8-KFinancial Events

TE Connectivity plc 8-K Report, Material Impairment (Jun 13, 2007)

Filed June 13, 2007For Securities:TEL

Summary

TE Connectivity plc (TEL), formerly Tyco International Ltd., announced on June 7, 2007, that its Board of Directors authorized the divestiture of its Power Systems business. Following this authorization, Tyco Electronics assessed the Power Systems assets for impairment. This assessment determined that the Power Systems assets are impaired, with an estimated pre-tax charge of approximately $500 million and an after-tax charge of approximately $370 million. This impairment charge is expected to be recorded in the three-month period ending June 29, 2007. As a result of the pending divestiture and impairment, the Power Systems business will be reported as a discontinued operation. Investors should note that this event primarily relates to the classification and financial reporting of a specific business segment rather than a direct impact on ongoing operations of the core TE Connectivity businesses.

Key Highlights

  • 1Tyco International Ltd. (now TE Connectivity plc) authorized the divestiture of its Power Systems business.
  • 2The Power Systems business assets have been assessed as impaired.
  • 3An estimated pre-tax impairment charge of approximately $500 million is expected.
  • 4An estimated after-tax impairment charge of approximately $370 million is expected.
  • 5The impairment charge is anticipated to be recorded in the fiscal quarter ending June 29, 2007.
  • 6The Power Systems business will be classified and reported as a discontinued operation.

Frequently Asked Questions

The divestiture and impairment indicate that the Power Systems business is no longer considered a strategic or profitable part of the company's portfolio. The impairment charge reflects a write-down of the assets' carrying value to their estimated fair value, impacting the company's reported earnings for the current period.

The impairment charge of approximately $500 million pre-tax ($370 million after-tax) will be recorded in the quarter ending June 29, 2007. The Power Systems business will be presented as a discontinued operation, meaning its revenues and expenses will be segregated from continuing operations on the income statement, providing a clearer view of the performance of the company's ongoing businesses.

For investors, this event highlights a restructuring within the company. While the impairment charge will reduce reported net income for the period, it is a non-cash charge related to a business that will be divested. Investors should focus on the performance of the continuing operations of TE Connectivity and the strategic rationale behind the divestiture.

The Board of Directors authorized the divestiture on June 7, 2007, and the impairment assessment was consequently performed, leading to the determination of impairment on or around that date.