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Item 2. Management’s Discussion and Analysis

2020-10-23 compared with 2020-07-24 · 161 added, 151 removed, 185 unchanged (63% of the section changed)

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(amounts in millions, except share and per share data, unless otherwise noted)

The following discussion and analysis of the results of operations and financial condition for the three and six months ended June 30, 2020 and 2019 has been derived from and should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our,” or “us”), which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The following discussion and analysis of the results of operations and financial condition for the three and nine months ended September 30, 2020 and 2019 has been derived from and should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our,” or “us”), which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The following discussion and analysis also includes references to certain non-GAAP financial measures, which are defined in the “Non-GAAP Financial Measures” section below, including “Constant Currency Net Sales Growth” and “Organic Net Sales Growth”.

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The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words and terms such as:

“anticipate,” “could,” “continue,” “expect,” “estimate,” “forecast,” “ongoing,” “project,” “seek,” “predict,” “target,” “will,” “intend,” “plan,” “optimistic,” “potential,” “guidance,” “may,” “should,” or “would” and other words and terms of similar meaning.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any forward-looking statements related in any way to the COVID-19 pandemic including its future impact on the Company.

“anticipate,” “could,” “believe,” “continue,” “expect,” “estimate,” “forecast,” “ongoing,” “project,” “seek,” “predict,” “target,” “will,” “intend,” “plan,” “look ahead,” “optimistic,” “potential,” “guidance,” “may,” “should,” or “would” and other words and terms of similar meaning.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any forward-looking statements related in any way to the coronavirus (“COVID-19”) pandemic including its future impact on the Company.

Although the Company believes the expectations reflected in such forward-looking statements, including those with regards to results of operations, liquidity or the Company’s effective tax rate, are based upon reasonable assumptions, the expectations may not be attained or there may be material deviation.

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There are risks and uncertainties that could cause actual results to differ materially from these forward-looking statements, which include, but are not limited to, the following:

future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have an a dverse impact on our operations, including, depending on the specific location, government actions that limit our ability to operate certain of our facilities at full capacity or at all, government actions that limit our ability to adjust certain costs, travel restrictions, “work-from-home” orders and the gradual transition back to the workplace, limited availability of our workforce in some locations, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers;

future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to disrupt our operations, including, depending on the specific location, government regulations that limit our ability to operate certain of our facilities at full capacity and to adjust certain costs, travel restrictions, “work-from-home” orders and the gradual transition back to the workplace, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers;

uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers;

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the Company’s ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time;

the Company’s

ability to continue to conceive, design, manufacture and market new products and upon continuing market acceptance of its existing and future product lines;

the Company’s ability to continue to conceive, design, manufacture and market new products and upon

continuing market acceptance of its existing and future product lines;

difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill and other intangible assets;

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and litigation, customer claims, product recalls, governmental investigations, criminal liability or environmental matters including changes to laws and regulations to which the Company may be subject.

In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government regulations in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

Such forward-looking statements may also be impacted by, among other things, additional guidance under the Tax Act.

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Impact of Coronavirus (“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations

The COVID-19 pandemic has caused widespread disruptions to our Company during both the second quarter and first six months of 2020.

The COVID-19 pandemic has caused widespread disruptions to our Company during the first nine months of 2020, particularly during the first half of the year.

During the first quarter, these disruptions were primarily limited to our operations in China, which were closed for three weeks during January and February due to government mandates.

As the virus spread to the rest of the world beginning in March and continuing throughout the second quarter of 2020, most of our other operations outside of China were then also impacted.

As of June 30, 2020, we continue to experience disruptions, and at a minimum, we expect those disruptions to continue throughout the second half of 2020.

These disruptions have included and may continue to include, depending on the specific location, government actions that limit our ability to operate certain of our facilities at full capacity or at all, government actions that limit our ability to adjust certain costs, travel restrictions, “work-from-home” orders and the gradual transition back to the workplace, limited availability of our workforce in some locations, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

As noted below within this Item 2, the COVID-19 pandemic did have a negative impact on our results for both our second quarter and our first six months of 2020, and we expect it to continue to have a negative impact on our second half of 2020 results.

The extent of the impact on our second half of 2020 results and beyond will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations.

In addition, the

COVID-19 pandemic could impact the health of our management team and other employees.

The Company continues taking actions to help mitigate, as best we can, the impact of the COVID-19 pandemic on the health and well-being of our employees, the communities in which we operate and our partners, as well as the impact on our operations and business as a whole.

As the virus spread to the rest of the world beginning in March and continuing throughout the second and third quarters of 2020, most of our other operations outside of China were then also impacted.

As of September 30, 2020, we continue to experience some disruptions, and at a minimum, we expect those disruptions to continue throughout the remainder of 2020.

These disruptions have included and may continue to include, depending on the specific location, government regulations that limit our ability to operate certain of our facilities at full capacity and to adjust certain costs, travel restrictions, “work-from-home” orders and the gradual transition back to the workplace, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

As noted below within this Item 2, the COVID-19 pandemic did have a negative impact on our year-to-date financial results, primarily during the first six months of 2020, and it may continue to have a negative impact on our financial results for the fourth quarter of 2020 and beyond.

The extent of any future impact will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government regulations in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

Given this uncertainty, the Company is currently unable to quantify the potential impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations.

In addition, the COVID-19 pandemic could impact the health of our management team and other employees.

The Company continues taking actions to mitigate, as best we can, the impact of the COVID-19 pandemic

on the health and well-being of our employees, the communities in which we operate and our partners, as well as the impact on our operations and business as a whole.

However, there can be no assurance that the COVID-19 pandemic will not have a material and adverse impact on our operations, financial condition, liquidity and results of operations.

Results of Operations

Three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019

Net sales were $1,987.5 in the second quarter of 2020 compared to $2,015.3 in the second quarter of 2019, which represented a decrease of 1% in U.S.

dollars and 3% organically, while flat in constant currencies, over the respective prior year period.

Net sales were $3,849.5 in the first six months of 2020 compared to $3,973.8 in the first six months of 2019, which represented a decrease of 3% in U.S.

Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019

Net sales were $2,323.4 in the third quarter of 2020 compared to $2,100.6 in the third quarter of 2019, which represented an increase of 11% in U.S.

dollars, 10% in constant currencies and 9% organically, over the respective prior year period.

The decrease in net sales during the second quarter and first six months of 2020 relative to the comparable periods in 2019 was driven primarily by the sudden and severe slowdown in certain of our markets resulting from the global outbreak of the COVID-19 pandemic, which also resulted in production limitations imposed in many parts of the world during much of the first and second quarters of 2020.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the second quarter of 2020 decreased 1% in U.S.

dollars and 3% organically, while flat in constant currencies, compared to the second quarter of 2019.

The decline in net sales in the Interconnect Products and Assemblies segment during the second quarter of 2020 relative to the comparable period in 2019 was driven by significant declines in the automotive and commercial aerospace markets, along with moderations in the mobile networks and military markets, all of which were negatively impacted by the COVID-19 pandemic, largely offset by strong growth in the information technology and data communications, mobile devices and industrial markets as well as contributions from the Company’s acquisition program.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the first six months of 2020 decreased 3% in U.S.

dollars, 2% in constant currencies and 6% organically, compared to the first six months of 2019.

The decline in net sales in the Interconnect Products and Assemblies segment during the first six months of 2020 relative to the comparable period in 2019 was driven by a significant decline in the automotive, mobile networks and commercial aerospace markets, all of which were negatively impacted by the COVID-19 pandemic, offset in part by strong growth in the information technology and data communications market and moderate growth in the industrial and military markets, along with contributions from the Company’s acquisition program.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the second quarter of 2020, which primarily serves the broadband communications market, decreased 1% in U.S.

dollars, while increasing 3% in constant currencies and 3% organically, compared to the second quarter of 2019.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the first six months of 2020 decreased 7% in U.S.

dollars, 4% in constant currencies and 4% organically, compared to the first six months of 2019.

The modest decline in net sales in the Cable Products and Solutions segment for the first six months of 2020 was primarily driven by the negative impact of the COVID-19 pandemic on our ability to produce products in the first quarter of 2020 as well as overall weakness in market demand.

Net sales were $6,172.9 in the first nine months of 2020 compared to $6,074.4 in the first nine months of 2019, which represented an increase of 2% in U.S.

dollars and 2% in constant currencies, while decreasing 1% organically, over the respective prior year period.

The increase in net sales during the third quarter of 2020 relative to the comparable period in 2019 was driven primarily by strong growth in several markets in the Interconnect Products and Assemblies segment, as described below.

The increase in net sales during the first nine months of 2020 relative to the comparable period in 2019 was driven primarily by strong growth in several markets (as discussed below), which was partially offset by the sudden and severe slowdown in certain of our markets resulting from the global outbreak of COVID-19, which also caused production limitations in many parts of the world during much of the first half of 2020.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the third quarter of 2020 increased 11% in U.S.

dollars, 10% in constant currencies and 9% organically, compared to the third quarter of 2019.

This increase was driven by strong growth in the mobile devices, information technology and data communications, and industrial markets, slightly offset by a significant slowdown in the commercial aerospace market, which continued to be negatively impacted by the COVID-19 pandemic, and a moderation in the mobile networks market.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the first nine months of 2020 increased 2% in U.S.

dollars and 2% in constant currencies, while decreasing 1% organically, compared to the first nine months of 2019.

This increase was primarily driven by strong growth in the information technology and data communications, industrial and mobile devices markets, offset in part by a significant decline in the automotive, mobile networks and commercial aerospace markets, all of which were negatively impacted by the COVID-19 pandemic.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the third quarter of 2020, which primarily serves the broadband communications market, increased 2% in U.S.

dollars, 5% in constant currencies and 5% organically, compared to the third quarter of 2019.

This increase was primarily driven by an increase in market demand at broadband operators.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the first nine months of 2020 decreased 4% in U.S.

dollars, 1% in constant currencies and 1% organically, compared to the first nine months of 2019.

The table below reconciles Constant Currency Net Sales Growth and Organic Net Sales Growth to the most directly comparable U.S.

GAAP financial measures for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019:

GAAP financial measures for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019:

Percentage Growth (relative to same prior year period)

Sales Growth (3)

Three Months Ended June 30:

Three Months Ended September 30:

Interconnect Products and Assemblies

Cable Products and Solutions

Six Months Ended June 30:

Nine Months Ended September 30:

Interconnect Products and Assemblies

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(4) Acquisition impact, a non-GAAP measure, represents the impact on net sales resulting from acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year periods and which do not reflect the underlying growth of the Company on a comparative basis.

Geographically, sales in the United States in the second quarter of 2020 decreased approximately 10% in U.S.

dollars ($569.8 in 2020 versus $632.8 in 2019) and 14 % organically, compared to the second quarter of 2019.

Sales in the United States in the first six months of 2020 decreased 2% in U.S.

dollars ($1,185.2 in 2020 versus $1,211.7 in 2019) and 8% organically, compared to the first six months of 2019.

Foreign sales in the second quarter of 2020 increased approximately 3% in U.S.

dollars ($1,417.7 in 2020 versus $1,382.5 in 2019), 4% in constant currencies and 2% organically, compared to the second quarter of 2019.

Foreign sales in the first six months of 2020 decreased approximately 4% in U.S.

dollars ($2,664.3 in 2020 versus $2,762.1 in 2019), 2% in constant currencies and 5% organically, compared to the first six months of 2019.

Geographically, sales in the United States in the third quarter of 2020 were flat in U.S.

dollars ($668.8 in 2020 versus $667.9 in 2019) while decreasing 1 % organically, compared to the third quarter of 2019.

Sales in the United States in the first nine months of 2020 decreased 1% in U.S.

dollars ($1,854.0 in 2020 versus $1,879.6 in 2019) and 6% organically, compared to the first nine months of 2019.

Foreign sales in the third quarter of 2020 increased 15% in U.S.

dollars ($1,654.6 in 2020 versus $1,432.7 in 2019), 14% in constant currencies and 13% organically, compared to the third quarter of 2019.

Foreign sales in the first nine months of 2020 increased 3% in U.S.

dollars ($4,318.9 in 2020 versus $4,194.8 in 2019), 4% in constant currencies and 1% organically, compared to the first nine months of 2019.

The comparatively weaker U.S.

dollar for the third quarter of 2020 had the effect of increasing sales by approximately $17.0, relative to the comparable period in 2019.

The comparatively stronger U.S.

dollar for the second quarter and first six months of 2020 had the effect of decreasing sales by approximately $21.7 and $40.4, respectively, relative to the comparable periods in 2019.

Selling, general and administrative expenses increased to $246.4, or 12.4% of net sales, and $489.3, or 12.7% of net sales, for the second quarter and first six months of 2020, respectively, compared to $239.2, or 11.9% of net sales, and $474.3, or 11.9% of net sales, for the second quarter and first six months of 2019.

The increase in selling, general and administrative expenses as a percentage of net sales in both the second quarter and first six months of 2020 is primarily driven by lower sales during the second quarter and first six months of 2020 relative to the comparable periods of 2019, and by government actions imposed in response to the COVID-19 pandemic that limited the Company’s ability to adjust costs.

Administrative expenses represented approximately 5.0% and 5.1% of net sales for the second quarter and first six months of 2020, respectively, and represented approximately 4.6% o f net sales for both the second quarter and first six months of 2019.

Research and development expenses represented approximately 3.1% of net sales for both the second quarter and first six months of 2020, and represented approximately 2.9% of net sales for both the second quarter and first six months of 2019.

Selling and marketing expenses represented approximately 4.3% and 4.5% of net sales for the second quarter and first six months of 2020, respectively, and represented approximately 4.4% of net sales for both the second quarter and first six months of 2019.

Operating income was $357.4, or 18.0% of net sales, and $674.3, or 17.5% of net sales, for the second quarter and first six months of 2020, respectively, compared to $399.5, or 19.8% of net sales, and $775.7, or 19.5% of net sales, for the second quarter and first six months of 2019, respectively.

Operating income for the second quarter of 2019 included

$8.9 of acquisition-related expenses (separately presented in the Condensed Consolidated Statements of Income) comprised primarily of external transaction costs of $5.7, as well as the amortization of $3.2 related to the value associated with acquired backlog from an acquisition which closed in the second quarter of 2019.

Operating income for the first six months of 2019 included $25.4 of acquisition-related expenses (separately presented in the Condensed Consolidated Statements of Income) comprised of the amortization of $15.7 related to the value associated with acquired backlog from two acquisitions, as well as external transaction costs of $9.7.

For the three and six months ended June 30, 2019, these acquisition-related expenses had the effect of decreasing net income by $7.8, or $0.03 per share and $21.0, or $0.07 per share, respectively.

Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, was $408.4, or 20.3% of net sales and $801.1, or 20.2% of net sales, for the three and six months ended June 30, 2019, respectively.

Operating income for the Interconnect Products and Assemblies segment for the second quarter and first six months of 2020 was $379.5, or 20.0% of net sales, and $719.2, or 19.6% of net sales, respectively, compared to $428.4, or 22.2% of net sales, and $838.5, or 22.1% of net sales, for the second quarter and first six months of 2019, respectively.

The decrease in operating margin for the Interconnect Products and Assemblies segment for the second quarter and first six months of 2020 relative to the comparable periods in 2019 was somewhat larger than our typical reduction in profitability given the corresponding sales decline.

This larger than typical decrease was due to the impact of the COVID-19 pandemic, which led to an extended shutdown in China during a three-week period in January and February and significant disruption to production and productivity in other parts of the world beginning in March and continuing through much of the second quarter of 2020.

As noted above, many government actions imposed in response to the COVID-19 pandemic also limited the Company’s ability to adjust costs.

The operating margin in the second quarter and first six months of 2020 was also negatively impacted, to a lesser extent, by 2019 acquisitions which currently have, on average, a lower operating margin than the average of the Interconnect Products and Assemblies segment for such periods.

Operating income for the Cable Products and Solutions segment for the second quarter and first six months of 2020 was $8.4, or 9.4% of net sales, and $14.8, or 8.6% of net sales, respectively, compared to $8.7, or 9.7% of net sales, and $19.1, or 10.3% of net sales, for the second quarter and first six months of 2019, respectively.

The decrease in operating margin for the Cable Products and Solutions segment for both the second quarter and first six months of 2020 relative to the comparable periods in 2019 was primarily driven by lower volumes as well as the negative impact of the COVID-19 pandemic on our ability to produce products and adjust certain costs.

Interest expense for the second quarter and first six months of 2020 was $30.2 and $59.0, respectively, compared to $30.0 and $59.7 for the second quarter and first six months of 2019, respectively.

dollar for the first nine months of 2020 had the effect of decreasing sales by approximately $23.3, relative to the comparable period in 2019.

Selling, general and administrative expenses increased to $259.1, or 11.2% of net sales, and $748.4, or 12.1% of net sales, for the third quarter and first nine months of 2020, respectively, compared to $248.3, or 11.8% of net sales, and $722.5, or 11.9% of net sales, for the third quarter and first nine months of 2019, respectively.

The decrease in selling, general and administrative expenses as a percentage of net sales in the third quarter of 2020 is primarily driven by higher sales during the third quarter, relative to the comparable period of 2019.

The increase in selling, general and administrative expenses as a percentage of net sales in the first nine months of 2020 was primarily driven by government actions imposed in response to the COVID-19 pandemic that limited the Company’s ability to adjust costs, specifically in the first half of 2020.

Administrative expenses represented approximately 4.4% and 4.8% of net sales for the third quarter and first nine months of 2020, respectively, and represented approximately 4.8% and 4.7% o f net sales for the third quarter and first nine months of 2019, respectively.

Research and development expenses represented approximately 3.0% and 3.1% of net sales for the third quarter and first nine months of 2020, respectively, and represented approximately 2.8% and 2.9% of net sales for the third quarter and first nine months of 2019, respectively.

Selling and marketing expenses represented approximately 3.7% and 4.2% of net sales for the third quarter and first nine months of 2020, respectively, and represented approximately 4.2% and 4.4% of net sales for the third quarter and first nine months of 2019, respectively.

Operating income was $475.8, or 20.5% of net sales, and $1,150.1, or 18.6% of net sales, for the third quarter and first nine months of 2020, respectively, compared to $413.6, or 19.7% of net sales, and $1,189.4, or 19.6% of net sales, for the third quarter and first nine months of 2019, respectively.

Operating income for the first nine months of 2019 included $25.4 of acquisition-related expenses (separately presented in the Condensed Consolidated Statements of Income) comprised of the amortization of $15.7 related to the value associated with the acquired backlog from two acquisitions, as well as external transaction costs of $9.7.

For the nine months ended September 30, 2019, these acquisition-related expenses had the effect of decreasing net income by $21.0, or $0.07 per share.

Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, was $1,214.8, or 20.0% of net sales, for the nine months ended September 30, 2019.

Operating income for the Interconnect Products and Assemblies segment for the third quarter and first nine months of 2020 was $498.4, or 22.4% of net sales, and $1,217.6, or 20.6% of net sales, respectively, compared to $433.9, or 21.7% of net sales, and $1,272.4, or 22.0% of net sales, for the third quarter and first nine months of 2019, respectively.

The increase in operating margin for the Interconnect Products and Assemblies segment for the third quarter of 2020 relative to the comparable period in 2019 is primarily driven by strong operating leverage on the higher sales volumes.

The decrease in operating margin for the Interconnect Products and Assemblies segment for the first nine months of 2020 relative to the comparable period in 2019 was primarily driven by the significant incremental costs incurred during the first half of 2020 related to the COVID-19 pandemic.

The incremental costs incurred related to the COVID-19 pandemic primarily impacted the first half of 2020.

Operating income for the Cable Products and Solutions segment for the third quarter and first nine months of 2020 was $10.9, or 10.7% of net sales, and $25.7, or 9.4% of net sales, respectively, compared to $10.2, or 10.2% of net sales, and $29.3, or 10.3% of net sales, for the third quarter and first nine months of 2019, respectively.

The increase in operating margin for the Cable Products and Solutions segment for the third quarter of 2020 relative to the comparable period in 2019 is driven primarily by operating leverage on the higher sales volumes.

The decrease in operating margin for the Cable Products and Solutions segment for the first nine months of 2020 relative to the comparable period in 2019 was driven by lower volumes as well as the negative impact of the COVID-19 pandemic on our ability to produce products and adjust certain costs, primarily during the first half of 2020.

Interest expense for the third quarter and first nine months of 2020 was $28.0 and $87.1, respectively, compared to $29.7 and $89.5 for the third quarter and first nine months of 2019, respectively.

Refer to Note 4 of the Condensed Consolidated Financial Statements for further information related to the Company’s debt.

Provision for income taxes for the second quarter and first six months of 2020 was at an effective tax rate of 20.7% and 18.5%, respectively.

Provision for income taxes for the second quarter and first six months of 2019 was at an effective tax rate of 21.3% and 22.0%, respectively.

For the second quarter and first six months of 2020 and 2019, the excess tax benefits resulting from stock option exercise activity had the impact of lowering the effective tax rate and increasing earnings per share by the amounts noted in the tables below.

For the first six months of 2020, the effective tax rate was also impacted by a discrete tax benefit related to the settlements of refund claims in certain non-U.S.

Loss on early extinguishment of debt for the third quarter and first nine months of 2019 was $14.3.

The loss on early extinguishment of debt incurred during the third quarter of 2019 was related to refinancing-related costs, specifically premiums and fees incurred associated with the early extinguishment of certain redeemed principal amounts of the 3.125% Senior Notes and 4.00% Senior Notes (collectively, the “Tendered Notes”) as a result of the tender offers in September 2019.

Refer to Note 4 of the accompanying Condensed Consolidated Financial Statements and the Liquidity and Capital Resources section within this Item 2 for further information related to the Tendered Notes.

Provision for income taxes for the third quarter and first nine months of 2020 was at an effective tax rate of 22.1% and 20.0%, respectively.

Provision for income taxes for the third quarter and first nine months of 2019 was at an effective tax rate of 24.5% and 22.9%, respectively.

For the third quarter and first nine months of 2020 and 2019, the excess tax benefits resulting from stock option exercise activity had the impact of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the tables below.

For the first nine months of 2020, the effective tax rate was also impacted by a discrete tax benefit related to the settlements of refund claims in certain non-U.S.

jurisdictions and the resulting adjustments to deferred taxes, which had the impact of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the tables below.

For the second quarter and first six months of 2019, the effective tax rate was further impacted by the tax effect of acquisition-related expenses, as noted in the tables below.

Excluding the effect of these items, the Adjusted Effective Tax Rate, a non-GAAP financial measure as defined in the “Non-GAAP Financial Measures” section below within this Item 2, for the three and six months ended June 30, 2020 and 2019 was 24.5% for all periods, as reconciled in the tables below to the comparable effective tax rate based on GAAP results.

The effective tax rate for the third quarter of 2019 was further impacted by the tax effect of the refinancing-related costs associated with the early extinguishment of debt, while the effective tax rate for the first nine months of 2019 was further impacted by the tax effects of both the acquisition-related expenses and the refinancing-related costs associated with the early extinguishment of debt, all as noted in the tables below.

months ended September 30, 2020 and 2019 was 24.5% for all periods, as reconciled in the tables below to the comparable effective tax rate based on GAAP results.

Refer to Note 6 of the Condensed Consolidated Financial Statements for further information related to income taxes.

Net income attributable to Amphenol Corporation and Net income per common share-Diluted (“Diluted EPS”) were $257.7 and $0.85, respectively, for the second quarter of 2020, compared to $288.4 and $0.93, respectively, for the second quarter of 2019.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income

attributable to Amphenol Corporation and Adjusted Diluted EPS, non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section below within this Item 2, were $245.3 and $0.81, respectively, for the second quarter of 2020, compared to $283.3 and $0.92, respectively, for the second quarter of 2019.

Net income attributable to Amphenol Corporation and Diluted EPS were $499.8 and $1.64, respectively, for the first six months of 2020, compared to $556.0 and $1.80, respectively, for the first six months of 2019.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS were $462.5 and $1.52, respectively, for the first six months of 2020, compared to $557.3 and $1.81, respectively, for the first six months of 2019.

Net income attributable to Amphenol Corporation and Net income per common share-Diluted (“Diluted EPS”) were $346.6 and $1.12, respectively, for the third quarter of 2020, compared to $280.3 and $0.92, respectively, for the third quarter of 2019.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS, non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section below within this Item 2, were $335.9 and $1.09, respectively, for the third quarter of 2020, compared to $291.2 and $0.95, respectively, for the third quarter of 2019.

Net income attributable to Amphenol Corporation and Diluted EPS were $846.4 and $2.76, respectively, for the first nine months of 2020, compared to $836.3 and $2.72, respectively, for the first nine months of 2019.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS were $798.4 and $2.61, respectively, for the first nine months of 2020, compared to $848.5 and $2.76, respectively, for the first nine months of 2019.

The following tables reconcile Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (all defined in the “Non-GAAP Financial Measures” section below) to the most directly comparable U.S.

GAAP financial measures for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

GAAP financial measures for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Reported (GAAP)

Acquisition-related expenses

Loss on early extinguishment of debt

Excess tax benefits related to stock-based compensation

Adjusted (non-GAAP)

Six Months Ended June 30,

Nine Months Ended September 30,

Reported (GAAP)

Acquisition-related expenses

Loss on early extinguishment of debt

Excess tax benefits related to stock-based compensation

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Liquidity and Capital Resources

The COVID-19 pandemic created significant economic uncertainty and volatility in the global credit and capital markets beginning in March 2020 and continuing into the second quarter of 2020.

In response, out of an abundance of caution, in late March 2020, the Company borrowed $1,255.6 under its $2,500.0 Revolving Credit Facility.

In addition, due to the significant volatility in the commercial paper markets, the Company also reduced its reliance on those markets and, as such, approximately half of the proceeds from the Revolving Credit Facility were used to repay amounts due under our Commercial Paper Programs (as defined below) as they matured.

During the second quarter of 2020, as the global credit and capital markets stabilized and our liquidity position remained strong, the Company used cash and cash equivalents on hand, along with the net proceeds of the €500.0 0.750% Euro Senior Notes issued in May 2020 (discussed further below), to repay all of the outstanding borrowings under the Revolving Credit Facility;

as such, there were no outstanding borrowings under the Commercial Paper Programs or the Revolving Credit Facility as of June 30,

As of June 30, 2020 and December 31, 2019, the Company had cash, cash equivalents and short-term investments of $1,314.0 and $908.6, respectively, with the vast majority of such funds located outside of the United States.

As of September 30, 2020 and December 31, 2019, the Company had cash, cash equivalents and short-term investments of $1,456.2 and $908.6, respectively, with the vast majority of such funds located outside of the United

As of September 30, 2020, there were no outstanding borrowings under the Commercial Paper Programs and the $2,500.0 Revolving Credit Facility (each defined below).

As a result of the Tax Act, on December 31, 2017, the Company indicated an intention to repatriate most of its pre-2018 accumulated earnings and recorded the foreign and U.S.

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The Company intends to distribute certain post-2017 foreign earnings and has accrued foreign and U.S.

state and local taxes, if applicable, on those earnings as appropriate as of June 30, 2020, and intends to indefinitely reinvest all remaining post-2017 foreign earnings.

state and local taxes, if applicable, on those earnings as appropriate as of September 30, 2020, and intends to indefinitely reinvest all remaining post-2017 foreign earnings.

The Company intends to evaluate future earnings for distribution, and accrue for those distributions where appropriate, and to indefinitely reinvest all other foreign earnings.

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The Company’s primary sources of liquidity are internally generated cash flow, our cash, cash equivalents and short-term investments on hand, the Commercial Paper Programs, and the Revolving Credit Facility.

Senior Notes in February 2020 and the 2026 Euro Senior Notes in May 2020, as discussed further within this Item 2), provide adequate liquidity to meet its obligations for at least the next twelve months.

The Company believes that its cash, cash equivalents and short-term investment position on hand, ability to generate future cash flow from operations, availability under its credit facilities, and access to capital markets (including the issuances of the 2025 Senior Notes in February 2020 and the 2026 Euro Notes in May 2020, each as defined and discussed further within this Item 2), provide adequate liquidity to meet its obligations for at least the next twelve months.

The Company’s primary ongoing cash requirements will be for operating and capital expenditures, product development activities, repurchases of its Common Stock, dividends, debt service, payments associated with the Transition Tax (which is payable in annual installments until 2025), taxes due upon the repatriation of foreign earnings (which will be payable upon the repatriation of such earnings), and funding of pension obligations.

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Cash Flow Summary

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the six months ended June 30, 2020 and 2019, as reflected in the Condensed Consolidated Statements of Cash Flow:

Six Months Ended June 30,

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the nine months ended September 30, 2020 and 2019, as reflected in the Condensed Consolidated Statements of Cash Flow:

Nine Months Ended September 30,

Net cash provided by operating activities

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The ability to generate cash from operating activities is one of the Company’s fundamental financial strengths.

Net cash provided by operating activities (“Operating Cash Flow”) was $ 752.4 in the first six months of 2020 compared to $666.0 in the first six months of 2019.

The increase in Operating Cash Flow for the first six months of 2020 compared to the first six months of 2019 is primarily due to a decrease in the components of working capital, which was partially offset by the decrease in net income.

In the first six months of 2020, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow decreased $70.8, excluding the impact of acquisitions and foreign currency translation, due to increases in accounts payable of $72.3 and accrued liabilities, including income taxes, of $34.8, along with a decrease in accounts receivable of $54.8, partially offset by increases in inventories of $69.3 and prepaid expenses and other current assets of $21.8.

In the first six months of 2019, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $66.6, excluding the impact of acquisitions

and foreign currency translation, due to decreases in accrued liabilities, including income taxes, of $124.6 and accounts payable of $107.0, partially offset by decreases in accounts receivable of $157.9 and inventories of $13.1.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at June 30, 2020 as compared to December 31, 2019.

Accounts receivable decreased $ 78.1 to $1,658.3 .

Days sales outstanding at June 30, 2020 and December 31, 2019 were approximately 74 and 73 days, respectively.

Inventories increased $ 51.8 to $1,361 .9.

Inventory days at June 30, 2020 and December 31, 2019 were 89 and 80 days, respectively.

The more than typical increase in inventory days was primarily driven by the depressed sales in the first six months of 2020 due to the required three-week shutdown during January and February of the Company’s manufacturing facilities in China, along with the production limitations imposed in other parts of the world beginning in March and continuing through much of the second quarter of 2020, all as a result of the COVID-19 pandemic.

Net cash provided by operating activities (“Operating Cash Flow”) was $ 1,151.0 in the first nine months of 2020 compared to $1,078.2 in the first nine months of 2019.

The increase in Operating Cash Flow for the first nine months of 2020 compared to the first nine months of 2019 is primarily due to a decrease in the components of working capital.

In the first nine months of 2020, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow decreased $38.6, excluding the impact of acquisitions and foreign currency translation, due to increases in accounts payable of $191.7 and accrued liabilities, including income taxes, of $80.6, partially offset by increases in accounts receivable of $126.4, inventories of $65.2, and prepaid expenses and other current assets of $42.1.

In the first nine months of 2019, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $27.1, excluding the impact of acquisitions

and foreign currency translation, primarily due to decreases in accounts payable of $75.9 and accrued liabilities, including income taxes, of $74.4, partially offset by a decrease in accounts receivable of $129.6.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at September 30, 2020 as compared to December 31, 2019.

Accounts receivable increased $ 143.9 to $1,880.3, primarily due to higher sales in the third quarter of 2020 relative to the fourth quarter of 2019 as well as the effect of translation from exchange rate changes at September 30, 2020 compared to December 31, 2019 (“Translation”).

Days sales outstanding at September 30, 2020 and December 31, 2019 were approximately 72 and 73 days, respectively.

Inventories increased $ 80.9 to $1,391 .0, primarily to support higher sales levels, along with the effect of Translation.

Inventory days at September 30, 2020 and December 31, 2019 were 79 and 80 days, respectively.

Prepaid expenses and other current assets increased $53.4 to $309.5, primarily due to increases in certain prepaid expenses and other current receivables.

Property, plant and equipment, net, increased $ 2.7 to $1,001.7, primarily due to capital expenditures of $128.3, partially offset by depreciation of $115.5 as well as the effect of translation from exchange rate changes at June 30, 2020 compared to December 31, 2019 (“Translation”).

Other intangible assets, net decreased $25.8 to $416.2, primarily due to the amortization related to the Company’s intangible assets during the first six months of 2020, along with Translation.

Accounts payable increased $61.2 to $928.0.

Payable days at June 30, 2020 and December 31, 2019 were approximately 60 and 53 days, respectively.

Total accrued expenses, including accrued income taxes, decreased $7.7 to $854.9, primarily as a result of the contingent consideration payment (related to the SSI acquisition) of $75.0 in June 2020, along with a decrease in accrued income taxes, primarily resulting from certain tax payments, partly offset by an increase in accrued salaries and wages and other accrued expenses.

Property, plant and equipment, net, increased $ 37.9 to $1,036.9, primarily due to capital expenditures of $204.8 and Translation, partially offset by depreciation of $176.1.

Goodwill increased $88.4 to $4,955.5, primarily as a result of goodwill recognized related to two acquisitions that closed in 2020, along with Translation.

Other intangible assets, net decreased $33.8 to $408.2, primarily due to the amortization related to the Company’s intangible assets during the first nine months of 2020, partially offset by Translation.

Accounts payable increased $209.1 to $1,075.9, primarily as a result of increased purchasing activity resulting from higher sales levels, along with Translation.

Payable days at September 30, 2020 and December 31, 2019 were approximately 61 and 53 days, respectively.

Total accrued expenses, including accrued income taxes, increased $47.3 to $909.9, primarily as a result of an increase in accrued salaries and wages and other accrued expenses, along with the impact of acquisitions, partly offset by the contingent consideration payment (related to the SSI acquisition) of $75.0 in June 2020 and the deferred purchase price payment in the third quarter of $16.2, along with a decrease in accrued income taxes, primarily resulting from certain tax payments.

There is no current requirement for cash contributions to any of the Company’s defined benefit pension plans in the U.S., and the Company plans to evaluate annually, based on actuarial calculations and the investment performance of the pension plans’ assets, the timing and amount of cash contributions in the future, as discussed in more detail in Note 10 of the notes to the condensed consolidated financial statements.

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The following table reconciles Free Cash Flow to its most directly comparable U.S.

GAAP financial measure for the six months ended June 30, 2020 and 2019.

GAAP financial measure for the nine months ended September 30, 2020 and 2019.

The increase in Free Cash Flow is driven by the increase in Operating Cash Flow, as described above, and to a lesser extent, a decrease in capital expenditures.

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Cash Flow (GAAP)

Capital expenditures (GAAP)

Proceeds from disposals of property, plant and equipment (GAAP)

Free Cash Flow (non-GAAP)

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Cash flows from investing activities consist primarily of cash flows associated with capital expenditures, proceeds from disposals of property, plant and equipment, net sales and maturities (purchases) of short-term investments, and acquisitions.

Net cash used in investing activities was $151.7 in the first six months of 2020, compared to $903.1 in the first six months of 2019.

In the first six months of 2020, net cash used in investing activities was driven primarily by capital expenditures (net of disposals) of $126.4, the use of $16.5 to fund acquisitions, and net purchases of short-term investments of $8.8.

In the first six months of 2019, net cash used in investing activities was driven primarily by the use of $756.2 to fund acquisitions, capital expenditures (net of disposals) of $144.4, and net purchases of short-term investments of $2.5.

Net cash used in investing activities was $262.5 in the first nine months of 2020, compared to $1,111.0 in the first nine months of 2019.

In the first nine months of 2020, net cash used in investing activities was driven primarily by capital expenditures (net of disposals) of $194.0, the use of $50.3 to fund acquisitions, and net purchases of short-term investments of $18.2.

In the first nine months of 2019, net cash used in investing activities was driven primarily by the

use of $891.2 to fund acquisitions, capital expenditures (net of disposals) of $215.9, and net purchases of short-term investments of $3.9.

Financing Activities

Cash flows from financing activities consist primarily of cash flows associated with borrowings and repayments of the Company’s credit facilities and other long-term debt, repurchases of common stock, proceeds from stock option exercises, dividend payments, and distributions to and purchases of noncontrolling interests.

Net cash used in financing activities was $191.4 in the first six months of 2020, compared to $55.0 in the first six months of 2019.

For the first six months of 2020, net cash used in financing activities was driven primarily by the repayment of the Company’s 2.20% U.S.

Senior Notes due April 2020 and other debt of $401.3, net repayments related to the Company’s commercial paper programs of $385.2, repurchases of the Company’s common stock of $257.2, dividend payments of $148.4, payment related to acquisition-related contingent consideration of $75.0, distributions to and purchases of noncontrolling interests of $9.7, payments of costs of $8.7 related to debt financing primarily associated with the 2025 Senior Notes and 2026 Euro Notes (each as defined below), and net repayments under the Company’s credit facilities of $0.7, partially offset by the net cash proceeds from both the February 2020 issuance of the 2025 Senior Notes and the May 2020 issuance of the 2026 Euro Notes of $942.3 and cash proceeds from the exercise of stock options of $152.5.

For the first six months of 2019, net cash used in financing activities was driven primarily by the repayment of the Company’s 2.55% U.S.

Senior Notes due January 2019 and other debt of $757.8, repurchases of the Company’s common stock of $408.7, dividend payments of $137.2, distributions to and purchases of noncontrolling interests of $24.6, and payments of costs of $7.2 related to debt financing primarily associated with the January 2019 issuance of the 4.350% U.S.

senior notes (“2029 Senior Notes”) and the amended Revolving Credit Facility (defined below), partially offset by net borrowings related to the Company’s commercial paper programs of $667.5, net cash proceeds from the January 2019 issuance of the 2029 Senior Notes of $499.5, and cash proceeds from the exercise of stock options of $113.5.

Net cash used in financing activities was $384.2 in the first nine months of 2020, compared to $246.4 in the first nine months of 2019.

For the first nine months of 2020, net cash used in financing activities was driven primarily by repurchases of the Company’s common stock of $459.2, the repayment of the Company’s 2.20% U.S.

Senior Notes due April 2020 and other debt of $402.9, net repayments related to the Company’s commercial paper programs of $385.9, dividend payments of $223.0, payment related to acquisition-related contingent consideration of $75.0, payment associated with the deferred purchase price related to an acquisition of $16.2, distributions to and purchases of noncontrolling interests of $11.5, payments of costs of $8.7 related to debt financing primarily associated with the 2025 Senior Notes and 2026 Euro Notes (each as defined below), and net repayments under the Company’s credit facilities of $0.7, partially offset by the net cash proceeds from both the February 2020 issuance of the 2025 Senior Notes and the May 2020 issuance of the 2026 Euro Notes of $942.3 and cash proceeds from the exercise of stock options of $256.6.

For the first nine months of 2019, net cash used in financing activities was driven primarily by the aggregate repayments of certain of the Company’s senior notes and other long-term debt (primarily the 2.55% U.S.

Senior Notes due January 2019 and the early extinguishment of the Tendered Notes in September 2019) of $1,111.2, repurchases of the Company’s common stock of $558.7, dividend payments of $205.5, distributions to and purchases of noncontrolling interests of $25.0, payments of costs of $14.9 related to debt financing primarily associated with the 2029 Senior Notes, the Revolving Credit Facility, and the 2030 Senior Notes (each as defined below), and premiums and fees paid of $13.4 related to the early extinguishment of the Tendered Notes, partially offset by aggregate net cash proceeds from the issuances of the 2029 Senior Notes and the 2030 Senior Notes of $1,398.8, cash proceeds from the exercise of stock options of $146.3, and net borrowings related to the Company’s commercial paper programs of $137.2.

The Company has significant flexibility to meet its financial commitments.

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The Company’s debt financing includes the use of commercial paper programs, its Revolving Credit Facility and senior notes as part of its overall cash management strategy.

On January 15, 2019, the Company amended its $2,000.0 unsecured credit facility with a $2,500.0 unsecured credit facility (“Revolving Credit Facility”).

On January 15, 2019, the Company amended its $2,000.0 unsecured credit facility with a $2,500.0 unsecured credit facility (the “Revolving Credit Facility”).

The Revolving Credit Facility, which matures January 2024, gives the Company the ability to borrow, in various currencies, at a spread over LIBOR.

The Company may utilize the Revolving Credit Facility for general corporate purposes.

At June 30, 2020 and December 31, 2019, there were no outstanding borrowings under the Revolving Credit Facility.

At September 30, 2020, there were no outstanding borrowings under the Revolving Credit Facility.

The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants.

At June 30, 2020, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

At September 30, 2020, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

Pursuant to the terms of the U.S.

commercial paper program, the Company issues short-term unsecured commercial paper notes (“USCP Notes”) in one or more private placements in the United States (the “U.S.

commercial paper program, the Company issues short-term unsecured commercial paper notes (the “USCP Notes”) in one or more private placements in the United States (the “U.S.

Commercial Paper Program”).

There were no USCP Notes outstanding as of June 30, 2020.

There were no USCP Notes outstanding as of September 30, 2020.

Pursuant to the terms of the euro-commercial paper program (the “Euro Commercial Paper Program” and, together with the U.S.

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dollars or other currencies.

In addition, effective April 14, 2020, a subsidiary of the Company is able to issue ECP Notes through the Bank of England’s COVID Corporate Financing Facility (“BOE Facility”).

The BOE Facility will be available for at least twelve months from its inception.

The Company repaid all of its outstanding ECP Notes in the second quarter of 2020, including under the BOE Facility, and as such, there were no ECP Notes outstanding as of June 30, 2020.

In addition, effective April 14, 2020, a subsidiary of the Company is able to issue ECP Notes through the Bank of England’s COVID Corporate Financing Facility (the “BOE Facility”).

The BOE Facility will be available until March 22, 2021.

As of September 30, 2020, there were no ECP Notes outstanding.

Amounts available under the Commercial Paper Programs may be borrowed, repaid and re-borrowed from time to time.

In conjunction with the Revolving Credit Facility, the authorization from the Company’s Board of Directors limits the maximum aggregate principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper,

euro-commercial paper or similar programs at any time to $2,500.0.

In addition, the maximum aggregate principal amount outstanding of USCP Notes at any time is $2,500.0.

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Prior to maturity, on May 5, 2020, the Company repaid, in full, the outstanding borrowing on this uncommitted line of credit, using cash and cash equivalents on hand.

As of June 30, 2020, the Company has outstanding senior notes (the “Senior Notes”) as follows:

As of September 30, 2020, the Company has outstanding senior notes (the “Senior Notes”) as follows:

September 2021

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On February 20, 2020, the Company issued $400.0 principal amount of unsecured 2.050% Senior Notes due March 1, 2025 at 99.829% of face value (the “2025 Senior Notes”).

On April 1, 2020, the Company used the net proceeds from the 2025 Senior Notes to repay the $400.0 2.20% Senior Notes due April 1, 2020 upon maturity.

On April 1, 2020, the Company used the net proceeds from the 2025 Senior Notes to repay the $400.0 principal amount of unsecured 2.20% Senior Notes due April 1, 2020 upon maturity.

On September 4, 2019, the Company commenced tender offers (the “Tender Offers”) to purchase for cash any and all of the Company’s outstanding (i) $375.0 principal amount of 3.125% Senior Notes due September 2021 (the “2021 Senior Notes”) and (ii) $500.0 principal amount of 4.00% Senior Notes due February 2022 (the “2022 Senior Notes”).

On September 11, 2019, as a result of the Tender Offers, the Company accepted for payment $147.3 aggregate principal amount of the 2021 Senior Notes and $205.0 aggregate principal amount of the 2022 Senior Notes for 101.9% and 104.5% of par value, respectively (collectively, the “Tendered Notes”), plus accrued and unpaid interest to, but not including, the settlement date of the Tender Offers.

The total consideration for the Tendered Notes was $368.8, which in addition to the Tendered Notes, included $13.4 of premiums and fees paid related to the early extinguishment of debt and $3.1 of accrued interest.

The remaining principal amounts associated with the 2021 Senior Notes and 2022 Senior Notes, which were not redeemed as a result of the Tender Offers, remain outstanding as of September 30, 2020.

On September 10, 2019, the Company issued $900.0 principal amount of unsecured 2.800% Senior Notes due February 15, 2030 at 99.920% of face value (the “2030 Senior Notes”).

In September 2019, the Company used the net proceeds from the 2030 Senior Notes to fund the cash consideration payable in the Tender Offers, with the remaining net proceeds being used for general corporate purposes, including to partially reduce outstanding borrowings related to the U.S.

Commercial Paper Program.

In January 2019, the Company issued $500.0 principal amount of unsecured 4.350% Senior Notes due June 1, 2029 at 99.904% of face value (the “2029 Senior Notes”), the net proceeds of which were used, along with proceeds from borrowings under the U.S.

Commercial Paper Program, to repay the $750.0 of the Company’s 2.55% Senior Notes due in January 2019.

All of the Company’s outstanding senior notes in the United States (“U.S.

Commercial Paper Program, to repay the $750.0 principal amount of unsecured 2.55% Senior Notes due in January 2019.

All of the Company’s outstanding senior notes in the United States (the “U.S.

Senior Notes”) are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness.

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Senior Notes is payable semiannually.

The Company may, at its option, redeem some or all of any series of U.S.

The Company may, at its option, redeem some or all of any series of the U.S.

Senior Notes, subject to certain terms and conditions.

On May 4, 2020, the Euro Issuer issued €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 at 99.563% of face value (the “2026 Euro Notes” or “0.750% Euro Senior Notes” and collectively with the 2028 Euro Notes, “Euro Notes”).

On May 4, 2020, the Euro Issuer issued €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 at 99.563% of face value (the “2026 Euro Notes” and collectively with the 2028 Euro Notes, the “Euro Notes”).

The Company used the net proceeds from the 2026 Euro Notes to repay amounts outstanding under its Revolving Credit Facility.

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Interest on each series of the Euro Notes is payable annually.

The Company may, at its option, redeem some or all of any series of Euro Notes, subject to certain terms and conditions.

The Company may, at its option, redeem some or all of any series of the Euro Notes, subject to certain terms and conditions.

The Company’s Senior Notes contain certain financial and non-financial covenants.

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In April 2018, the Company’s Board of Directors authorized a stock repurchase program under which the Company may purchase up to $2,000.0 of the Company’s Common Stock during the three-year period ending April 24, 2021 (the “2018 Stock Repurchase Program”) in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Company did not repurchase any of its Common Stock during the three months ended June 30, 2020, while during the six months ended June 30, 2020, the Company repurchased 2.7 million shares of its Common Stock for $257.2, all under the 2018 Stock Repurchase Program.

All of the repurchased shares during the first six months of 2020 have been retired by the Company.

During the three months ended June 30, 2019, the Company repurchased 2.6 million shares of its Common Stock for $248.7, while during the six months ended June 30, 2019, the Company repurchased 4.4 million shares of its Common Stock for $408.7, all under the 2018 Stock Repurchase Program.

Of the total repurchases during the first six months of 2019, 1.0 million shares, or $87.6, were retained in Treasury stock at time of repurchase;

During the three months ended September 30, 2020, the Company repurchased 1.9 million shares of its Common Stock for $201.9, while during the nine months ended September 30, 2020, the Company repurchased 4.6 million shares of its Common Stock for $459.2, all under the 2018 Stock Repurchase Program.

Of the total repurchases during the first nine months of 2020, 1.0 million shares, or $110.3, have been retained in Treasury stock at time of repurchase;

the remaining 3.6 million shares, or $348.9, have been retired by the Company.

During the three months ended September 30, 2019, the Company repurchased 1.7 million shares of its Common Stock for $150.0, while during the nine months ended September 30, 2019, the Company repurchased 6.1 million shares of its Common Stock for $558.7, all under the 2018 Stock Repurchase Program.

Of the total repurchases during the first nine months of 2019, 1.0 million shares, or $87.6, were retained in Treasury stock at time of repurchase;

the remaining 5.1 million shares, or $471.1, were retired by the Company.

The Company has not repurchased any additional shares of its Common Stock from July 1, 2020 to July 21, 2020, and has remaining authorization to purchase up to $587.9 of its Common Stock under the 2018 Stock Repurchase Program.

From October 1, 2020 through October 20, 2020, the Company repurchased approximately 0.1 million additional shares of its Common Stock for $6.0, leaving $379.9 available to purchase under the 2018 Stock Repurchase Program.

The price and timing of any future purchases under the 2018 Stock Repurchase Program will depend on a number of factors such as levels of cash generation from operations, the level of uncertainty relating to the COVID-19 pandemic, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price.

Contingent upon declaration by the Board of Directors, the Company generally pays a quarterly dividend on shares of its Common Stock.

The following table summarizes the declared quarterly dividends per share as well as the dividends declared and paid for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

The following table summarizes the declared quarterly dividends per share as well as the dividends declared and paid for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

Dividends declared per share

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Dividends paid (including those declared in the prior year)

On July 23, 2019, the Company’s Board of Directors approved an increase to its quarterly dividend rate from $0.23 to $0.25 per share effective with dividends declared in the third quarter of 2019.

On July 23, 2019, the Company’s Board of Directors approved an increase to its quarterly dividend rate from $0.23 to $0.25 per share effective with dividends declared in the third quarter of 2019, and then on October 20, 2020, approved

a further increase to its quarterly dividend rate to $0.29 per share effective with dividends declared in the fourth quarter of 2020.

Environmental Matters

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Non-GAAP financial measures related to operating income, operating margin, net income attributable to Amphenol Corporation, effective tax rate and diluted EPS exclude income and expenses that are not directly related to the Company’s operating performance during the periods presented.

Items excluded in such non-GAAP financial measures in any period may consist of, without limitation, acquisition-related expenses, refinancing-related costs, and certain discrete tax items including but not limited to (i) the excess tax benefits related to stock-based compensation and (ii) the impact of significant changes in tax law.

Non-GAAP financial measures related to net sales exclude the impact

related to foreign currency exchange and acquisitions.

Items excluded in the presentation of such non-GAAP financial measures in any period may consist of, without limitation, acquisition-related expenses, refinancing-related costs and certain discrete tax items including but not limited to (i) the excess tax benefits related to stock-based compensation and (ii) the impact of significant changes in tax law.

Non-GAAP financial measures related to net sales exclude the impact related to foreign currency exchange and acquisitions.

The non-GAAP financial information contained herein is included for supplemental purposes only and should not be considered in isolation, as a substitute for or superior to the related U.S.

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The reconciliations of these non-GAAP financial measures to the most directly comparable U.S.

GAAP financial measures for the three and six months ended June 30, 2020 and 2019 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 2:

GAAP financial measures for the three and nine months ended September 30, 2020 and 2019 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 2:

● Adjusted Diluted EPS is defined as diluted earnings per share (as reported in accordance with U.S.

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dollars, as well as Organic Net Sales Growth (defined below) and Constant Currency Net Sales Growth, and believes that such information is useful to investors to assess the underlying sales trends.

● Free Cash Flow is defined as Net cash provided by operating activities (“Operating Cash Flow” - as reported in accordance with U.S.

GAAP) less capital expenditures (as reported in accordance with U.S.

GAAP), both of which are derived from the Condensed Consolidated Statements of Cash Flow.

● Free Cash Flow is defined as (i) Net cash provided by operating activities (“Operating Cash Flow” - as reported in accordance with U.S.

GAAP) less (ii) capital expenditures (as reported in accordance with U.S.

GAAP), net of proceeds from disposals of property, plant and equipment (as reported in accordance with U.S.

GAAP), all of which are derived from the Condensed Consolidated Statements of Cash Flow.

Free Cash Flow is an important liquidity measure for the Company, as we believe it is useful for management and investors to assess our ability to generate cash, as well as to assess how much cash can be used to reinvest in the growth of the Company or to return to shareholders through either stock repurchases or dividends.

● Organic Net Sales Growth is defined as the period-over-period percentage change in net sales growth resulting from operating volume and pricing changes, and excludes the impact of 1) changes in foreign currency exchange rates, which directly impact the Company’s operating results and are outside the control of the Company and 2) acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year periods and which do not reflect the underlying growth of the Company on a comparative basis.

● Organic Net Sales Growth is defined as the period-over-period percentage change in net sales growth resulting from operating volume and pricing changes, and excludes the impact of (i) changes in foreign currency exchange rates, which directly impact the Company’s operating results and are outside the control of the Company and (ii) acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year periods and which do not reflect the underlying growth of the Company on a comparative basis.

Management evaluates the Company’s sales performance based on actual sales growth in U.S.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis