934
344
107
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,233
$11,973
$11,390
$1,749
$1,805
$1,385
No single customer accounted for a significant amount of our net sales in fiscal 2015, 2014, and
2013.
As we are not organized by product or service, it is not practicable to disclose net sales by product
or service.
Depreciation and amortization and capital expenditures were as follows:
Depreciation and
Amortization
Capital Expenditures
Transportation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . . . . . . . . . . . .
2015
$347
123
146
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$616
Fiscal
2014
$285
102
164
$551
2013
2015
(in millions)
$400
$294
104
92
96
150
$536
$600
Fiscal
2014
$379
143
113
$635
2013
$325
111
145
$581
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
22. Segment and Geographic Data (Continued)
Segment assets and a reconciliation of segment assets to total assets were as follows:
Segment Assets
Fiscal Year End
2015
2014
2013
Transportation Solutions . . . . . . . . . . . . . . . . . . . . . .
Industrial Solutions . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications Solutions . . . . . . . . . . . . . . . . . . . . .
$ 3,310
1,720
1,625
(in millions)
$ 3,062
1,735
1,689
Total segment assets(1)
. . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . .
6,655
4,152
9,801
6,486
5,313
8,353
$ 2,983
1,640
1,764
6,387
4,243
7,831
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,608
$20,152
$18,461
(1)
Segment assets are composed of accounts receivable, inventories, and property, plant, and equipment.
Net sales and net property, plant, and equipment by geographic region were as follows:
Net Sales(1)
Fiscal
Property, Plant, and
Equipment, Net
Fiscal Year End
2015
2014
2013
2015
2014
2013
(in millions)
Americas:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Americas . . . . . . . . . . . . . . . . . . . . .
$ 3,817
321
$ 3,119
396
$ 3,042
414
$ 887
87
$ 837
97
$ 867
49
Total Americas . . . . . . . . . . . . . . . . . . . .
4,138
3,515
3,456
974
934
916
Asia–Pacific:
China . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Asia–Pacific . . . . . . . . . . . . . . . . . . .
Total Asia–Pacific . . . . . . . . . . . . . . . . . .
Europe/Middle East/Africa:
Switzerland . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . .
Other Europe/Middle East/Africa . . . . . . . .
Total Europe/Middle East/Africa . . . . . . .
2,367
1,736
4,103
2,992
117
883
3,992
2,331
1,903
4,234
3,483
126
615
4,224
2,072
1,914
3,986
3,216
123
609
3,948
529
461
990
55
313
588
956
492
468
960
54
330
642
495
490
985
54
346
650
1,026
1,050
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,233
$11,973
$11,390
$2,920
$2,920
$2,951
(1) Net sales to external customers is attributed to individual countries based on the legal entity that records the sale.
98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
23. Quarterly Financial Data (unaudited)
Summarized quarterly financial data was as follows:
Fiscal
2015
2014
First
Second
Third
Fourth
First
Second
Third
Fourth
Quarter(1) Quarter Quarter Quarter(2) Quarter Quarter Quarter Quarter(3)
(in millions, except per share data)
Net sales . . . . . . . . . . . . . . . . . . . . . $3,049 $3,082 $3,118 $2,984 $2,862 $2,964 $3,075 $3,072
1,014
1,051
Gross margin . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . .
29
14
Restructuring and other charges
1,020
24
1,048
8
1,018
1
968
9
945
—
995
1
(credits), net . . . . . . . . . . . . . . . .
25
38
19
70
6
(1)
10
4
Amounts attributable to TE
Connectivity Ltd.:
Income from continuing operations
Income (loss) from discontinued
435
316
351
136
313
340
347
614
operations, net of income taxes .
49
283
Net income . . . . . . . . . . . . . . . . . $ 472 $ 599 $ 309 $1,040 $ 353 $ 362 $ 403 $ 663
(42)
904
40
22
56
37
Basic earnings per share attributable
to TE Connectivity Ltd.:
Income from continuing operations $ 1.07 $ 0.78 $ 0.86 $ 0.34 $ 0.76 $ 0.83 $ 0.85 $ 1.50
1.62
1.47
Net income . . . . . . . . . . . . . . . . .
0.76
0.86
1.16
0.88
2.60
0.99
Diluted earnings per share
attributable to TE
Connectivity Ltd.:
Income from continuing operations $ 1.05 $ 0.77 $ 0.85 $ 0.34 $ 0.75 $ 0.82 $ 0.83 $ 1.48
1.59
1.45
Net income . . . . . . . . . . . . . . . . .
0.75
0.87
1.14
0.84
2.57
0.97
(1) Results for the first quarter of fiscal 2015 include $27 million of charges from the amortization of acquisition-related fair
value adjustments to acquired inventories and customer order backlog associated primarily with Measurement Specialties.
Results for the first quarter of fiscal 2015 also include $189 million of income tax benefits associated with the effective
settlement of all undisputed tax matters for the years 2001 through 2007 and the related impact of $83 million to other
expense pursuant to the Tax Sharing Agreement with Tyco International and Covidien.
(2) Results for the fourth quarter of fiscal 2015 include $216 million of income tax charges associated with the tax impacts of
certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties and
$63 million of income tax benefits associated with the effective settlement of all undisputed tax matters for the years 2008
through 2010. In addition, in the fourth quarter of fiscal 2015, income from discontinued operations, net of income taxes
includes the gain on the sale of our BNS business.
(3) Results for the fourth quarter of fiscal 2014 include $282 million of income tax benefits recognized in connection with a
reduction in the valuation allowance associated with certain ADC tax loss carryforwards.
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
24. Subsequent Event
On November 7, 2015, we entered into a definitive agreement to sell our Circuit Protection
Devices (‘‘CPD’’) business for $350 million in cash, subject to a final working capital adjustment. The
transaction is expected to close during the second quarter of fiscal 2016 pending customary closing
conditions and regulatory approvals. The net assets of the CPD business were approximately
$200 million at September 25, 2015. The CPD business is currently reported in our Communications
Solutions segment.
25. 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 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.
100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 25, 2015
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses,
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
net(1)
Research, development, and engineering
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . . . . . . . . .
Restructuring and other charges, net . . . . . . .
Operating income (loss) . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . .
Equity in net income of subsidiaries . . . . . . .
Equity in net income of subsidiaries of
discontinued operations . . . . . . . . . . . . . .
Intercompany interest income (expense), net .
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . .
Income from discontinued operations, net of
$ — $ — $12,233
8,146
—
—
—
163
—
—
—
(163)
—
—
—
1,398
1,182
3
2,420
—
2,420
—
835
—
—
—
(835)
—
(135)
—
2,318
365
50
1,763
—
1,763
4,087
506
627
55
152
2,747
17
(1)
(55)
—
—
(53)
2,655
(337)
2,318
$ —
—
—
—
—
—
—
—
—
—
—
(3,716)
(1,547)
—
(5,263)
—
(5,263)
$12,233
8,146
4,087
1,504
627
55
152
1,749
17
(136)
(55)
—
—
—
1,575
(337)
1,238
income taxes . . . . . . . . . . . . . . . . . . . . . .
—
817
365
—
1,182
Net income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . .
Comprehensive income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
2,420
(356)
2,580
(356)
2,683
(368)
(5,263)
724
2,420
(356)
$2,064
$2,224
$ 2,315
$(4,539)
$ 2,064
(1) TEGSA selling, general, and administrative expenses include losses of $846 million related to intercompany transactions.
These losses are offset by corresponding gains recorded by Other Subsidiaries.
101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 26, 2014
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses,
. . . . . . . . . . . . . . . . . . . . . . . . . . .
net(1)
Research, development, and engineering
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . . . . . . . .
Restructuring and other charges, net . . . . . .
Operating income (loss) . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . .
Equity in net income of subsidiaries . . . . . . .
Equity in net income of subsidiaries of
discontinued operations . . . . . . . . . . . . . .
Intercompany interest income (expense), net
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . .
Income from discontinued operations, net of
income taxes . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . .
Comprehensive income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
$ — $ — $11,973
8,001
—
—
—
131
—
—
—
(131)
—
—
18
1,729
167
(2)
1,781
—
1,781
—
3,972
1,877
(474)
—
—
—
(1,877)
—
(126)
(3)
3,672
167
63
1,896
—
1,896
583
31
19
3,813
19
(1)
48
—
—
(61)
3,818
(146)
3,672
$ —
—
—
—
—
—
—
—
—
—
—
(5,401)
(334)
—
(5,735)
—
(5,735)
$11,973
8,001
3,972
1,534
583
31
19
1,805
19
(127)
63
—
—
—
1,760
(146)
1,614
—
—
167
—
167
1,781
(320)
1,896
(320)
3,839
(328)
(5,735)
648
1,781
(320)
$1,461
$ 1,576
$ 3,511
$(5,087)
$ 1,461
(1) TEGSA selling, general, and administrative expenses include losses of $1,874 million related to intercompany transactions.
These losses are offset by corresponding gains recorded by Other Subsidiaries.
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 27, 2013
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
$ — $ — $11,390
7,739
—
—
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses .
Research, development, and engineering
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration costs . . . . . . . . . .
Restructuring and other charges, net . . . . . . .
Operating income (loss) . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . .
Equity in net income of subsidiaries . . . . . . .
Equity in net income of subsidiaries of
discontinued operations . . . . . . . . . . . . . .
Intercompany interest income (expense), net .
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit . . . . . . . . . . . .
Income from continuing operations . . . . . .
Income from discontinued operations, net of
—
156
—
—
—
(156)
—
—
—
1,323
122
(13)
1,276
—
1,276
—
3
—
—
—
(3)
—
(135)
—
1,411
122
54
1,449
(4)
1,445
$ —
—
—
—
—
—
—
—
—
—
—
(2,734)
(244)
—
(2,978)
—
(2,978)
—
(2,978)
$11,390
7,739
3,651
1,440
590
14
222
1,385
17
(139)
(183)
—
—
—
1,080
75
1,155
122
1,277
3,651
1,281
590
14
222
1,544
17
(4)
(183)
—
—
(41)
1,333
79
1,412
122
1,534
income taxes . . . . . . . . . . . . . . . . . . . . . .
—
—
Net income . . . . . . . . . . . . . . . . . . . . . . . .
1,276
1,445
Less: net income attributable to
noncontrolling interests . . . . . . . . . . . . . . .
—
—
(1)
—
(1)
Net income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . .
Comprehensive income attributable to TE
Connectivity Ltd., TEGSA, or Other
Subsidiaries . . . . . . . . . . . . . . . . . . . . .
1,276
74
1,445
74
1,533
64
(2,978)
(138)
1,276
74
$1,350
$1,519
$ 1,597
$(3,116)
$ 1,350
103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Balance Sheet
As of September 25, 2015
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany receivables . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . .
Deferred income taxes . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment, net . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . .
Intercompany loans receivable . . . . . . . . . . . .
Receivable from Tyco International plc and
Covidien plc . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ — $ 3,329
2,120
1,615
66
468
345
—
—
813
4
—
—
—
389
6
—
817
—
—
—
—
9,505
22
—
—
395
—
—
—
—
19,645
2,328
—
44
7,943
2,920
4,824
1,555
2,144
—
8,110
964
270
$
— $ 3,329
2,120
—
1,615
—
—
(1,268)
478
—
345
—
(1,268)
—
—
—
—
(29,150)
(10,460)
—
—
7,887
2,920
4,824
1,555
2,144
—
—
964
314
Total Assets . . . . . . . . . . . . . . . . . . . . . . . .
$10,344
$22,412
$28,730
$(40,878)
$20,608
Liabilities and Equity
Current liabilities:
Current maturities of long-term debt . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . . . . . .
$ — $
2
442
—
311
Total current liabilities . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . .
Intercompany loans payable . . . . . . . . . . . . . .
Long-term pension and postretirement
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . .
755
—
4
—
—
—
—
500
—
75
—
824
1,399
3,402
8,106
—
—
—
—
Total Liabilities . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . .
759
9,585
12,907
9,505
$ —
1,141
1,232
185
133
2,691
1
2,350
1,327
329
1,954
433
9,085
$
— $
—
—
—
(1,268)
(1,268)
—
(10,460)
—
—
—
—
500
1,143
1,749
185
—
3,577
3,403
—
1,327
329
1,954
433
(11,728)
11,023
19,645
(29,150)
9,585
Total Liabilities and Equity . . . . . . . . . . . . .
$10,344
$22,412
$28,730
$(40,878)
$20,608
104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Balance Sheet
As of September 26, 2014
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany receivables . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . .
Total current assets
. . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment, net . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . .
Intercompany loans receivable . . . . . . . . . . . . . .
Receivable from Tyco International plc and
Covidien plc . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
$ —
—
—
932
6
—
—
938
—
—
—
—
8,602
20
—
—
$
1
—
—
230
3
—
—
234
—
—
—
—
19,966
2,160
—
30
$ 2,456
2,057
1,509
30
510
324
2,013
8,899
2,920
3,726
1,087
2,047
—
9,883
1,037
426
$
—
—
—
(1,192)
—
—
—
(1,192)
—
—
—
—
(28,568)
(12,063)
—
—
$ 2,457
2,057
1,509
—
519
324
2,013
8,879
2,920
3,726
1,087
2,047
—
—
1,037
456
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . .
$9,560
$22,390
$30,025
$(41,823)
$20,152
Liabilities and Equity
Current liabilities:
. . . . . . . .
Current maturities of long-term debt
Accounts payable . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . .
Intercompany payables . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . .
Intercompany loans payable . . . . . . . . . . . . . . . .
Long-term pension and postretirement liabilities . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Equity . . . . . . . . . . . . . . .
$ —
1
282
—
260
—
543
—
4
—
—
—
—
547
9,013
$9,560
$
577
—
50
—
—
—
627
3,281
9,880
—
—
—
—
13,788
8,602
$ —
1,229
1,262
176
932
416
4,015
—
2,179
1,280
229
2,044
312
10,059
19,966
$
—
—
—
—
(1,192)
—
(1,192)
—
(12,063)
—
—
—
—
$
577
1,230
1,594
176
—
416
3,993
3,281
—
1,280
229
2,044
312
(13,255)
11,139
(28,568)
9,013
$22,390
$30,025
$(41,823)
$20,152
105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 25, 2015
Cash Flows From Operating Activities:
Net cash provided by continuing operating activities(1) .
Net cash provided by discontinued operating activities .
Net cash provided by operating activities
. . . . . . . . .
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . .
. .
Proceeds from sale of property, plant, and equipment
Acquisition of business, net of cash acquired . . . . . . . .
Proceeds from divestiture of discontinued operations, net
of cash retained by sold operations . . . . . . . . . . . . .
Change in intercompany loans . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) continuing investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued investing activities . . . .
Net cash provided by (used in) investing activities . . . .
Cash Flows From Financing Activities:
Changes in parent company equity(2) . . . . . . . . . . . . . .
Net decrease in commercial paper . . . . . . . . . . . . . . .
. . . . . . . . . .
Proceeds from issuance of long-term debt
Repayment of long-term debt . . . . . . . . . . . . . . . . . .
Proceeds from exercise of share options
. . . . . . . . . . .
Repurchase of common shares
. . . . . . . . . . . . . . . . .
Payment of common share dividends to shareholders . . .
Intercompany distributions(1) . . . . . . . . . . . . . . . . . . .
Loan activity with parent . . . . . . . . . . . . . . . . . . . . .
Transfers from discontinued operations . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in continuing financing activities . . . . .
Net cash used in discontinued financing activities . . . .
Net cash used in financing activities . . . . . . . . . . . . .
Effect of currency translation on cash . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . .
Cash and cash equivalents at beginning of fiscal year . .
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
$ 1,186
—
1,186
$ 1,270
—
1,270
$ 1,824
294
2,118
$(2,661)
—
(2,661)
$ 1,619
294
1,913
—
—
—
—
—
—
—
—
—
80
—
—
—
—
(916)
(515)
—
165
—
—
(1,186)
—
(1,186)
—
—
—
—
—
—
709
(1,304)
—
(595)
—
(595)
624
(328)
617
(250)
—
—
—
(1,335)
—
—
(4)
(676)
—
(676)
—
(1)
1
(600)
17
(1,725)
2,248
—
12
(48)
(25)
(73)
(704)
—
—
(223)
103
(107)
13
(1,326)
1,139
269
4
(832)
(269)
(1,101)
(71)
873
2,456
—
—
—
—
1,304
—
1,304
—
1,304
—
—
—
—
—
—
—
2,661
(1,304)
—
—
1,357
—
1,357
—
—
—
(600)
17
(1,725)
2,957
—
12
661
(25)
636
—
(328)
617
(473)
103
(1,023)
(502)
—
—
269
—
(1,337)
(269)
(1,606)
(71)
872
2,457
Cash and cash equivalents at end of fiscal year . . . . . .
$ —
$ —
$ 3,329
$ —
$ 3,329
(1) During fiscal 2015, other subsidiaries made distributions to TEGSA in the amount of $1,326 million and TEGSA made
distributions to TE Connectivity Ltd. in the amount of $1,335 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.
106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 26, 2014
Cash Flows From Operating Activities:
Net cash provided by (used in) continuing operating
activities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by discontinued operating activities .
Net cash provided by (used in) operating activities . . .
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant, and equipment
. .
Acquisition of business, net of cash acquired . . . . . . . .
Intercompany distribution receipts(1) . . . . . . . . . . . . . .
Change in intercompany loans . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) continuing investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued investing activities . . . .
Net cash provided by (used in) investing activities . . . .
Cash Flows From Financing Activities:
Changes in parent company equity(2) . . . . . . . . . . . . . .
Net decrease in commercial paper . . . . . . . . . . . . . . .
. . . . . . . . . .
Proceeds from issuance of long-term debt
Repayment of long-term debt . . . . . . . . . . . . . . . . . .
Proceeds from exercise of share options
. . . . . . . . . . .
Repurchase of common shares
. . . . . . . . . . . . . . . . .
Payment of common share dividends to shareholders . . .
Intercompany distributions(1) . . . . . . . . . . . . . . . . . . .
Loan activity with parent . . . . . . . . . . . . . . . . . . . . .
Transfers from discontinued operations . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) continuing financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued financing activities . . . .
Net cash provided by (used in) financing activities . . .
Effect of currency translation on cash . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . .
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
$(296)
—
(296)
$ 1,829
—
1,829
$ 2,153
279
2,432
$(1,882)
—
(1,882)
$ 1,804
279
2,083
—
—
—
—
—
—
—
—
—
67
—
—
—
—
(127)
(452)
—
808
—
—
296
—
296
—
—
—
—
—
—
99
347
—
446
—
446
(3,259)
(23)
1,322
(303)
—
—
—
—
—
—
(11)
(2,274)
—
(2,274)
—
1
—
1
(635)
129
(522)
—
—
(10)
(1,038)
(37)
(1,075)
3,192
—
—
(57)
156
(451)
9
(1,981)
(1,155)
242
2
(43)
(242)
(285)
(19)
1,053
1,403
—
—
—
(99)
(347)
—
(446)
—
(446)
—
—
—
—
—
—
—
1,981
347
—
—
2,328
—
2,328
—
—
—
(635)
129
(522)
—
—
(10)
(1,038)
(37)
(1,075)
—
(23)
1,322
(360)
156
(578)
(443)
—
—
242
(9)
307
(242)
65
(19)
1,054
1,403
$ 2,456
$ —
$ 2,457
Cash and cash equivalents at end of fiscal year . . . . . .
$ —
$
(1) During fiscal 2014, other subsidiaries made distributions to TEGSA in the amount of $1,981 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.
107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
TE CONNECTIVITY LTD.
25. Tyco Electronics Group S.A. (Continued)
Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 27, 2013
Cash Flows From Operating Activities:
Net cash provided by continuing operating activities(1) .
Net cash provided by discontinued operating activities .
Net cash provided by operating activities
. . . . . . . . .
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . .
. .
Proceeds from sale of property, plant, and equipment
Acquisition of business, net of cash acquired . . . . . . . .
Proceeds from divestiture of discontinued operations, net
of cash retained by sold operations . . . . . . . . . . . . .
Intercompany distribution receipts(1) . . . . . . . . . . . . . .
Change in intercompany loans . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) continuing investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued investing activities . . . .
Net cash provided by (used in) investing activities . . . .
Cash Flows From Financing Activities:
Changes in parent company equity(2) . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Net increase in commercial paper
Repayment of long-term debt . . . . . . . . . . . . . . . . . .
Proceeds from exercise of share options
. . . . . . . . . . .
Repurchase of common shares
. . . . . . . . . . . . . . . . .
Payment of common share dividends and cash
distributions to shareholders
. . . . . . . . . . . . . . . . .
Intercompany distributions(1) . . . . . . . . . . . . . . . . . . .
Loan activity with parent . . . . . . . . . . . . . . . . . . . . .
Transfers from discontinued operations . . . . . . . . . . . .
Net cash used in continuing financing activities . . . . .
Net cash used in discontinued financing activities . . . .
Net cash used in financing activities . . . . . . . . . . . . .
Effect of currency translation on cash . . . . . . . . . . . . .
Net decrease in cash and cash equivalents . . . . . . . . . .
Cash and cash equivalents at beginning of fiscal year . .
TE
Connectivity
Ltd.
TEGSA
Other
Subsidiaries
Consolidating
Adjustments
Total
(in millions)
$ 3,621
—
3,621
$ 1,972
—
1,972
$ 2,058
271
2,329
$(5,876)
—
(5,876)
$ 1,775
271
2,046
—
1
—
—
—
—
(3)
(2)
—
(2)
(826)
—
—
—
(602)
(391)
—
(1,800)
—
(3,619)
—
(3,619)
—
—
—
—
—
—
—
1,100
1,566
—
2,666
—
2,666
(174)
50
(714)
—
—
—
(3,800)
—
—
(4,638)
—
(4,638)
—
—
—
(581)
21
(6)
14
—
—
26
(526)
(17)
(543)
1,000
—
—
214
(242)
7
(3,176)
234
254
(1,709)
(254)
(1,963)
(9)
(186)
1,589
—
—
—
—
(1,100)
(1,566)
—
(2,666)
—
(2,666)
—
—
—
—
—
—
6,976
1,566
—
8,542
—
8,542
—
—
—
(581)
22
(6)
14
—
—
23
(528)
(17)
(545)
—
50
(714)
214
(844)
(384)
—
—
254
(1,424)
(254)
(1,678)
(9)
(186)
1,589
Cash and cash equivalents at end of fiscal year . . . . . .
$ —
$ —
$ 1,403
$ —
$ 1,403
(1) During fiscal 2013, other subsidiaries made distributions to TEGSA in the amount of $3,176 million and TEGSA made
distributions to TE Connectivity Ltd. in the amount of $3,800 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.
108
TE CONNECTIVITY LTD.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Fiscal Years Ended September 25, 2015, September 26, 2014, and September 27, 2013
Description
Fiscal 2015:
Allowance for doubtful accounts
receivable . . . . . . . . . . . . . . . . . .
Valuation allowance on deferred tax
assets . . . . . . . . . . . . . . . . . . . . .
Fiscal 2014:
Allowance for doubtful accounts
receivable . . . . . . . . . . . . . . . . . .
Valuation allowance on deferred tax
assets . . . . . . . . . . . . . . . . . . . . .
Fiscal 2013:
Allowance for doubtful accounts
receivable . . . . . . . . . . . . . . . . . .
Valuation allowance on deferred tax
assets . . . . . . . . . . . . . . . . . . . . .
Balance at
Beginning of Year
Additions
Charged to
Costs and
Expenses
Acquisitions,
Divestitures,
and Other
(in millions)
Deductions
Balance at
End of Year
$
14
$
2
1,706
1,627
$
29
$
2
1,801
285
$
26
$
3
1,700
323
$ 3
1
$—
—
$—
—
$
(1)
$
18
(97)
3,237
$ (17)
$
14
(380)
1,706
$ —
$
29
(222)
1,801
109
REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS
OF TE CONNECTIVITY LTD.
To the General meeting of
TE CONNECTIVITY LTD., SCHAFFHAUSEN
Report of the Statutory Auditor on the consolidated financial statements
As Statutory Auditor, we have audited the accompanying consolidated financial statements of
TE Connectivity Ltd. (the ‘‘Company’’), which comprise the consolidated balance sheet as of
September 25, 2015, and the consolidated statement of operations, statement of comprehensive income,
statement of shareholders’ equity, statement of cash flows and notes for the year then ended.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with accounting principles generally accepted in the United States of
America and the requirements of Swiss law. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error. The
Board of Directors is further responsible for selecting and applying appropriate accounting policies and
making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with Swiss law, Swiss Auditing Standards and auditing
standards generally accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers the
internal control system relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system.
An audit also includes evaluating the appropriateness of the accounting policies used and the
reasonableness of accounting estimates made, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements for the year ended September 25, 2015
present fairly, in all material respects, the financial position of the Company and the result of its
operations and its cash flows in accordance with accounting principles generally accepted in the United
States of America, and comply with Swiss law.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight
Act (‘‘AOA’’) and independence (Article 728 CO and Article 11, AOA) and that there are no
circumstances incompatible with our independence.
110
In accordance with Article 728a, paragraph 1, item 3, CO, and Swiss Auditing Standard 890, we
confirm that an internal control system exists, which has been designed for the preparation of the
consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
Deloitte AG
/s/ Martin Welser
Licensed Audit Expert
Auditor in charge
Zurich, November 10, 2015
/s/ Matthias Gschwend
Licensed Audit Expert
111
(This page has been left blank intentionally.)
112
TE CONNECTIVITY LTD.
INDEX TO SWISS STATUTORY FINANCIAL STATEMENTS
Statements of Operations for the fiscal years ended September 25, 2015 and September 26, 2014 .
Balance Sheets as of September 25, 2015 and September 26, 2014 . . . . . . . . . . . . . . . . . . . . . . .
Notes to Swiss Statutory Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposed Appropriation of Available Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of the Statutory Auditor on the Swiss Statutory Financial Statements of TE
Page
114
115
116
126
Connectivity Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127
113
TE CONNECTIVITY LTD.
SWISS STATUTORY FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the fiscal years ended September 25, 2015 and September 26, 2014
Income
Income from distributions made by a subsidiary
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance premiums charged to subsidiaries . . . . . . .
Remeasurement gain on foreign currency
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany interest income . . . . . . . . . . . . . . . . .
13
7
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,368
Expenses
Salary and social costs . . . . . . . . . . . . . . . . . . . . . . .
General and administrative costs . . . . . . . . . . . . . . .
Legal and consulting costs . . . . . . . . . . . . . . . . . . . .
Insurance premiums . . . . . . . . . . . . . . . . . . . . . . . .
Pre-separation tax settlement expense, net (Note 3) .
Expenses for services provided by subsidiaries . . . . . .
Intercompany interest expense . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
4
7
16
(10)
54
4
80
September 25, 2015
September 26, 2014
U.S. dollars
Swiss francs
U.S. dollars
Swiss francs
(in millions)
$1,335
13
CHF 1,300
13
$ —
13
CHF —
12
12
6
1,331
4
4
7
15
(10)
52
4
76
12
2
27
6
4
8
17
186
44
4
269
11
1
24
5
4
7
15
167
40
4
242
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
$1,288
CHF 1,255
$(242)
CHF (218)
See Notes to Swiss Statutory Financial Statements.
114
TE CONNECTIVITY LTD.
SWISS STATUTORY FINANCIAL STATEMENTS
BALANCE SHEETS
As of September 25, 2015 and September 26, 2014
September 25, 2015
September 26, 2014
U.S. dollars
Swiss francs
U.S. dollars
Swiss francs
(in millions, except share data)
Assets
Current assets:
Accounts receivable from subsidiaries (Note 3) .
Prepaid expenses and other current assets . . . .
Shares held in treasury (Note 4) . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries (Note 2) . . . . . . . . . .
$
817
5
—
822
9,649
CHF
798
5
—
803
10,443
$
942
7
164
1,113
9,621
CHF
895
7
150
1,052
10,416
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . .
$10,471
CHF 11,246
$10,734
CHF 11,468
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to subsidiaries (Note 3) . . . . .
Loans from subsidiaries (Note 3) . . . . . . . . . . .
Accrued and other current liabilities . . . . . . . . .
Approved but unpaid distributions to
shareholders (Note 4) . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . .
Unrealized translation gains (Note 2) . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . .
Commitments, contingencies, and guarantees
(Note 3)
Shareholders’ equity (Note 4):
Share capital, 414,064,381 and 419,070,781
shares authorized and issued, CHF 0.57 par
value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory reserves:
General reserve from earnings . . . . . . . . . . .
Free reserves:
Reserves from capital contributions (Note 4) .
Allocated reserves for the acquisition of
treasury shares by a subsidiary (Note 2) . . .
Unappropriated accumulated earnings . . . . . . .
Own shares held in treasury . . . . . . . . . . . . . . .
Reserves for treasury shares (Note 2) . . . . . . . .
Total Shareholders’ Equity . . . . . . . . . . . . . .
1
44
272
186
264
767
—
767
182
38
7,505
(175)
2,728
(915)
341
9,704
CHF
1
43
266
182
256
748
580
1,328
236
49
$ — CHF
46
230
50
242
568
—
568
184
38
—
43
218
47
217
525
553
1,078
239
49
8,392
8,036
8,907
(166)
1,968
(875)
314
9,918
(51)
1,315
—
644
(45)
659
—
581
10,166
10,390
Total Liabilities and Shareholders’ Equity . . .
$10,471
CHF 11,246
$10,734
CHF 11,468
See Notes to Swiss Statutory Financial Statements.
115
1. Basis of Presentation
TE Connectivity Ltd. (‘‘TE Connectivity’’ or the ‘‘Company,’’ which may be referred to as ‘‘we,’’
‘‘us,’’ or ‘‘our’’), incorporated in Schaffhausen, Switzerland, is the ultimate holding company of
TE Connectivity Ltd. and its subsidiaries (the ‘‘TE Group’’) with a listing on the New York Stock
Exchange. The Company employs less than 10 full time positions. For additional information on the
TE Group, see our annual report on Form 10-K filed with the United States (‘‘U.S.’’) Securities and
Exchange Commission (‘‘SEC’’) for the fiscal year ended September 25, 2015.
The accompanying statements of operations reflect the results of operations for the fiscal years
ended September 25, 2015 and September 26, 2014, and have been prepared in accordance with the
requirements of Swiss law for companies, the Swiss Code of Obligations. The financial statements
present the results of the holding company on a stand-alone basis and do not represent the
consolidated operations of the TE Group.
On January 1, 2013, changes in Swiss company law became effective. We adopted the requirements
on September 27, 2014, the first day of fiscal 2015 (adoption was mandated by January 1, 2015). The
Company is exempt from certain requirements for larger companies as the Company prepares
consolidated financial statements in accordance with a recognized financial reporting standard (the
consolidated financial statements of the TE Group are prepared under accounting principles generally
accepted in the U.S.). See Note 2 for additional information on the impact of adoption.
Fiscal Year
Unless otherwise indicated, references in the financial statements to fiscal 2015 and fiscal 2014 are
to our fiscal years ended September 25, 2015 and September 26, 2014. Our fiscal year is a
‘‘52-53 week’’ year ending on the last Friday of September. Fiscal 2015 and 2014 were 52 week years.
2. Summary of Significant Accounting Policies
Own Shares Held in Treasury and Allocated Reserves for the Acquisition of Treasury Shares by a
Subsidiary
Effective in fiscal 2015, shares held in treasury that are directly owned by us are recorded at
historical cost and presented as reductions to equity on our balance sheets. The reserves for treasury
shares reflects all treasury shares held by a subsidiary and is recorded at historical cost.
Prior to fiscal 2015 and in accordance with the then applicable law, shares held in treasury that
were held directly by us for the purpose of retirement were presented at historical cost, and, because
we expected to retire the shares within the next year, as current assets. Our reserves for treasury shares
represented all shares held in treasury, whether held by us or a subsidiary, and was recorded at
historical cost.
We established the reserves for treasury shares during fiscal 2015 and 2014 by charging, as
management deemed appropriate, either accumulated earnings or allocated reserves for the acquisition
of treasury shares by a subsidiary. As shares acquired by a subsidiary are re-issued for use in share-
based compensation arrangements, we credit the same account impacted by initial acquisition.
Investments in Subsidiaries
Investments in subsidiaries are equity interests held on a long-term basis for the purpose of our
business activities. Investments in subsidiaries are carried at a value no higher than cost less
adjustments for impairment. No impairments were recorded during fiscal 2015 or fiscal 2014.
116
2. Summary of Significant Accounting Policies (Continued)
During fiscal 2015, a subsidiary distributed $1,335 million (equivalent to CHF 1,300 million) to us.
The distributions are included in income from distributions made by a subsidiary in our statements of
operations.
Currency Translation
Our functional currency is the U.S. dollar. We present our financial statements in both U.S. dollars
and Swiss francs (‘‘CHF’’). Assets and liabilities in U.S. dollars are converted to Swiss francs for
presentation purposes using historical foreign exchange rates (for investments in subsidiaries, shares
held in treasury, approved but unpaid distributions to shareholders payable, and equity accounts) and
current foreign exchange rates (for all other assets and liabilities; at fiscal year-end 2015 and 2014,
exchange rates were CHF 0.9768:$1 and CHF 0.9508:$1, respectively). Revenue and expenses, excluding
income from distributions made by a subsidiary, are translated using the average exchange rates in
effect for the period presented (exchange rates were CHF 0.9558:$1 and CHF 0.8992:$1 for fiscal 2015
and 2014, respectively). Income from distributions made by a subsidiary is translated using the exchange
rate in effect on the date that each distribution was made to us. Net unrealized foreign currency
translation gains are deferred in the balance sheets, while unrealized translation losses and realized
transactional gains and losses are reflected in the statements of operations. We consider all foreign
currency transactional gains and losses associated with current assets and liabilities, excluding shares
held in treasury, to be realized.
Salaries and Social Charges
Salaries and social charges include cash and equity compensation paid to our directors.
Adoption of New Swiss Accounting Rules
On September 27, 2014, we prospectively adopted new Swiss accounting rules. The most significant
impact of adoption was the manner in which we account for treasury shares that we directly hold and is
summarized below. Adoption did not impact our accounting for treasury shares held by a subsidiary.
As reported at
September 26,
2014
Adjustment
(CHF Millions)
Impact of
adoption as of
September 27,
2014
Assets
Shares held in treasury(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF
All other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150 CHF (150) CHF
11,318
—
—
11,318
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF 11,468 CHF (150) CHF 11,318
Liabilities and Shareholders’ Equity
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF 1,078 CHF — CHF 1,078
Own shares held in treasury(1)
. . . . . . . . . . . . . . . . . . . . . . .
Reserves for treasury shares held by a subsidiary(2)
. . . . . . . .
Unappropriated accumulated earnings . . . . . . . . . . . . . . . . .
All other equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .
—
581
659
9,150
10,390
(150)
(150)
150
—
(150)
(150)
431
809
9,150
10,240
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . CHF 11,468 CHF (150) CHF 11,318
(1) On adoption, shares held in treasury of CHF 150 million was reduced to zero with a corresponding reduction in total
shareholders’ equity via the creation of shares held in treasury.
(2) Reserves for treasury shares was reduced by CHF 150 million associated with shares held directly by us via an increase in
unappropriated accumulated earnings, consistent with how we currently create reserves for treasury shares.
117
2. Summary of Significant Accounting Policies (Continued)
Reclassifications
Certain prior year balances have been reclassified to conform to current year presentation.
3. Commitments, Contingencies, and Guarantees
Affiliated Debt and Loans Receivable
We have three open lines of credit, the 2012 Line, the 2011 Line, and the Schaffhausen Line, with
wholly-owned subsidiaries. All lines bear interest at the 1-month London interbank offered rate
(‘‘LIBOR’’) plus 0.40% (0.59% and 0.55% at September 25, 2015 and September 26, 2014,
respectively). The 2012 Line has a $500 million limit (CHF 488 million) on the principal drawable and
matures in September 2017. The 2011 Line has a $200 million limit (CHF 195 million) on the principal
drawable and matures in September 2016. The Schaffhausen Line does not have a limit on the amount
drawable and matures in April 2017. At September 25, 2015 and September 26, 2014, there were no
outstanding borrowings under any of the open lines of credit.
We utilize a cash pooling relationship with a wholly-owned subsidiary (the ‘‘Cash Pool’’). The Cash
Pool does not have an expiration date and accrues interest based on LIBOR. At September 25, 2015
and September 26, 2014, our Cash Pool position was an asset of CHF 779 million and
CHF 868 million, respectively, and was included in accounts receivable from subsidiaries on our
balance sheets.
In order to minimize currency exposure related to distributions to shareholders approved in Swiss
francs and paid in U.S. dollars, we enter into arrangements with a wholly-owned subsidiary in which we
borrow Swiss francs from, and simultaneously loan U.S. dollars to, the subsidiary. As distributions to
shareholders are paid, both the borrowing and the loan receivable are partially settled. As of
September 25, 2015 and September 26, 2014, the borrowing totaled CHF 266 million and
CHF 218 million, respectively, and was reflected as loans from subsidiaries on our balance sheets. At
both periods, the loan receivable, which approximates the borrowing, was included in the Cash Pool
asset reflected in accounts receivable from subsidiaries on our balance sheets.
We have fully and unconditionally guaranteed the debt of a subsidiary, Tyco Electronics
Group S.A., totaling approximately CHF 3,812 million and CHF 3,668 million at September 25, 2015
and September 26, 2014, respectively. As of September 25, 2015, we have not been required to perform
on our guarantee.
Tax Sharing Agreement
We are a party to the Tax Sharing Agreement (‘‘TSA’’) with Tyco International Ltd. (‘‘Tyco
International’’) and Covidien plc (‘‘Covidien’’, which, on January 26, 2015, was acquired and now
operates as a subsidiary of Medtronic plc), under which we share responsibility for certain of our, Tyco
International’s, and Covidien’s income tax liabilities based on a sharing formula for periods prior to
and including June 29, 2007. We, Tyco International, and Covidien share 31%, 27%, and 42%,
respectively, of U.S. income tax liabilities that arise from adjustments made by tax authorities to our,
Tyco International’s, and Covidien’s U.S. income tax returns. The effect of the TSA is to indemnify us
for 69% of certain liabilities settled in cash by us with respect to unresolved pre-separation tax matters.
Pursuant to that indemnification, we have made similar indemnifications to Tyco International and
Covidien with respect to 31% of certain liabilities settled in cash by the companies relating to
unresolved pre-separation tax matters. All costs and expenses associated with the management of these
shared tax liabilities are shared equally among the parties.
118
3. Commitments, Contingencies, and Guarantees (Continued)
During fiscal 2015 and 2014, we recorded net income of CHF 10 million and net expense of
CHF 167 million, respectively, related to the TSA and tax settlements involving Tyco International,
Covidien, and us. These amounts are presented in pre-separation tax settlement expense, net in our
statements of operations.
Performance Guarantees
From time to time, we provide performance guarantees and surety bonds in favor of our
subsidiaries. At September 25, 2015 and September 26, 2014, these performance guarantees totaled
CHF 451 million and CHF 497 million, respectively. In addition to these amounts, all of which are
quantifiable, we have issued a parent company guarantee in behalf of a U.S.-based aerospace customer
that does not have a limit. We do not anticipate having to perform under these guarantees.
We are the leader of a Swiss value-added tax (‘‘VAT’’) group (‘‘VAT Group’’). All companies in
the VAT Group maintain primary responsibility for their own VAT liabilities. However, in the event of
non-compliance by any company in the VAT Group, all companies within the VAT Group assume joint
and several responsibility for any VAT liabilities. As VAT Group leader, we have not had to assume
responsibility for any events of noncompliance by the other companies in the group.
119
4. Equity
Changes in Equity Accounts
The following table presents activity related to our equity accounts during fiscal 2015 and 2014 in
Swiss francs.
Allocated
Reserves
for the
Acquisition
General
Reserve Reserves from of Treasury Unappropriated
Share
Shares by a
Capital Earnings Contributions Subsidiary
Capital
from
September 27, 2013 . CHF 244 CHF — CHF 9,342
CHF —
Appropriation of
general reserve .
Approved dividends
Retirement of
treasury shares . .
Transfer of reserves
for treasury
shares and other
. . . . . . .
Net loss
September 26, 2014 .
Adoption of Swiss
accounting rules .
Correction related
to appropriation
of general
reserve(1)
. . . . .
Approved dividends
Retirement of
treasury shares . .
Acquisition of
treasury shares . .
Transfer of reserves
for treasury
shares and other
Net income . . . . .
—
—
(5)
—
—
239
—
—
—
(3)
—
—
—
49
—
—
—
—
49
—
—
—
—
—
—
—
—
(435)
—
—
—
8,907
—
—
(515)
—
—
—
—
Reserves
for
Treasury
Shares
Own
Shares
Held in
Treasury Subsidiary
held by a Shareholders’
Total
Equity
CHF — CHF 684
CHF 11,364
—
—
—
—
—
—
—
—
(373)
270
—
581
49
(435)
(373)
3
(218)
10,390
(150)
(150)
(150)
Accumulated
Earnings
(in CHF millions)
CHF 1,094
—
—
5
(222)
(218)
659
150
(49)
—
(283)
—
—
—
(45)
—
(45)
—
—
—
—
—
—
—
286
—
—
—
—
—
(1,011)
(49)
(515)
—
(1,011)
(2)
1,255
(121)
—
236
1,255
—
—
(117)
—
September 25, 2015 . CHF 236 CHF 49
CHF 8,392
CHF (166)
CHF 1,968
CHF (875) CHF 314
CHF 9,918
(1) Reflects a correction to the appropriation of the general reserve in fiscal 2014.
120
4. Equity (Continued)
The following table presents activity related to our equity accounts during fiscal 2015 and 2014 in
U.S. dollars.
Allocated
Reserves
for the
General
Own
Acquisition
Reserve Reserves from of Treasury Unappropriated Shares
Held in
Shares by a
Share
Treasury Subsidiary
Capital Earnings Contributions Subsidiary
Reserves
for
Treasury
Shares
Accumulated
Earnings
Capital
from
held by a Shareholders’
Total
Equity
September 27, 2013 . . .
$189
$—
$8,520
$ —
(in USD millions)
$1,858
$ —
$ 723
$11,290
Appropriation of
general reserve . . .
Approved dividends . .
Retirement of treasury
shares . . . . . . . . .
Transfer of reserves
for treasury shares
and other . . . . . . .
. . . . . . . . .
Net loss
—
—
(5)
—
—
September 26, 2014 . . .
184
Adoption of Swiss
accounting rules . . .
Approved dividends . .
Retirement of treasury
shares . . . . . . . . .
Acquisition of treasury
shares . . . . . . . . .
Transfer of reserves
for treasury shares
and other . . . . . . .
Net income . . . . . . .
—
—
(2)
—
—
—
September 25, 2015 . . .
$182
38
—
—
—
—
38
—
—
—
—
—
—
$38
Conditional Share Capital
—
(484)
—
—
—
8,036
—
(531)
—
—
—
—
$7,505
—
—
—
(51)
—
(51)
—
—
—
—
(38)
—
5
(268)
(242)
1,315
164
—
(303)
—
—
—
—
—
—
(164)
—
305
—
(1,056)
—
—
(398)
319
—
644
(164)
—
—
—
—
(484)
(398)
—
(242)
10,166
(164)
(531)
—
(1,056)
(124)
—
$(175)
264
1,288
$2,728
—
—
(139)
—
1
1,288
$ (915)
$ 341
$ 9,704
Subject to certain conditions specified in our articles of association, we are authorized to increase
our conditional share capital by issuing new shares in aggregate not exceeding 50% of our authorized
shares. As of September 25, 2015, no conditional shares had been issued.
Own Shares Held in Treasury and Treasury Shares held by a Subsidiary
During the fiscal years ended September 25, 2015 and September 26, 2014, activity related to
common shares held in treasury by us was as follows:
Number of
Shares
(in millions)
Total Cost
(in CHF millions)
Common shares held as of September 27, 2013 . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder-approved retirements . . . . . . . . . . . . . .
Common shares held as of September 26, 2014 . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder-approved retirements . . . . . . . . . . . . . .
Common shares held as of September 25, 2015 . . . . . .
9
3
(10)
2
17
(5)
14
CHF 373
150
(373)
150
1,011
(286)
CHF 875
121
4. Equity (Continued)
In fiscal 2015 and 2014, our shareholders approved the cancellation of five million and ten million
shares, respectively, purchased under our share repurchase program. These capital reductions by
cancellation of shares were subject to a notice period and filing with the commercial register in
Switzerland.
We acquire treasury shares with the intent to retire them using a virtual secondary trading line
(‘‘Secondary Line’’). Pursuant to this Secondary Line, we acquired 17 million shares at a historical cost
of CHF 1,011 million in fiscal 2015 and 3 million shares at a historical cost of CHF 150 million in fiscal
2014.
Treasury shares held by us and a subsidiary at September 25, 2015 totaled 14 million and 6 million,
respectively, with a combined historical cost of CHF 1,189 million. Treasury shares held by us and a
subsidiary at September 26, 2014 totaled 2 million and 9 million, respectively, with a combined
historical cost of CHF 581 million.
During fiscal 2015 and 2014, our board of directors authorized increases of $3 billion and
$1 billion, respectively in the share repurchase program. We and our subsidiary repurchased
approximately 18 million of our common shares for $1,163 million (equivalent to CHF 1,115 million)
and approximately 11 million of our common shares for $604 million (equivalent to CHF 544 million)
during fiscal 2015 and 2014, respectively. At September 25, 2015, we had $2,711 million of availability
remaining under our share repurchase authorization. Purchases made both pursuant to the Secondary
Line and by a subsidiary are subject to this authorization.
Reserves from Capital Contributions
Reserves from capital contributions, subject to certain conditions, are freely distributable reserves.
As of September 25, 2015 and September 26, 2014, reserves from capital contributions were
CHF 8,392 million (equivalent to $7,505 million) and CHF 8,907 million (equivalent to $8,036 million),
respectively.
General Reserve from Earnings
To comply with the Swiss Code of Obligations, 5% of annual net income must be appropriated to
our general reserve until the general reserve, a non-distributable reserve, equals 20% of share capital.
In March 2014, our shareholders approved an appropriation for the general reserve in an amount of
CHF 49 million. This appropriation satisfies the requirements of the Swiss Code of Obligations with
respect to the general reserve.
Distributions to Shareholders
Under current Swiss tax law, subject to certain conditions, distributions to shareholders made in
the form of a reduction of registered share capital or from reserves from capital contributions are
exempt from Swiss withholding tax.
During the quarters ended December 27, 2013, and March 28, 2014, we paid the third and fourth
installments of the dividend originally approved in March 2013 at a rate of $0.25 per installment.
In March 2014, our shareholders approved a dividend payment to shareholders of CHF 1.04
(equivalent to $1.16) per share out of reserves from capital contributions, payable in four quarterly
installments beginning in the third quarter of fiscal 2014 through the second quarter of fiscal 2015. We
paid the installments of the dividend at a rate of $0.29 per share during each of the quarters ended
June 27, 2014, September 26, 2014, December 26, 2014, and March 27, 2015.
122
4. Equity (Continued)
In March 2015, our shareholders approved a dividend payment to shareholders of $1.32
(approximately CHF 1.27, based on the exchange rate on the date of approval) per share out of
reserves from capital contributions, payable in four quarterly installments beginning in the third quarter
of fiscal 2015 through the second quarter of fiscal 2016. We paid the installments of the dividend at a
rate of $0.33 per share during each of the quarters ended June 26, 2015 and September 25, 2015. We
have reflected a liability related to the unpaid distributions in approved but unpaid distributions to
shareholders on our balance sheets.
5. Non-Employee Director and Executive Compensation
For information regarding non-employee director and executive compensation, see our Swiss
Statutory Compensation Report.
6. Security Ownership of Board of Directors and Executive Officers
Board of Directors
The following table sets forth the shares, options and stock units held as of September 25, 2015
and September 26, 2014 by each member of our board of directors serving on our Board at
September 25, 2015. The share ownership of Mr. Lynch, our Chairman and Chief Executive Officer, is
set forth in Executive Management below.
Board of Directors:
Pierre Brondeau . . . . . . . . . . . . . . . . . . . . . . . . . . .
Juergen Gromer . . . . . . . . . . . . . . . . . . . . . . . . . . .
William Jeffrey . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yong Nam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel Phelan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paula Sneed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David Steiner . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Van Scoter(2) . . . . . . . . . . . . . . . . . . . . . . . . . .
Laura Wright
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year
Shares
Held
DSUs Held(1)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
19,646
17,539
77,477
77,477
9,106
6,999
9,106
6,999
18,151
16,044
19,351
17,244
18,151
16,044
23,247
18,640
3,329
1,222
12,334
12,102
38,512
34,978
—
—
—
—
12,334
12,102
15,140
14,855
12,334
12,102
6,605
6,481
—
—
(1) Directors hold DSUs. The DSUs are vested upon issuance, generally will be settled in shares on a one-for-one
basis within 30 days following the director’s termination, and receive dividend equivalent units.
(2)
Includes 400 shares held by Mr. Van Scoter’s spouse as of September 25, 2015.
123
6. Security Ownership of Board of Directors and Executive Officers (Continued)
Executive Management
The following table sets forth the shares, options and stock units held as of September 25, 2015
and September 26, 2014 by each member of our executive management serving in such position as of
September 25, 2015.
Executive Management:
. . . .
Thomas Lynch(4)
Terrence Curtin . . . . .
Joseph Donahue . . . .
Robert Hau . . . . . . .
John S. Jenkins, Jr.
. .
Jane Leipold . . . . . . .
Steven Merkt
. . . . . .
James O’Toole . . . . .
Kevin Rock(5)
. . . . . .
Robert Shaddock . . . .
Joan Wainwright . . . .
Year
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2015
2014
2015
2014
Shares
Held
Options
Held
Options
Exercise Price(1)
Fiscal Years
of Expiration
RSUs
Held(2)
PSUs
Held(3)
332,639
339,421
40,181
40,181
25,178
17,272
34,626
21,690
2,558
2,708
17,210
27,121
1,600
1,390
4,929
7,035
20,725
18,570
13,595
36,164
32,839
3,386,552
3,574,469
581,800
553,750
295,150
323,713
217,200
158,650
102,600
92,550
221,752
432,550
178,876
275,681
154,076
216,839
115,450
367,950
456,750
96,888
118,788
$24.60–$61.50
$14.56–$51.61
$33.73–$72.13
$24.60–$51.61
$34.05–$61.50
$33.73–$51.61
$34.05–$61.50
$34.05–$51.61
$34.05–$61.50
$34.05–$51.61
$24.60–$61.50
$24.60–$51.61
$34.05–$61.50
$14.11–$51.61
$34.05–$61.50
$19.09–$51.61
$34.05–$72.13
$29.15–$61.50
$14.11–$51.61
$34.05–$61.50
$33.73–$51.61
2017–2025
2017–2024
2021–2025
2020–2024
2021–2025
2021–2024
2023–2025
2023–2024
2023–2025
2023–2024
2017–2025
2017–2024
2021–2025
2017–2024
2021–2025
2019–2024
2022–2025
2018–2025
2018–2024
2022–2025
2021–2024
91,484
112,067
29,817
34,731
41,281
33,653
33,411
45,012
16,709
17,160
8,927
15,847
46,134
18,732
31,137
19,032
15,662
40,096
21,575
10,880
14,263
157,417
109,680
51,828
35,082
48,106
35,082
39,315
28,037
23,716
16,421
15,250
15,250
34,158
24,036
31,364
22,875
12,687
34,194
24,332
18,815
13,722
(1) Each option provides the right to purchase one share at the exercise price. Subject to acceleration upon certain events, the
stock options are exercisable in equal installments on anniversaries of the grant dates.
(2) Executive management holds RSUs. Subject to acceleration upon certain events, the RSUs vest over time on anniversaries
of the grant dates, are settled in shares upon vesting on a one-for-one basis, and receive dividend equivalent units.
(3) The PSU amounts in the table above assume achievement of target level of performance including target dividend
equivalent units through September 26, 2014 and September 25, 2015, respectively. Under the terms of the PSUs, shares of
stock are reserved based on the company’s earnings per share growth relative to the Standard & Poor’s 500 Non-Financial
Companies Index over a three-year performance cycle, subject to various conditions, and the PSUs earn dividend equivalent
units. Subject to acceleration upon certain events, vesting of reserved PSUs occurs when the management development and
compensation committee certifies year three results following the close of the three-year performance cycle. PSU awards
were granted on November 12, 2012, November 14, 2013 and November 10, 2014. Year one certification results relating to
the November 12, 2012 grant occurred on December 3, 2013 and the following shares were reserved: (Mr. Lynch—29,836;
Mr. Curtin—9,804; Mr. Donahue—9,804; Mr. Hau—7,670; Mr. Jenkins—4,262; Ms. Leipold—2,345; Mr. Merkt—6,392;
Mr. O’Toole—6,392; Mr. Rock—2,129; Mr. Shaddock—6,392; and Ms. Wainwright—3,835). Year two certification results
relating to the November 12, 2012 grant occurred on December 8, 2014 and the following shares were reserved:
(Mr. Lynch—35,972; Mr. Curtin—11,820; Mr. Donahue—11,820; Mr. Hau—9,248; Mr. Jenkins—5,139; Ms. Leipold—2,827;
Mr. Merkt—7,706; Mr. O’Toole—7,706; Mr. Rock—2,567; Mr. Shaddock—7,706; and Ms. Wainwright—4,624). Year One
certification results relating to the November 14, 2013 grant occurred on December 8, 2014 and the following shares were
reserved: (Mr. Lynch—24,281; Mr. Curtin—7,446; Mr. Donahue—7,446; Mr. Hau—6,154; Mr. Jenkins—3,888;
Ms. Leipold—2,508; Mr. Merkt—5,503; Mr. O’Toole—4,857; Mr. Rock—1,620; Mr. Shaddock—5,666; and
Ms. Wainwright—2,912).
124
6. Security Ownership of Board of Directors and Executive Officers (Continued)
(4) Mr. Lynch is chairman of the board of directors and chief executive officer.
(5)
Includes 18,676 shares held in a family trust over which Mr. Rock has dispositive power. Mr. Rock became a member of
executive management in March 2015.
For additional information regarding share-based compensation arrangements, see the TE Group’s
consolidated financial statements and our Swiss Statutory Compensation Report.
7. Significant Shareholders
The following table sets forth the information indicated for persons or groups known to us to be
beneficial owners of more than 5% of our outstanding shares beneficially owned as of September 25,
2015.
Name and Address of Beneficial Owner
Number
of Shares
Percentage
of Class
Dodge & Cox(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,427,408
9.8%
555 California Street, 40th Floor
San Francisco, CA 94104
Harris Associates L.P.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,889,444
7.6%
111 S. Wacker Drive, Suite 4600
Chicago, IL 60606
The Vanguard Group(3)
100 Vanguard Blvd.
Malvern, PA 19355
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,865,708
5.3%
(1) This information is based on a Schedule 13G/A filed with the SEC on February 13, 2015 by Dodge & Cox, which reported
sole voting power and sole dispositive power as follows: sole voting power—37,105,132 and sole dispositive power—
38,427,408.
(2) This information is based on a Schedule 13G/A filed with the SEC on February 11, 2015 by Harris Associates L.P. and its
general partner, Harris Associates Inc., which reported sole voting power and sole dispositive power as follows: sole voting
power—28,275,611 and sole dispositive power—28,275,611. As a result of advisory and other relationships with persons who
own the shares, Harris Associates L.P. may be deemed to be the beneficial owner of the shares.
(3) This information is based on a Schedule 13G filed with the SEC on February 11, 2015 by The Vanguard Group, which
reported sole voting power, sole dispositive power and shared dispositive power as follows: sole voting power—647,947, sole
dispositive power—20,252,296, and shared dispositive power—613,412.
125
8. Subsidiaries of the Company
We are the ultimate holding company of all subsidiaries of the TE Group. Our direct subsidiaries
and significant subsidiaries of the TE Group, as determined based on net sales or total assets and all of
which are wholly-owned indirectly by us, were as follows as of September 25, 2015:
Entity Name
Jurisdiction
Direct or Indirect
Holding(1)
Nominal
Capital(2)
Purpose(3)
Tyco Electronics Group S.A.
Tyco Electronics Holdings (Bermuda)
. . . . . . . . . . . .
Luxembourg
Direct
Bermuda
Germany
. . . . . . . . . . . Hong Kong
No. 7 Limited . . . . . . . . . . . . . . . . . . . . .
Tyco Electronics Verwaltungs GmbH . . . . . . .
TE Connectivity HK Limited.
TE Connectivity Holding
International II S.a r.l.
Luxembourg
. . . . . . . . . . . . . . .
Switzerland
TE Connectivity Solutions GmbH . . . . . . . . .
China
Tyco Electronics (Shanghai) Co., Ltd.
. . . . . .
Germany
TE Connectivity Germany GmbH . . . . . . . . .
Tyco Electronics AMP Korea Co., Ltd. . . . . .
South Korea
Tyco Electronics Corporation . . . . . . . . . . . . United States
Luxembourg
Tyco Electronics Holding S.a r.l.
Japan
Tyco Electronics Japan G.K.
Tyco Electronics Singapore Pte Ltd.
Singapore
Tyco Electronics Subsea
. . . . . . . . .
. . . . . . . . . . . .
. . . . . . .
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
$1
$—
EUR—
$380
$—
CHF—
CNY 6
EUR 78
KRW 6,000
$625
$592
JPY 21,776
$183
Communications LLC . . . . . . . . . . . . . . . . United States
Indirect
$—
F
F
F
S
F
S
M
M
M
M
F
M
S
M
(1) All subsidiaries labelled as ‘‘direct’’ are wholly-owned by the Company.
(2) Nominal capital is presented in millions for the currencies noted as of September 25, 2015. Nominal capital denoted with a
‘‘—’’ is insignificant.
(3)
‘‘F’’ denotes the primary purpose as a holding or financing company; ‘‘M’’ denotes the primary purpose as manufacturing
and production; ‘‘S’’ denotes the primary purpose as sales and distribution.
9. Subsequent Events
The Company has evaluated subsequent events through November 10, 2015, the date the Swiss
Statutory Financial Statements were issued.
On November 7, 2015, the TE Group entered into a definitive agreement to sell its Circuit
Protection Devices (‘‘CPD’’) business for $350 million in cash, subject to a final working capital
adjustment. The transaction is expected to close during the second quarter of fiscal 2016 pending
customary closing conditions and regulatory approvals. The net assets of the CPD business were
approximately $200 million at September 25, 2015. No other significant subsequent events have
occurred through this date requiring adjustment to the Swiss Statutory Financial Statements or
disclosures.
Proposed Appropriation of Available Earnings
Our board of directors will propose, in conjunction with our annual general meeting, that we carry
forward unappropriated accumulated earnings of CHF 1,968 million as included in our balance sheet as
of September 25, 2015.
126
REPORT OF THE STATUTORY AUDITOR ON THE SWISS STATUTORY
FINANCIAL STATEMENTS OF TE CONNECTIVITY LTD.
To the General meeting of
TE CONNECTIVITY LTD., SCHAFFHAUSEN
Report of the Statutory Auditor on the financial statements
As Statutory Auditor, we have audited the accompanying financial statements of TE
Connectivity Ltd. (the ‘‘Company’’), which comprise the balance sheet as of September 25, 2015, and
the statement of operations and notes for the year then ended.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance
with the requirements of Swiss law and the Company’s articles of association. This responsibility
includes designing, implementing, and maintaining an internal control system relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error. The Board of Directors is further responsible for selecting and applying appropriate accounting
policies and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers the internal control system
relevant to the entity’s preparation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control system. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of accounting estimates made,
as well as evaluating the overall presentation of the financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended September 25, 2015 comply with Swiss
law and the Company’s articles of association.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight
Act (‘‘AOA’’) and independence (Article 728, CO, and Article 11, AOA) and that there are no
circumstances incompatible with our independence.
In accordance with Article 728a, paragraph 1, item 3, CO, and Swiss Auditing Standard 890, we
confirm that an internal control system exists, which has been designed for the preparation of financial
statements according to the instructions of the Board of Directors.
127
We further confirm that the proposed appropriation of accumulated earnings complies with Swiss
law and the Company’s articles of association. We recommend that the financial statements submitted
to you be approved.
Deloitte AG
/s/ Martin Welser
Licensed Audit Expert
Auditor in charge
Zurich, November 10, 2015
/s/ Matthias Gschwend
Licensed Audit Expert
128
TE Connectivity Ltd.
Swiss Statutory Compensation Report
as of September 25, 2015
129
A General
Under the new Swiss ordinance against excessive pay in stock exchange listed companies (the
‘‘Minder Ordinance’’) we are now required to prepare a separate Swiss Statutory Compensation Report
each year that contains specific items in a presentation format determined by these regulations. This
report must be included in the materials made available to our shareholders each year.
Our executive management (as defined under Swiss law) consists of Thomas Lynch, Chairman and
Chief Executive Officer; Terrence Curtin, President; Joseph Donahue, Executive Vice President and
Chief Operating Officer; Robert Hau, Executive Vice President and Chief Financial Officer; John S.
Jenkins, Jr., Executive Vice President and General Counsel; Jane Leipold, Senior Vice President,
Global Human Resources; Steven Merkt, President, Transportation Solutions; James O’Toole, President,
Communications Solutions; Kevin Rock, President, Industrial Solutions; Robert Shaddock, Executive
Vice President and Chief Technology Officer; and Joan Wainwright, President, Channel and Customer
Experience.
The following sets forth the compensation for the years ended September 25, 2015 and
September 26, 2014, of the members of the Board of Directors and Executive Management for all of
the functions that they have performed for TE Connectivity.
For more detailed information about compensation for our Board of Directors and Executive
Management, please review our Definitive Proxy Statement for our 2016 Annual Meeting of
Shareholders. You may access this report on the Investor Relations section of our website at
http://investors.te.com/financial-reports/annual-reports/default.aspx.
B. Compensation of the Board of Directors
Compensation paid during fiscal 2015 and 2014 to each director who is not our salaried employee
or an employee of our subsidiaries was based on the following fee structures:
Fee Structure
Effective March,
2015(1)
Fee Structure Effective
through February,
2015(1)
Cash
Equity
Cash
Equity
Annual retainer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,000 $160,000 $ 90,000 $160,000
Additional annual retainers:
Lead Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000
Audit Committee Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000
Audit Committee Member . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000
Nominating, Governance & Compliance Committee Chair . . . . $15,000
Management, Development & Compensation Committee
$100,000 $ 60,000
$ 25,000
$ 10,000
$ 15,000
Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000
$ 15,000
(1) The new fee structure became effective March, 2015. The table above reflects full year fee structure.
In addition to the compensation described above, our board governance principles encourage
directors to attend certain continuing education courses that are related to their duties as directors, and
provide that we will reimburse the costs associated with attending one course every two years.
TE Connectivity will also provide company matching gift contributions on behalf of certain directors
under TE Connectivity’s matching gift program up to a maximum of $10,000 per year.
Our board members also receive non-compensatory reimbursement for expenses incurred in
attending board and committee meetings or performing other services for us in their capacities as
directors. Such expenses include food, lodging, and transportation. Directors who are employees of us
130
B. Compensation of the Board of Directors (Continued)
or our subsidiaries, including our current chairman of the board, do not receive any compensation for
their services as directors.
Each non-employee director received the equity component of their compensation in the form of a
grant of common shares of TE Connectivity Ltd., with the exception of Dr. Gromer, who received the
equity component of his compensation in the form of deferred stock units (‘‘DSUs’’). Under current
U.S. tax law, our U.S.-based non-employee directors cannot defer any portion of their compensation,
including DSUs, and therefore, they were issued common shares (which are immediately taxable) in
lieu of DSUs. Because Dr. Gromer is a German citizen, he receives his equity compensation in the
form of DSUs.
DSUs awarded to Dr. Gromer vested immediately upon grant, and will be paid in common shares
within 30 days following termination (subject to the previously-existing option of deferring the payout).
Dividend equivalents or additional DSUs are credited to a non-employee director’s DSU account when
dividends or distributions are paid on our common shares.
The following table discloses the cash and equity awards paid to each of our non-employee
directors during fiscal 2015 and 2014.
Table 1—(2015 Audited) (2014 Unaudited)
Name
Pierre Brondeau . . . . . . . . . . . . . . . . . . .
Juergen Gromer . . . . . . . . . . . . . . . . . . .
William Jeffrey . . . . . . . . . . . . . . . . . . . .
Yong Nam . . . . . . . . . . . . . . . . . . . . . . . .
Daniel Phelan . . . . . . . . . . . . . . . . . . . . .
Frederic Poses(5)
. . . . . . . . . . . . . . . . . . .
Lawrence Smith(6)
. . . . . . . . . . . . . . . . . .
Paula Sneed . . . . . . . . . . . . . . . . . . . . . .
David Steiner . . . . . . . . . . . . . . . . . . . . .
John Van Scoter . . . . . . . . . . . . . . . . . . .
Laura Wright(4)
. . . . . . . . . . . . . . . . . . . .
Fees Earned
or Paid in
Cash
($)(1)
Fiscal Year
Stock
Awards
($)(2)
All Other
Compensation
($)(3)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
$120,417
$100,000
$100,000
$100,000
$ 90,000
$ 90,000
$ 90,000
$ 90,000
$101,667
$ 90,000
$ 85,417
$205,000
$ 68,750
$125,000
$ 90,000
$ 90,000
$100,417
$105,000
$ 90,000
$ 90,000
$108,750
$ 58,333
$172,815
$157,256
$172,815
$157,256
$172,815
$157,256
$172,815
$157,256
$172,815
$157,256
$118,818
$216,246
$172,815
$157,256
$172,815
$157,256
$172,815
$157,256
$172,815
$157,256
$172,815
$ 96,089
$25,135
$22,895
$47,238
$37,339
0
$
$ 1,000
$
0
$ 3,450
$31,008
$22,895
$ 7,932
$24,468
$19,822
$27,461
$28,595
$25,810
$25,135
$22,895
$ 9,091
$ 8,388
$10,000
$60,000
Total
($)
$318,367
$280,151
$320,053
$294,595
$262,815
$248,256
$262,815
$250,706
$305,490
$270,151
$212,167
$445,714
$261,387
$309,717
$291,410
$273,066
$298,367
$285,151
$271,906
$255,644
$291,565
$214,422
(1) The amounts shown represent the amount of cash compensation earned in fiscal 2015 and 2014 for Board and committee
services. Dr. Brondeau received additional fees for his work as lead independent director for fiscal year 2015 (starting
March, 2015) and Mr. Poses received additional fees for his work as lead independent director for fiscal year 2014 and
fiscal year 2015 until his retirement in March, 2015. Effective March, 2015 Dr. Brondeau, Mr. Phelan and Ms. Wright each
131
B. Compensation of the Board of Directors (Continued)
received additional fees for their roles as chairs of the nominating, governance and compliance committee, the management
development and compensation committee and the audit committee, respectively. Dr. Brondeau and Ms. Wright each
received an additional audit committee cash retainer for serving on the committee until March, 2015. Mr. Steiner received
an additional audit committee cash retainer for serving on the committee for two months during quarter three, and
Mr. Gromer received an additional audit committee cash retainer for serving on the committee for fiscal 2015. For fiscal
2014 Messrs. Poses, Smith, and Steiner each received additional fees for their roles as chair of the nominating, governance
and compliance committee, the management development and compensation committee, and the audit committee
respectively. Dr. Brondeau, Dr. Gromer, and Mr. Smith each received for the full year the additional audit committee cash
retainer for serving on the committee. Ms. Wright received an additional audit committee cash retainer for serving on the
audit committee for the last month of quarter two and the last two full quarters of fiscal year 2014.
(2) On November 10, 2014, Dr. Brondeau, Dr. Jeffrey, Mr. Nam, Mr. Phelan, Mr. Smith, Ms. Sneed, Mr. Steiner, Mr. Van
Scoter and Ms. Wright each received a grant of 2,810 common shares. Dr. Gromer received an award of 2,810 DSUs. In
determining the number of common shares and DSUs to be issued, we used the average daily closing price for the 20-day
period prior to the grant date ($56.94 per share), the same methodology used to determine employee equity awards. The
grant date fair value of these awards, as shown above for fiscal year 2015, was calculated by using the closing price of
TE Connectivity Ltd. common shares on the date of grant ($61.50 per share). As of September 25, 2015, the aggregate
number of DSUs outstanding for each non-employee director was as follows: Dr. Brondeau—12,334; Dr. Gromer—38,512;
Mr. Phelan—12,334; Ms. Sneed—15,140; Mr. Steiner—12,334; Mr. Van Scoter—6,605. On November 14, 2013,
Dr. Brondeau, Dr. Jeffrey, Mr. Nam, Mr. Phelan, Mr. Poses, Mr. Smith, Ms. Sneed, Mr. Steiner and Mr. Van Scoter each
received a grant of 3,047 common shares. Dr. Gromer received an award of 3,047 DSUs. Mr. Poses received an additional
1,143 shares in equity compensation for serving as lead independent director for fiscal 2014. In fiscal 2014, in determining
the number of common shares and DSUs to be issued, we used the average daily closing price for the 20 day period prior
to the grant date ($52.51 per share), the same methodology used to determine employee equity awards. The grant date fair
value of these awards, as shown above for fiscal 2014, was calculated by using the closing price of TE Connectivity Ltd.
common shares on the date of grant ($51.61 per share). On March 5, 2014, Ms. Wright received a grant of 1,630 common
shares. In determining the number of common shares and DSUs to be issued, we used the average daily closing price for
the 20-day period prior to the grant date ($57.26 per share), the same methodology used to determine employee equity
awards. The grant date fair value of these awards, as shown above for fiscal 2014, was calculated by using the closing price
of TE Connectivity Ltd. common shares on the date of grant ($58.95 per share). The common shares and DSUs vested
immediately and non-employee directors receive dividend equivalents in connection with any DSU award granted to them.
(3) Amounts shown represent the value of dividend equivalent units earned on current and prior DSU awards calculated using
the market value on the date of the dividend, company matching gift contributions made on behalf of certain directors
under TE Connectivity’s matching gift program, and amounts reimbursed to Mr. Phelan in fiscal 2015 and Mr. Smith in
fiscal 2014 for expenses incurred when attending continuing education courses. The $47,238 and $37,339 amounts reported
in fiscal 2015 and 2014, respectively, for Dr. Gromer are the dividend equivalent unit amount earned on his DSU awards.
The $60,000 amount reported for Ms. Wright in fiscal 2014 is for fees paid for consulting services performed prior to her
being elected to the board.
(4) On March 4, 2014, Ms. Wright was elected to our Board of Directors. Cash compensation for Ms. Wright was pro-rated for
her service during fiscal 2014
(5) On November 10, 2015, Mr. Poses received a fiscal 2015 stock award of 1,405 common shares and an additional 527
common shares for serving as lead independent director and Mr. Poses retired from the Board effective March 3, 2015. The
number of common shares issued to Mr. Poses was determined in the same manner applied to all grants on November 10,
2014 and reflects a pro-ration of his service during fiscal 2015. Cash compensation for Mr. Poses was pro-rated for his
service during fiscal 2015.
(6) Cash compensation for Mr. Smith was pro-rated for his service during fiscal 2015.
c. Compensation of Executive Management
The following table presents information concerning Executive Management’s 2015 and 2014
compensation.
132
c. Compensation of Executive Management (Continued)
Table 2—(2015 Audited) (2014 Unaudited)
Change in
Pension
Value and
Nonqualified
Deferred
Non-Equity
Name and Principal
Position
Year
Salary(3) Bonus
($)
($)
Stock
Awards(4)
($)
Option
Awards(5) Compensation(6)
Incentive Plan Compensation
Earnings(7)
($)
All Other
Compensation(8)
($)
Total
($)
($)
($)
Thomas J. Lynch, Chief
Executive Officer
.
. 2015
2014
$1,200,000 — $ 4,590,360 $4,682,416
$1,172,308 — $ 3,685,986 $3,828,213
$1,080,000
$2,512,800
—
—
$ 612,301
$ 417,675
$12,165,077
$11,616,982
All Other Executive
Management(1)
.
.
.
.
.
. 2015
2014(2)
$6,014,607 — $14,921,633 $9,549,126
$5,599,496 — $ 7,494,805 $7,782,888
$3,216,328
$5,930,442
$ 90,816
$143,712
$2,516,976
$2,821,372
$36,309,486
$29,772,715
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
The executive management team for Swiss reporting purposes includes Mr. Hau, Mr. Curtin, Mr. Donahue, Mr. Jenkins, Ms. Leipold,
Mr. Merkt, Mr. O’Toole, Mr. Rock, Mr. Shaddock, Ms. Wainwright and Mr. Gambill until his last day of work in March, 2015.
2014 total compensation does not include Mr. Rock as he was not a member of the executive management team for Swiss reporting purposes
in fiscal 2014.
Amounts shown are not reduced to reflect the named executive officers’ elections, if any, to defer receipt of salary into the SSRP.
This amount represents the grant date fair value of restricted stock units (RSUs) and performance stock units (PSUs) calculated using the
provisions of Accounting Standards Codification (‘‘ASC’’) 718, Compensation—Stock Compensation. The value of PSUs included in the table
assumes target performance. All dividend equivalent units earned on unvested RSUs and PSUs are reported in the All Other Compensation
column.
This amount represents the grant date fair value of stock options calculated using the provisions of ASC 718.
Represents amounts earned under the TE Connectivity Ltd. annual incentive program. Amounts shown are not reduced to reflect the named
executive officers’ elections, if any, to defer receipt of awards into the SSRP.
Represents the aggregate change in actuarial present value of the accumulated benefits for four executives in 2015 and three executives in
2014 under the frozen pension plan.
See the All Other Compensation table below for a breakdown of amounts shown in column (i) which include perquisites, the company’s
401(k) plan and nonqualified defined contribution plan, dividend equivalent units and other amounts. The amounts reflected in the table for
perquisites are our incremental cost. We also provide group life, health, hospitalization and medical reimbursement plans which do not
discriminate in scope, terms or operation in favor of officers and are available to all full-time employees; the values of the benefits are not
shown in the table.
All Other Compensation
Insurance
Perquisites(a) Premiums(b)
Name
Year
($)
Thomas J. Lynch .
.
.
.
.
. 2015
2014
$
$
84,569
17,353
All Other Executive
.
Management
.
.
.
.
.
. 2015
2014
$ 576,830
$1,551,944
($)
—
—
$620
$568
Dollar
Value of
Dividends
not factored
into Grant
Date Fair
Value(c)
($)
$304,964
$236,767
Company
ESPP
Contributions Company
to DC plans(d) Match(e)
($)
$222,768
$163,555
($)
—
—
Payment for
unused
vacation/
personal
time(f)
($)
Total
All Other
Severance(g) Compensation
($)
($)
—
—
—
—
$ 612,301
$ 417,675
$710,646
$509,777
$800,683
$735,948
$1,950
$1,950
$17,371
$21,185
$408,876
—
$2,516,976
$2,821,372
(a)
Perquisites consisting of the following:
• Amounts in fiscal 2015 for Mr. Lynch and five other executives reflect an attendance gift provided to all attendees at a certain business
meeting. Amounts in fiscal 2015 and 2014 include the incremental cost to us of Mr. Lynch’s non-business use of our aircraft. Mr. Lynch is
permitted to use the corporate aircraft for business and non-business purposes. The incremental cost to us during fiscal year 2015 and
2014 includes the direct variable cost and value of the lost corporate tax benefit associated with Mr. Lynch’s travel to attend Thermo
Fisher Scientific Inc. and Cummins Inc. board meetings, as Mr. Lynch is a member of the board of directors of both companies, and
occasional personal use. Amounts in fiscal 2015 also include the incremental cost to us of non-business travel after the conclusion of a
business trip for two executives. Executive officers have limited access to the use of the corporate aircraft for non-business purposes.
• Amounts reflect a cash perquisite paid for the first two quarters of fiscal 2015 for one executive under the executive perquisites allowance
program which provides a cash allowance of 10% of base salary for executives whose employment is based in the United States.
133
c. Compensation of Executive Management (Continued)
• Amounts for fiscal 2015 and fiscal 2014 include various miscellaneous fees and expenses, personal tax preparation assistance, international
tax payments and U.S. tax gross-up payments pertaining to expatriate assignments for two executives. Due to the timing of payments, the
following range of exchange rates, primarily as determined by TE Connectivity finance, were used to convert amounts reported or paid in
EUR to U.S. dollars: $1.08–$1.27:EUR 1 in fiscal 2015 and $1.33–$1.38:EUR 1 in fiscal 2014.
• Fiscal 2014 amounts include tax gross-up payments for calendar year 2013 on relocation allowances paid in fiscal year 2013 for two
executives. In accordance with our relocation benefit policy, tax gross-up payments are made to cover the additional taxes assessed on the
value of the relocation benefits provided.
Additional income reported for participation in a company paid split dollar life insurance program for one executive.
The value of dividend equivalent units credited in the fiscal year to each individual’s unvested restricted stock units and performance stock
units (PSU) using the closing price on the date of the crediting. The dividend equivalent unit value associated with the PSUs reflects target
performance and will be adjusted based on certified performance results following the close of the three-year performance period.
Contributions made on behalf of the named executive officers under TE Connectivity’s qualified defined contribution plan and accruals on
behalf of the named executive officers under the SSRP (a nonqualified defined contribution excess plan).
Name
Mr. Lynch .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
All Other Executive Management .
.
.
.
.
.
.
.
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
Company Matching
Contribution
(Qualified Plan)(*)
Company
Contribution
(Non-Qualified Plan)
$ 15,900
$ 13,000
$170,353
$148,064
$206,868
$150,555
$630,330
$587,884
Year
2015
2014
2015
2014
(*)
Included in the amount above is an additional matching contribution of $5,720 and $6,240 for fiscal 2015 for two executives and
$5,610 for fiscal 2014 for one executive as a result of a frozen defined benefit plan.
The company matching contribution made under the TE Connectivity employee stock purchase plan for one executive.
The value of unused vacation and personal time for one executive.
The value of severance payments for one executive, as per the terms of an employment agreement entered into before January 1, 2014.
(b)
(c)
(d)
(e)
(f)
(g)
134
REPORT OF THE STATUTORY AUDITOR ON THE SWISS STATUTORY COMPENSATION
REPORT OF TE CONNECTIVITY LTD.
To the General meeting of
TE CONNECTIVITY LTD., SCHAFFHAUSEN
We have audited Tables 1 and 2 within the accompanying compensation report of TE
Connectivity Ltd. for the year ended September 25, 2015.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the
compensation report in accordance with Swiss law and the Ordinance against Excessive Compensation
in Stock Exchange Listed Companies (the ‘‘Ordinance’’). The Board of Directors is also responsible for
designing the compensation system and defining individual compensation packages.
Auditor’s Responsibility
Our responsibility is to express an opinion on the accompanying compensation report. We
conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the compensation report complies with Swiss law and articles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the
compensation report with regard to compensation, loans and credits in accordance with articles 14–16
of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatements in the compensation report, whether due to fraud or error. This
audit also includes evaluating the reasonableness of the methods applied to value components of
remuneration, as well as assessing the overall presentation of the compensation report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the compensation report of TE Connectivity Ltd. for the year ended September 25,
2015 complies with Swiss law and articles 14–16 of the Ordinance.
Deloitte AG
/s/ Martin Welser
Martin Welser
Licensed audit expert
Auditor in charge
Zurich, December 18, 2015
/s/ Matthias Gschwend
Matthias Gschwend
Licensed audit expert
135
BOARD OF DIRECTORS
Thomas J. Lynch
Chairman &
Chief Executive Officer,
TE Connectivity Ltd.
Dr. Pierre R. Brondeau*
President, Chairman, &
Chief Executive Officer,
FMC Corporation
Dr. Juergen W. Gromer
Retired President,
Tyco Electronics
Dr. William A. Jeffrey
Chief Executive Officer
& President,
SRI International
Yong Nam
Advisor to the CEO,
Daelim Industrial Co. Ltd.
Former Chief Executive Officer,
LG Electronics Inc.
Daniel J. Phelan
Retired Chief of Staff,
GlaxoSmithKline plc
David P. Steiner
President, Chief Executive Officer,
& Director,
Waste Management, Inc.
John C. Van Scoter
President, Chief Executive Officer,
& Director,
eSolar, Inc.
Paula A. Sneed
Chair & Chief Executive Officer,
Phelps Prescott Group, LLC
Retired Executive Vice President,
Kraft Foods Inc.
Laura H. Wright
Founder,
GSB Advisors
Retired Chief Financial Officer,
Southwest Airlines Co.
* Lead Independant Director of the TE Connectivity Ltd. Board of Directors
LEADERSHIP TEAM AND OFFICERS
Thomas J. Lynch
Chairman &
Chief Executive Officer
John S. Jenkins, Jr.
Executive Vice President,
General Counsel
Eric J. Resch
Senior Vice President,
Chief Tax Officer
Terrence R. Curtin
President,
TE Connectivity
Jane A. Leipold
Senior Vice President,
Global Human Resources
Kevin N. Rock
President,
Industrial Solutions
Mario Calastri
Senior Vice President,
Treasurer
Steven T. Merkt
President,
Transportation Solutions
Robert N. Shaddock
Executive Vice President,
Chief Technology Officer
Que Dallara
Senior Vice President,
Corporate Strategy
Minoru Okamoto
Senior Advisor to the CEO
Amy B. Shah
Senior Vice President,
Chief Marketing Officer
Joseph B. Donahue
Executive Vice President,
Chief Operating Officer
James O’Toole
President,
Communications Solutions
Joan E. Wainwright
President,
Channel & Customer Experience
Joseph F. Eckroth, Jr.
Senior Vice President,
Chief Information Officer
Robert J. Ott
Senior Vice President,
Corporate Controller
Robert W. Hau
Executive Vice President,
Chief Financial Officer
Jeanne Quirk
Senior Vice President,
Mergers & Aquisitions
CORPORATE DATA
REGISTERED & PRINCIPAL
EXECUTIVE OFFICE
TE Connectivity Ltd.
Rheinstrasse 20
CH-8200 Schaffhausen
Switzerland
+41.0.52.633.66.61
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1700 Market Street
Philadelphia, PA 19103
Deloitte AG
General Guisan-Quai 38
CH-8022 Zurich
Switzerland
STOCK EXCHANGE
The company’s common shares are traded on
the New York Stock Exchange (NYSE) under
the ticker symbol TEL.
FORM 10-K
Copies of the company’s Annual Report on
Form 10-K for the fiscal year ended September
25, 2015 may be obtained by shareholders
without charge upon written request to
TE Connectivity Ltd., Rheinstrasse 20,
CH-8200 Schaffhausen, Switzerland.
The Annual Report on Form 10-K is also
available on the company’s website at
www.te.com
SHAREHOLDER SERVICES
Registered shareholders (shares held in your
own name with our transfer agent) with
requests such as change of address or dividend
checks should contact TE Connectivity’s
transfer agent at:
Wells Fargo Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
866.258.4745
www.shareowneronline.com
Beneficial shareholders (shares held with
a bank or broker) should contact the bank
or brokerage holding their shares with their
requests.
Other shareholder inquiries may be directed
to TE Connectivity Shareholder Services at the
company’s registered and principal executive
office above.
www.te.com
This document was printed using soy–based inks and paper containing 30% postconsumer
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Custody supplier. Printing was done according to ISO workflow procedures.
© 2016 TE Connectivity Ltd. All Rights Reserved.
001-AR-FY2015
TE Connectivity and TE Connectivity (logo) are trademarks. Other logos, product and/or
company names may be trademarks of TE Connectivity Ltd., its affiliates or unrelated parties.