TE Connectivity Annual Report 2019

FY2019 Annual Report · TE Connectivity

Loading PDF…

2019 ANNUAL REPORT
2019 ANNUAL REPORT

WHEN
WHEN
TECHNOLOGY
TECHNOLOGY
CONNECTS,
CONNECTS,
SO DOES
SO DOES
HUMANITY.
HUMANITY.

CORPORATE DATA

REGISTERED & PRINCIPAL
EXECUTIVE OFFICE
TE Connectivity Ltd.
Mühlenstrasse 26
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 that ended September 27, 2019 may be
obtained by shareholders without charge upon written
request to:
TE Connectivity Ltd.
Mühlenstrasse 26
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:
Equiniti 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

“TE Connectivity” and “TE Connectivity (logo)” are trademarks. This report further contains other trademarks
of ours and additional trade names and trademarks of other companies that are not owned by TE Connectivity.
We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or
sponsorship of us by such companies, or any relationship with any of these companies.

BOARD OF DIRECTORS

Thomas J. Lynch

Non-Executive Chairman

TE Connectivity Ltd.

Dr. William A. Jeffrey

Chief Executive Officer,

SRI International

Paula A. Sneed

Chair and Chief Executive Officer,

Phelps Prescott Group, LLC

Retired Executive Vice President,

Dr. Pierre R. Brondeau*

David M. Kerko

Kraft Foods Inc.

Chairman and

Chief Executive Officer,

FMC Corporation

Terrence R. Curtin

Director and

Chief Executive Officer,

TE Connectivity Ltd.

Former Member and Advisor,

KKR & Co., L.P.

Yong Nam

Advisor to the CEO,

Daelim Industrial Co. Ltd.

Abhijit Y. Talwalkar

Former President and

Chief Executive Officer,

LSI Corporation

Former Chief Executive Officer,

LG Electronics Inc.

Mark C. Trudeau

President and

Carol A. “John” Davidson

Daniel J. Phelan

Retired Senior Vice President,

Retired Chief of Staff,

Controller and Chief Accounting

GlaxoSmithKline plc

Officer,

Tyco International Ltd.

*Lead Independent Director of the TE Connectivity Ltd. Board of Directors

Chief Executive Officer,

Mallinckrodt plc

Laura H. Wright

Retired Chief Financial Officer,

Southwest Airlines Co.

LEADERSHIP TEAM AND OFFICERS

Terrence R. Curtin

Chief Executive Officer

and Director

Alan Amici

Vice President,

Chief Technology Officer,

Transportation Solutions

Claudia Anderson

Vice President,

Chief Continuous

Improvement Officer

Mario Calastri

Senior Vice President,

Treasurer

Joel Dubs

Senior Vice President,

Operations

Joseph F. Eckroth, Jr.

Senior Vice President,

Chief Information Officer

Kari Janavitz

Vice President,

Steven T. Merkt

President,

Chief Marketing Officer

Transportation Solutions

John S. Jenkins, Jr.

Executive Vice President,

General Counsel

Heath A. Mitts

Executive Vice President,

Chief Financial Officer

Arvind Kaushal

Senior Vice President,

Chief Strategy Officer

Timothy J. Murphy

Senior Vice President,

Chief Human Resources Officer

Shad W. Kroeger

President,

Communications Solutions

Robert J. Ott

Senior Vice President,

Corporate Controller

Karen Leggio

Senior Vice President,

GM Channel

Nitin Mathur

Vice President,

Jeanne Quirk

Senior Vice President,

Mergers and Acquisitions

Eric J. Resch

Senior Vice President,

Chief Digital & eBusiness Officer

Chief Tax Officer

Jimmy McDonald

Vice President,

Kevin N. Rock

President,

Chief Supply Chain Officer

Industrial Solutions

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 ..............................................................................................................................

Page

Swiss Statutory Compensation Report .............................................................................................................................

107

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Annual Report 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. Investors should not place undue reliance on any forward-looking
statements. We do not have any intention or obligation to update forward-looking statements after we file this report except
as required by law.

The risk factors described in this Annual Report and those discussed in our Annual Report on Form 10-K for the

fiscal year ended September 27, 2019 filed with the United States (“U.S.”) 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.

“TE Connectivity” and “TE Connectivity (logo)” are trademarks. This report further contains other trademarks of

ours and additional trade names and trademarks of other companies that are not owned by TE Connectivity. We do not
intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by
such companies, or any relationship with any of these companies.

BUSINESS

General

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

global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of
connectivity and sensor solutions, proven in the harshest environments, enable advancements in transportation, industrial
applications, medical technology, energy, data communications, and the home.

We became an independent, publicly traded company in 2007; however, through our predecessor companies, we

trace our foundations in the connectivity business back to 1941. 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.

We have a 52- or 53-week fiscal year that ends on the last Friday of September. Fiscal 2019, 2018, and 2017 were

52 weeks in length and ended on September 27, 2019, September 28, 2018, and September 29, 2017, respectively. For fiscal
years in which there are 53 weeks, the fourth quarter reporting period includes 14 weeks, with the next such occurrence
taking place in fiscal 2022.

Segments

We operate through three reportable segments: Transportation Solutions, Industrial Solutions, and Communications

Solutions. We believe our segments serve a combined market of approximately $190 billion.

Our net sales by segment as a percentage of our total net sales were as follows:

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

Fiscal
2019 2018 2017
58 %
29
13

59 %
28
13
100 % 100 % 100 %

58 %
30
12

Below is a description of our reportable segments and the primary products, markets, and competitors of each

segment.

Transportation Solutions

The Transportation Solutions segment is a leader in connectivity and sensor technologies. The primary products sold
by the Transportation Solutions segment include terminals and connector systems and components, sensors, antennas, relays,
application tooling, and wire and heat shrink tubing. The Transportation Solutions segment’s products, which must withstand
harsh conditions, are used in the following end markets:

• Automotive (73% of segment’s net sales)—We are one of the leading providers of advanced automobile

connectivity solutions. The automotive industry uses our products in automotive technologies for body and
chassis systems, convenience applications, driver information, infotainment solutions, miniaturization solutions,
motor and powertrain applications, and safety and security systems. Hybrid and electronic mobility solutions
include in-vehicle technologies, battery technologies, and charging solutions.

• Commercial transportation (15% of segment’s net sales)—We deliver reliable connectivity products designed to
withstand harsh environmental conditions for on- and off-highway vehicles and recreational transportation,
including heavy trucks, construction, agriculture, buses, and other vehicles.

•

Sensors (12% of segment’s net sales)—We offer a portfolio of intelligent, efficient, and high-performing sensor
solutions that are used by customers across multiple industries, including automotive, industrial equipment,
commercial transportation, medical solutions, aerospace and defense, and consumer applications.

The Transportation Solutions segment’s major competitors include Yazaki, Aptiv, Sumitomo, Sensata, Honeywell,

Molex, and Amphenol.

Industrial Solutions

The Industrial Solutions segment is a leading supplier of products that connect and distribute power, data, and

signals. The primary products sold by the Industrial Solutions segment include terminals and connector systems and
components, heat shrink tubing, relays, and wire and cable. The Industrial Solutions segment’s products are used in the
following end markets:

•

Industrial equipment (49% of segment’s net sales)—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. Our products are also used by the solar industry. The medical industry uses our
products in imaging, diagnostic, surgical, and minimally invasive interventional applications.

• Aerospace, defense, oil, and gas (33% of segment’s net sales)—We design, develop, and manufacture a

comprehensive portfolio of critical electronic components and systems for the harsh operating conditions of the
aerospace, defense, and marine industries. Our products and systems are designed and manufactured to operate
effectively in harsh conditions ranging from the depths of the ocean to the far reaches of space.

• Energy (18% of segment’s net sales)—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.

The Industrial Solutions segment competes primarily against Amphenol, Belden, Hubbell, Carlisle Companies, 3M,

Integer Holdings, Esterline, Molex, and Phoenix Contact.

Communications Solutions

The Communications Solutions segment is a leading supplier of electronic components for the data and devices and

the appliances markets. The primary products sold by the Communications Solutions segment include terminals and
connector systems and components, relays, heat shrink tubing, and antennas. The Communications Solutions segment’s
products are used in the following end markets:

• Data and devices (59% of segment’s net sales)—We deliver products and solutions that are used in a variety of
equipment architectures within the networking equipment, data center equipment, and wireless infrastructure
industries. Additionally, we deliver a range of connectivity solutions for the Internet of Things, smartphones,
tablet computers, notebooks, and virtual reality applications to help our customers meet their current challenges
and future innovations.

• Appliances (41% of segment’s net sales)—We provide solutions to meet the daily demands of home appliances.
Our products are used in many household appliances, including washers, dryers, refrigerators, air conditioners,
dishwashers, cooking appliances, water heaters, air purifiers, floor care devices, and microwaves. Our
expansive range of standard products is supplemented by an array of custom-designed solutions.

The Communications Solutions segment’s major competitors include Amphenol, Molex, JST, and Korea Electric

Terminal (KET).

Customers

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 can identify and act
on trends and leverage knowledge about next-generation technology across our products.

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.

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 our 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.

No single customer accounted for a significant amount of our net sales in fiscal 2019, 2018, or 2017.

Sales and Distribution

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:

Europe/Middle East/Africa (“EMEA”)
Asia–Pacific
Americas
Total

Fiscal
2019 2018 2017
38 % 36 %
34
28
100 % 100 % 100 %

36 %
33
31

35
29

(1)

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

We sell our products into approximately 150 countries primarily through direct selling efforts to manufacturers. In

fiscal 2019, our direct sales represented approximately 80% of total net sales. We also sell our products indirectly via
third-party distributors.

We maintain distribution centers around the world. Products are generally delivered to the distribution centers by

our manufacturing facilities and then subsequently delivered to the customer. In some instances, however, products are
delivered directly from our manufacturing facility to the customer. 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 contract
with a wide range of transport providers to deliver our products globally via road, rail, sea, and air. We believe our balanced
sales distribution lowers our exposure to any particular geography and improves our financial profile.

Seasonality and Backlog

We experience a slight seasonal pattern to our business. Overall, the third and fourth fiscal quarters are typically the

strongest quarters of our fiscal year, whereas the first fiscal quarter is negatively affected by holidays and 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 in 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 in the energy market typically increase in the third and fourth fiscal quarters as customer
activity increases.

Customer orders typically fluctuate from quarter to quarter based upon business and market conditions. Backlog is

not necessarily indicative of future net sales as unfilled orders may be cancelled prior to shipment of goods. Backlog by
reportable segment was as follows:

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

Fiscal Year End
2018
2019

(in millions)
$ 1,639 $ 1,779
1,245
441
$ 3,315 $ 3,465

1,315
361

We expect that the majority of our backlog at fiscal year end 2019 will be filled during fiscal 2020.

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 based on breadth of product offering,
product innovation, price, quality, delivery, and service. Our markets have generally been growing but with downward
pressure on prices.

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.

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.

Management Team and Employees

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 and segment leaders average over 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.

Our strong employee base, along with their commitment to uncompromising values, provides the foundation of our
company’s success. We continue to emphasize employee development and training, and we embrace diversity and inclusion.

We have employees located throughout the world. As of fiscal year end 2019, we employed approximately 78,000
people worldwide, of whom 31,000 were in the EMEA region, 22,000 were in the Asia–Pacific region, and 25,000 were in
the Americas region. Of our total employees, approximately 49,000 were employed in manufacturing.

Government Regulation and Supervision

The import and export of products are subject to regulation by the various jurisdictions where we conduct business.

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 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 Electronic 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 may increase our costs for energy and
certain materials and products. We also have projects underway at a number of current and former manufacturing sites to
investigate and remediate environmental contamination resulting from past operations. Based upon our experience, available
information, and applicable laws, as of fiscal year end 2019, we concluded that we would incur investigation and remediation
costs at these sites in the reasonably possible range of $15 million to $43 million, and we accrued $18 million as the probable
loss, which was the best estimate within this range. We do not anticipate any material capital expenditures during fiscal 2020
for environmental control facilities or other costs of compliance with laws or regulations relating to greenhouse gas
emissions.

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. The information on our website is not
incorporated by reference in this Annual Report on Form 10-K.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

Market Information and Holders

Our common shares are listed and traded on the NYSE under the symbol “TEL.” As of November 6, 2019, there

were 19,412 shareholders of record of our common shares.

Performance Graph

The following graph compares 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 at fiscal year end 2014 and assumes the reinvestment of all
dividends and distributions. The graph shows the cumulative total return for the last five fiscal years. The comparisons in the
graph are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common
shares.

COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG TE CONNECTIVITY LTD., S&P 500 INDEX, AND
DOW JONES ELECTRICAL COMPONENTS AND EQUIPMENT INDEX

$200

$150

$100

$50

2014

2015

2016

2017

2018

2019

Fiscal Year Ended

TE Connectivity Ltd.

S&P 500 Index

Dow Jones Electrical Components & Equipment

TE Connectivity Ltd.
S&P 500 Index
Dow Jones Electrical Components and Equipment
Index

2015

2014(1)
$ 100.00 $ 101.30 $ 114.21 $ 150.45 $ 162.08 $ 174.62
165.55

99.41

159.61

114.13

135.36

100.00

2019

2018

Fiscal Year End
2017
2016

100.00

91.84

109.03

140.59

156.34

150.52

(1)

$100 invested on September 26, 2014 in TE Connectivity Ltd.’s common shares and in indexes. Indexes calculated on month-end
basis.

Issuer Purchases of Equity Securities

The following table presents information about our purchases of our common shares during the quarter ended

September 27, 2019:

Period
June 29–July 26, 2019
July 27–August 30, 2019
August 31–September 27, 2019

Total

Maximum
Approximate
Dollar Value
of Shares that May
Total Number Average Price Publicly Announced Yet Be Purchased

Total Number of
Shares Purchased
as Part of

of Shares
Purchased(1)

Paid Per
Share(1)

Plans or
Programs(2)

Under the Plans
or Programs(2)

671,633 $

1,007,600
289,992
1,969,225 $

92.76
89.85
92.77
91.27

670,900 $ 1,616,977,103
1,526,870,086
1,500,732,017

1,003,000
282,100
1,956,000

(1)

These columns include the following transactions which occurred during the quarter ended September 27, 2019:

(i)

(ii)

the acquisition of 13,225 common shares from individuals to satisfy tax withholding requirements in connection with
the vesting of restricted share awards issued under equity compensation plans; and

open market purchases totaling 1,956,000 common shares, summarized on a trade-date basis, in conjunction with the
share repurchase program announced in September 2007.

(2)

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

SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data. The data presented should be read in conjunction

with our Consolidated Financial Statements and accompanying notes and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” included elsewhere in this Annual Report. Our consolidated financial
information may not be indicative of our future performance.

2019

As of or for Fiscal
2016(1)
2017
(in millions, except per share data)

2018

2015

Statement of Operations Data
Net sales
Acquisition and integration costs
Restructuring and other charges (credits), net(2)
Other income (expense), net(3)
Income tax (expense) benefit(4)
Income from continuing operations
Income (loss) from discontinued operations, net of income taxes(5)
Net income

$ 13,448 $ 13,988 $ 12,185 $ 11,352 $ 11,524
55
152
(55)
(306)
1,180
1,240
2,420

22
(2)
(677)
826
1,847
162
2,009

6
147
(42)
(180)
1,540
143
1,683

14
126
1
344
2,584
(19)
2,565

27
255
2
15
1,946
(102)
1,844

Per Share Data
Basic earnings per share:

Income from continuing operations
Net income

Diluted earnings per share:

Income from continuing operations
Net income

$ 5.76 $

5.46

$ 5.72 $

5.42

7.38 $ 4.34 $ 5.05 $
7.33

4.74

5.49

7.32 $ 4.30 $ 5.01 $
7.27

4.70

5.44

2.91
5.98

2.87
5.89

Dividends paid per common share

$ 1.80 $

1.68 $ 1.54 $ 1.40 $

1.24

Balance Sheet Data
Total assets
Long-term liabilities
Total shareholders’ equity

$ 19,694 $ 20,386 $ 19,403 $ 17,608 $ 20,589
7,429
5,805
9,585
9,751

6,057
8,485

5,145
10,831

5,584
10,570

Fiscal 2016 was a 53-week year.

Fiscal 2016 included a pre-tax gain of $144 million on the sale of our Circuit Protection Devices business.

Fiscal 2016 and 2015 net other income (expense) was recorded primarily pursuant to the Tax Sharing Agreement with Tyco
International plc and Covidien plc. Fiscal 2016 included $604 million of other expense related to the effective settlement of tax
matters for the years 1997 through 2000 and $46 million of other expense related to a tax settlement in another tax jurisdiction.
Fiscal 2015 included $84 million of other expense related to the effective settlement of all undisputed tax matters for the years
2001 through 2007.

For fiscal 2019, 2018, and 2017, see Note 15 to the Consolidated Financial Statements for additional information. Fiscal 2016
included a $1,135 million income tax benefit related to the effective settlement of tax matters for the years 1997 through 2000,
partially offset by a $91 million income tax charge related to an increase to the valuation allowance for certain U.S. deferred tax
assets. Additionally, fiscal 2016 included an $83 million net income tax benefit related to tax settlements in certain other tax
jurisdictions, partially offset by an income tax charge related to certain legal entity restructurings. Fiscal 2015 included a $216
million income tax charge associated with the tax impacts of certain intercompany legal entity restructurings made in connection
with our integration of Measurement Specialties, Inc; a $201 million income tax benefit related to the effective settlement of all
undisputed tax matters for the years 2001 through 2007; and a $63 million income tax benefit associated with the effective
settlement of all undisputed tax matters for the years 2008 through 2010.

(1)

(2)

(3)

(4)

(5)

Fiscal 2019 included a pre-tax loss of $86 million on the sale of our Subsea Communications business. Fiscal 2015 included a
pre-tax gain of $1.1 billion on the sale of our Broadband Network Solutions business. For additional information regarding
discontinued operations, see Note 4 to the Consolidated Financial Statements.

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 27, 2019 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”).

Discussion of our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 is presented

below. Discussion of our financial condition and results of operations for fiscal 2018 compared to fiscal 2017 can be found in
“Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual
Report on Form 10-K for the fiscal year ended September 28, 2018.

The following discussion includes organic net sales growth which is a non-GAAP financial measure. See

“Non-GAAP Financial Measure” for additional information regarding this measure.

We are a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our

broad range of connectivity and sensor solutions, proven in the harshest environments, enable advancements in
transportation, industrial applications, medical technology, energy, data communications, and the home.

Overview

Fiscal 2019 included the following:

• Our fiscal 2019 net sales decreased 3.9% from fiscal 2018 levels due to sales declines in the Communications

Solutions and Transportation Solutions segments, partially offset by growth in the Industrial Solutions segment.
On an organic basis, our net sales decreased 1.7% in fiscal 2019 as compared to fiscal 2018.

• Our net sales by segment were as follows:

• Transportation Solutions—Our net sales decreased 5.7% due primarily to sales declines in the

automotive end market.

•

Industrial Solutions—Our net sales increased 2.5% primarily as a result of increased sales in the
aerospace, defense, oil, and gas end market.

• Communications Solutions—Our net sales decreased 9.2% due to sales declines in both the appliances

and the data and devices end markets.

• During fiscal 2019, our shareholders approved a dividend payment to shareholders of $1.84 per share, payable
in four equal quarterly installments of $0.46 beginning in the third quarter of fiscal 2019 and ending in the
second quarter of fiscal 2020.

• Net cash provided by continuing operating activities was $2,454 million in fiscal 2019.

Outlook

In the first quarter of fiscal 2020, we expect our net sales to be between $3.0 billion and $3.2 billion as compared to
$3.35 billion in the first quarter of fiscal 2019. We expect our net sales to be between $12.7 billion and $13.3 billion in fiscal
2020 as compared to $13.4 billion in fiscal 2019. These decreases are primarily due to sales declines in the Communications
Solutions and Transportation Solutions segments. Additional information regarding expectations for our reportable segments
for the first quarter of fiscal 2020 as compared to the same period of fiscal 2019 and for fiscal 2020 compared to fiscal 2019
is as follows:

• Transportation Solutions—We expect our net sales to decrease in the automotive end market as a result of

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

•

Industrial Solutions—We expect our net sales declines in the industrial equipment end market to be largely
offset by sales increases in the aerospace, defense, oil, and gas and the energy end markets. In the industrial
equipment end market, market weakness in industrial applications is expected to be partially offset by continued
growth in medical applications.

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

We expect diluted earnings per share from continuing operations to be in the range of $0.93 to $0.99 per share in the
first quarter of fiscal 2020. In fiscal 2020, we expect diluted earnings per share from continuing operations to be in the range
of $4.21 to $4.61 per share.

The outlook for the first quarter of fiscal 2020 as compared to the same period of fiscal 2019 reflects the negative
impact of foreign currency exchange rates on net sales and earnings per share of approximately $62 million and $0.03 per
share, respectively. The outlook for fiscal 2020 as compared to fiscal 2019 reflects the negative impact of foreign currency
exchange rates on net sales and earnings per share of approximately $229 million and $0.11 per share, respectively.

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

current levels.

We are monitoring the current macroeconomic environment and its potential effects on our customers and the end

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

Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”) in

September 2018, and it was approved by public vote in May 2019. Certain measures became effective in fiscal 2019 and
accordingly are reflected on our Consolidated Financial Statements.

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law. We are currently assessing the

impacts of the cantonal implementation, including reductions in tax rates. We expect to recognize approximately $350
million of income tax expense related to the write-down of certain deferred tax assets to the lower tax rates in the first quarter
of fiscal 2020, the period of enactment. This income tax charge is not reflected in the above outlook; however, our outlook
does reflect an expected increase of approximately 400 basis points in our effective tax rate in fiscal 2020 as a result of other
provisions of Swiss Tax Reform. See Note 15 to the Consolidated Financial Statements for additional information regarding
Swiss Tax Reform.

Acquisitions

During fiscal 2019, we acquired three businesses for a combined cash purchase price of $296 million, net of cash

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

We acquired two businesses during fiscal 2018 for a combined cash purchase price of $153 million, net of cash
acquired. In fiscal 2019, we received $13 million as a result of a customary net working capital settlement for one of the
acquisitions. The acquisitions were reported as part of our Industrial Solutions segment from the date of acquisition.

See Note 5 to the Consolidated Financial Statements for additional information regarding acquisitions.

Pending Acquisition

During fiscal 2019, we entered into a business combination agreement and commenced a voluntary public tender
offer for all outstanding shares of First Sensor AG (“First Sensor”), a provider of sensing solutions based in Germany. The
offer was accepted for approximately 72% of First Sensor’s shares. The transaction, including the assumption of First
Sensor’s outstanding net debt and minority interest, is valued at approximately €307 million. Completion of the offer will be
subject to customary closing conditions, including regulatory approvals. We expect to complete the transaction in fiscal 2020.

Discontinued Operations

In fiscal 2019, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $297 million and
incurred a pre-tax loss on sale of $86 million. The SubCom business met the held for sale and discontinued operations criteria
and has been reported as such in all periods presented on our Consolidated Financial Statements. Prior to reclassification to
discontinued operations, the SubCom business was included in the Communications Solutions segment.

See Note 4 to the Consolidated Financial Statements for additional information regarding discontinued operations.

Net Sales

Results of Operations

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

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

Fiscal

2019

2018

($ in millions)
$ 7,821 58 % $ 8,290 59 %

3,954
1,673
$ 13,448

3,856
30
12
1,842
100 % $ 13,988

28
13
100 %

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

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

Change in Net Sales for Fiscal 2019 versus Fiscal 2018

Net Sales
Growth

Organic Net
Sales Growth

Translation Acquisitions

($ in millions)

$ (469) (5.7)% $ (232) (2.8)% $

98 2.5
(169) (9.2)

120 3.1
(129) (7.0)

$ (540) (3.9)% $ (241) (1.7)% $

(274) $
(95)
(40)
(409) $

37
73
—
110

Net sales decreased $540 million, or 3.9%, in fiscal 2019 as compared to fiscal 2018. The decrease in net sales

resulted from the negative impact of foreign currency translation of 3.0% due to the weakening of certain foreign currencies

and organic net sales declines 1.7%, partially offset by sales contributions from acquisitions of 0.8%. Price erosion adversely
affected organic net sales by $108 million in fiscal 2019.

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

Net Sales by Geographic Region. Our business operates in three geographic regions—EMEA, Asia–Pacific, and

the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or
decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate
those currencies into U.S. dollars at the end of each fiscal period. We sell our products into approximately 150 countries, and
approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in fiscal 2019. The percentage of
net sales in fiscal 2019 by major currencies invoiced was as follows:

Currencies
U.S. dollar
Euro
Chinese renminbi
Japanese yen
All others
Total

Percentage
42 %
30
13
6
9
100 %

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

EMEA
Asia–Pacific
Americas
Total

Fiscal

2019

2018

($ in millions)
$ 4,823 36 % $ 5,255 38 %

4,401
4,224

33
31

4,762
3,971

34
28

$ 13,448 100 % $ 13,988 100 %

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

Change in Net Sales for Fiscal 2019 versus Fiscal 2018

Net Sales
Growth

Organic Net
Sales Growth

Translation Acquisitions

($ in millions)

$ (432) (8.2)% $ (231) (4.4)% $

(361) (7.6)
253 6.4

(248) (5.2)
238 6.0

$ (540) (3.9)% $ (241) (1.7)% $

(269) $
(120)
(20)
(409) $

68
7
35
110

EMEA
Asia–Pacific
Americas
Total

Cost of Sales and Gross Margin

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

Fiscal

Cost of sales

As a percentage of net sales

Gross margin

As a percentage of net sales

2019

$ 9,054

2018
($ in millions)
$ 9,243

Change

$ (189)

67.3 %

66.1 %

$ 4,394

$ 4,745

$ (351)

32.7 %

33.9 %

In fiscal 2019, gross margin decreased $351 million as compared to fiscal 2018, primarily as a result of lower

volume, unfavorable product mix, negative foreign currency translation, and price erosion, partially offset by lower material
costs. Gross margin as a percentage of net sales decreased to 32.7% in fiscal 2019 from 33.9% in fiscal 2018.

We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are
subject to variability in raw material prices which continue to fluctuate for many of the raw materials we use, including
copper, gold, and silver. In fiscal 2019, we purchased approximately 172 million pounds of copper, 122,000 troy ounces of
gold, and 2.6 million troy ounces of silver. The following table presents the average prices incurred related to copper, gold,
and silver:

Measure

2019

2018

Fiscal

Copper
Gold
Silver

Lb. $ 2.93 $ 2.86
1,281
17.15

1,309
16.42

Troy oz.
Troy oz.

In fiscal 2020, we expect to purchase approximately 170 million pounds of copper, 120,000 troy ounces of gold, and

2.4 million troy ounces of silver.

Operating Expenses

The following table presents operating expense information:

Fiscal

Selling, general, and administrative expenses

$ 1,490

2019

2018
($ in millions)
$ 1,594

Change

$ (104)

As a percentage of net sales

11.1 %

11.4 %

Restructuring and other charges, net

255

126

129

Selling, General, and Administrative Expenses. In fiscal 2019, selling, general, and administrative expenses
decreased $104 million as compared to fiscal 2018 due primarily to lower incentive compensation costs as well as cost
control measures and savings attributable to restructuring actions. Selling, general, and administrative expenses as a
percentage of net sales decreased to 11.1% in fiscal 2019 from 11.4% in fiscal 2018.

Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we

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

During fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural

improvements impacting all segments. During fiscal 2018, we initiated a restructuring program associated with footprint
consolidation and structural improvements primarily impacting the Industrial Solutions and Transportation Solutions
segments. In connection with these initiatives, we incurred net restructuring charges of $255 million and $140 million in
fiscal 2019 and 2018, respectively. Annualized cost savings related to actions initiated in fiscal 2019 are expected to be
approximately $220 million and are expected to be realized by the end of fiscal 2021. Cost savings will be reflected primarily
in cost of sales and selling, general, and administrative expenses.

In response to market weakness in fiscal 2019, we initiated incremental restructuring actions, primarily consisting of
employee severance, to broaden the scope of our cost reduction initiatives and accelerate cost reduction and factory footprint
consolidation activities. We previously disclosed that we expected total restructuring charges to be approximately $375
million in fiscal 2019. We now expect certain of these actions to occur in fiscal 2020 or 2021. For fiscal 2020, we currently
expect total restructuring charges to be approximately $200 million to $250 million and total spending, which will be funded
with cash from operations, to be approximately $300 million.

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 information:

Fiscal

Operating income

Operating margin

Operating income included the following:

2019

$ 1,978

2018
($ in millions)
$ 2,331

14.7 % 16.7 %

Change

$ (353)

Acquisition-related charges:

Acquisition and integration costs
Charges associated with the amortization of acquisition-related fair
value adjustments

Restructuring and other charges, net
Other items(1)
Total

(1)

Represents the write-off of certain spare parts.

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

Fiscal

2019

2018

(in millions)

27 $

3
30
255
17

8
22
126
—
$ 302 $ 148

Non-Operating Items

The following table presents select non-operating information:

Fiscal

Interest expense

Income tax benefit

Effective tax rate

2019

$ 68

2018
($ in millions)
$ 107

Change

$ (39)

344

(329)

(0.8)% (15.4)%

Loss from discontinued operations, net of income taxes

$ (102)

$ (19)

$ (83)

Interest Expense. Interest expense decreased $39 million during the fiscal 2019 due primarily to the expansion of

our cross-currency swap program. Under the terms of the fiscal 2019 contracts, we receive interest in U.S. dollars at a
weighted-average rate of 2.9% per annum and pay no interest. See Note 13 to the Consolidated Financial Statements for
additional information regarding our cross-currency swap program.

Income Taxes. See Note 15 to the Consolidated Financial Statements for discussion of items impacting income tax
benefit and the effective tax rate for fiscal 2019 and 2018, including Swiss Tax Reform and the U.S. Tax Cuts and Jobs Act.

The valuation allowance for deferred tax assets was $4,970 million and $2,191 million at fiscal year end 2019 and

2018, respectively. See Note 15 to the Consolidated Financial Statements for further information regarding the valuation
allowance for deferred tax assets.

As of fiscal year end 2019, certain subsidiaries had approximately $26 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. See Note 15 to the Consolidated
Financial Statements for additional information regarding undistributed earnings.

Loss from Discontinued Operations, Net of Income Taxes. During fiscal 2019, we sold our SubCom business for
net cash proceeds of $297 million and incurred a pre-tax loss on sale of $86 million. The net sales of the business were $41
million and $702 million in fiscal 2019 and 2018, respectively. The results for fiscal 2019 represent one month of activity. In
fiscal 2018, net sales and operating income were negatively impacted by production delays on a program. See Note 4 to the
Consolidated Financial Statements for additional information regarding discontinued operations.

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 industry end market(1):

Automotive
Commercial transportation
Sensors
Total

Fiscal

2019

2018

($ in millions)
$ 5,686 73 % $ 6,092 74 %

1,221
914

15
12

1,280
918

15
11

$ 7,821 100 % $ 8,290 100 %

(1)

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

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

industry end market:

Automotive
Commercial transportation
Sensors
Total

Change in Net Sales for Fiscal 2019 versus Fiscal 2018

Net Sales
Growth

Organic Net
Sales Growth

Translation Acquisitions

($ in millions)
$ (406) (6.7)% $ (198) (3.3)% $

(59) (4.6)
(4) (0.4)

(48) (3.9)
14 1.4

$ (469) (5.7)% $ (232) (2.8)% $

(208) $
(40)
(26)
(274) $

—
29
8
37

Net sales in the Transportation Solutions segment decreased $469 million, or 5.7%, in fiscal 2019 from fiscal 2018

primarily as a result of the negative impact of foreign currency translation of 3.3% and organic net sales declines of 2.8%.
Our organic net sales by industry end market were as follows:

• Automotive—Our organic net sales decreased 3.3% in fiscal 2019. The decrease resulted from declines of 6.4%
and 3.4% in the Asia–Pacific and EMEA regions, respectively, partially offset by growth of 3.7% in the
Americas region. Our declines in the Asia–Pacific and EMEA regions resulted primarily from declines in
automotive production. In the Americas region, our growth was attributable to electronification and market
share gains.

• Commercial transportation—Our organic net sales decreased 3.9% in fiscal 2019 as a result of market

weakness in all regions.

•

Sensors—Our organic net sales increased 1.4% in fiscal 2019 due primarily to growth in the industrial
equipment end market.

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

operating margin information:

Fiscal

2019

$ 1,226

2018
($ in millions)
$ 1,578

15.7 % 19.0 %

Change

$ (352)

Operating income

Operating margin

Operating income in the Transportation Solutions segment decreased $352 million in fiscal 2019 as compared to

fiscal 2018. The Transportation Solutions segment’s operating income included the following:

Acquisition-related charges:

Acquisition and integration costs
Charges associated with the amortization of acquisition-related fair
value adjustments

Restructuring and other charges, net
Other items
Total

Fiscal

2019

2018

(in millions)

17 $

—
17
144
14
$ 175 $

4
12
33
—
45

Excluding these items, operating income decreased in fiscal 2019 primarily as a result of lower volume, unfavorable product
mix, and price erosion, partially offset by lower material costs.

Industrial Solutions

Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net

sales by industry end market(1):

Industrial equipment
Aerospace, defense, oil, and gas
Energy
Total

Fiscal

2019

2018

($ in millions)
$ 1,949 49 % $ 1,987 52 %

1,306
699
$ 3,954

33
18

1,157
712
100 % $ 3,856

30
18
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 by industry

end market:

Change in Net Sales for Fiscal 2019 versus Fiscal 2018

Net Sales
Growth

Organic Net
Sales Growth

($ in millions)

Translation Acquisition

Industrial equipment
Aerospace, defense, oil, and gas
Energy
Total

$ (38) (1.9)% $ (66) (3.4)% $

149 12.9
(13) (1.8)

165 14.1
2.7
3.1 % $

21
2.5 % $ 120

$ 98

(45) $
(16)
(34)
(95) $

73
—
—
73

In the Industrial Solutions segment, net sales increased $98 million, or 2.5%, in fiscal 2019 from fiscal 2018 due to
organic net sales growth of 3.1% and sales contributions from an acquisition of 1.9%, partially offset by the negative impact
of foreign currency translation of 2.5%. Our organic net sales by industry end market were as follows:

•

Industrial equipment—Our organic net sales decreased 3.4% in fiscal 2019 primarily as a result of market
weakness in industrial applications, particularly in the Asia-Pacific and EMEA regions, partially offset by
strength in medical applications.

• Aerospace, defense, oil, and gas—Our organic net sales increased 14.1% in fiscal 2019 due to growth in the oil

and gas, commercial aerospace, and defense markets.

• Energy—Our organic net sales increased 2.7% in fiscal 2019 primarily as a result of growth in the Americas

region, partially offset by declines in the EMEA region.

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

margin information:

Fiscal

Operating income

Operating margin

2019

$ 543

2018
($ in millions)
$ 465

13.7 % 12.1 %

Change

$ 78

Operating income in the Industrial Solutions segment increased $78 million in fiscal 2019 from fiscal 2018. The

Industrial Solutions segment’s operating income included the following:

Acquisition-related charges:

Acquisition and integration costs
Charges associated with the amortization of acquisition-related fair
value adjustments

Restructuring and other charges, net
Other items
Total

Fiscal

2019

2018

(in millions)

10 $

3
13
63
2
78 $

4
10
80
—
90

Excluding these items, operating income increased in fiscal 2019 primarily as a result of higher volume and improved
manufacturing productivity.

Communications Solutions

Net Sales. The following table presents the Communications Solutions segment’s net sales and the percentage of

total net sales by industry end market(1):

Data and devices
Appliances
Total

Fiscal

2019

2018

$ 993
680

($ in millions)
59 % $ 1,068
774
41

58 %
42

$ 1,673 100 % $ 1,842 100 %

(1)

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

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

industry end market:

Change in Net Sales for Fiscal 2019 versus Fiscal 2018

Net Sales
Growth

Organic Net
Sales Growth

($ in millions)

Translation

Data and devices
Appliances
Total

$ (75)

(94) (12.1)

(7.0)% $ (58)
(71)
(9.2)% $ (129)

(5.4)% $
(9.3)
(7.0)% $

(17)
(23)
(40)

$ (169)

Net sales in the Communications Solutions segment decreased $169 million, or 9.2%, in fiscal 2019 as compared to

fiscal 2018 due to organic net sales declines of 7.0% and the negative impact of foreign currency translation of 2.2%. Our
organic net sales by industry end market were as follows:

• Data and devices—Our organic net sales decreased 5.4% in fiscal 2019 as a result of market weakness across

all regions.

• Appliances—Our organic net sales decreased 9.3% in fiscal 2019 due to market weakness across all regions and

reduced demand resulting from high inventory levels at distributors.

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

operating margin information:

Fiscal

Operating income

Operating margin

2019

$ 209

2018
($ in millions)
$ 288

12.5 % 15.6 %

Change

$ (79)

In the Communications Solutions segment, operating income decreased $79 million in fiscal 2019 as compared to

fiscal 2018. The Communications Solutions segment’s operating income included the following:

Restructuring and other charges, net
Other items
Total

Fiscal

2019

2018

(in millions)
48 $
1
49 $

13
—
13

Excluding these items, operating income decreased in fiscal 2019 due primarily to lower volume.

Liquidity and Capital Resources

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

As of fiscal year end 2019, 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 expense. 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 fiscal year end 2019, we had approximately $9.1 billion of cash, cash
equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to distribute to TEGSA and
TE Connectivity Ltd. but we consider to be permanently reinvested. We estimate that up to $1.0 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 increased $153 million to $2,454 million in fiscal 2019 as

compared to $2,301 million in fiscal 2018. The increase resulted primarily from higher collections of accounts receivable and
fluctuations in cash collateral requirements under our cross-currency swap contracts, partially offset by a decrease in pre-tax
income levels.

The amount of income taxes paid, net of refunds, during fiscal 2019 and 2018 was $338 million and $393 million,

respectively. We do not expect a significant change in our income tax payments as a result of Swiss Tax Reform. See Note 15
to the Consolidated Financial Statements for additional information regarding Swiss Tax Reform.

Pension contributions in fiscal 2019 and 2018, were $45 million and $54 million, respectively. We expect pension

contributions to be $68 million in fiscal 2020, before consideration of any voluntary contributions.

Cash Flows from Investing Activities

Capital expenditures were $749 million and $935 million in fiscal 2019 and 2018, respectively. We expect fiscal
2020 capital spending levels to be approximately 5-6% of net sales. We believe our capital funding levels are adequate to
support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and
manufacturing capabilities.

During fiscal 2019, we acquired three businesses for a combined cash purchase price of $296 million, net of cash
acquired. We acquired two businesses during fiscal 2018 for a combined cash purchase price of $153 million, net of cash
acquired. In fiscal 2019, we received $13 million as a result of a customary net working capital settlement for one of the
acquisitions. See Note 5 to the Consolidated Financial Statements for additional information regarding acquisitions.

During fiscal 2019, we received net cash proceeds of $297 million related to the sale of our SubCom 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 2019 and 2018 was $3,965 million and $4,000 million, respectively. See Note 11 to the

Consolidated Financial Statements for additional information regarding debt.

During fiscal 2019, TEGSA, our 100%-owned subsidiary, issued €350 million aggregate principal amount of fixed-

to-floating rate senior notes due June 2021. The fixed-to-floating rate senior notes bear interest at a rate of 0% until June
2020 and then at a rate of three-month Euro Interbank Offered Rate (“EURIBOR”) plus 0.30% per year until maturity. In
June 2020, we may, at our option, redeem the fixed-to-floating rate senior notes, as a whole, at 100% of the principal amount.
Also, during fiscal 2019, TEGSA issued $350 million aggregate principal amount of floating rate senior notes due June 2020.
The floating rate senior notes bear interest at a rate of three-month London Interbank Offered Rate (“LIBOR”) plus 0.45%
per year. The fixed-to-floating rate senior notes and floating rate senior 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 $1.5

billion. The Credit Facility was amended in November 2018 primarily to extend the maturity date from December 2020 to
November 2023. The amended Credit Facility contains provisions that allow for incremental commitments of up to $500
million, an option to temporarily increase the financial ratio covenant following a qualified acquisition, and borrowings in
designated currencies. TEGSA had no borrowings under the Credit Facility at fiscal year end 2019 or 2018.

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 fiscal year end 2019, we were in compliance with all of
our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable
future.

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 to shareholders were $608 million and $588 million in fiscal 2019 and 2018,

respectively. See Note 17 to the Consolidated Financial Statements for additional information regarding dividends on our
common shares.

Future dividends on our common shares, if any, must be approved by our shareholders. In exercising their discretion

to recommend to the shareholders that such dividends 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.

In both fiscal 2019 and 2018, our board of directors authorized increases of $1.5 billion in our share repurchase

program. We repurchased approximately 12 million of our common shares for $1,014 million and approximately 10 million
of our common shares for $966 million under the share repurchase program during fiscal 2019 and 2018, respectively. At
fiscal year end 2019, we had $1.5 billion of availability remaining under our share repurchase authorization.

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 2019:

Commitments and Contingencies

Total

2020

2021 2022 2023 2024 Thereafter

Payments Due by Fiscal Year

Debt(1)
Interest payments on debt(2)
Operating leases(3)
Purchase obligations(4)

Total contractual cash obligations(5)(6)(7)

(in millions)
$ 3,975 $ 571 $ 633 $ 500 $ 602 $ 350 $ 1,319
522
118
3
$ 6,126 $ 1,426 $ 844 $ 669 $ 748 $ 477 $ 1,962

72
55
—

79
67
—

103
102
6

115
117
623

979
540
632

88
81
—

(1)

(2)

Debt represents principal payments. See Note 11 to the Consolidated Financial Statements for additional information regarding
debt.

Interest payments exclude the impact of our interest rate swap and cross-currency swap contracts. Interest payments on debt are
projected for future periods using rates in effect as of fiscal year end 2019 and are subject to change in future periods.

(3)

(4)

(5)

(6)

See “Recently Issued Accounting Pronouncements” in Note 2 to the Consolidated Financial Statements for information regarding
our adoption of Accounting Standards Codifications (“ASC”) 842, Leases, in fiscal 2020.

Purchase obligations consist primarily of commitments for purchases of goods and services.

The above table does not reflect unrecognized income tax benefits of $542 million and related accrued interest and penalties of
$42 million, the timing of which is uncertain. See Note 15 to the Consolidated Financial Statements for additional information
regarding unrecognized income tax benefits, interest, and penalties.

The above table does not reflect pension obligations to certain employees and former employees. We are obligated to make
contributions to our pension 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 $68 million to pension plans in fiscal 2020, before consideration of any voluntary
contributions. See Note 14 to the Consolidated Financial Statements for additional information regarding these plans and our
estimates of future contributions and benefit payments.

(7)

Other long-term liabilities of $427 million are excluded from the above table as we are unable to estimate the timing of payment
for these items.

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent

infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes,
environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and
use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon
our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either
individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

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 2020
through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the
potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations,
financial position, or cash flows.

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover

various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for
investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and
unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will
have a material adverse effect on our results of operations, financial position, or cash flows.

At fiscal year end 2019, we had outstanding letters of credit, letters of guarantee, and surety bonds of $309 million.

As discussed above, in fiscal 2019, we sold our SubCom business. In connection with the sale, we contractually

agreed to continue to honor performance guarantees and letters of credit related to the SubCom business’ projects that existed
as of the date of sale. These guarantees had a combined value of approximately $1.55 billion as of fiscal year end 2019 and
are expected to expire at various dates through fiscal 2025; however, the majority are expected to expire by fiscal year end
2020. Also, under the terms of the definitive agreement, we are required to issue up to $300 million of new performance
guarantees, subject to certain limitations, for projects entered into by the SubCom business following the sale for a period of
up to three years. At fiscal year end 2019, there were no such new performance guarantees outstanding. We have contractual
recourse against the SubCom business if we are required to perform on any SubCom guarantees; however, based on historical
experience, we do not anticipate having to perform. See Note 4 to the Consolidated Financial Statements for additional
information regarding the divestiture of the SubCom business.

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. We believe the following accounting policies are 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

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our revenues are
generated principally from the sale of our products. Revenue is recognized as performance obligations under the terms of a
contract, such as a purchase order with a customer, are satisfied; generally this occurs with the transfer of control. We transfer
control and recognize revenue when we ship product to our customers, the customers accept and have legal title for the
product, and we have a right to payment for such product. Revenue is measured as the amount of consideration that we
expect to receive in exchange for those products and excludes taxes assessed by governmental authorities and collected from
customers concurrent with the sale of products. Shipping and handling costs are treated as fulfillment costs and are included
in cost of sales. Since we typically invoice our customers when we satisfy our performance obligations, we do not have
material contract assets or contract liabilities. Our credit terms are customary and do not contain significant financing
components that extend beyond one year of fulfillment of performance obligations. We apply the practical expedient of ASC
606 with respect to financing components and do not evaluate contracts in which payment is due within one year of
satisfaction of the related performance obligation. Since our performance obligations to deliver products are part of contracts
that generally have original durations of one year or less, we have elected to use the optional exemption to not disclose the
aggregate amount of transaction prices associated with unsatisfied or partially satisfied performance obligations as of fiscal
year end 2019.

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 do not account for
these warranties as separate performance obligations.

Although products are generally sold at fixed prices, certain distributors and customers receive incentives or awards,

such as sales rebates, return allowances, scrap allowances, and other rights, which are accounted for as variable
consideration. We estimate these amounts in the same period revenue is recognized based on the expected value to be
provided to customers and reduce revenue accordingly. Our estimates of variable consideration and ultimate determination of
the estimated amounts to include in the transaction price are based primarily on our assessment of anticipated performance
and historical and forecasted information that is reasonably available to us.

See Note 2 to the Consolidated Financial Statements for information regarding our adoption of ASC 606 in fiscal

2019.

Goodwill and Other Intangible Assets

Intangible assets include both indeterminable-lived residual goodwill and determinable-lived identifiable intangible
assets. Intangible assets with determinable lives primarily include intellectual property, consisting of patents, trademarks, and
unpatented technology, and customer relationships. Recoverability estimates range from 1 to 50 years and costs are generally
amortized on a straight-line basis. Evaluations of the remaining useful lives of determinable-lived intangible assets are
performed on a periodic basis and when events and circumstances warrant.

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 (a “component”) if the component constitutes a business for which discrete financial
information is available and regularly reviewed by segment management. At fiscal year end 2019, we had five reporting
units, all of which contained goodwill. There were two reporting units in both the Transportation Solutions and Industrial
Solutions segments and one reporting unit 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 several 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 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 has been supported by guideline analyses
(a market approach). These approaches incorporate several 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 2019 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 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 taxable
income. In estimating future taxable income, we develop assumptions including the amount of pre-tax operating income in
various tax jurisdictions, the reversal of temporary differences, and the implementation of feasible and prudent tax planning
strategies. These assumptions require significant judgment about the forecasts of 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.

Changes in tax laws and rates, including Swiss Tax Reform, also could affect recorded deferred tax assets and

liabilities in the future. See Note 15 to the Consolidated Financial Statements for additional information regarding Swiss Tax
Reform. Management is not aware of any other such changes that would have a material effect on our results of operations,
financial position, or cash flows.

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 tax jurisdictions based on our estimate of
whether, and the extent to which, additional taxes and related interest will be due. 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

Our defined benefit pension plan expense and obligations are developed from actuarial assumptions. The funded

status of our plans is recognized on the Consolidated Balance Sheets and is measured as the difference between the fair value
of plan assets and the projected benefit obligation at the measurement date. The projected benefit obligation represents the
actuarial present value of benefits projected to be paid upon retirement factoring in estimated future compensation levels. 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 our defined benefit pension plans are based on various factors, such as years of service and compensation.

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, or, for
inactive plans, over the remaining life expectancy of 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 2019, a 25-basis-point decrease in the discount rate would have increased the present value of
our pension obligations by $150 million; a 25-basis-point increase would have decreased the present value of our pension
obligations by $131 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 2019 pension expense by $11 million.

At fiscal year end 2019, the long-term target asset allocation in our U.S. plans’ master trust is 5% return-seeking

assets and 95% liability-hedging assets. Asset re-allocation to meet that target is occurring over a multi-year period based on
the funded status. We expect to reach our target allocation when the funded status of the plans exceeds 115%. Based on the
funded status of the plans as of fiscal year end 2019, our target asset allocation is 67% return-seeking and 33% liability-
hedging.

See Note 2 to the Consolidated Financial Statements for information regarding recently issued and recently adopted

Accounting Pronouncements

accounting pronouncements.

Organic Net Sales Growth

Non-GAAP Financial Measure

We present organic net sales growth as we believe it is appropriate for investors to consider this adjusted financial

measure in addition to results in accordance with GAAP. Organic net sales growth represents net sales growth (the most
comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and
divestitures that occurred in the preceding twelve months, if any. Organic net sales growth is a useful measure of our

performance because it excludes items that are not completely under management’s control, such as the impact of changes in
foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and
divestiture activity.

Organic net sales growth provides useful information about our results and the trends of our business. Management

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

Organic net sales growth is a non-GAAP financial measure and should not be considered a replacement for results in

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

Forward-Looking Information

Certain statements in this Annual 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

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 27, 2019 filed with the SEC and elsewhere 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 our new product introductions and product innovations and product life cycles;

raw material availability, quality, and cost;

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

financial condition and consolidation of customers and vendors;

reliance on third-party suppliers;

•

risks associated with current and future acquisitions and divestitures;

global risks of business interruptions such as natural disasters;

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

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

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

our ability to protect our intellectual property rights;

risks of litigation;

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

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

various risks associated with being a Swiss corporation;

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.

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 foreign 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 and foreign currency forward 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. In addition, we utilize cross-currency swap contracts to hedge our net investment
in certain foreign operations. A 10% appreciation or depreciation of the underlying currency in our cross-currency swap
contracts or foreign currency forward contracts from the fiscal year end 2019 market rates would have changed the unrealized
value of our contracts by $282 million. A 10% appreciation or depreciation of the underlying currency in our cross-currency
swap contracts or foreign currency forward contracts from the fiscal year end 2018 market rates would have changed the
unrealized value of our contracts by $101 million. Such gains or losses on these contracts would generally be offset by the
losses or gains 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 swap contracts to convert a portion of fixed rate debt
into variable rate debt. We may use forward starting interest rate swap contracts to manage interest rate exposure in periods
prior to the anticipated issuance of fixed rate debt. We also utilize investment swap contracts to manage earnings exposure on
certain nonqualified deferred compensation liabilities.

Based on our floating rate debt balances at fiscal year end 2019 and 2018, a 50-basis-point increase in the levels of
the U.S. dollar interest rates, with all other variables held constant, would have resulted in an immaterial increase in interest
expense in both fiscal 2019 and 2018.

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 to hedge a portion of
usage requirements over that period. At fiscal year end 2019, our commodity hedges, which related to expected purchases of
gold, silver, and copper, were in a net gain position of $1 million and had a notional value of $316 million. At fiscal year end
2018, our commodity hedges, which related to expected purchases of gold, silver, and copper, were in a net loss position of
$34 million and had a notional value of $401 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 fiscal year end 2019 prices would have changed the unrealized value
of our forward contracts by $32 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 fiscal year end 2018 prices would have changed the unrealized value of our
forward contracts by $37 million.

See Note 13 to the Consolidated Financial Statements for additional information regarding financial instruments.

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 27, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of September 27, 2019.

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 concluded our internal control over financial reporting was
effective as of September 27, 2019.

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 27, 2019, which is included in this Annual Report.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 27, 2019, 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.

(This page has been left blank intentionally.)

TE CONNECTIVITY LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm.........................................................................................

Consolidated Statements of Operations for the Fiscal Years Ended September 27, 2019, September 28, 2018, and
September 29, 2017 ......................................................................................................................................................

Consolidated Statements of Comprehensive Income for the Fiscal Years Ended September 27, 2019, September 28,
2018, and September 29, 2017 .......................................................................................................................................

Consolidated Balance Sheets as of September 27, 2019 and September 28, 2018 ........................................................

Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended September 27, 2019, September 28,
2018, and September 29, 2017 .......................................................................................................................................

Consolidated Statements of Cash Flows for the Fiscal Years Ended September 27, 2019, September 28, 2018, and
September 29, 2017 .......................................................................................................................................................

Notes to Consolidated Financial Statements ..................................................................................................................

Schedule II—Valuation and Qualifying Accounts ........................................................................................................

Report of the Statutory Auditor on the Consolidated Financial Statements of TE Connectivity Ltd. ..........................

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of TE Connectivity Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TE Connectivity Ltd. and subsidiaries (the

"Company") as of September 27, 2019 and September 28, 2018, the related consolidated statements of operations,
comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 27,
2019, and the related notes and the schedule listed in the Index (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
September 27, 2019 and September 28, 2018, and the results of its operations and its cash flows for each of the three years in
the period ended September 27, 2019, in conformity with accounting principles generally accepted in the United States of
America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the Company's internal control over financial reporting as of September 27, 2019, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated November 12, 2019, expressed an unqualified opinion on the Company's internal
control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an

opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial

statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.

Goodwill —Transportation Solutions Reportable Segment — Refer to Notes 2 and 8 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves comparing the carrying amount of each reporting

unit to its fair value on the first day of the fourth fiscal quarter or whenever the Company believes a triggering event
requiring a more frequent assessment has occurred. The Company uses the income approach based on the present value of
future cash flows to estimate fair value. The income approach is supported by guideline analyses (a market approach). These
approaches incorporate several assumptions including future growth rates, discount rates, and market activity in assessing fair
value and are reporting unit specific. The goodwill balance was $5.7 billion as of September 27, 2019, of which $1.1 billion
was allocated to a reporting unit within the Transportation Solutions reportable segment. The fair value of this reporting unit
exceeded its carrying amount as of the measurement date and, therefore, no impairment was recognized.

We identified goodwill for this reporting unit as a critical audit matter because of the significant judgments made by

management to estimate its fair value, especially considering future growth rates were based on an expectation of an increase
in net sales in a product portfolio with limited historical operating results and limited available third-party industry reports.
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value
specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions
related to forecasts of future revenue and operating margin and the selection of a discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenue and operating margin (the “forecasts”), and the

selection of a discount rate for a reporting unit within the Transportation Solutions reportable segment included the
following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those

over the determination of the fair value, such as controls related to forecasts and management’s selection of the
discount rate.

• We evaluated management’s ability to accurately forecast future revenue and operating margin by comparing

actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:

− Historical operating results of the reporting unit.

− Historical operating results of the Company’s other reporting units.

−

Internal communications to management and the board of directors.

− External communications made by management to analysts and investors.

− Third-party industry reports for similar products.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation

methodology and (2) discount rate by:

– Testing the source information underlying the determination of the discount rate and the mathematical

accuracy of the calculation.

− Developing a range of independent estimates and comparing those to the discount rate selected by

management.

Income Taxes — Realizability of Deferred Tax Assets — Refer to Notes 2 and 15 to the financial statements

Critical Audit Matter Description

The Company recognizes deferred income taxes for temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes. 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.
Future realization of deferred tax assets depends on the existence of sufficient taxable income of the appropriate character
prior to expiration. Sources of taxable income include future reversals of deferred tax assets and liabilities, expected future
taxable income, taxable income in prior carryback years if permitted under the tax law, and tax planning strategies.
Management has determined that it is more likely than not that sufficient taxable income will be generated in the future to
realize a portion of its deferred tax assets, and therefore, a valuation allowance of $5.0 billion has been recorded to offset the
Company’s gross deferred tax assets as of September 27, 2019 of $7.7 billion.

We identified the realizability of deferred tax assets as a critical audit matter because of the Company’s tax structure

and the significant judgments and estimates made by management to determine that sufficient taxable income will be
generated in the future prior to expiration to realize a portion of its deferred tax assets. This required a high degree of auditor
judgment and an increased extent of effort, including the need to involve our income tax specialists, when performing audit
procedures to evaluate the appropriateness of qualifying tax planning strategies and the reasonableness of management’s
estimates of taxable income prior to expiration.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination that it is more likely than not that sufficient taxable income will be

generated in the future to realize deferred tax assets included the following, among others:

• We tested the effectiveness of controls over management’s estimates of the realization of the deferred tax

assets, including those over the estimates of taxable income, the approval of tax planning strategies and the
determination of whether it is more likely than not that the deferred tax assets will be realized prior to
expiration.

• We evaluated management’s ability to accurately estimate taxable income by comparing actual results to

management’s historical estimates and evaluating whether there have been any changes that would impact
management’s ability to continue accurately estimating taxable income.

• We tested the reasonableness of management’s estimates of taxable income by comparing the estimates to:

– Historical taxable income.

–

Internal communications and the Company’s strategic plan approved by management and the board of
directors.

– Management’s history of carrying out its stated plans and its ability to carry out its plans considering

contractual commitments, available financing, or debt covenants.

• We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other

areas of the audit.

• We evaluated whether the taxable income in prior carryback years was of the appropriate character and

available under the tax law.

• With the assistance of our income tax specialists, we evaluated (1) the appropriateness of qualifying tax

planning strategies, including that they were prudent, feasible and would more likely than not result in the
realization of deferred tax assets and (2) management’s assessment that sufficient taxable income will be
generated in the future to realize a portion of the deferred tax assets prior to expiration.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
November 12, 2019

We have served as the Company’s auditor since 2007.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of TE Connectivity Ltd.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of TE Connectivity Ltd. and subsidiaries (the

“Company”) as of September 27, 2019, based on criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of September 27, 2019, based on
criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the financial statements as of and for the fiscal year ended September 27, 2019, of the Company and our
report dated November 12, 2019 expressed an unqualified opinion on those financial statements.

Basis for Opinion

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 are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
November 12, 2019

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Years Ended September 27, 2019, September 28, 2018, and September 29, 2017

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 (loss) from discontinued operations, net of income taxes

Net income

Basic earnings per share:

Income from continuing operations
Income (loss) from discontinued operations
Net income

Diluted earnings per share:

Income from continuing operations
Income (loss) from discontinued operations
Net income

Weighted-average number of shares outstanding:

Basic
Diluted

Fiscal
2019
2017
2018
(in millions, except per share data)
$ 13,448 $ 13,988 $ 12,185
8,002
4,183
1,543
611
6
147
1,876
16
(130)
(42)
1,720
(180)
1,540
143
1,683

9,054
4,394
1,490
644
27
255
1,978
19
(68)
2
1,931
15
1,946
(102)
1,844 $

9,243
4,745
1,594
680
14
126
2,331
15
(107)
1
2,240
344
2,584
(19)
2,565 $

5.76 $
(0.30)
5.46

7.38 $
(0.05)
7.33

4.34
0.40
4.74

5.72 $
(0.30)
5.42

7.32 $
(0.05)
7.27

4.30
0.40
4.70

338
340

350
353

355
358

See Notes to Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Fiscal Years Ended September 27, 2019, September 28, 2018, and September 29, 2017

Net income
Other comprehensive income (loss):

Currency translation
Adjustments to unrecognized pension and postretirement benefit costs, net of
income taxes
Gains (losses) on cash flow hedges, net of income taxes

Other comprehensive income (loss)

Comprehensive income

2019

Fiscal
2018
(in millions)

2017

1,844 $

2,565 $

1,683

(48)

(117)

(195)
46
(197)
1,647 $

83
(74)
(108)
2,457 $

330
15
382
2,065

See Notes to Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONSOLIDATED BALANCE SHEETS

As of September 27, 2019 and September 28, 2018

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $25 and $22, respectively
Inventories
Prepaid expenses and other current assets
Assets held for sale

Total current assets

Property, plant, and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Other assets

Total assets

Liabilities and shareholders’ equity
Current liabilities:
Short-term debt
Accounts payable
Accrued and other current liabilities
Liabilities held for sale

Total current liabilities

Long-term debt
Long-term pension and postretirement liabilities
Deferred income taxes
Income taxes
Other liabilities

Total liabilities

Commitments and contingencies (Note 12)
Shareholders’ equity:

Fiscal Year End

2019

2018

(in millions, except
share data)

927 $

2,320
1,836
471
—
5,554
3,574
5,740
1,596
2,776
454
19,694 $

848
2,361
1,857
661
472
6,199
3,497
5,684
1,704
2,144
1,158
20,386

570 $

1,357
1,613
—
3,540
3,395
1,367
156
239
427
9,124

963
1,548
1,711
188
4,410
3,037
1,102
207
312
487
9,555

Common shares, CHF 0.57 par value, 350,951,381 shares authorized and issued, and
357,069,981 shares authorized and issued, respectively
Accumulated earnings
Treasury shares, at cost, 15,862,337 and 12,279,603 shares, respectively
Accumulated other comprehensive loss

Total shareholders’ equity
Total liabilities and shareholders’ equity

154
12,256
(1,337)
(503)
10,570
19,694 $

157
12,114
(1,134)
(306)
10,831
20,386

See Notes to Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Fiscal Years Ended September 27, 2019, September 28, 2018, and September 29, 2017

Accumulated

Other

Total

Common Shares
Shares Amount Shares Amount Surplus

Treasury Shares

Contributed Accumulated Comprehensive Shareholders'

Earnings

Loss

Equity

Balance at fiscal year end
2016
Adoption of ASU No. 2016-09
Net income
Other comprehensive income
Share-based compensation
expense
Dividends
Exercise of share options
Restricted share award
vestings and other activity
Repurchase of common shares
Cancellation of treasury shares
Balance at fiscal year end
2017
Adoption of ASU No. 2018-02
Net income
Other comprehensive loss
Share-based compensation
expense
Dividends
Exercise of share options
Restricted share award
vestings and other activity
Repurchase of common shares
Balance at fiscal year end
2018
Adoption of ASU No. 2016-16
Net income
Other comprehensive loss
Share-based compensation
expense
Dividends
Exercise of share options
Restricted share award
vestings and other activity
Repurchase of common shares
Cancellation of treasury shares
Balance at fiscal year end
2019

(in millions)

383 $ 168
—
—
—

—
—
—

(28) $ (1,624) $
—
—
—

—
—
—

1,801 $
—
—
—

8,682 $
165
1,683
—

(542) $
—
—
382

8,485
165
1,683
382

—
—
—

—
—
3

—
—
117

99
(564)
—

—
—
(26)

—
—
(11)

2
(8)
26

195
(621)
1,512

(184)
—
(1,152)

—
—
—

(6)
—
(349)

—
—
—

99
(564)
117

5
(621)
—

357 $ 157
—
—
—

—
—
—

(5) $
—
—
—

(421) $
—
—
—

— $
—
—
—

10,175 $
38
2,565
—

(160) $
(38)
—
(108)

9,751
—
2,565
(108)

—
—
—

—
—

—
—
—

—
—
1

—
—
100

—
—

2
(10)

153
(966)

98
—
—

(98)
—

—
(610)
—

(54)
—

—
—
—

—
—

98
(610)
100

1
(966)

357 $ 157
—
—
—

—
—
—

(12) $ (1,134) $
—
—
—

—
—
—

— $
—
—
—

12,114 $
(443)
1,844
—

(306) $
—
—
(197)

10,831
(443)
1,844
(197)

—
—
—

—
—
(6)

—
—
—

—
—
(3)

—
—
1

—
—
85

1
(12)
6

154
(1,014)
572

75
—
—

(75)
—
—

—
(613)
—

(77)
—
(569)

—
—
—

75
(613)
85

2
(1,014)
—

351 $ 154

(16) $ (1,337) $

— $

12,256 $

(503) $

10,570

See Notes to Consolidated Financial Statements.

TE CONNECTIVITY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended September 27, 2019, September 28, 2018, and September 29, 2017

Cash flows from operating activities:
Net income

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

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

Depreciation and amortization
Deferred income taxes
Provision for losses on accounts receivable and inventories
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
Income taxes
Other

Net cash provided by continuing operating activities
Net cash provided by (used in) 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 operation, net of cash retained by sold operation
Other

Net cash used in continuing investing activities
Net cash used in discontinued investing activities
Net cash used in investing activities

Cash flows from financing activities:
Net increase (decrease) in commercial paper
Proceeds from issuance of debt
Repayment of debt
Proceeds from exercise of share options
Repurchase of common shares
Payment of common share dividends to shareholders
Transfers (to) from discontinued operations
Other

Net cash used in continuing financing activities
Net cash provided by (used in) discontinued financing activities
Net cash used in financing activities

Effect of currency translation on cash
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of fiscal year
Cash, cash equivalents, and restricted cash at end of fiscal year

Supplemental cash flow information:
Interest paid on debt, net
Income taxes paid, net of refunds

See Notes to Consolidated Financial Statements.

2019

Fiscal
2018
(in millions)

2017

1,844 $
102
1,946

2,565 $
19
2,584

1,683
(143)
1,540

690
(218)
43
75
51

31
64
144
(178)
(15)
(135)
(44)
2,454
(32)
2,422

(749)
43
(283)
297
2
(690)
(2)
(692)

(51)
746
(691)
85
(1,091)
(608)
(34)
(33)
(1,677)
34
(1,643)
(8)
79
848
927 $

667
(791)
30
95
5

(269)
(247)
(63)
201
5
54
30
2,301
150
2,451

(935)
23
(153)
—
(8)
(1,073)
(21)
(1,094)

270
119
(708)
100
(879)
(588)
129
(36)
(1,593)
(129)
(1,722)
(5)
(370)
1,218

848 $

611
(142)
20
95
25

(204)
(270)
(62)
314
224
(1)
123
2,273
48
2,321

(679)
19
(250)
—
1
(909)
(23)
(932)

(330)
589
—
117
(614)
(546)
25
(30)
(789)
(25)
(814)
(4)
571
647
1,218

75 $
338

127 $
393

128
323

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

We operate through 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 leading supplier of electronic

components for the data and devices and the appliances markets.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make

Fiscal Year

We have a 52- or 53-week fiscal year that ends on the last Friday of September. Fiscal 2019, 2018, and 2017 were

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 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

We account for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from
Contracts with Customers, which introduced a single, comprehensive, five-step revenue recognition model. Our revenues are
generated principally from the sale of our products. Revenue is recognized as performance obligations under the terms of a
contract, such as a purchase order with a customer, are satisfied; generally this occurs with the transfer of control. We transfer
control and recognize revenue when we ship product to our customers, the customers accept and have legal title for the
product, and we have a right to payment for such product. Revenue is measured as the amount of consideration that we

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

expect to receive in exchange for those products and excludes taxes assessed by governmental authorities and collected from
customers concurrent with the sale of products. Shipping and handling costs are treated as fulfillment costs and are included
in cost of sales. Since we typically invoice our customers when we satisfy our performance obligations, we do not have
material contract assets or contract liabilities. Our credit terms are customary and do not contain significant financing
components that extend beyond one year of fulfillment of performance obligations. We apply the practical expedient of ASC
606 with respect to financing components and do not evaluate contracts in which payment is due within one year of
satisfaction of the related performance obligation. Since our performance obligations to deliver products are part of contracts
that generally have original durations of one year or less, we have elected to use the optional exemption to not disclose the
aggregate amount of transaction prices associated with unsatisfied or partially satisfied performance obligations as of fiscal
year end 2019. See Note 20 for net sales disaggregated by industry end market and geographic region which is summarized
by segment and that we consider meaningful to depict the nature, amount, timing, and uncertainty of revenue and cash flows
affected by economic factors.

We generally warrant that our products will conform to our, or mutually agreed to, specifications and that our

Although products are generally sold at fixed prices, certain distributors and customers receive incentives or awards,

Inventories

Inventories are recorded at the lower of cost or net realizable value using the first-in, first-out cost method.

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 several 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

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At fiscal year end 2019, we had five reporting units, all of which contained goodwill. There were two reporting units

in both the Transportation Solutions and Industrial Solutions segments and one reporting unit 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

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 2019, 2018, and 2017 were $572
million, $606 million, and $548 million, respectively.

Income Taxes

Income taxes are computed in accordance with the provisions of 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 tax jurisdictions based on our estimate of whether, and
the extent to which, additional taxes and related interest will be due. 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.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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. 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 fiscal year end 2019, 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 certain of 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.

• 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.

Derivative financial instruments measured at fair value on a recurring basis are generally valued using level 2 inputs.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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).

• Debt—The fair value of 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

The funded status of our defined benefit pension plans is recognized on the Consolidated Balance Sheets and is

measured as the difference between the fair value of plan assets and the projected benefit obligation at the measurement date.
The projected benefit obligation represents the actuarial present value of benefits projected to be paid upon retirement
factoring in estimated future compensation levels. 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 our defined benefit pension plans are based on various
factors, such as years of service and compensation.

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, or, for
inactive plans, over the remaining life expectancy of 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 is computed by dividing net income by the basic weighted-average number of common

shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of
common shares outstanding adjusted for the potentially dilutive impact of share-based compensation arrangements.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 are included in earnings.

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 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.

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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

(“ASU”) No. 2016-02 which codified ASC 842, Leases. This guidance, as subsequently amended, requires lessees to
recognize a lease liability and a right-of-use asset for most leases and is effective for us in the first quarter of fiscal 2020. In
fiscal 2019, we substantially completed the process of updating policies, internal controls, financial statement disclosures,
and systems to incorporate the impact of the new standard in our financial reporting processes. In fiscal 2020, we are
adopting the standard using the optional transition method permitted by ASU No. 2018-11, which allows for application of
the standard at the adoption date and no restatement of comparative periods. We plan to elect the package of practical
expedients permitted under the transition guidance within the new standard, which among other things, allows for the carry
forward of historical lease classification of existing and expired leases. We expect to record right-of-use assets and related
lease liabilities of approximately $530 million on our Consolidated Balance Sheet. Adoption will not have a material impact
on our results of operations or cash flows.

Recently Adopted Accounting Pronouncements

In August 2017, the FASB issued ASU No. 2017-12, an update to ASC 815, Derivatives and Hedging. The update
improves and simplifies hedge accounting and related disclosures. We elected to early adopt this update, which did not have
a material impact on our Consolidated Financial Statements, in fiscal 2019.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In October 2016, the FASB issued ASU No. 2016-16, an update to ASC 740, Income Taxes. This guidance requires
the recognition of the income tax consequences of intra-entity transfers of assets other than inventory in the period in which
the transfer occurs. The update was adopted on a modified retrospective basis in fiscal 2019 and resulted in a $443 million
cumulative-effect adjustment to beginning accumulated earnings, which represented the net reversal of all balances
associated with deferred tax impacts of intra-entity transfers of assets other than inventory. This included a decrease in other
assets of $798 million, an increase in deferred tax assets of $418 million, and a decrease in prepaid expenses and other
current assets of $63 million on the Consolidated Balance Sheet.

In May 2014, the FASB issued ASU No. 2014-09 which codified 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. We adopted ASC 606, as
amended, in fiscal 2019 using a modified retrospective approach. Prior period amounts have not been adjusted and continue
to be reported under the accounting standards in effect for those periods. Transition impacts, which relate primarily to
incentive compensation arrangements, were not material to our results of operations or financial position. Because the impact
of adoption was immaterial, we have not recorded a cumulative-effect adjustment to beginning accumulated earnings.

3. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

Fiscal
2018

2019

2017

Restructuring charges, net
Gain on divestiture
Other charges (credits), net

Restructuring and other charges, net

Net restructuring charges by segment were as follows:

Transportation Solutions
Industrial Solutions
Communications Solutions

Restructuring charges, net

(in millions)
$ 255 $ 140 $ 146
—
1
$ 255 $ 126 $ 147

(2)
(12)

—
—

2019

Fiscal
2018
(in millions)

2017

$ 144 $

69
73
4
$ 255 $ 140 $ 146

42 $
83
15

63
48

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Activity in our restructuring reserves was as follows:

Balance at
End
of Fiscal

Balance at
Beginning
of Fiscal
Year

Changes in Cash
Charges Estimate Payments Items

Non-Cash Currency

Translation Year

(in millions)

— $ 252 $
2
—
3
—
—
257

(3) $
—
—
(3)

(55) $
(1)
—
(56)

(3) $
—
(3)
(6)

(3) $
—
—
(3)

188
1
—
189

114
4
—
118

3
4
2
9

(5)
(2)
(2)
(9)

(57)
(5)
—
(62)

—
—
—
—

(3)
—
—
(3)

52
1
—
53

(4)

(19)

—

(1)

13
—
—
13

4
4
1
9
167 $ 277 $

(6)
(3)
(3)
—
—
(3)
(9)
(6)
(22) $ (146) $

—
—
2
2
(4) $

(1)
—
—
(1)
(8) $

7
1
—
8
264

— $ 130 $
6
—
—
6
— 142

— $
—
—
—

(16) $
(2)
—
(18)

— $
—
(6)
(6)

— $
—
—
—

114
4
—
118

102
1
—
103

5
2
1
8

(10)
—
(2)
(12)

(60)
(3)
2
(61)

35
—
—
35

7
6
1
14
138 $ 164 $

(19)
(9)
(5)
—
3
(3)
(21)
(12)
(24) $ (100) $

— $ 141 $
—
—
—

2
9
152

(5) $
—
—
(5)

(39) $
(1)
—
(40)

76
1
77
77 $ 164 $

8
4
12

(13)
—
(13)
(18) $

(33)
(5)
(38)
(78) $

—
—
(1)
(1)

—
—
(1)
(1)
(8) $

— $
—
(9)
(9)

—
—
—
(9) $

(1)
—
—
(1)

36
—
—
36

(1)
(1)
—
(2)
(3) $

13
—
—
13
167

5 $
—
—
5

(3)
—
(3)
2 $

102
1
—
103

35
—
35
138

Fiscal 2019 Activity:

Fiscal 2019 Actions:

Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Fiscal 2018 Actions:

Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Fiscal 2017 Actions:

Employee severance
Pre-Fiscal 2017 Actions:
Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Total fiscal 2019 activity

Fiscal 2018 Activity:

Fiscal 2018 Actions:

Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Fiscal 2017 Actions:

Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Pre-Fiscal 2017 Actions:
Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Total fiscal 2018 activity

Fiscal 2017 Activity:

Fiscal 2017 Actions:

Employee severance
Facility and other exit costs
Property, plant, and equipment

Total

Pre-Fiscal 2017 Actions:
Employee severance
Facility and other exit costs

Total

Total fiscal 2017 activity

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fiscal 2019 Actions

During fiscal 2019, we initiated a restructuring program associated with footprint consolidation and structural

improvements impacting all segments. In connection with this program, during fiscal 2019, we recorded net restructuring
charges of $254 million. We expect to complete all restructuring actions commenced during fiscal 2019 by the end of fiscal
2021 and to incur additional charges of approximately $35 million related primarily to employee severance and facility exit
costs in the Transportation Solutions and Industrial Solutions segments.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2019 program by segment:

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

Fiscal 2018 Actions

Cumulative Remaining
Total
Charges Expected
Expected
Charges Incurred Charges
(in millions)

$ 160 $

80
49

$ 289 $

144 $
66
44
254 $

16
14
5
35

During fiscal 2018, we initiated a restructuring program associated with footprint consolidation and structural

improvements primarily impacting the Industrial Solutions and Transportation Solutions segments. In connection with this
program, during fiscal 2018, we recorded restructuring charges of $142 million. We expect to complete all restructuring
actions commenced during fiscal 2018 by the end of fiscal 2020 and anticipate that any additional charges will be
insignificant.

Fiscal 2017 Actions

During fiscal 2017, we initiated a restructuring program associated with footprint consolidation related to recent

acquisitions and structural improvements impacting all segments. In connection with this program, during fiscal 2019, 2018,
and 2017, we recorded net restructuring credits of $2 million, credits of $4 million, and charges of $147 million, respectively.
We anticipate that any additional charges will be insignificant for restructuring actions commenced during fiscal 2017.

Pre-Fiscal 2017 Actions

During fiscal 2019, 2018, and 2017, we recorded net restructuring charges of $3 million, charges of $2 million, and

credits of $1 million, respectively. We anticipate that any additional charges will be insignificant for restructuring actions
commenced prior to fiscal 2017.

Total Restructuring Reserves

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

Accrued and other current liabilities
Other liabilities

Restructuring reserves

Fiscal Year End
2018
2019

(in millions)
245 $
19
264 $

141
26
167

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Discontinued Operations

In fiscal 2019, we sold our Subsea Communications (“SubCom”) business for net cash proceeds of $297 million and
incurred a pre-tax loss on sale of $86 million, related primarily to the recognition of cumulative translation adjustment losses
of $67 million and the guarantee liabilities discussed below. The definitive agreement provided that, if the purchaser sells the
business within two years of the closing date, we will be entitled to 20% of the net proceeds of that future sale, as defined in
the agreement, in excess of $325 million. The sale of the SubCom business, which was previously included in our
Communications Solutions segment, represents our exit from the telecommunications market and was significant to our sales
and profitability, both to the Communications Solutions segment and to the consolidated company. We concluded that the
divestiture was a strategic shift that had a major effect on our operations and financial results. As a result, the SubCom
business met the held for sale and discontinued operations criteria and has been reported as such in all periods presented on
our Consolidated Financial Statements.

Upon entering into the definitive agreement, which we consider a level 2 observable input in the fair value
hierarchy, we assessed the carrying value of the SubCom business and determined that it was in excess of its fair value. In
fiscal 2018, we recorded a pre-tax impairment charge of $19 million, which was included in income (loss) from discontinued
operations on the Consolidated Statement of Operations, to write the carrying value of the business down to its estimated fair
value less costs to sell.

In connection with the sale, we contractually agreed to continue to honor performance guarantees and letters of

credit related to the SubCom business’ projects that existed as of the date of sale. These guarantees had a combined value of
approximately $1.55 billion as of fiscal year end 2019 and are expected to expire at various dates through fiscal 2025;
however, the majority are expected to expire by fiscal year end 2020. At the time of sale, we determined that the fair value of
these guarantees was $12 million, which we recognized by a charge to pre-tax loss on sale. Also, under the terms of the
definitive agreement, we are required to issue up to $300 million of new performance guarantees, subject to certain
limitations, for projects entered into by the SubCom business following the sale for a period of up to three years. At fiscal
year end 2019, there were no such new performance guarantees outstanding. We have contractual recourse against the
SubCom business if we are required to perform on any SubCom guarantees; however, based on historical experience, we do
not anticipate having to perform.

The following table presents the summarized components of income (loss) from discontinued operations, net of

income taxes, for the SubCom business and prior divestitures:

Net sales
Cost of sales

Gross margin

Selling, general, and administrative expenses
Research, development, and engineering expenses
Restructuring and other charges (credits), net

Operating income (loss)
Non-operating income, net
Pre-tax income (loss) from discontinued operations
Pre-tax gain (loss) on sale of discontinued operations
Income tax (expense) benefit

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

2019

Fiscal
2018
(in millions)

2017

41 $
50
(9)
11
3
3
(26)
—
(26)
(86)
10
(102) $

702 $
602
100
48
39
30 (1)
(17)
—
(17)
(2)
—
(19) $

928
653
275
50
40
(3)
188
22 (2)
210
3
(70)
143

Included a $19 million impairment charge recorded in connection with the sale of our SubCom business.

Included a $19 million credit related to the SubCom business’ curtailment of a postretirement benefit plan.

(1)

(2)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents balance sheet information for assets and liabilities held for sale at fiscal year end 2018;

there were no such balances at fiscal year end 2019:

Accounts receivable, net
Inventories
Other current assets
Property, plant, and equipment, net(1)
Other assets

Total assets held for sale

Accounts payable
Accrued and other current liabilities
Deferred revenue
Other liabilities

Total liabilities held for sale

Fiscal Year End
2018
(in millions)

72
130
32
221
17
472

63
26
60
39
188

(1)

Included a reduction of $19 million related to the impairment charge recorded in connection
with the sale of our SubCom business.

5. Acquisitions

During fiscal 2019, we acquired three businesses for a combined cash purchase price of $296 million, net of cash

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

During fiscal 2017, we acquired two businesses for a combined cash purchase price of $250 million, net of cash

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

Pending Acquisition

6. Inventories

Inventories consisted of the following:

Raw materials
Work in progress
Finished goods
Inventories

Fiscal Year End
2018
2019

(in millions)
260 $
739
837

276
656
925
$ 1,836 $ 1,857

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Property, Plant, and Equipment, Net

Net property, plant, and equipment consisted of the following:

Fiscal Year End
2018
2019

(in millions)

Property, plant, and equipment, gross:

Land and improvements
Buildings and improvements
Machinery and equipment
Construction in process

Accumulated depreciation

Property, plant, and equipment, net

152 $

171
1,379
7,124
724
9,398
(5,901)
$ 3,574 $ 3,497

1,393
7,298
637
9,480
(5,906)

Depreciation expense was $510 million, $487 million, and $442 million in fiscal 2019, 2018, and 2017, respectively.

8. Goodwill

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

Transportation Industrial Communications
Solutions

Solutions

Total

Balance at fiscal year end 2017(1)

Acquisitions
Purchase price adjustments
Currency translation

Balance at fiscal year end 2018(1)

Acquisitions
Purchase price adjustments
Currency translation

Balance at fiscal year end 2019(1)

2,011 $ 3,047 $

(in millions)

—
—
(18)
1,993
167
—
(36)

80
(2)
(21)
3,104
—
(12)
(53)

2,124 $ 3,039 $

593 $ 5,651
80
—
(2)
—
(45)
(6)
5,684
587
167
—
(12)
—
(10)
(99)
577 $ 5,740

(1)

At fiscal year end 2019, 2018, and 2017, accumulated impairment losses for the Transportation Solutions, Industrial Solutions,
and Communications Solutions segments were $2,191 million, $669 million, and $489 million, respectively.

We recognized goodwill in fiscal 2019 and 2018 in connection with recent acquisitions. See Note 5 for additional

information regarding acquisitions.

We completed our annual goodwill impairment test in the fourth quarter of fiscal 2019 and determined that no

impairment existed.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9. Intangible Assets, Net

Intangible assets consisted of the following:

Customer relationships
Intellectual property
Other

Total

Fiscal Year End

2019

2018

Gross

Net

Gross

Net

Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
(in millions)

$ 1,513 $
1,260
33

$ 2,806 $

(459) $ 1,054 $ 1,468 $
526
(734)
16
(17)
(1,210) $ 1,596 $ 2,762 $

1,261
33

(389) $ 1,079
608
(653)
17
(16)
(1,058) $ 1,704

Intangible asset amortization expense was $180 million, $180 million, and $169 million for fiscal 2019, 2018, and

2017, respectively. At fiscal year end 2019, the aggregate amortization expense on intangible assets is expected to be as
follows:

Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Total

10. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:

(in millions)
179
$
176
176
175
145
745
1,596

Fiscal Year End
2018
2019

Accrued payroll and employee benefits
Dividends payable to shareholders
Restructuring reserves
Income taxes payable
Deferred revenue
Interest payable
Share repurchase program payable
Other

Accrued and other current liabilities

(in millions)
455 $
308
245
94
36
31
18
426

565
303
141
109
27
34
94
438
$ 1,613 $ 1,711

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

11. Debt

Debt was as follows:

Fiscal Year End
2018
2019

(in millions)

Principal debt:

Commercial paper, at a weighted-average interest rate of 2.20%
and 2.35%, respectively
2.375% senior notes due 2018
2.35% senior notes due 2019
Floating rate senior notes due 2020(1)
4.875% senior notes due 2021
Euro-denominated fixed-to-floating rate senior notes due 2021(2)
3.50% senior notes due 2022
1.10% euro-denominated senior notes due 2023
3.45% senior notes due 2024
3.70% senior notes due 2026
3.125% senior notes due 2027
7.125% senior notes due 2037
Other

Unamortized discounts, premiums, and debt issuance costs, net

Total debt

219 $
—
—
350
250
383
500
602
350
350
400
477
94
3,975
(10)

270
325
250
—
250
—
500
639
350
350
400
477
210
4,021
(21)
$ 3,965 $ 4,000

(1)

(2)

The floating rate senior notes due 2020 bear interest at a rate of three-month London
Interbank Offered Rate (“LIBOR”) plus 0.45% per year.

The euro-denominated fixed-to-floating rate senior notes due 2021 bear interest at a rate of
0% until June 2020 and then at a rate of three-month Euro Interbank Offered Rate
(“EURIBOR”) plus 0.30% per year until maturity.

During fiscal 2019, Tyco Electronics Group S.A. (“TEGSA”), our 100%-owned subsidiary, issued €350 million

aggregate principal amount of fixed-to-floating rate senior notes due June 2021. In June 2020, we may, at our option, redeem
the fixed-to-floating rate senior notes, as a whole, at 100% of the principal amount. Also, during fiscal 2019, TEGSA issued
$350 million aggregate principal amount of floating rate senior notes due June 2020. The fixed-to-floating rate senior notes
and floating rate senior 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 $1.5

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) Bank of America, N.A.’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 TEGSA. TEGSA is required to pay an annual facility fee ranging from 5.0 to 12.5 basis points based upon the amount of
the lenders’ commitments under the Credit Facility and the applicable credit ratings of TEGSA.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our

TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and

unconditionally guaranteed by its parent, TE Connectivity Ltd.

At fiscal year end 2019, principal payments required for debt are as follows:

Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Total

(in millions)
571
$
633
500
602
350
1,319
3,975

The fair value of our debt, based on indicative valuations, was approximately $4,278 million and $4,149 million at

fiscal year end 2019 and 2018, respectively.

12. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent

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
2019, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of
$15 million to $43 million, and we accrued $18 million as the probable loss, which was the best estimate within this range.
We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of
operations, financial position, or cash flows.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Leases

We have facility, land, vehicle, and equipment leases that expire at various dates. Rental expense under these

operating leases was $162 million, $141 million, and $147 million for fiscal 2019, 2018, and 2017, respectively. At fiscal
year end 2019, future minimum lease payments under non-cancelable operating lease obligations were as follows:

Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Thereafter
Total

(in millions)
117
$
102
81
67
55
118
540

See “Recently Issued Accounting Pronouncements” in Note 2 for information regarding our adoption of ASC 842,

Leases, in fiscal 2020.

Guarantees

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover

At fiscal year end 2019, we had outstanding letters of credit, letters of guarantee, and surety bonds of $309 million.

We sold our SubCom business during fiscal 2019. In connection with the sale, we contractually agreed to honor

certain performance guarantees and letters of credit related to the SubCom business. See Note 4 for additional information
regarding these guarantees and the divestiture of the SubCom business.

13. 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 2019,

2018, and 2017.

Foreign Currency Exchange Rate Risk

During fiscal 2015, we entered into cross-currency swap contracts with an aggregate notional value of €1,000

million to reduce our exposure to foreign currency exchange rate risk associated with certain intercompany loans. Under the
terms of these contracts, which have been designated as cash flow hedges, we make interest payments in euros at 3.50% per
annum and receive interest in U.S. dollars at a weighted-average rate of 5.33% per annum. Upon the maturity of these

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

contracts in fiscal 2022, we will pay the notional value of the contracts in euros and receive U.S. dollars from our
counterparties. In connection with the cross-currency swap contracts, both counterparties to each contract are required to
provide cash collateral.

At fiscal year end 2019, these cross-currency swap contracts were in an asset position of $19 million and were

recorded in other assets on the Consolidated Balance Sheet. The cross-currency swap contracts were in a liability position of
$100 million and were recorded in other liabilities on the Consolidated Balance Sheet at fiscal year end 2018. At fiscal year
end 2019 and 2018, collateral received from or paid to our counterparties approximated the derivative positions and was
recorded in accrued and other current liabilities (when the contracts are in an asset position) or prepaid expenses and other
current assets (when the contracts are in a liability position) on the Consolidated Balance Sheets. The impacts of these cross-
currency swap contracts were as follows:

2019

Fiscal
2018
(in millions)

2017

Gains (losses) recorded in other comprehensive income (loss) $
Gains (losses) excluded from the hedging relationship(1)

53 $
66

(25) $ (20)
(58)
21

(1)

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

Hedge of Net Investment

We hedge our net investment in certain foreign operations using intercompany loans and external borrowings

denominated in the same currencies. The aggregate notional value of these hedges was $3,374 million and $4,064 million at
fiscal year end 2019 and 2018, respectively.

During fiscal 2019, we expanded our cross-currency swap program to hedge our net investment in certain foreign
operations. The aggregate notional value of the fiscal 2019 contracts was $1,844 million at fiscal year end 2019. Under the
terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 2.9% per annum and pay no interest.
Upon the maturity of these contracts at various dates through fiscal 2023, we will pay the notional value of the contracts in
the designated foreign currency and receive U.S. dollars from our counterparties. We are not required to provide collateral for
these contracts.

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

2019

Fiscal
2018
(in millions)

2017

Foreign currency exchange gains (losses) on intercompany
loans and external borrowings(1)
Gain on cross-currency swap contracts designated as hedges
of net investment(2)

$ 162 $

36 $

(74)

—

(1)

(2)

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

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

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Interest Rate and Investment Risk Management

We issue debt, as needed, to fund our operations and capital requirements. Such borrowings can result in interest

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 fiscal year end 2019 and 2018, our commodity hedges had notional values of $316 million and $401 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 Statement 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 fiscal year end 2019 and 2018.

14. Retirement Plans

Defined Benefit Pension Plans

We have several contributory and noncontributory defined benefit retirement plans covering certain of our non-U.S.

and U.S. employees, designed in accordance with local customs and practice.

The net periodic pension benefit cost for all non-U.S. and U.S. defined benefit pension plans was as follows:

Operating expense:
Service cost

Other (income) expense:

Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Amortization of prior service credit and other

Net periodic pension benefit cost
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

Non-U.S. Plans
Fiscal
2018

2019

2017

2019
($ in millions)

U.S. Plans
Fiscal
2018

2017

$ 47

$ 46

$ 50

42
(64)
24
(8)
$ 41

42
(69)
24
(6)
$ 37

35
(68)
41
(4)
$ 54

46
(58)
17
—
18

43
(59)
22
—
20

43
(53)
40
—
42

1.94 % 1.87 % 1.44 % 4.35 % 3.77 %
4.65 % 4.92 % 5.21 % 6.57 % 6.45 %
— %
2.57 % 2.53 % 2.52 %

— %

3.58 %
5.93 %
— %

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 non-U.S. and U.S. defined benefit pension plans:

Change in benefit obligation:
Benefit obligation at beginning of fiscal year

Service cost
Interest cost
Actuarial (gains) losses
Benefits and administrative expenses paid
Currency translation
Other

Benefit obligation at end of fiscal year

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

Funded status

Amounts recognized on the Consolidated Balance Sheets:
Other assets
Accrued and other current liabilities
Long-term pension and postretirement liabilities

Net amount recognized

Non-U.S. Plans
Fiscal

U.S. Plans
Fiscal

2019

2018

2019

2018

($ in millions)

$ 2,220
47
42
347
(82)
(92)
1
2,483

$ 2,292
46
42
(22)
(77)
(43)
(18)
2,220

$ 1,093
13
46
125
(82)
—
—
1,195

$ 1,191
14
43
(69)
(86)
—
—
1,093

1,390
186
43
(82)
(42)
(6)
1,489
$ (994)

1,402
51
51
(77)
(30)
(7)
1,390
$ (830)

917
100
2
(82)
—
—
937
$ (258)

128
(25)
(1,097)
$ (994)

107
(23)
(914)
$ (830)

—
(5)
(253)
$ (258)

963
37
3
(86)
—
—
917
(176)

—
(5)
(171)
(176)

Pre-tax amounts included in accumulated other comprehensive income
(loss) which have not yet been recognized in net periodic pension benefit
cost:
Net actuarial loss
Prior service (cost) credit

Total

Weighted-average assumptions used to determine pension benefit
obligation at fiscal year end:
Discount rate
Rate of compensation increase

$ (656)
43
$ (613)

$ (476)
58
$ (418)

$ (290)
(2)
$ (292)

(224)
(2)
(226)

1.01 %
2.53 %

1.94 %
2.57 %

3.14 %
— %

4.35 %
— %

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The pre-tax amounts recognized in accumulated other comprehensive income (loss) for all non-U.S. and U.S.

defined benefit pension plans were as follows:

Current year net actuarial (gain) loss recorded in accumulated other
comprehensive income (loss)
Amortization of net actuarial loss
Current year prior service cost (credit) recorded in accumulated other
comprehensive income (loss)
Amortization of prior service cost (credit)

Non-U.S. Plans
Fiscal

U.S. Plans
Fiscal

2019

2018

2019

2018

(in millions)

(204) $
24

13 $
24

(83) $
17

(8)
(7)
(195) $

5
(6)
36 $

—
—
(66) $

46
22

—
—
68

In fiscal 2019, unrecognized actuarial losses recorded in accumulated other comprehensive income (loss) were

primarily the result of lower discount rates, partially offset by favorable asset performance for both non-U.S. and U.S.
defined benefit pension plans as compared to fiscal 2018. In fiscal 2018, unrecognized actuarial gains recorded in
accumulated other comprehensive income (loss) were primarily the result of higher discount rates and favorable asset
performance for both non-U.S. and U.S. defined benefit pension plans as compared to fiscal 2017.

The estimated amortization of actuarial losses from accumulated other comprehensive income (loss) into net
periodic pension benefit cost for non-U.S. and U.S. defined benefit pension plans in fiscal 2020 is expected to be $40 million
and $9 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 2020 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 strategies for non-U.S. and 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 allocation, expected long-term returns, and forward-looking
estimates of active portfolio and investment management.

At fiscal year end 2019, the long-term target asset allocation in our U.S. plans’ master trust is 5% return-seeking

assets and 95% liability-hedging assets. Return-seeking assets, including non-U.S. and U.S. equity securities, are assets
intended to generate returns in excess of pension liability growth. Liability-hedging assets, including government and
corporate bonds, are assets intended to have characteristics similar to pension liabilities and are used to better match asset
cash flows with expected obligation cash flows. Asset re-allocation to meet that target is occurring over a multi-year period
based on the funded status. We expect to reach our target allocation when the funded status of the plans exceeds 115%. Based
on the funded status of the plans as of fiscal year end 2019, our target asset allocation is 67% return-seeking and 33%
liability-hedging.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Target weighted-average asset allocation and weighted-average asset allocation for non-U.S. and U.S. pension plans

were as follows:

Asset category:

Equity securities
Fixed income
Insurance contracts and other investments
Real estate investments

Total

Non-U.S. Plans

Fiscal

U.S. Plans
Fiscal

Fiscal

Year End Year End

Target

2019

2018

Target

2019

2018

25 %
55
17
3
100 %

26 %
53
18
3
100 %

29 % 67 %
49
20
2

33
—
—

100 % 100 %

41 %
59
—
—
100 %

53 %
47
—
—
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 $42 million and $26 million to our non-U.S. and U.S. pension plans, respectively, in
fiscal 2020. We may also make voluntary contributions at our discretion.

At fiscal year end 2019, benefit payments, which reflect future expected service, as appropriate, are expected to be

paid as follows:

Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025-2029

Non-U.S. Plans U.S. Plans
(in millions)
82 $
77
81
85
86
490

77
74
74
74
74
361

Presented below is the accumulated benefit obligation for all non-U.S. and 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

Non-U.S. Plans
Fiscal Year End

U.S. Plans
Fiscal Year End

2019

2018

2019

2018

(in millions)
$ 2,340 $ 2,099 $ 1,195 $ 1,093

1,304
316

1,453
331

1,400
580

1,560
623

1,195
937

1,093
917

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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:

Equity:

Commingled equity funds(1)

Fixed income:

Government bonds(2)
Corporate bonds(3)
Commingled bond funds(4)

Other(5)
Subtotal
Items to reconcile to fair value of plan assets(6)

Fair value of plan assets

Equity:

Non-U.S. equity securities(7)
U.S. equity securities(7)
Commingled equity funds(1)

Fixed income:

Government bonds(2)
Corporate bonds(3)
Commingled bond funds(4)

Other(5)
Subtotal
Items to reconcile to fair value of plan assets(6)

Fair value of plan assets

Non-U.S. Plans

Level 1 Level 2 Level 3 Total

U.S. Plans
Level 1 Level 2 Level 3 Total

Fiscal Year End 2019

(in millions)

$ — $ 339 $ — $ 339 $ — $ 385 $ — $ 385

—
—
—
—

—
—
—
157
$ — $ 1,312 $ 157

315
137
359
162

315
137
359
319

—
—
—
—
1,469 $ — $ 936 $ —

—
—
540
11

—
—
—
—

20
$ 1,489

Fiscal Year End 2018

Non-U.S. Plans

Level 1 Level 2 Level 3 Total

U.S. Plans
Level 1 Level 2 Level 3 Total

(in millions)

$ — $
—
—

— $ — $
—
397

—
—

— $ 220 $ — $ — $ 220
265
—
—
—
—
397

265
—

—
—

—
—
—
—

—
—
—
120
$ — $ 1,264 $ 120

213
6
464
184

213
6
464
304

—
—
—
—
1,384 $ 485 $ 426 $ —

45
283
87
11

—
—
—
—

6
$ 1,390

—
—
540
11
936
1
$ 937

45
283
87
11
911
6
$ 917

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.

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.

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.

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.

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).

(1)

(2)

(3)

(4)

(5)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(6)

(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.

Non-U.S. and U.S. equity securities are valued at the closing price reported on the stock exchange on which the individual
securities are traded.

Changes in Level 3 assets in non-U.S. plans were primarily the result of purchases in fiscal 2019 and 2018.

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 $63
million, $62 million, and $60 million for fiscal 2019, 2018, and 2017, 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 several funds in our
401(k) plans and the account balance fluctuates with the investment returns on those funds. At fiscal year end 2019 and 2018,
total deferred compensation liabilities were $203 million and $189 million, respectively, and were recorded primarily in other
liabilities on the Consolidated Balance Sheets. See Note 13 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 $18 million
at fiscal year end 2019 and 2018, 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 2019, 2018, and
2017 was not significant.

15. Income Taxes

Income Tax Expense (Benefit)

Significant components of the income tax expense (benefit) were as follows:

Current income tax expense (benefit):

U.S.:

Federal
State
Non-U.S.

Deferred income tax expense (benefit):

U.S.:

Federal
State
Non-U.S.

Income tax expense (benefit)

2019

Fiscal
2018
(in millions)

2017

$ (28) $

2
229
203

20 $
21
406
447

(9)
9
322
322

(25)
(8)
(185)
(218)

(119)
(15)
(8)
(142)
$ (15) $ (344) $ 180

499
(30)
(1,260)
(791)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The U.S. and non-U.S. components of income from continuing operations before income taxes were as follows:

U.S.
Non-U.S.

Income from continuing operations before income taxes

2019

2017

Fiscal
2018
(in millions)
$ (216) $ (245) $ (273)
1,993
2,485
$ 1,931 $ 2,240 $ 1,720

2,147

The reconciliation between U.S. federal income taxes at the statutory rate and income tax expense (benefit) was as

follows:

Notional U.S. federal income tax expense at the statutory
rate(1)
Adjustments to reconcile to the income tax expense (benefit):

$ 406 $

551 $ 602

2019

Fiscal
2018
(in millions)

2017

U.S. state income tax benefit, net
Tax law changes
Tax credits
Non-U.S. net earnings(2)
Change in accrued income tax liabilities
Valuation allowance
Legal entity restructuring and intercompany transactions
Excess tax benefits from share-based payments
Other

Income tax expense (benefit)

(5)
15
(22)
(166)
(61)
(163)
3
(8)
(14)

(4)
7
(8)
(355)
24
(1)
(40)
(40)
(5)
$ (15) $ (344) $ 180

(7)
638
(8)
(213)
13
33
(1,329)
(24)
2

(1)

The U.S. federal statutory rate was 21% for fiscal 2019, 24.58% for fiscal 2018, and 35%
for fiscal 2017.

(2)

Excludes items which are separately presented.

The income tax benefit for fiscal 2019 included a $216 million income tax benefit related to the tax impacts of

certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”), a $90 million
income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction, and $15 million of income tax
expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions. See “Swiss Tax
Reform” below for additional information regarding Swiss Tax Reform.

The income tax benefit for fiscal 2018 included a $1,222 million net income tax benefit associated with the tax

impacts of certain legal entity restructurings and intercompany transactions that occurred in the quarter ended September 28,
2018. The net income tax benefit of $1,222 million related primarily to the recognition of certain non-U.S. loss carryforwards
and basis differences in subsidiaries expected to be utilized against future taxable income, partially offset by a $46 million
increase in the valuation allowance for certain U.S. federal tax credit carryforwards. The income tax benefit for fiscal 2018
also included $567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act (the “Act”) and a
$61 million net income tax benefit related to the tax impacts of certain legal entity restructurings that occurred in the quarter
ended December 29, 2017. See “Tax Cuts and Jobs Act” below for additional information regarding the Act.

The income tax expense for fiscal 2017 included a $52 million income tax benefit associated with the tax impacts of
certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards,
a $40 million income tax benefit related to share-based payments and the adoption of ASU No. 2016-09, and a $14 million
income tax benefit associated with pre-separation tax matters.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Tax Assets and Liabilities

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:

Fiscal Year End
2018
2019

(in millions)

Deferred tax assets:

Accrued liabilities and reserves
Tax loss and credit carryforwards
Inventories
Intangible assets
Pension and postretirement benefits
Deferred revenue
Interest
Unrecognized income tax benefits
Basis difference in subsidiaries
Other

Gross deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance

Deferred tax liabilities:
Intangible assets
Property, plant, and equipment
Other

Total deferred tax liabilities

245 $

6,041
43
964
248
4
134
7
—
8
7,694
(4,970)
2,724

255
3,237
58
—
179
5
30
8
946
13
4,731
(2,191)
2,540

—
(57)
(47)
(104)

(552)
(13)
(38)
(603)

Net deferred tax assets

$ 2,620 $ 1,937

Our tax loss and credit carryforwards (tax effected) at fiscal year end 2019 were as follows:

U.S. Federal:

Net operating loss carryforwards
Tax credit carryforwards
Capital loss carryforwards

U.S. State:

Net operating loss carryforwards
Tax credit carryforwards

Non-U.S.:

Net operating loss carryforwards
Tax credit carryforwards
Capital loss carryforwards

Total tax loss and credit carryforwards

Expiration Period
Fiscal 2025
Through Through

Fiscal 2024 Fiscal 2039 Expiration Total

(in millions)

128 $
42
1

359 $
123
—

41 $ 528
165
—
1
—

50
8

39
13

—
3

89
24

3,437
—
2

5,205
12
1
—
—
28
241 $ 3,973 $ 1,827 $ 6,041

1,756
1
26

The valuation allowance for deferred tax assets of $4,970 million and $2,191 million at fiscal year end 2019 and
2018, respectively, related 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 2019, tax loss and carryforwards increased
primarily as a result of a $2,891 million (tax effected) net write-down of investments in subsidiaries in certain jurisdictions,

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

offset by a corresponding increase to the valuation allowance. 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.

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 fiscal year end 2019, certain subsidiaries had
approximately $26 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 fiscal year end 2019, we had approximately $9.1 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 $1.0 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 Positions

As of fiscal year end 2019, we had total unrecognized income tax benefits of $542 million. If recognized in future
years, $397 million of these currently unrecognized income tax benefits would impact income tax expense (benefit) and the
effective tax rate. As of fiscal year end 2018, we had total unrecognized income tax benefits of $566 million. If recognized in
future years, $467 million of these currently unrecognized income tax benefits would impact income tax expense (benefit)
and the 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 years tax positions
Reductions related to prior years tax positions
Additions related to current year tax positions
Settlements
Reductions due to lapse of applicable statute of limitations

Balance at end of fiscal year

2017

2019

Fiscal
2018
(in millions)
$ 566 $ 501 $ 490
40
(9)
70
(4)
(86)
$ 542 $ 566 $ 501

13
(101)
98
(2)
(32)

14
(11)
105
(7)
(36)

We record accrued interest and penalties related to uncertain tax positions as part of income tax expense (benefit).

As of fiscal year end 2019 and 2018, we had $42 million and $60 million, respectively, of accrued interest and penalties
related to uncertain tax positions on the Consolidated Balance Sheets, recorded primarily in income taxes. During fiscal 2019,
2018, and 2017, we recognized income tax benefits of $14 million, expense of $5 million, and benefits of $5 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.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of fiscal year end 2019, under applicable statutes, the following tax years remained subject to examination in the

major tax jurisdictions indicated:

Jurisdiction
Brazil
China
Czech Republic
France
Germany
Hong Kong
Ireland
Italy
Japan
Luxembourg
Mexico
Singapore
South Korea
Spain
Switzerland
Thailand
United Kingdom
U.S.—federal

Open Years
2014 through 2019
2009 through 2019
2016 through 2019
2016 through 2019
2017 through 2019
2013 through 2019
2014 through 2019
2014 through 2019
2013 through 2019
2014 through 2019
2014 through 2019
2014 through 2019
2014 through 2019
2015 through 2019
2014 through 2019
2017 through 2019
2017 through 2019
2016 through 2019

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
approximately $100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and
penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized

income tax benefits reflected on the Consolidated Balance Sheet as of fiscal year end 2019.

Other Income Tax Matters

Swiss Tax Reform

Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing in September 2018, and it was

approved by public vote on May 19, 2019. Swiss Tax Reform eliminates certain preferential tax items and implements new
tax rates at both the federal and cantonal levels.

Subsequent to the public approval of Swiss Tax Reform, on May 24, 2019, the federal tax authority issued guidance

abolishing certain interest deductions effective January 1, 2020. The federal provisions of Swiss Tax Reform were enacted
into law in the quarter ended September 27, 2019. Based on our forecast of taxable income and the abolishment of certain
interest deductions, we believe it is more likely than not that additional deferred tax assets for tax loss carryforwards in
Switzerland will be realized in the future. As a result, during fiscal 2019, we recorded a $216 million income tax benefit
related primarily to the reduction to the valuation allowance for deferred tax assets.

In October 2019, the canton of Schaffhausen enacted Swiss Tax Reform into law. We are currently assessing the

impacts of the cantonal implementation, including reductions in tax rates.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act, which was enacted in December 2017, included numerous significant changes to

existing tax law, including a permanent reduction in the U.S. federal corporate income tax rate to 21%, effective January 1,
2018; further limitations on the deductibility of interest expense and certain executive compensation; repeal of the corporate
Alternative Minimum Tax; and imposition of a territorial tax system with a one-time repatriation tax on deemed repatriated
earnings of foreign subsidiaries. In the period of enactment, we revalued our U.S. federal deferred tax assets and liabilities at
the 21% tax rate and recorded income tax expense of $567 million primarily in connection with the write-down of our U.S.
federal deferred tax asset for net operating loss and interest carryforwards to the lower tax rate. Included in the expense of
$567 million was an income tax benefit of $34 million related to the reduction in the existing valuation allowance recorded
against certain U.S. federal tax credit carryforwards.

Tax Sharing Agreement

Under a Tax Sharing Agreement entered into upon our separation from Tyco International plc (“Tyco International”)
in fiscal 2007, we, Tyco International, and Covidien plc (“Covidien”) share 31%, 27%, and 42%, respectively, of income tax
liabilities that arise from adjustments made by tax authorities to the collective income tax returns for periods prior to and
including June 29, 2007. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and
indemnifications with Tyco International and Covidien. We have substantially settled all U.S. federal income tax matters
with the IRS for periods covered under the Tax Sharing Agreement. Certain shared U.S. state and non-U.S. income tax
matters remain open. We do not expect these matters will have a material effect on our results of operations, financial
position, or cash flows. As a result of subsequent transactions, Tyco International and Covidien now operate as part of
Johnson Controls International plc and Medtronic plc, respectively.

16. Earnings Per Share

The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per

share were as follows:

Basic

Dilutive impact of share-based compensation arrangements

Diluted

2019

2017

Fiscal
2018
(in millions)
350
3
353

338
2
340

355
3
358

The following share options were not included in the computation of diluted earnings per share because the

instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion
would be antidilutive:

Antidilutive share options

17. Shareholders’ Equity

Common Shares

Fiscal

2019

2018

2017

(in millions)

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.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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. In March 2018, our
shareholders reapproved and extended through March 14, 2020, our board of directors’ authorization to issue additional new
shares, subject to certain conditions specified in the articles of association, in aggregate not exceeding 50% of the amount of
our authorized shares.

Common Shares Held in Treasury

At fiscal year end 2019, approximately 16 million common shares were held in treasury, of which 4 million were

owned by one of our subsidiaries. At fiscal year end 2018, approximately 12 million common shares were held in treasury, of
which 6 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 2019 and 2017, our shareholders approved the cancellation of 6 million and 26 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.

Contributed Surplus

During fiscal 2017, cumulative equity transactions, including dividend activity and treasury share cancellations,

reduced our contributed surplus balance to zero with residual activity recorded against accumulated earnings as reflected on
the Consolidated Statement of Shareholders’ Equity. To the extent that the contributed surplus balance continues to be zero,
the impact of future transactions that normally would have been recorded as a reduction of contributed surplus will be
recorded in accumulated earnings. Contributed surplus established for Swiss tax and statutory purposes (“Swiss Contributed
Surplus”) is not impacted by our GAAP treatment.

Swiss Contributed Surplus, subject to certain conditions, is a freely distributable reserve. As of fiscal year end 2019

and 2018, Swiss Contributed Surplus was CHF 6,107 million and CHF 6,724 million, respectively (equivalent to $5,195
million and $5,809 million, respectively).

Dividends

We paid cash dividends to shareholders of $1.80, $1.68, and $1.54 per share in fiscal 2019, 2018, and 2017,

respectively.

Under Swiss law, subject to certain conditions, dividends paid from reserves from capital contributions (equivalent

to Swiss Contributed Surplus) are exempt from Swiss withholding tax. Dividends on our shares must be approved by our
shareholders.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our shareholders approved the following dividends on our common shares:

Approval Date
March 2016

Annual Payment Per Share
$1.48, payable in four quarterly installments of $0.37

March 2017

$1.60, payable in four quarterly installments of $0.40

March 2018

$1.76, payable in four quarterly installments of $0.44

March 2019

$1.84, payable in four quarterly installments of $0.46

Payment Timing

Third quarter of fiscal 2016
Fourth quarter of fiscal 2016
First quarter of fiscal 2017
Second quarter of fiscal 2017
Third quarter of fiscal 2017
Fourth quarter of fiscal 2017
First quarter of fiscal 2018
Second quarter of fiscal 2018
Third quarter of fiscal 2018
Fourth quarter of fiscal 2018
First quarter of fiscal 2019
Second quarter of fiscal 2019
Third quarter of fiscal 2019
Fourth quarter of fiscal 2019
First quarter of fiscal 2020
Second quarter of fiscal 2020

Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to
shareholders’ equity. At fiscal year end 2019 and 2018, the unpaid portion of the dividends recorded in accrued and other
current liabilities on the Consolidated Balance Sheets totaled $308 million and $303 million, respectively.

Share Repurchase Program

In both fiscal 2019 and 2018, our board of directors authorized increases of $1.5 billion in our share repurchase

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

Number of common shares repurchased
Repurchase value

2019

2017

Fiscal
2018
(in millions)
10

8
$ 1,014 $ 966 $ 621

At fiscal year end 2019, we had $1.5 billion of availability remaining under our share repurchase authorization.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

18. Accumulated Other Comprehensive Income (Loss)

The changes in each component of accumulated other comprehensive income (loss) were as follows:

Foreign
Currency
Translation

Unrecognized Gains (Losses)
Pension and
Postretirement
Adjustments(1) Benefit Costs

on Cash
Flow
Hedges

Accumulated
Other
Comprehensive
Income (Loss)

Balance at fiscal year end 2016

Other comprehensive income, net of tax:

316 $

(826) $

(32) $

(542)

(in millions)

Other comprehensive income before reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax expense

Other comprehensive income, net of tax

Balance at fiscal year end 2017

Adoption of ASU No. 2018-02
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax (expense) benefit

Other comprehensive income (loss), net of tax

Balance at fiscal year end 2018

Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax (expense) benefit

Other comprehensive income (loss), net of tax

Balance at fiscal year end 2019

(1)
—
37
353
—

(117)

—
—
(117)
236

378

74
(122)
330
(496)
(39)

40
(21)
83
(452)

(14)
(3)
15
(17)
1

(60)

(23)
9
(74)
(90)

(115)

(2)

67
—
(48)
188 $

(295)

34
66
(195)
(647) $

15
(4)
46
(44) $

448

59
(125)
382
(160)
(38)

(113)

17
(12)
(108)
(306)

(375)

116
62
(197)
(503)

(1)

(2)

Includes hedges of net investment foreign currency exchange gains or losses which offset foreign currency exchange losses or
gains attributable to the translation of the net investments.

Represents net foreign currency translation adjustments reclassified as a result of the sale of the SubCom business. This net loss
is included in income (loss) from discontinued operations on the Consolidated Statement of Operations. See Note 4 for additional
information regarding the divestiture of SubCom.

19. Share Plans

Our equity compensation plans, of which the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and

restated as of March 8, 2017, is the primary plan, provide for the award of annual performance bonuses and long-term
performance awards, including share options; restricted, performance, and deferred share units; and other share-based awards
(collectively, “Awards”) and allow for the use of unissued shares or treasury shares to be used to satisfy such Awards. As of
fiscal year end 2019, our plans provided for a maximum of 77 million shares to be issued as Awards, subject to adjustment as
provided under the terms of the plans. A total of 18 million shares remained available for issuance under our plans as of fiscal
year end 2019.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Share-Based Compensation Expense

Share-based compensation expense, which was included primarily in selling, general, and administrative expenses

on the Consolidated Statements of Operations, was as follows:

Share-based compensation expense

2019

Fiscal
2018
(in millions)

2017

75 $

95 $

We recognized a related tax benefit associated with our share-based compensation arrangements of $16 million, $20

million, and $31 million in fiscal 2019, 2018, and 2017, 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 share 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.

Restricted share award activity was as follows:

Nonvested at fiscal year end 2018

Granted
Vested
Forfeited

Nonvested at fiscal year end 2019

Weighted-Average
Grant-Date
Fair Value

Shares
1,631,470 $
692,899
(689,040)
(232,910)
1,402,419 $

75.39
77.77
70.31
78.80
78.36

The weighted-average grant-date fair value of restricted share awards granted during fiscal 2019, 2018, and 2017

was $77.77, $93.45, and $67.72, respectively.

The total fair value of restricted share awards that vested during fiscal 2019, 2018, and 2017 was $48 million, $50

million, and $50 million, respectively.

As of fiscal year end 2019, there was $64 million of unrecognized compensation expense related to nonvested

restricted share awards, which is expected to be recognized over a weighted-average period of 1.7 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.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Performance share award activity was as follows:

Outstanding at fiscal year end 2018

Granted
Vested
Forfeited

Outstanding at fiscal year end 2019

Weighted-Average
Grant-Date
Fair Value

688,903 $
397,716
(448,652)
(52,844)
585,123 $

73.38
71.38
65.84
74.87
77.44

The weighted-average grant-date fair value of performance share awards granted during fiscal 2019, 2018, and 2017

was $71.38, $92.96, and $62.88, respectively.

The total fair value of performance share awards that vested during fiscal 2019, 2018, and 2017 was $30 million,

$19 million, and $15 million, respectively.

As of fiscal year end 2019, there was $16 million of unrecognized compensation expense related to nonvested

performance share awards, which is expected to be recognized over a weighted-average period of 1.0 years.

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.

Share option award activity was as follows:

Weighted-Average

Weighted-Average
Exercise
Price

Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic

Value

(in millions)

Outstanding at fiscal year end 2018

Granted
Exercised
Expired
Forfeited

Outstanding at fiscal year end 2019
Vested and expected to vest at fiscal year end 2019
Exercisable at fiscal year end 2019

6,759,077 $
1,608,300
(1,546,377)
(19,099)
(456,958)
6,344,943 $
6,000,393 $
2,855,129 $

65.85
76.91
54.09
85.80
75.95
70.72
70.31
62.01

7.0 $
7.0 $
5.6 $

140
135
88

The weighted-average exercise price of share option awards granted during fiscal 2019, 2018, and 2017 was $76.91,

$93.44, and $66.76, respectively.

The total intrinsic value of options exercised during fiscal 2019, 2018, and 2017 was $58 million, $106 million, and
$130 million, respectively. We received cash related to the exercise of options of $85 million, $100 million, and $117 million
in fiscal 2019, 2018, and 2017, respectively.

As of fiscal year end 2019, there was $30 million of unrecognized compensation expense related to nonvested share

options granted under our share option plans, which is expected to be recognized over a weighted-average period of 1.7
years.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.
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:

Weighted-average grant-date fair value

Assumptions:

Expected share price volatility
Risk-free interest rate
Expected annual dividend per share
Expected life of options (in years)

20. Segment and Geographic Data

2019
$ 13.40

Fiscal
2018
$ 16.49

2017
$ 12.80

20 %
3.0 %

20 %
2.2 %

24 %
1.9 %

$ 1.76
5.2

$ 1.60
5.3

$ 1.48
5.6

We 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.

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 approximated market
prices. Corporate assets are allocated to the segments based on segment assets.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Transportation Solutions:

Automotive
Commercial transportation
Sensors

Total Transportation Solutions

Industrial Solutions:

Industrial equipment
Aerospace, defense, oil, and gas
Energy

Total Industrial Solutions

Communications Solutions:

Data and devices
Appliances

Total Communications Solutions

Total

(1)

2019

Fiscal
2018
(in millions)

2017

$ 5,686 $ 6,092 $ 5,228
997
1,280
814
918
7,039
8,290

1,221
914
7,821

1,949
1,306
699
3,954

1,987
1,157
712
3,856

1,747
1,075
685
3,507

993
680
1,673

963
676
1,639
$ 13,448 $ 13,988 $ 12,185

1,068
774
1,842

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

Net sales by geographic region and segment were as follows:

Europe/Middle East/Africa (“EMEA”):

Transportation Solutions
Industrial Solutions
Communications Solutions

Total EMEA

Asia–Pacific:

Transportation Solutions
Industrial Solutions
Communications Solutions
Total Asia–Pacific

Americas:

Transportation Solutions
Industrial Solutions
Communications Solutions

Total Americas

Total

Operating income by segment was as follows:

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

2019

Fiscal
2018
(in millions)

2017

$ 3,099 $ 3,417 $ 2,786
1,354
1,534
259
304
4,399
5,255

1,466
258
4,823

2,812
625
964
4,401

3,025
668
1,069
4,762

2,715
634
963
4,312

1,910
1,863
451
4,224

1,538
1,519
417
3,474
$ 13,448 $ 13,988 $ 12,185

1,848
1,654
469
3,971

2019

2017

Fiscal
2018
(in millions)
$ 1,226 $ 1,578 $ 1,294
364
218
$ 1,978 $ 2,331 $ 1,876

465
288

543
209

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

No single customer accounted for a significant amount of our net sales in fiscal 2019, 2018, or 2017.

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
Fiscal
2018

2017

2019

Capital Expenditures
Fiscal
2018

2017

2019

Transportation Solutions
Industrial Solutions
Communications Solutions

Total

(in millions)
$ 442 $ 416 $ 362 $ 530 $ 711 $ 473
123
83
$ 690 $ 667 $ 611 $ 749 $ 935 $ 679

165
84

145
74

178
73

181
67

145
79

Segment assets and a reconciliation of segment assets to total assets were as follows:

Transportation Solutions
Industrial Solutions
Communications Solutions
Total segment assets(1)

Other current assets
Other non-current assets

Total assets

2017

2019

Segment Assets
Fiscal Year End
2018
(in millions)
$ 4,781 $ 4,707 $ 4,084
1,909
2,049
951
959
6,944
7,715
2,141
1,981
10,318
10,690
$ 19,694 $ 20,386 $ 19,403

2,100
849
7,730
1,398
10,566

(1)

Segment assets are composed of accounts receivable, inventories, and net property, plant,
and equipment.

Net sales and net property, plant, and equipment by geographic region were as follows:

Net Sales(1)
Fiscal
2018

2019

Property, Plant, and
Equipment, Net
Fiscal Year End
2018

2017

2017
(in millions)

2019

$ 3,251 $ 3,478 $ 3,016 $

92 $

94 $

404
1,168
4,823

443
1,334
5,255

235
1,148
4,399

443
851
1,386

448
829
1,371

80
413
741
1,234

2,443
1,958
4,401

2,739
2,023
4,762

2,414
1,898
4,312

642
449
1,091

627
436
1,063

555
390
945

3,794
430
4,224

880
100
980
$ 13,448 $ 13,988 $ 12,185 $ 3,574 $ 3,497 $ 3,159

3,136
338
3,474

3,583
388
3,971

964
99
1,063

991
106
1,097

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

EMEA:

Switzerland
Germany
Other EMEA

Total EMEA

Asia–Pacific:
China
Other Asia–Pacific

Total Asia–Pacific

Americas:
U.S.
Other Americas

Total Americas

Total

(1)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

21. Quarterly Financial Data (unaudited)

Summarized quarterly financial data was as follows:

First

Second

Third

Fourth

First

Second

Third

Fourth

2019

2018

Fiscal

Net sales
Gross margin
Acquisition and integration costs
Restructuring and other charges, net
Income (loss) from continuing
operations
Income (loss) from discontinued
operations, net of income taxes
Net income (loss)
Basic earnings (loss) per share:
Income (loss) from continuing
operations
Net income (loss)

Diluted earnings (loss) per share:
Income (loss) from continuing
operations
Net income (loss)

Quarter(1) Quarter Quarter(2) Quarter Quarter(3) Quarter Quarter Quarter(4)
(in millions, except per share data)
$ 3,347 $ 3,412 $ 3,389 $ 3,300 $ 3,336 $ 3,562 $ 3,581 $ 3,509
1,182
5
22

1,164
2
34

1,114
5
75

1,110
9
67

1,212
3
6

1,187
4
64

1,118
7
42

1,052
6
71

383

429

758

376

(33)

490

453

1,674

(107)
276

10
439

(1)
757

(4)
372

(7)
(40)

—
490

1
454

(13)
1,661

$ 1.12 $ 1.27 $ 2.25 $ 1.12 $ (0.09) $ 1.40 $ 1.30 $
1.11

(0.11)

2.25

0.81

1.30

1.40

$ 1.11 $ 1.26 $ 2.24 $ 1.11 $ (0.09) $ 1.38 $ 1.29 $
1.10

(0.11)

2.23

1.38

1.29

0.80

1.29

4.82
4.79

4.78
4.75

(1)

(2)

(3)

(4)

Results for the quarter ended December 28, 2018 included a pre-tax loss of $86 million on the sale of our SubCom business
which was reported as a discontinued operation on our Consolidated Financial Statements. See Note 4 for additional information
regarding discontinued operations.

Results for the quarter ended June 28, 2019 included a $214 million income tax benefit related to the tax impacts of certain
measures of Swiss Tax Reform and a $93 million income tax benefit related to the effective settlement of a tax audit in a non-
U.S. jurisdiction. See Note 15 for additional information regarding income taxes.

Results for the quarter ended December 29, 2017 included $567 million of income tax expense related to the tax impacts of the
Tax Cuts and Jobs Act. See Note 15 for additional information regarding income taxes.

Results for the quarter ended September 28, 2018 included a $1,222 million net income tax benefit associated with the tax
impacts of certain legal entity restructurings and intercompany transactions. See Note 15 for additional information regarding
income taxes.

22. 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.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 27, 2019

TE
Connectivity

Other

Consolidating

Ltd.

TEGSA

Subsidiaries Adjustments Total

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, net
Equity in net income of subsidiaries
Equity in net loss of subsidiaries of discontinued operations
Intercompany interest income (expense), net

Income from continuing operations before income
taxes

Income tax benefit

Income from continuing operations

Loss from discontinued operations, net of income taxes

Net income

Other comprehensive loss

Comprehensive income

— $
—
—
128
—
—
—
(128)
—
—
—
2,194
(102)
(120)

(in millions)

— $ 13,448 $
—
—
(155)
—
—
—
155
1
(64)
1
2,287
(52)
(186)

9,054
4,394
1,517
644
27
255
1,951
18
(4)
1
—
—
306

— $ 13,448
9,054
—
4,394
—
1,490
—
644
—
27
—
255
—
—
1,978
19
—
(68)
—
2
—
—
(4,481)
—
154
—
—

1,844
—
1,844
—
1,844
(197)
1,647 $ 1,895 $

2,142
—
2,142
(50)
2,092
(197)

2,272
15
2,287
(52)
2,235
(290)
1,945 $

(4,327)
—
(4,327)
—
(4,327)
487

1,931
15
1,946
(102)
1,844
(197)
(3,840) $ 1,647

(1)

TEGSA selling, general, and administrative expenses include gains of $194 million related to intercompany transactions. These
gains are offset by corresponding losses recorded by other subsidiaries.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 28, 2018

TE
Connectivity
Ltd.

TEGSA

Other

Consolidating

Subsidiaries Adjustments Total

Net sales
Cost of sales

Gross margin

Selling, general, and administrative expenses, net
Research, development, and engineering expenses
Acquisition and integration costs
Restructuring and other charges, net

Operating income (loss)

Interest income
Interest expense
Other income, net
Equity in net income of subsidiaries
Equity in net loss of subsidiaries of discontinued operations
Intercompany interest income (expense), net

Income from continuing operations before income
taxes

Income tax benefit

Income from continuing operations

Loss from discontinued operations, net of income taxes

Net income

Other comprehensive loss

Comprehensive income

— $
—
—
154
—
—
—
(154)
—
—
—
2,808
(19)
(70)

(in millions)

— $ 13,988 $
—
—
6
—
—
—
(6)
2
(105)
—
2,841
(19)
76

9,243
4,745
1,434
680
14
126
2,491
13
(2)
1
—
—
(6)

— $ 13,988
9,243
—
4,745
—
1,594
—
680
—
14
—
126
—
—
2,331
15
—
(107)
—
1
—
—
(5,649)
—
38
—
—

2,565
—
2,565
—
2,565
(108)
2,457 $ 2,681 $

2,789
—
2,789
—
2,789
(108)

2,497
344
2,841
(19)
2,822
(82)
2,740 $

(5,611)
—
(5,611)
—
(5,611)
190

2,240
344
2,584
(19)
2,565
(108)
(5,421) $ 2,457

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Operations
For the Fiscal Year Ended September 29, 2017

Connectivity

Other

Consolidating

Ltd.

TEGSA

Subsidiaries 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 (loss) from discontinued operations, net of income
taxes(2)

Net income

Other comprehensive income
Comprehensive income

— $
—
—
184
—
—
—
(184)
—
—
—
1,756

— $ 12,185 $
—
—
1,911
—
—
—
(1,911)
—
(129)
—
3,686

8,002
4,183
(552)
611
6
147
3,971
16
(1)
(42)
—

—
(78)

3,866
(180)
3,686

143
(32)

156
110

1,683
—
1,683

—
1,683
382

1,912
—
1,912

(13)
1,899
382

2,065 $ 2,281 $

— $ 12,185
8,002
—
4,183
—
1,543
—
611
—
6
—
147
—
—
1,876
16
—
(130)
—
(42)
—
—
(5,442)

(299)
—

(5,741)
—
(5,741)

—
—

1,720
(180)
1,540

156
3,842
375
4,217 $

—
(5,741)
(757)

143
1,683
382
(6,498) $ 2,065

(1)

TEGSA selling, general and administrative expenses include losses of $1,965 million related to intercompany transactions. These
losses are offset by corresponding gains recorded by other subsidiaries.

(2)

Includes the internal allocation of gains and losses associated with the divestiture of our Broadband Network Solutions business.

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Balance Sheet
As of September 27, 2019

TE
Connectivity
Ltd.

TEGSA

Other

Consolidating

Subsidiaries Adjustments Total

(in millions)

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net
Inventories
Intercompany receivables
Prepaid expenses and other current assets

Total current assets

Property, plant, and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Investment in subsidiaries
Intercompany loans receivable
Other assets

Total assets

Liabilities and shareholders’ equity
Current liabilities:
Short-term debt
Accounts payable
Accrued and other current liabilities
Intercompany payables

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 shareholders’ equity
Total liabilities and shareholders’ equity

927 $

— $
—
—
49
4
53
—
—
—
—
13,865
—
—

927
2,320
1,836
—
471
5,554
3,574
5,740
1,596
2,776
—
—
454
$ 13,918 $ 33,965 $ 35,675 $ (63,864) $ 19,694

— $
—
—
2,959
36
2,995
—
—
—
—
28,336
2,562
72

— $
—
—
(3,068)
—
(3,068)
—
—
—
—
(42,201)
(18,595)
—

2,320
1,836
60
431
5,574
3,574
5,740
1,596
2,776
—
16,033
382

2 $

— $
1
328
3,019
3,348
—
—
—
—
—
—
3,348
10,570

570
1,357
1,356
1,613
1,228
—
49
3,540
2,635
3,395
—
—
2,562
1,367
1,367
156
156
239
239
427
380
9,124
7,339
10,570
28,336
$ 13,918 $ 33,965 $ 35,675 $ (63,864) $ 19,694

568 $
—
57
—
625
3,395
16,033
—
—
—
47
20,100
13,865

— $
—
—
(3,068)
(3,068)
—
(18,595)
—
—
—
—
(21,663)
(42,201)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Balance Sheet
As of September 28, 2018

TE
Connectivity
Ltd.

TEGSA

Other

Consolidating

Subsidiaries Adjustments Total

(in millions)

848 $

— $
—
—
37
5
—
42
—
—
—
—
13,626
2
—

848
2,361
1,857
—
661
472
6,199
3,497
5,684
1,704
2,144
—
—
1,158
$ 13,670 $ 35,651 $ 38,204 $ (67,139) $ 20,386

— $
—
—
2,391
112
—
2,503
—
—
—
—
26,613
6,535
—

— $
—
—
(2,476)
—
—
(2,476)
—
—
—
—
(40,239)
(24,424)
—

2,361
1,857
48
544
472
6,130
3,497
5,684
1,704
2,144
—
17,887
1,158

2 $

— $
2
400
2,437
—
2,839
—
—
—
—
—
—
2,839
10,831

963
1,548
1,711
—
188
4,410
3,037
—
1,102
207
312
487
9,555
10,831
$ 13,670 $ 35,651 $ 38,204 $ (67,139) $ 20,386

961 $
—
36
—
—
997
3,033
17,888
—
—
—
107
22,025
13,626

— $
—
—
(2,476)
—
(2,476)
—
(24,424)
—
—
—
—
(26,900)
(40,239)

1,546
1,275
39
188
3,050
4
6,536
1,102
207
312
380
11,591
26,613

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, net
Inventories
Intercompany receivables
Prepaid expenses and other current assets
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
Other assets

Total assets

Liabilities and shareholders’ equity
Current liabilities:
Short-term debt
Accounts payable
Accrued and other current liabilities
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 shareholders’ equity
Total liabilities and shareholders’ equity

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 27, 2019

Cash flows from operating activities:

Net cash provided by continuing operating activities(1)
Net cash used in discontinued operating activities
Net cash provided by operating activities

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 debt
Repayment of 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 to discontinued operations
Other

Net cash used in continuing financing activities
Net cash provided by discontinued financing activities
Net cash used in financing activities

Effect of currency translation on cash
Net increase in cash, cash equivalents, and restricted
cash
Cash, cash equivalents, and restricted cash at beginning
of fiscal year
Cash, cash equivalents, and restricted cash at end of
fiscal year

TE
Connectivity
Ltd.

TEGSA

Other

Consolidating

Subsidiaries Adjustments Total

(in millions)

998 $ 4,107 $

—
998

—
4,107

2,920 $
(32)
2,888

(5,571) $ 2,454
(32)
2,422

—
(5,571)

—
—
—

312
1,483
—

1,795
—
1,795

78
—
—
—
—
(1,052)
(608)
—
584
—
—
(998)
—
(998)
—

—

(4,642)
(51)
746
(691)
—
—
—
(1,260)
—
—
(4)
(5,902)
—
(5,902)
—

—

(749)
43
(283)

(15)
—
2

(1,002)
(2)
(1,004)

4,564
—
—
—
85
(39)
—
(4,311)
(2,067)
(34)
(29)
(1,831)
34
(1,797)
(8)

848

—
—
—

—
(1,483)
—

(1,483)
—
(1,483)

—
—
—
—
—
—
—
5,571
1,483
—
—
7,054
—
7,054
—

—

(749)
43
(283)

297
—
2

(690)
(2)
(692)

—
(51)
746
(691)
85
(1,091)
(608)
—
—
(34)
(33)
(1,677)
34
(1,643)
(8)

848

— $

927 $

— $

927

(1)

(2)

During fiscal 2019, other subsidiaries made distributions to TEGSA in the amount of $4,311 million and TEGSA made
distributions to TE Connectivity Ltd. In the amount of $1,260 million. Cash flows are presented based upon the nature of the
distributions.

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

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 28, 2018

TE
Connectivity
Ltd.

TEGSA

Other

Consolidating

Subsidiaries Adjustments Total

(in millions)

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

486 $
—
486

343 $
—
343

2,625 $
150
2,775

(1,153) $ 2,301
150
2,451

—
(1,153)

Cash flows from investing activities:
Capital expenditures
Proceeds from sale of property, plant, and equipment
Acquisition of businesses, 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 increase in commercial paper
Proceeds from issuance of debt
Repayment of 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 decrease in cash, cash equivalents, and restricted
cash
Cash, cash equivalents, and restricted cash at beginning
of fiscal year
Cash, cash equivalents, and restricted cash at end of
fiscal year

—
—
—
—
—
—

—
—
—

112
—
—
—
—
(478)
(594)
—
474
—
—
(486)
—
(486)
—

—

—
—
—
794
62
—

856
—
856

(170)
270
119
(708)
—
—
—
(710)
—
—
—
(1,199)
—
(1,199)
—

(935)
23
(153)
—
—
(8)

(1,073)
(21)
(1,094)

58
—
—
—
100
(401)
6
(505)
(1,268)
129
(36)
(1,917)
(129)
(2,046)
(5)

—
—
—
(794)
(62)
—

(856)
—
(856)

—
—
—
—
—
—
—
1,215
794
—
—
2,009
—
2,009
—

(935)
23
(153)
—
—
(8)

(1,073)
(21)
(1,094)

—
270
119
(708)
100
(879)
(588)
—
—
129
(36)
(1,593)
(129)
(1,722)
(5)

—

(370)

—

(370)

—

1,218

—

1,218

— $

848 $

— $

848

During fiscal 2018, other subsidiaries made distributions to TEGSA in the amount of $505 million and TEGSA made
distributions to TE Connectivity Ltd. in the amount of $710 million. Cash flows are presented based upon the nature of the
distributions.

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

(1)

(2)

TE CONNECTIVITY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Condensed Consolidating Statement of Cash Flows
For the Fiscal Year Ended September 29, 2017

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

Net cash used in continuing investing activities
Net cash used in discontinued investing activities
Net cash used in investing activities
Cash flows from financing activities:
Changes in parent company equity(2)
Net decrease in commercial paper
Proceeds from issuance of 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

Connectivity

Other

Consolidating

Ltd.

TEGSA

Subsidiaries Adjustments Total

(in millions)

(180) $
—
(180)

102 $
—
102

2,581 $
48
2,629

(230) $ 2,273
48
2,321

—
(230)

—
—
—
—
—
—
—
—
—

—
—
—
516
(1,369)
(12)
(865)
—
(865)

97
—
—
—
—
(550)
—
633
—
—

180
—
180
—

—

559
(330)
589
—
—
—
(50)
—
—
(5)

763
—
763
—

—

(679)
19
(250)
—
—
13
(897)
(23)
(920)

(656)
—
—
117
(614)
4
(696)
736
25
(25)

(1,109)
(25)
(1,134)
(4)

571

647

—
—
—
(516)
1,369
—
853
—
853

—
—
—
—
—
—
746
(1,369)
—
—

(623)
—
(623)
—

—

(679)
19
(250)
—
—
1
(909)
(23)
(932)

—
(330)
589
117
(614)
(546)
—
—
25
(30)

(789)
(25)
(814)
(4)

571

647

— $

1,218 $

— $ 1,218

(1)

(2)

During fiscal 2017, other subsidiaries made distributions to TEGSA in the amount of $696 million and TEGSA made
distributions to TE Connectivity Ltd. in the amount of $50 million. Cash flows are presented based upon the nature of the
distributions.

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

TE CONNECTIVITY LTD.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Fiscal Years Ended September 27, 2019, September 28, 2018, and September 29, 2017

Description

Fiscal 2019:

Additions
Balance at Charged to Acquisitions,
Beginning of Costs and Divestitures,
Fiscal Year Expenses and Other Deductions Fiscal Year
(in millions)

Balance at
End of

Allowance for doubtful accounts receivable
Valuation allowance on deferred tax assets

22 $

9 $

2,191

3,248

— $
—

(6) $

(469)

25
4,970

Fiscal 2018:

Allowance for doubtful accounts receivable
Valuation allowance on deferred tax assets

18 $

7 $

3,627

261

(1) $
—

(1,697)

(2) $

22
2,191

Fiscal 2017:

Allowance for doubtful accounts receivable
Valuation allowance on deferred tax assets

17 $

5 $

3,096

1,072

— $
—

(4) $

(541)

18
3,627

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 27, 2019, 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.

Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the

consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.

Key Audit Matter (KAM):

How the scope of our audit responded to the key
audit matters:

Goodwill —Transportation Solutions Reportable
Segment — Refer to Notes 2 and 8 to the financial
statements

The Company’s evaluation of goodwill for impairment
involves comparing the carrying amount of each reporting
unit to its fair value on the first day of the fourth fiscal
quarter or whenever the Company believes a triggering
event requiring a more frequent assessment has occurred.
The Company uses the income approach based on the
present value of future cash flows to estimate fair value.
The income approach is supported by guideline analyses (a
market approach). These approaches incorporate several
assumptions including future growth rates, discount rates,
and market activity in assessing fair value and are reporting
unit specific. The goodwill balance was $5.7 billion as of
September 27, 2019, of which $1.1 billion was allocated to
a reporting unit within the Transportation Solutions
reportable segment. The fair value of this reporting unit
exceeded its carrying amount as of the measurement date
and, therefore, no impairment was recognized.

We identified goodwill for this reporting unit as a critical
audit matter because of the significant judgments made by
management to estimate its fair value, especially
considering future growth rates were based on an
expectation of an increase in net sales in a product portfolio
with limited historical operating results and limited
available third-party industry reports. This required a high
degree of auditor judgment and an increased extent of
effort, including the need to involve our fair value
specialists, when performing audit procedures to evaluate
the reasonableness of management’s estimates and
assumptions related to forecasts of future revenue and
operating margin and the selection of a discount rate.

Income Taxes — Realizability of Deferred Tax Assets
— Refer to Notes 2 and 15 to the financial statements

Our audit procedures related to the forecasts of future revenue and
operating margin (the “forecasts”), and the selection of a discount
rate for a reporting unit within the Transportation Solutions
reportable segment included the following, among others:

• We tested the effectiveness of controls over management’s

goodwill impairment evaluation, including those over the
determination of the fair value, such as controls related to
forecasts and management’s selection of the discount rate.

• We evaluated management’s ability to accurately forecast future
revenue and operating margin by comparing actual results to
management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by

comparing the forecasts to:

− Historical operating results of the reporting unit.

− Historical operating results of the Company’s other

reporting units.

−

Internal communications to management and the board of
directors.

− External communications made by management to analysts

and investors.

− Third-party industry reports for similar products.

• With the assistance of our fair value specialists, we evaluated
the reasonableness of the (1) valuation methodology and (2)
discount rate by:
− Testing the source information underlying the

determination of the discount rate and the mathematical
accuracy of the calculation.

− Developing a range of independent estimates and
comparing those to the discount rate selected by
management.

Our audit procedures related to the determination that it is more
likely than not that sufficient taxable income will be generated in the
future to realize deferred tax assets included the following, among
others:

• We tested the effectiveness of controls over management’s

estimates of the realization of the deferred tax assets, including
those over the estimates of taxable income, the approval of tax
planning strategies and the determination of whether it is more

Sources of taxable income include future reversals of
deferred tax assets and liabilities, expected future taxable
income, taxable income in prior carryback years if
permitted under the tax law, and tax planning strategies.
Management has determined that it is more likely than not
that sufficient taxable income will be generated in the
future to realize a portion of its deferred tax assets, and
therefore, a valuation allowance of $5.0 billion has been
recorded to offset the Company’s gross deferred tax assets
as of September 27, 2019 of $7.7 billion.

We identified the realizability of deferred tax assets as a
critical audit matter because of the Company’s tax structure
and the significant judgments and estimates made by
management to determine that sufficient taxable income
will be generated in the future prior to expiration to realize
a portion of its deferred tax assets. This required a high
degree of auditor judgment and an increased extent of
effort, including the need to involve our income tax
specialists, when performing audit procedures to evaluate
the appropriateness of qualifying tax planning strategies
and the reasonableness of management’s estimates of
taxable income prior to expiration.

likely than not that the deferred tax assets will be realized prior
to expiration.

• We evaluated management’s ability to accurately estimate

taxable income by comparing actual results to management’s
historical estimates and evaluating whether there have been any
changes that would impact management’s ability to continue
accurately estimating taxable income.

• We tested the reasonableness of management’s estimates of

taxable income by comparing the estimates to:
– Historical taxable income.

–

Internal communications and the Company’s strategic plan
approved by management and the board of directors.

– Management’s history of carrying out its stated plans and
its ability to carry out its plans considering contractual
commitments, available financing, or debt covenants.

• We evaluated whether the estimates of future taxable income
were consistent with evidence obtained in other areas of the
audit.

• We evaluated whether the taxable income in prior carryback
years was of the appropriate character and available under the
tax law.

• With the assistance of our income tax specialists, we evaluated
(1) the appropriateness of qualifying tax planning strategies,
including that they were prudent, feasible and would more likely
than not result in the realization of deferred tax assets and (2)
management’s assessment that sufficient taxable income will be
generated in the future to realize a portion of the deferred tax
assets prior to expiration.

Opinion

In our opinion, the consolidated financial statements for the year ended September 27, 2019 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 Code of Obligations (“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 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/ Matthias Gschwend
Licensed Audit Expert
Auditor in charge

/s/ Dominik Voegtli
Licensed Audit Expert

Zurich, November 12, 2019

TE CONNECTIVITY LTD.

INDEX TO SWISS STATUTORY FINANCIAL STATEMENTS

Statements of Operations for the Fiscal Years Ended September 27, 2019 and September 28, 2018 ............................

Balance Sheets as of September 27, 2019 and September 28, 2018 .......................................................................................

Notes to Swiss Statutory Financial Statements ..............................................................................................................

Proposed Appropriation of Available Earnings ..............................................................................................................

Report of the Statutory Auditor on the Swiss Statutory Financial Statements of TE Connectivity Ltd. ........................

Page

103

104

TE CONNECTIVITY LTD.

SWISS STATUTORY FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS

Fiscal Years Ended September 27, 2019 and September 28, 2018

Income
Income from distributions made by subsidiaries (Note 8) ......
Pre-separation tax settlement income, net (Note 3) ................
Remeasurement gain on foreign currency transactions ..........
Insurance premiums charged to subsidiaries ..........................
Total income, net ..............................................................

Expenses
Salary and social costs ............................................................
General and administrative costs ............................................
Legal and consulting costs .....................................................
Insurance premiums ...............................................................
Expenses for services provided by subsidiaries .....................
Intercompany interest expense ...............................................
Total expenses ...................................................................

Fiscal 2019

Fiscal 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions)

$1,260 CHF 1,254
1
7
12
1,274

1
7
12
1,280

$710 CHF 680
14
15
10
719

14
14
10
748

6
4
7
13
42
120
192

4
4
8
12
48
70
146

4
4
8
12
47
68
143

Net income .........................................................................

$1,088 CHF 1,082

$602 CHF 576

See Notes to Swiss Statutory Financial Statements.

TE CONNECTIVITY LTD.

SWISS STATUTORY FINANCIAL STATEMENTS

BALANCE SHEETS

As of September 27, 2019 and September 28, 2018

Fiscal Year End 2019

Fiscal Year End 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions, except share data)

Assets
Current assets:

Accounts receivable from subsidiaries ..........................
Prepaid expenses and other current assets .....................
Total current assets ....................................................
Investments in subsidiaries (Notes 2 and 8) ......................
Total assets ...............................................................

$ 49 CHF 49
4
53
10,430
$9,688 CHF 10,483

4
53
9,635

$ 38 CHF 37
5
5
42
43
9,635
10,430
$9,678 CHF 10,472

Liabilities and shareholders’ equity
Current liabilities:

Accounts payable .........................................................
Accounts payable to subsidiaries ..................................
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, CHF 0.57 par value, 350,951,381 shares

authorized and issued and 357,069,981 shares
authorized and issued, at fiscal year end 2019 and 2018,
respectively ................................................................

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 ......................................
Total liabilities and shareholders’ equity ..............

$ 1 CHF 1
59
2,935
21

60
2,959
21

$ 2 CHF 2
46
2,334
94

48
2,389
97

308
3,349
—
3,349

310
3,326
623
3,949

303
2,839
—
2,839

286
2,762
669
3,431

154

200

157

204

5,195

6,107

5,809

6,724

(362)
1,927
(975)
362
6,339

(355)
1,151
(973)
355
6,534
$9,688 CHF 10,483

(546)
(562)
625
1,407
(561)
(572)
546
562
6,839
7,041
$9,678 CHF 10,472

See Notes to Swiss Statutory Financial Statements.

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. We employed less than 10 full time positions during the fiscal
years ended September 27, 2019 and September 28, 2018. 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 27, 2019.

The accompanying statements of operations reflect the results of operations for the fiscal years ended September 27,

2019 and September 28, 2018 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.

Fiscal Year

Unless otherwise indicated, references in the financial statements to fiscal 2019 and fiscal 2018 are to our fiscal

years ended September 27, 2019 and September 28, 2018. We have a 52- or 53-week fiscal year that ends on the last Friday
of September. Fiscal 2019 and 2018 were both 52-week years.

2. Summary of Significant Accounting Policies

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 2019
and 2018, exchange rates were CHF 0.9918:$1 and CHF 0.9766:$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 0.9948:$1 and CHF 0.9760:$1 for fiscal 2019 and 2018, 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 to be realized.

Own Shares Held in Treasury and Allocated Reserves for the Acquisition of Treasury Shares by a Subsidiary

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. Reserves for treasury shares reflects all treasury shares held by a subsidiary and is recorded at
historical cost.

As management deems appropriate, we can establish reserves for treasury shares by charging either accumulated
earnings or allocated reserves for the acquisition of treasury shares by a subsidiary. During fiscal 2019 and 2018, allocated
reserves for the acquisition of treasury shares by a subsidiary were charged to establish reserves. 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 and Income from Distributions Made by a Subsidiary

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.

Salaries and Social Costs

Salaries and social costs include cash and equity compensation paid to our directors.

3. Commitments, Contingencies, and Guarantees

Affiliated Debt and Loans Receivable

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 fiscal year end 2019 and 2018, we had the following Cash
Pool liabilities:

Fiscal Year End 2019

Fiscal Year End 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions)

Cash Pool liability(1) ........................................................

$2,635

CHF 2,614

$2,055

CHF 2,008

(1)

Included in loans 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 fiscal year end 2019 and 2018, our borrowings were as follows:

Fiscal Year End 2019

Fiscal Year End 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions)

Borrowings(1) ...................................................................

$ 324

CHF 321

$ 334

CHF 326

(1)

Included in loans from subsidiaries on our balance sheets

At fiscal year end 2019 and 2018, the related loan receivable, which approximates the borrowing, was included in

the net Cash Pool liability reflected in loans from subsidiaries on our balance sheets.

We have fully and unconditionally guaranteed the debt of a subsidiary, Tyco Electronics Group S.A., totaling CHF

3,946 million (equivalent to $3,978 million) and CHF 3,916 million (equivalent to $4,010 million) at fiscal year end 2019
and 2018, respectively. As of fiscal year end 2019, 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 plc (“Tyco International,” which
now operates as part of Johnson Controls International plc) and Covidien plc (“Covidien,” which now operates as part 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 income tax liabilities that arose from adjustments made by tax authorities to our,
Tyco International’s, and Covidien’s income tax returns.

During fiscal 2019 and 2018, we recorded net income of CHF 1 million (equivalent to $1 million) and CHF 14

million (equivalent to $14 million), respectively, related to the TSA and tax settlements involving Tyco International,
Covidien, and us. These amounts are presented in pre-separation tax settlement income, net in our statement of operations.

Performance Guarantees

From time to time, we provide performance guarantees and surety bonds in favor of our subsidiaries. At fiscal year

end 2019 and 2018, these performance guarantees were as follows:

Performance Guarantees ..................................................

$ 198

CHF 197

$ 173

CHF 169

Fiscal Year End 2019

Fiscal Year End 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions)

A guarantee totaling CHF 94 million (equivalent to $95 million) expired unused subsequent to year end fiscal 2019.

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 responsibilities 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
VAT Group.

4. Equity

Changes in Equity Accounts

The following table presents activity related to our equity accounts during fiscal 2019 and 2018 in Swiss francs.

General
Reserve
from
Earnings

Reserves
from Capital
Contributions

Share
Capital

Allocated
Reserves for
the
Acquisition of
Treasury
Shares by a
Subsidiary

Unappropriated
Accumulated
Earnings

Own Shares
Held in
Treasury

Reserves
for
Treasury
Shares held
by a
Subsidiary

Total
Shareholders’
Equity

(in CHF millions)

Fiscal year end 2017 ........ CHF 204
—

CHF 49
—

CHF 7,300
(576)

CHF (409)
—

CHF 49
—

CHF —
—

CHF 409
—

CHF 7,602
(576)

—

204
—

—

(4)

—

—
—
49
—

—
—

—

—
—
6,724
(617)

—

(137)
—
(546)
—

—

—
576
625
—

—

(557)

(561)

—

(561)

—
—
(561)
—

(973)

561

137
—
546
—

—

—
576
7,041
(617)

(973)

—

Dividends .....................
Repurchase of common
shares ...........................
Transfer of reserves for
treasury shares and
other .............................
Net income ...................
Fiscal year end 2018 ........
Dividends .....................
Repurchase of common
shares ...........................
Cancellation of
treasury shares .............
Transfer of reserves for
treasury shares and
other .............................
Net income ...................

—
—
Fiscal year end 2019 ........ CHF 200

—
—
CHF 49

—
—
CHF 6,107

191
—
CHF (355)

1
1,082
CHF 1,151

—
—

(191)
—
CHF (973) CHF 355

1
1,082
CHF 6,534

The following table presents activity related to our equity accounts during fiscal 2019 and 2018 in U.S. dollars.

General
Reserve
from
Earnings

Reserves
from Capital
Contributions

Allocated
Reserves for
the Acquisition
of Treasury
Shares by a
Subsidiary

Unappropriated
Accumulated
Earnings

Own
Shares
Held in
Treasury

Reserves
for
Treasury
Shares
held by a
Subsidiary

Total
Shareholders’
Equity

(in USD millions)

$ 38
—

$ 6,420
(611)

$ (421)
—

$ 805
—

$ —
—

$ 421
—

$ 7,420
(611)

—

—
—
38
—

—
—

—

(572)

—

(572)

—
—
5,809
(614)

—

(141)
—
(562)
—

—
—

—
602
1,407
—

—
(569)

—
—
(572)
—

(975)

572

141
—
562
—

—

—
602
6,839
(614)

(975)

—

Share
Capital

$ 157
—

—

—
—
157
—

—

(3)

—
—
$ 154

—
—

$ 38

—
—
$ 5,195

200
—

$ (362)

1
1,088
$ 1,927

—
—
$ (975)

(200)
—
$ 362

1
1,088
$ 6,339

Fiscal year end 2017 ........
Dividends .....................
Repurchase of
common shares. ...........
Transfer of reserves
for treasury shares and
other..............................
Net income ..................
Fiscal year end 2018 ........
Dividend ......................
Repurchase of
common shares ............
Cancellation of
treasury shares .............
Transfer of reserves
for treasury shares and
other .............................
Net income ..................
Fiscal year end 2019 ........

Authorized Share Capital

In March 2018, our shareholders reapproved and extended through March 14, 2020 our board of directors’
authorization to issue additional new shares, subject to certain conditions specified in the articles, in aggregate not exceeding
50% of the amount of our authorized shares. This authorization can be renewed for additional two-year periods upon
shareholder approval. As of fiscal year end 2019, no additional shares had been issued under this authorization.

Conditional Share Capital

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 fiscal year end 2019, no
conditional shares had been issued.

Own Shares Held in Treasury and Treasury Shares Held by a Subsidiary

During fiscal 2019 and 2018, activity related to common shares held in treasury by us and by a subsidiary was as

follows:

Common Shares Held By Us

Common Shares Held By a Subsidiary

Total Cost

Number
of Shares

U.S.
Dollars

Swiss
Francs

Number of
Shares

U.S.
Dollars

Swiss
Francs

Common shares held as of fiscal year end 2017 ..............
Repurchases under share repurchase program ............
Other additions(1) ........................................................
Reissuances .................................................................
Common shares held as of fiscal year end 2018 ..............
Repurchases under share repurchase program ............
Other additions(1) .........................................................
Reissuances .................................................................
Shareholder approved cancellations ............................
Common shares held as of fiscal year end 2019 ..............

—
6
—
—
6
12
—
—
(6)
12

$ — CHF —
561
—
—
561
973
—
—
(561)
$ 975 CHF 973

572
—
—
572
975
—
—
(572)

(in millions)
5
4
—
(3)
6
—
—
(2)
—
4

$ 421 CHF 409
383
35
(281)
546
39
29
(259)
—
$ 362 CHF 355

393
36
(288)
562
39
29
(268)
—

(1)

Other additions include shares withheld to cover employee taxes under share-based compensation arrangements. These additions are not part of
the share repurchase program.

In fiscal 2019, our shareholders approved the cancellation of 6 million shares purchased under our share repurchase

program. This capital reduction by cancellation of shares was subject to a notice period and filing with the commercial
register in Switzerland.

During fiscal 2019, our board of directors authorized an increase of $1.5 billion in the share repurchase program. At

fiscal year end 2019, we had CHF 1,488 million (equivalent to $1,501 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 fiscal year

end 2019 and 2018, reserves from capital contributions were as follows:

Reserves from capital contributions ................................

$5,195

CHF 6,107

$5,809

CHF 6,724

Fiscal Year End 2019

Fiscal Year End 2018

U.S. dollars

Swiss francs

U.S. dollars

Swiss francs

(in millions)

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. Our current appropriation of CHF
49 million (equivalent to $38 million) satisfies the requirements of the Swiss Code of Obligations with respect to the general
reserve.

Dividends

We paid cash dividends to shareholders of $1.80 and $1.68 per share in fiscal 2019 and 2018, respectively.

Under current Swiss tax law, subject to certain conditions, dividends paid from reserves from capital contributions

are exempt from Swiss withholding tax. Dividends on our shares must be approved by our shareholders.

Our shareholders approved the following dividends on our common shares:

Approval Date
March 2017 ..............................

March 2018 ..............................

March 2019 ..............................

Annual Payment Per Share
$1.60, payable in four
quarterly installments of
$0.40

$1.76, payable in four
quarterly installments of
$0.44

$1.84, payable in four
quarterly installments of
$0.46

Payment Timing

Third quarter of fiscal 2017
Fourth quarter of fiscal 2017
First quarter of fiscal 2018
Second quarter of fiscal 2018

Third quarter of fiscal 2018
Fourth quarter of fiscal 2018
First quarter of fiscal 2019
Second quarter of fiscal 2019

Third quarter of fiscal 2019
Fourth quarter of fiscal 2019
First quarter of fiscal 2020
Second quarter of fiscal 2020

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

shareholders’ equity.

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 share units held as of fiscal year end 2019 and 2018 by each

member of our board of directors serving on our board at fiscal year end 2019. The share ownership of Mr. Curtin, our Chief
Executive Officer and a member of the board of directors, is set forth in Executive Management.

Board of Directors:
Pierre R. Brondeau ..................

Carol A. (“John”) Davidson ....

William A. Jeffrey ...................

David M. Kerko(4) ...................
Thomas J. Lynch(5) ..................

Yong Nam ...............................

Daniel J. Phelan ......................

Paula A. Sneed ........................

Abhijit Y. Talwalkar ..............

Mark C. Trudeau .....................

Laura H. Wright ......................

Year

2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018

Shares
Held

Options
Held

Options
Exercise Price(1)

Fiscal Years of
Expiration

RSUs
Held(2)

PSUs
Held(3)

35,203
33,418
10,373
8,588
16,502
14,717

982
202,248
140,967
16,278
14,613
30,149
31,571
36,333
34,548
5,867
3,486
6,773
4,988
10,725
8,940

—
—
—
—
—
—
—
479,650
728,450
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—

$65.95–$93.36
$61.50–$93.36

2026–2028
2025–2028

—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
8,081
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
40,095
101,668
—
—
—
—
—
—
—
—
—
—
—
—

(1)

(2)

(3)

Each option provides the right to purchase one share at the exercise price. Subject to acceleration upon certain events, the share options are
exercisable in equal installments on anniversaries of the grant dates.

Subject to acceleration upon certain events, the restricted share units (“RSUs”) vest over time, are settled in shares upon vesting on a one-for-one
basis, and receive dividend equivalent units.

The performance share unit (“PSU”) amounts in the table above assume achievement of target level of performance including target dividend
equivalent units through September 27, 2019 and September 28, 2018, respectively. Under the terms of the PSUs, shares of stock are earned 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. Annual PSU awards for the last three fiscal years were granted to Mr. Lynch on November 14, 2016 and November 13, 2017
when he was serving as an executive officer of the Company.

(4)

Mr. Kerko was elected to our board of directors on March 13, 2019.

(5)

Mr. Lynch served as Chief Executive Officer of the Company until March 8, 2017 and as Executive Chairman of the Company until March 14,
2018. Since March 2018, Mr. Lynch has served as Non-Executive Chairman of the board of directors. Shares held as of September 27, 2019
include 15,000 shares held in a charitable trust and 10,000 shares held in a grantor retained annuity trust.

100

Executive Management

The following table sets forth the shares, options and share units held as of fiscal year end 2019 and 2018 by each

member of our executive management serving in such position as of fiscal year end 2019.

Executive

Management:

Terrence R. Curtin(4) ....

John S. Jenkins, Jr. ......

Shad W. Kroeger(5) ......

Steven T. Merkt ...........

Heath A. Mitts .............

Timothy J. Murphy ......

Kevin N. Rock(6) ..........

Joan E. Wainwright .....

Year

Shares
Held

Options

Held

Options
Exercise Price(1)

Fiscal Years

of
Expiration

RSUs
Held(2)

PSUs
Held(3)

2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018

84,969 991,650
58,122 861,250
28,329 201,400
15,967 189,400
6,504 134,750
90,050
2,592
32,192 300,600
2,126 285,800
13,219 229,950
12,908 138,800
12,622 132,950
5,302 100,800
68,854 190,500
42,182 234,350
47,413
51,916
69,788
45,071

2024-2029
$51.61–$93.36
2023-2028
$34.05–$93.36
2026-2029
$65.95–$93.36
2025-2028
$61.50–$93.36
2024-2029
$51.61–$93.36
2024-2028
$51.61–$93.36
2026-2029
$65.95–$93.36
$51.61–$93.36
2024-2028
$66.74–$93.36 2027-2029
$66.74–$93.36 2027-2028
2023-2029
$34.05–$93.36
2023-2028
$34.05–$93.36
2023-2028
$34.05–$93.36
2022-2028
$34.05–$93.36
2026-2028
$65.95–$93.36
2025-2028
$61.50–$93.36

—
2,848
6,454
6,336
—
427
—
31,810
20,324
39,792
—
535
24,949
12,136
9,208
9,870

139,586
114,961
29,009
31,041
17,745
13,082
45,347
44,891
44,500
27,153
17,231
16,848
15,556
24,385
11,317
17,739

(1)

(2)

(3)

(4)

(5)

(6)

Subject to acceleration upon certain events, the RSUs vest over time, are settled in shares upon vesting on a one-for-one basis, and receive
dividend equivalent units.

The PSU amounts in the table above assume achievement of target level of performance including target dividend equivalent units through
September 27, 2019 and September 28, 2018, respectively. Under the terms of the PSUs, shares of stock are earned 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. Annual PSU awards for the last three fiscal years were granted on November 14, 2016, November 13, 2017 and November 12, 2018.

Mr. Curtin is a member of the board of directors and chief executive officer.

Mr. Kroeger became a member of executive management in December 2017.

Includes 28,296 shares held in a family trust over which Mr. Rock has dispositive power.

For additional information regarding share-based compensation arrangements, see the TE Group’s consolidated

financial statements and our Swiss Statutory Compensation Report.

101

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 fiscal year end 2019.

Name and Address of Beneficial Owner
The Vanguard Group(1) .....................................................................................................

Number
of Shares
25,268,602

Percentage
of Class

7.5%

100 Vanguard Blvd.
Malvern, PA 19355

Dodge & Cox(2) ................................................................................................................

24,400,495

7.3%

555 California Street, 40th Floor
San Francisco, CA 94104

Harris Associates L.P.(3) ...................................................................................................

24,345,438

7.3%

111 S. Wacker Drive, Suite 4600
Chicago, IL 60606

BlackRock, Inc.(4) .............................................................................................................

16,803,499

5.0%

55 East 52nd Street
New York, NY 10055

This information is based on a Schedule 13G/A filed with the SEC on February 13, 2019 by The Vanguard Group, which reported sole voting
power, sole dispositive power and shared dispositive power as follows: sole voting power—334,011, shared voting power—87,565, sole
dispositive power—24,852,628, and shared dispositive power—415,974.

This information is based on a Schedule 13G/A filed with the SEC on February 14, 2019 by Dodge & Cox, which reported sole voting power and
sole dispositive power as follows: sole voting power—23,623,934 and sole dispositive power—24,400,495.

This information is based on a Schedule 13G/A filed with the SEC on February 14, 2019 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—21,850,255 and sole dispositive
power—24,345,438. 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.

This information is based on a Schedule 13G/A filed with the SEC on February 11, 2019 by BlackRock, Inc., which reported sole voting power
and sole dispositive power as follows: sole voting power—14,759,309, and sole dispositive power—16,803,499.

(1)

(2)

(3)

(4)

102

8. Subsidiaries

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, were as follows as of fiscal year end 2019:

Entity Name
Tyco Electronics Group S.A. .........................................
Tyco Electronics Holdings (Bermuda) No. 7 Limited ....
TE Connectivity Corporation .........................................
TE Connectivity Germany GmbH ..................................
TE Connectivity HK Limited. ........................................
TE Connectivity Holding International II S.a r.l. ...........
TE Connectivity Investments Holding S.a r.l. (3) ............
TE Connectivity Solutions GmbH ..................................
Tyco Electronics Finance Alpha GmbH(3) ......................
Tyco Electronics (Shanghai) Co., Ltd. ...........................
Tyco Electronics AMP Korea Co., Ltd. .........................
Tyco Electronics Japan G.K. ..........................................
Tyco Electronics Singapore Pte Ltd. ..............................

Jurisdiction
Luxembourg
Bermuda
United States
Germany
Hong Kong
Luxembourg
Luxembourg
Switzerland
Switzerland
China
South Korea
Japan
Singapore

Direct or Indirect
Holding(1)
Direct
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect

Nominal
Capital
(in millions)

$1
$—
$625
EUR 78
$380
$—
$1,101
CHF—
$1
CNY 6
KRW 6,812
JPY 21,835
$183

Purpose(2)
F
F
M
M
S
F
F
S
F
M
M
M
S

(1)

(2)

All subsidiaries labeled as “direct” are wholly-owned by us. All subsidiaries labeled as “indirect” are wholly-owned indirectly by us.

“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.

(3)

This subsidiary is a new to our listing of significant subsidiaries in fiscal 2019.

Tyco Electronics Subsea Communications LLC, a significant U.S.-based indirect manufacturing subsidiary with

zero nominal capital at fiscal year end 2018, was sold in November 2018. Tyco Electronics Holding S.a r.l., a Luxembourg-
based indirect financing subsidiary with nominal capital of $593 million at fiscal year end 2018, was merged out of existence
in fiscal 2019.

During fiscal 2019 and 2018, subsidiaries distributed CHF 1,254 million (equivalent to $1,260 million) and CHF

680 million (equivalent to $710 million), respectively, to us. The distributions are included in income from distributions
made by subsidiaries in our statements of operations.

9. Subsequent Events

We have evaluated subsequent events through November 12, 2019, the date the Swiss Statutory Financial

Statements were issued, and determined that no significant subsequent events have occurred through this date requiring
adjustment to the Swiss Statutory Financial Statements or disclosures.

Proposed Appropriation of Accumulated Earnings

Our board of directors will propose, in conjunction with our annual general meeting, that we carry forward

unappropriated accumulated earnings of CHF 1,151 million as included in our balance sheet as of September 27, 2019.

103

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 27, 2019, 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 27, 2019 comply with Swiss law and the

Company’s articles of association.

Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the

financial statements of the current period. We have determined that there are no key audit matters to communicate in our
report.

104

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 Code of Obligations (“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.

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/ Matthias Gschwend
Licensed Audit Expert
Auditor in charge

/s/ Dominik Voegtli
Licensed Audit Expert

Zurich, November 12, 2019

105

(This page has been left blank intentionally.)

106

TE Connectivity Ltd.
Swiss Statutory Compensation Report
September 27, 2019

107

TE CONNECTIVITY LTD.
INDEX TO SWISS STATUTORY COMPENSATON REPORT

General ...........................................................................................................................................................................

Compensation of the Board of Directors .....................................................................................................................................

Compensation of Executive Management ......................................................................................................................

Report of the Statutory Auditor on the Swiss Statutory Compensation Report of TE Connectivity Ltd. ......................

Page

109

112

115

108

General

Under the Swiss ordinance against excessive pay in stock exchange listed companies (the “Minder Ordinance”) we

are 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, hereafter referred to as “Executive Management”) for

fiscal 2019 consisted of Terrence Curtin, Chief Executive Officer; John Jenkins, Jr., Executive Vice President and General
Counsel; Shadrak Kroeger, President, Communication Solutions; Heath Mitts, Executive Vice President and Chief Financial
Officer; Steven Merkt, President, Transportation Solutions; Timothy Murphy, Senior Vice President and Chief Human
Resource Officer; Kevin Rock, President, Industrial Solutions; and Joan Wainwright, President, Channel and Customer
Experience. James O’Toole, former President, Communication Solutions, was a former member of Executive Management
who continued to receive pay as an employee during fiscal 2019 and is included in this report. Thomas Lynch, former
Executive Chairman who during fiscal 2019 continued to receive dividend equivalent units on equity awards granted to him
as a member of Executive Management is included in this report.

Joseph Donahue, former Executive Vice President is included as a member of Executive Management for fiscal

2018 but is not included for fiscal 2019.

The following sets forth, for the fiscal years ended September 27, 2019 and September 28, 2018, the compensation
of the members of the Board of Directors and Executive Management for all the functions that they have performed for TE
Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”). This report
contains all elements of compensation paid, granted or promised to the Board of Directors and Executive Management.

For more detailed information about compensation for our Board of Directors and Executive Management, please

review our Definitive Proxy Statement for our 2020 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.

Compensation of the Board of Directors

Compensation paid for fiscal 2019 and 2018 to each director who is not our salaried employee, or an employee of

our subsidiaries was based on the following fee structures:

Annual retainer
Additional annual fees:

Non-Executive Chairman
Lead Independent Director
Audit Committee Chair
Audit Committee Member

Nominating, Governance & Compliance
Committee Chair
Management, Development &
Compensation Committee Chair
Science Advisory Board Retainer

Fee Structure

Cash
$90,000

Equity
$185,000

$170,000
$40,000
$25,000
$10,000

$15,000

$20,000
$10,000

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.

109

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 our employees or employees of our subsidiaries 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.

The following table discloses the cash and equity awards paid to each of our non-employee directors for fiscal 2019

and 2018.

Table 1

Name

Fiscal Year

Fees Earned or
Paid in Cash
($) (1)

Stock
Awards ($)
(2)

Dividend Equivalent
Units and Other
Compensation ($)
(3)

Total
($)
(7)

Pierre Brondeau

Carol (John) Davidson

William Jeffrey

David Kerko(4)
Thomas Lynch(5)

Yong Nam

Daniel Phelan

Paula Sneed

Abhijit Talwalkar

Mark Trudeau

John Van Scoter(6)

Laura Wright

2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018

$145,000
$145,000
$100,000
$100,000
$100,000
$100,000
$58,333
$260,000
$151,667
$90,000
$90,000
$110,000
$110,000
$90,000
$90,000
$94,167
$100,000
$94,167
$100,000
$37,500
$90,000
$115,000
$115,000

$182,527
$191,201
$182,527
$191,201
$182,527
$191,201
$109,110
$182,527
$—
$182,527
$191,201
$182,527
$191,201
$182,527
$191,201
$182,527
$191,201
$182,527
$191,201
$91,225
$191,201
$182,527
$191,201

$—
$5,120
$10,000
$5,000
$—
$—
$—
$10,000
$—
$—
$—
$15,416
$12,620
$5,000
$12,258
$10,000
$10,000
$—
$—
$—
$2,750
$10,000
$10,000

$327,527
$341,321
$292,527
$296,201
$282,527
$291,201
$167,443
$452,527
$151,667
$272,527
$281,201
$307,943
$313,821
$277,527
$293,459
$286,694
$301,201
$276,694
$291,201
$128,725
$283,951
$307,527
$316,201

(1)

The amounts shown represent the amount of cash compensation earned in fiscal 2019 and 2018 for Board and committee
services. For fiscal 2019, Mr. Lynch received additional fees for serving the full year as Non-Executive Chairman; Mr.
Lynch’s fee for serving as Non-Executive Chairman was pro-rated for his service in fiscal 2018. Dr. Brondeau received
additional fees for his work as Lead Independent Director for fiscal 2019 and 2018. Dr. Brondeau, Mr. Phelan, and Ms.
Wright each received additional fees for their role as chairs of the nominating, governance and compliance committee; the
management development and compensation committee; and the audit committee, respectively for fiscal 2019 and 2018. For
fiscal 2019, Mr. Davidson received an additional cash retainer for serving on the audit committee for the full fiscal year and
Messrs. Talwalkar, Trudeau, and Kerko each received an additional pro-rata cash retainer for serving on the audit committee
for part of the fiscal year. For fiscal 2018, Messrs. Davidson, Talwalkar, and Trudeau each received an additional cash

110

(2)

(3)

(4)

(5)

(6)

retainer for serving on the audit committee for the full fiscal year. Dr. Jeffrey received an additional fee for his role on the
Science Advisory board for fiscal 2019 and 2018.

On November 12, 2018, Dr. Brondeau, Mr. Davidson, Dr. Jeffrey, Mr. Lynch, Mr. Nam, Mr. Phelan, Ms. Sneed, Mr.
Trudeau, Mr. Talwalkar, and Ms. Wright each received a grant of 2,381 common shares. In determining the number of
common shares issued, we used the average daily closing price for the 20-day period prior to the grant date ($77.71 per
share), the same methodology used to determine employee equity awards. The grant date fair value of these awards, as
shown above for fiscal 2019, was calculated by using the closing price of TE Connectivity Ltd. common shares on the date
of grant ($76.66 per share). On November 13, 2017, Dr. Brondeau, Mr. Davidson, Dr. Jeffrey, Mr. Nam, Mr. Phelan,
Ms. Sneed, Mr. Trudeau, Mr. Talwalkar, Mr. Van Scoter, and Ms. Wright each received a grant of 2,048 common shares. In
determining the number of common shares issued, we used the average daily closing price for the 20-day period prior to the
grant date ($90.33 per share), the same methodology used to determine employee equity awards. The grant date fair value of
these awards, as shown above for fiscal 2018, was calculated by using the closing price of TE Connectivity Ltd. common
shares on the date of grant ($93.36 per share). The common shares vested immediately. As of September 27, 2019, Mr.
Lynch held options to purchase 279,800 shares at an exercise price of $65.95, options to purchase 156,150 shares at an
exercise price of $66.74, and options to purchase 43,700 shares at an exercise price of $93.36. On November 13, 2017 and
November 14, 2016, Mr. Lynch was awarded performance stock units (“PSUs”) with a target vesting of 8,300 shares and
29,670 shares, respectively. The PSU awarded to Mr. Lynch on November 13, 2017 represents target shares that have not yet
been earned under the PSU program. PSUs granted on November 14, 2016 vested on December 11, 2019 and Mr. Lynch
received 45,793 equity shares relating to the PSU award. Delivery of vested shares occurs as soon as administratively
feasible following the year 3 certification process. The foregoing equity awards were granted to Mr. Lynch when he was
serving as a member of Executive Management of the Company.

Amounts shown represent the value of dividend equivalent units earned on prior deferred share unit (DSU) awards calculated
using the market value on the date of the dividend for the first quarter of fiscal 2018, 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 2019 for expenses incurred for a continuing education course. For fiscal 2019, Mr. Lynch received dividend
equivalent units on PSU awards granted to him when Mr. Lynch was serving as a member of Executive Management.
Therefore, the value of the dividend equivalent units in the amount of $98,689 is not included in this Table 1 but is included
in Table 2 below.

On March 13, 2019 Mr. Kerko was elected to our Board of Directors and, on March 14, 2019, received a grant of 1,310
common shares. In determining the number of common shares to be issued, we used the average daily closing price for the
20-day period prior to the grant date ($82.42 per share). The grant date fair value of the award was calculated by using the
closing price of TE Connectivity Ltd. common shares on the date of grant ($83.29 per share). Cash compensation for Mr.
Kerko was pro-rated for his service during fiscal 2019.

Mr. Lynch was a member of Executive Management until March 14, 2018, when he was elected to our Board of Directors as
Non-Executive Chairman. Cash compensation for Mr. Lynch was pro-rated for service during fiscal 2018.

On November 12, 2018, Mr. Van Scoter received 1,190 common shares. Mr. Van Scoter retired from the board effective
March 13, 2019. The number of common shares issued to Mr. Van Scoter was determined in the same manner applied to all
grants on November 12, 2018 and reflects a pro-ration of his service during fiscal 2019. Cash compensation for Mr. Van
Scoter was also pro-rated for his service during fiscal 2019.

(7)

The Company has not made any loans or extended credit to any current or former member of the Board of Directors.

111

Compensation of Executive Management

The following table presents information concerning Executive Management’s fiscal 2019 and 2018 compensation.

Table 2

Name and Principal
Position
Terrence Curtin, Chief
Executive Officer

Salary(3)
($)

Bonus
($)

Stock
Awards(4)
($)

$1,186,539 $—

$3,576,189

Option
Awards(5)
($)
$3,462,244

Year
2019

Change in
Pension
Value and
Nonqualified
Deferred
Compen-
sation
Earnings(7)
($)
$—

Non-Equity
Incentive
Plan
Compen-
sation(6)
($)
$579,600

All Other
Compen-
sation(8)
($)

$487,264

Total(9)
($)
$9,291,836

2018

$1,136,539 $—

$3,359,093

$3,118,595

$2,164,875

$—

$457,909

$10,237,011

All Other Executive
Management (1) (2)

2019
2018

$3,870,754
$5,035,014

$—
$—

$5,372,736
$7,740,793

$3,987,960
$5,230,049

$1,711,885
$5,844,452

$69,192
$—

$1,591,762
$2,156,390

$16,604,289
$26,006,698

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

For fiscal 2019, the Executive Management team for Swiss reporting purposes includes Mr. Jenkins, Mr. Kroeger, Mr. Merkt,
Mr. Mitts, Mr. Murphy, Mr. Rock, and Ms. Wainwright. Mr. Lynch and Mr. O’Toole are also included as they continued to
receive compensation for part of fiscal 2019.

For fiscal 2018, the Executive Management team for Swiss reporting purposes includes Mr. Jenkins, Mr. Kroeger, Mr. Merkt,
Mr. Mitts, Mr. Murphy, Mr. Rock, and Ms. Wainwright. Compensation for Mr. Lynch, Mr. Donahue, and Mr. O’Toole is also
reported as they were members of Executive Management for part of fiscal 2018.

Amounts shown are not reduced to reflect Executive Management’s elections, if any, to defer receipt of salary into the
Supplemental Savings and Retirement Plan (“SSRP”), a nonqualified supplemental retirement plan for management and
executive level employees.

This amount represents the grant date fair value of restricted stock units (“RSUs”) and 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
Executive Management’s elections, if any, to defer receipt of awards into the SSRP.

Represents the aggregate change in actuarial present value of the accumulated benefits for three executives in fiscal 2019 and
four executives in fiscal 2018 under the frozen pension plan.

See the All Other Compensation table below for a breakdown of amounts which include perquisites, matching contributions
associated with 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.

(9)

The Company has not made any loans or extended credit to any current or former member of Executive Management.

112

All Other Compensation

Dollar
Value of
Dividends
not
factored
into Grant
Date Fair
Value(c)
($)

Insurance
Premiums(b)
($)

$—
$—

$259,545
$202,754

Company
Contributions
to DC plans(d)
($)
$201,085
$202,585

Employee
Stock
Purchase
Plan
(“ESPP”)
Company
Match(e)
($)

Payment for
unused
vacation/
personal time
and Settlement
of Equity
Award(f)
($)

Total All Other
Compensation
($)

$—
$—

$487,264
$457,909

Name
Terrence Curtin

Year
2019
2018

Perquisites(a)
($)
$26,634
$52,570

All Other Executive
Management

2019
2018

$11,344
$482,470

$—
$811

$605,658
$722,211

$472,810
$904,609

$1,950
$1,950

$500,000
$44,339

$1,591,762
$2,156,390

(a) Perquisites consisting of the following:

Amounts for Mr. Curtin in fiscal 2019 include payment by the Company of a penalty assessed by the Internal Revenue Service
and the gross-up amount for an impermissible distribution from Mr. Curtin’s deferred compensation account under the SSRP due
to an administrative error made by the Company and the incremental pre-tax cost to us of Mr. Curtin’s non-business use of our
aircraft. Mr. Curtin is permitted to use the aircraft for business and non-business purposes.

Amounts in fiscal 2018 for Mr. Curtin include the incremental pre-tax cost to us of non-business use of our aircraft.

Amounts for All Other Executive Management 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 one executive in
fiscal 2019 and two executives in fiscal 2018. 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 euros to U.S. dollars: $1.11—$1.15:
EUR 1 in fiscal 2019 and EUR to U.S. dollars: $1.13—$1.25: EUR 1 in fiscal 2018

Amounts in fiscal 2018 for All Other Executive Management include the incremental pre-tax cost to us for non-business use of
our aircraft for two executives and the value and tax gross-up amount of a retirement gift for one executive.

(b) Additional income reported for participation in a Company paid split dollar life insurance program for one executive in fiscal

2018.

(c) The value of dividend equivalent units credited in the fiscal year to each individual’s unvested RSUs and PSUs 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.

(d) Contributions made on behalf of Executive Management under TE Connectivity’s qualified defined contribution plan and

accruals on behalf of Executive Management under the SSRP (a nonqualified defined contribution excess plan).

113

Name
Terrence Curtin

All Other Executive Management

Company Matching
Contribution
(Qualified Plan)(*)

Company
Contribution
(Non-Qualified Plan)

Year

2019
2018

$16,800
$16,500

$100,694
$124,411

$184,285
$186,085

$372,116
$780,198

(*) Included in the amount above is an additional matching contribution in fiscal 2019 for one executive and fiscal 2018 for two
executives as a result of a frozen defined benefit plan.

(e) For fiscal 2019 and 2018, the Company made matching contributions under the TE Connectivity employee stock purchase plan

for one executive.

(f) For fiscal 2019, the amount includes cash settlement of previously issued retention equity awards to former members of
Executive Management. For fiscal 2018, the amount includes the value of unused vacation and personal time paid to one
executive pursuant to local state law requirements.

114

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 27, 2019.

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 compensation, 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 27, 2019 complies

with Swiss law and articles 14 – 16 of the Ordinance.

Deloitte AG

/s/ Matthias Gschwend
Licensed audit expert
Auditor in charge

Zurich, December 13, 2019

/s/ Dominik Voegtli
Licensed audit expert

115

CORPORATE DATA

REGISTERED & PRINCIPAL

EXECUTIVE OFFICE

TE Connectivity Ltd.

Mühlenstrasse 26

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 that ended September 27, 2019 may be

obtained by shareholders without charge upon written

request to:

TE Connectivity Ltd.

Mühlenstrasse 26

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:

Equiniti 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

001-AR-FY2019

“TE Connectivity” and “TE Connectivity (logo)” are trademarks. This report further contains other trademarks

of ours and additional trade names and trademarks of other companies that are not owned by TE Connectivity.

We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or

sponsorship of us by such companies, or any relationship with any of these companies.

BOARD OF DIRECTORS

Thomas J. Lynch
Non-Executive Chairman
TE Connectivity Ltd.

Dr. William A. Jeffrey
Chief Executive Officer,
SRI International

Dr. Pierre R. Brondeau*
Chairman and
Chief Executive Officer,
FMC Corporation

Terrence R. Curtin
Director and
Chief Executive Officer,
TE Connectivity Ltd.

Carol A. “John” Davidson
Retired Senior Vice President,
Controller and Chief Accounting
Officer,
Tyco International Ltd.

David M. Kerko
Former Member and Advisor,
KKR & Co., L.P.

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

*Lead Independent Director of the TE Connectivity Ltd. Board of Directors

Paula A. Sneed
Chair and Chief Executive Officer,
Phelps Prescott Group, LLC
Retired Executive Vice President,
Kraft Foods Inc.

Abhijit Y. Talwalkar
Former President and
Chief Executive Officer,
LSI Corporation

Mark C. Trudeau
President and
Chief Executive Officer,
Mallinckrodt plc

Laura H. Wright
Retired Chief Financial Officer,
Southwest Airlines Co.

LEADERSHIP TEAM AND OFFICERS

Terrence R. Curtin
Chief Executive Officer
and Director

Alan Amici
Vice President,
Chief Technology Officer,
Transportation Solutions

Claudia Anderson
Vice President,
Chief Continuous
Improvement Officer

Mario Calastri
Senior Vice President,
Treasurer

Joel Dubs
Senior Vice President,
Operations

Joseph F. Eckroth, Jr.
Senior Vice President,
Chief Information Officer

Kari Janavitz
Vice President,
Chief Marketing Officer

Steven T. Merkt
President,
Transportation Solutions

John S. Jenkins, Jr.
Executive Vice President,
General Counsel

Heath A. Mitts
Executive Vice President,
Chief Financial Officer

Arvind Kaushal
Senior Vice President,
Chief Strategy Officer

Timothy J. Murphy
Senior Vice President,
Chief Human Resources Officer

Shad W. Kroeger
President,
Communications Solutions

Robert J. Ott
Senior Vice President,
Corporate Controller

Karen Leggio
Senior Vice President,
GM Channel

Jeanne Quirk
Senior Vice President,
Mergers and Acquisitions

Nitin Mathur
Vice President,
Chief Digital & eBusiness Officer

Eric J. Resch
Senior Vice President,
Chief Tax Officer

Jimmy McDonald
Vice President,
Chief Supply Chain Officer

Kevin N. Rock
President,
Industrial Solutions

2019 ANNUAL REPORT

WHEN

TECHNOLOGY

CONNECTS,

SO DOES

HUMANITY.