8-KMaterial AgreementsOther Events

TE Connectivity plc 8-K Report, Agreement Terminated (Mar 26, 2020)

Filed March 26, 2020For Securities:TEL

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.

Frequently Asked Questions

The termination of the Tax Sharing Agreement, originally established in 2007, signifies the final resolution of historical tax liabilities among TE Connectivity, Johnson Controls International (formerly Tyco International), and Medtronic (formerly Covidien) related to periods before their separation. The company indicated that these matters are largely settled and are not expected to materially affect its financial performance, providing greater clarity on historical tax obligations.

TE Connectivity stated that substantially all income tax matters under the agreement have been settled and they do not expect any remaining issues to have a material effect on their results of operations, financial position, or cash flows. The exchange of payments between parties was described as 'immaterial'.

The company is highlighting significant concerns about potential business interruptions caused by COVID-19. This includes disruptions to their own operations, their suppliers, and their customers, as well as impacts on the global supply chain. They explicitly note that the virus could materially affect their liquidity, financial condition, and results of operations.

While this filing doesn't detail specific operational actions, it serves to update investors by formally adding COVID-19-related risks to their disclosures. The company acknowledges that they have already experienced disruptions, such as travel restrictions and temporary facility closures, and that they are assessing the ongoing and future impacts.