Summary
TE Connectivity plc (TEL) filed an 8-K on March 26, 2020, primarily to report the termination of a material definitive agreement and to provide a supplemental risk factor related to COVID-19. The company, along with Johnson Controls International plc and Medtronic plc, entered into an agreement to terminate a Tax Sharing Agreement dated June 29, 2007. This agreement was related to shared income tax liabilities from periods prior to their separation. TE Connectivity stated that substantially all tax matters under this agreement have been settled and are not expected to materially impact their financial results. Immaterial payments were exchanged between the parties as a good faith determination of any remaining liabilities or refunds. Furthermore, in light of the escalating COVID-19 pandemic, TEL is updating its risk factor disclosures. The company acknowledges the potential for significant business interruptions due to the virus, impacting its operations, those of its suppliers and customers, and the broader supply chain. This could lead to disruptions in travel, temporary facility closures, and a broader economic downturn affecting demand for its products. TE Connectivity explicitly states that COVID-19 may materially impact its liquidity, financial condition, and results of operations, with the full extent depending on future, highly uncertain developments.
Key Highlights
- 1Termination of a 2007 Tax Sharing Agreement with Tyco International (now part of Johnson Controls) and Covidien (now part of Medtronic).
- 2The termination agreement was entered into on March 25, 2020.
- 3TE Connectivity expects no material impact on its financial results from any remaining tax matters under the terminated agreement.
- 4Parties exchanged immaterial payments as part of the termination process.
- 5Company is supplementing its risk factors to specifically address the potential business interruptions and financial impacts of COVID-19.
- 6COVID-19 risks include disruptions to operations, supply chains, and potential adverse effects on liquidity, financial condition, and results of operations.
- 7The full impact of COVID-19 on TE Connectivity is uncertain and depends on future developments.