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Item 2. Management’s Discussion and Analysis

2021-07-30 compared with 2021-04-30 · 192 added, 131 removed, 187 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 months ended March 31, 2021 and 2020 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 six months ended June 30, 2021 and 2020 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.

Any references to the Company’s results in this Item 2 are specifically to our continuing operations only and exclude discontinued operations, unless otherwise noted.

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 additional shares were distributed on March 4, 2021, and the Company’s Common Stock began trading on a split-adjusted basis on March 5, 2021.

All current and prior year data impacted by the stock split and presented in this Item 2 and throughout this Form 10-Q herein, including number of shares, share and per share activity, earnings per share and dividends per share amounts, among others, have been retroactively adjusted to reflect the effect of the stock split.

All current and prior year data impacted by the stock split and presented in this Item 2 and throughout this Form 10-Q herein, including number of shares and per share information, earnings per share and dividends per share amounts, among others, have been retroactively adjusted to reflect the effect of the stock split.

Refer to Note 1 of the accompanying Notes to Condensed Consolidated Financial Statements for further information related to the stock split.

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“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “look ahead,” “may,” “ongoing,” “optimistic,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” 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 (i) the coronavirus (“COVID-19”) pandemic, including its future impact on the Company, (ii) the expected acquisition costs associated with the MTS Systems Corporation (“MTS”) acquisition and (iii) the expected closing of the divestiture of the MTS Test & Simulation (“MTS T&S”) business to Illinois Tool Works Inc.

(“ITW”) which may not be completed in a timely manner or at all, all of which are discussed within this Form 10-Q.

Although the Company believes the expectations reflected in all forward-looking statements, including those with regards to results of operations, liquidity, the Company’s effective tax rate, acquisition-related costs associated with the MTS acquisition and other matters discussed herein, are based upon reasonable assumptions, the expectations may not be attained or there may be material deviation.

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 (i) the coronavirus (“COVID-19”) pandemic, including its future impact on the Company or (ii) the expected closing of the divestiture of the MTS Test & Simulation (“MTS T&S”) business to Illinois Tool Works Inc.

(“ITW”), which may not be completed in a timely manner or at all, each of which are discussed within this Form 10-Q.

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

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.

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

future risks and existing uncertainties associated with adverse public health developments, including epidemics and pandemics such as 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, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers;

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 adverse public health developments, including epidemics and pandemics such as 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 or at all and to adjust certain costs, travel restrictions, “work-from-home” orders, 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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governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws;

cybersecurity threats or incidents that could arise on our information technology systems, which could disrupt business operations or cause the release of highly sensitive confidential information and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations;

cybersecurity threats, malware, phishing, ransomware or other increasingly sophisticated attacks, that could impair our information technology systems and could disrupt business operations, result in a loss of or inability to access confidential information and critical business, financial or other data, and/or cause the release of highly sensitive confidential information and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations;

changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions;

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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, future government regulations and actions in response to the crisis, the timing, availability and effectiveness of vaccines, 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, any potential resurgence of the crisis including from the recent, more transmissible Delta variant strain, future government regulations and actions in response to the crisis, the timing, availability, effectiveness and adoption rates of vaccines, 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.

A further description of these uncertainties and other risks can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the Securities and Exchange Commission.

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Impact of COVID-19 on our Operations, Financial Condition, Liquidity and Results of Operations

The COVID-19 pandemic caused widespread disruptions to our Company during 2020, particularly during the first half of that year, and as of March 31, 2021, we continue to experience some disruptions, and at a minimum, we expect those disruptions to continue through the second quarter of 2021 and they could, potentially, extend for the full year and beyond.

restrictions, “work-from-home” orders, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

In the second half of 2020 and into the first quarter of 2021, in several regions around the world, including the United States, Europe, South America and India, there was a resurgence in COVID-19 cases.

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, future government regulations and actions in response to the crisis, the timing, availability and effectiveness of vaccines, 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.

The COVID-19 pandemic caused widespread disruptions to our Company during 2020, particularly during the first half of that year, and as of June 30, 2021, we continue to experience some disruptions, and at a minimum, we expect those disruptions to continue through the third quarter of 2021 and they could, potentially, extend for the full year and

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 or at all and to adjust certain costs, travel restrictions, “work-from-home” orders, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.

In the second half of 2020 and into the first half of 2021, in several regions around the world, there was a resurgence in COVID-19 cases.

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, any potential resurgence of the crisis including from the recent, more transmissible Delta variant strain, future government regulations and actions in response to the crisis, the timing, availability, effectiveness and adoption rates of vaccines, 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 COVID-19 pandemic could impact the health of our management team and other employees.

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Results of Operations

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Net sales were $2,377.1 in the first quarter of 2021 compared to $1,862.0 in the first quarter of 2020, which represented an increase of 28% in U.S.

Three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020

Net sales were $2,653.9 in the second quarter of 2021 compared to $1,987.5 in the second quarter of 2020, which represented an increase of 34% in U.S.

dollars, 30% in constant currencies and 22% organically, over the respective prior year period.

The increase in net sales was driven primarily by growth in nearly all markets in the Interconnect Products and Assemblies segment, as described below.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the first quarter of 2021 increased 28% in U.S.

dollars, 25% in constant currencies and 23% organically, compared to the first quarter of 2020.

This increase was driven by growth in nearly all markets, in particular by strong growth in the automotive, mobile devices, industrial, and information technology and data communications markets, moderate growth in the military and mobile networks markets, and contributions from the Company’s acquisition program, all of which were slightly offset by a significant decline in the commercial aerospace market which continued to be negatively impacted by the COVID-19 pandemic.

The strong sales growth in the Interconnect Products and Assemblies segment also reflected a recovery in certain markets from the negative impact in the first quarter of 2020 resulting from the COVID-19 pandemic.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the first quarter of 2021, which primarily serves the broadband communications market, increased 17% in U.S.

dollars, 18% in constant currencies and 18% organically, compared to the first quarter of 2020.

This increase was primarily driven by increased market demand at broadband operators, as well as the market recovery from the negative impact of the COVID-19 pandemic that impacted the first quarter of 2020.

Net sales were $5,031.0 in the first six months of 2021 compared to $3,849.5 in the first six months of 2020, which represented an increase of 31% in U.S.

dollars, 27% in constant currencies and 22% organically, over the respective prior year period.

The increase in net sales during the second quarter and first six months of 2021 was driven primarily by growth in several markets in the Interconnect Products and Assemblies segment, as described below.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the second quarter of 2021 increased 34% in U.S.

dollars, 30% in constant currencies and 22% organically, compared to the second quarter of 2020.

The increase in the second quarter of 2021 compared to the second quarter of 2020 was driven by growth in several markets, in particular by strong growth in the automotive, industrial, and military markets, and moderate growth in the information technology and data communications and commercial aerospace markets, which included contributions from the Company’s acquisition program, all of which were slightly offset by a moderate decline in the mobile devices market.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) in the first six months of 2021 increased 31% in U.S.

dollars, 27% in constant currencies and 22% organically, compared to the first six months of 2020.

The increase in the first six months of 2021 compared to the first six months of 2020 was driven by growth in several markets, in particular by strong growth in the automotive, industrial, information technology and data communications, military and mobile devices markets, and moderate growth in the mobile networks market, along with contributions from the Company’s acquisition program, all of which were slightly offset by a significant decline in the commercial aerospace market which continued to be negatively impacted by the COVID-19 pandemic.

The strong sales growth in 2021 in the Interconnect Products and Assemblies segment also reflected a recovery in certain markets from the negative impact resulting from the COVID-19 pandemic during both the second quarter and first six months of 2020.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the second quarter of 2021, which primarily serves the broadband communications market, increased 27% in U.S.

dollars, 24% in constant currencies and 15% organically, compared to the second quarter of 2020.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales) in the first six months of 2021, which primarily serves the broadband communications market, increased 22% in U.S.

dollars, 21% in constant currencies and 16% organically, compared to the first six months of 2020.

The increase in both periods in 2021 was primarily driven by increased market demand at broadband operators, coupled with the market recovery from the negative impact of the COVID-19 pandemic that impacted the first six months of 2020 as well as the contribution from one acquisition in this segment that closed during the first quarter of 2021.

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 months ended March 31, 2021 compared to the three months ended March 31, 2020:

GAAP financial measures for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020:

Percentage Growth (relative to same prior year period)

Sales Growth (3)

Three Months Ended March 31:

Three Months Ended June 30:

Interconnect Products and Assemblies

Cable Products and Solutions

Six Months Ended June 30:

Interconnect Products and Assemblies

Cable Products and Solutions

(1) Net sales growth in U.S.

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GAAP financial measure, for purposes of this table, we derive the reported (GAAP) measure based on GAAP results, which serves as the basis for the reconciliation to its comparable non-GAAP financial measures.

(2) Foreign currency translation impact, a non-GAAP measure, represents the impact on net sales resulting from foreign currency exchange rate changes in the current year period(s) compared to the same period(s) in the prior year.

(2) Foreign currency translation impact, a non-GAAP measure, represents the percentage impact on net sales resulting from foreign currency exchange rate changes in the current reporting period(s) compared to the same period(s) in the prior year.

Such amount is calculated by subtracting current year net sales translated at average foreign currency exchange rates for the respective prior year period(s) from current year reported net sales, taken as a percentage of the respective prior period net sales.

(3) Constant Currency Net Sales Growth and Organic Net Sales Growth are non-GAAP financial measures as defined in the "Non-GAAP Financial Measures"

(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 first quarter of 2021 increased 10% in U.S.

dollars ($673.9 in 2021 versus $615.4 in 2020) and 7 % organically, compared to the first quarter of 2020.

Foreign sales in the first quarter of 2021 increased 37% in U.S.

dollars ($1,703.2 in 2021 versus $1,246.6 in 2020), 32% in constant currencies and 30% organically, compared to the first quarter of 2020.

(4) Acquisition impact, a non-GAAP measure, represents the percentage impact on net sales resulting from acquisitions that have closed during the prior twelve months that have not been included in the Company's consolidated results for the full current period(s) and/or prior comparable period(s) presented.

Such net sales related to these acquisitions do not reflect the underlying growth of the Company on a comparative basis.

Geographically, sales in the United States in the second quarter of 2021 increased 37% in U.S.

dollars ($779.1 in 2021 versus $569.8 in 2020) and 24 % organically, compared to the second quarter of 2020.

Sales in the United States in the first six months of 2021 increased 23% in U.S.

dollars ($1,453.0 in 2021 versus $1,185.2 in 2020) and 16% organically, compared to the first six months of 2020.

Foreign sales in the second quarter of 2021 increased 32% in U.S.

dollars ($1,874.8 in 2021 versus $1,417.7 in 2020), 27% in constant currencies and 21% organically, compared to the second quarter of 2020.

Foreign sales in the first six months of 2021 increased approximately 34% in U.S.

dollars ($3,578.0 in 2021 versus $2,664.3 in 2020), 30% in constant currencies and 25% organically, compared to the first six months of 2020.

The comparatively weaker U.S.

dollar for the first quarter of 2021 had the effect of increasing sales by approximately $56.4 relative to the comparable period in 2020.

Selling, general and administrative expenses increased to $262.7, or 11.1% of net sales, for the first quarter of 2021, compared to $242.9, or 13.0% of net sales, for the first quarter of 2020.

The decrease in selling, general and administrative expenses as a percentage of net sales in the first quarter of 2021 is primarily driven by higher sales during the first quarter of 2021, relative to the comparable period of 2020.

Administrative expenses represented approximately 4.3% of net sales for the first quarter of 2021 and represented approximately 5.2% o f net sales for the first quarter of 2020.

Research and development expenses represented approximately 3.1% of net sales for the first quarter of 2021 and represented approximately 3.1% of net sales for the first quarter of 2020.

Selling and marketing expenses represented approximately 3.7% of net sales for the first quarter of 2021 and represented approximately 4.8% of net sales for the first quarter of 2020.

The comparable first quarter of 2020 was negatively impacted by government actions imposed in response to the COVID-19 pandemic that limited the Company’s ability to adjust costs during that quarter which elevated the percentage of net sales in such period.

Operating income was $464.8, or 19.6% of net sales, for the first quarter of 2021, compared to $316.9, or 17.0% of net sales, for the first quarter of 2020.

The increase in operating income and operating margin for the first quarter of 2021 relative to the comparable period in 2020 was primarily driven by the Interconnect Products and Assemblies segment.

Operating income for the Interconnect Products and Assemblies segment for the first quarter of 2021 was $489.4, or 21.5% of net sales, compared to $339.8, or 19.1% of net sales, for the first quarter of 2020.

The increase in operating margin for the Interconnect Products and Assemblies segment for the first quarter of 2021 relative to the comparable period in 2020 is primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to the first quarter of 2020, partially offset by the impact of the more challenging commodity and supply chain environment.

Operating income for the Cable Products and Solutions segment for the first quarter of 2021 was $8.5, or 8.8% of net sales, compared to $6.3, or 7.6% of net sales, for the first quarter of 2020.

The increase in operating margin for the Cable Products and Solutions segment for the first quarter of 2021 relative to the comparable period in 2020 is primarily

driven by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to the first quarter of 2020, partially offset by the impact of the more challenging commodity and supply chain environment.

Interest expense for the first quarter of 2021 was $28.6 compared to $28.8 for the first quarter of 2020.

dollar for the second quarter and first six months of 2021 had the effect of increasing sales by approximately $74.0 and $130.5, respectively, relative to the comparable periods in 2020.

Selling, general and administrative expenses increased to $311.6, or 11.7% of net sales, and $574.3, or 11.4% of net sales, for the second quarter and first six months of 2021, respectively, compared 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.

The decrease in selling, general and administrative expenses as a percentage of net sales in both the second quarter and first six months of 2021 is primarily driven by higher sales during both periods of 2021, relative to the comparable periods of 2020, slightly offset by the impact of the MTS Sensors business which currently has significantly higher selling, general and administrative expenses as a percentage of net sales compared to the average of the Company.

Administrative expenses represented approximately 4.6% and 4.4% of net sales for the second quarter and first six months of 2021, respectively, and represented approximately 5.0% and 5.1% o f net sales for the second quarter and first six months of 2020, respectively.

Research and development expenses represented approximately 3.1% of net sales for both the second quarter and first six months of 2021, and represented approximately 3.1% of net sales for both the second quarter and first six months of 2020.

Selling and marketing expenses represented approximately 4.1% and 3.9% of net sales for the second quarter and first six months of 2021, respectively, and represented approximately 4.3% and 4.5% of net sales for the second quarter and first six months of 2020, respectively.

Operating income was $476.2, or 17.9% of net sales, and $941.0, or 18.7% of net sales, for the second quarter and first six months of 2021, respectively, compared to $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.

Operating income for the second quarter and first six months of 2021 included $55.4 of acquisition-related expenses (separately presented in the Condensed Consolidated Statements of Income) primarily comprised of transaction, severance, restructuring and certain non-cash costs related to the acquisition of MTS Systems Corporation (“MTS”).

For the three and six months ended June 30, 2021, these acquisition-related expenses had the effect of decreasing net income from continuing operations by $44.6, 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, were $531.6, or 20.0% of net sales and $996.4, or 19.8% of net sales, for the three and six months ended June 30, 2021, respectively.

The increase in Adjusted Operating Income and Adjusted Operating Margin for the second quarter and first six months of 2021 relative to the comparable period in 2020 was primarily driven by the Interconnect Products and Assemblies segment, as discussed further below.

Operating income for the Interconnect Products and Assemblies segment for the second quarter and first six months of 2021 was $559.7, or 22.0% of net sales, and $1,049.0, or 21.8% of net sales, respectively, compared to $379.5, or 20.0% of net sales, and $719.2, or 19.6% of net sales, for the second quarter and first six months of 2020, respectively.

The increase in operating margin for the Interconnect Products and Assemblies segment for the second quarter and first six months of 2021 relative to the comparable periods in 2020 was primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to the second quarter and first six months of 2020, partially offset by the impact of the more challenging commodity and supply chain environment experienced to date in 2021.

Operating income for the Cable Products and Solutions segment for the second quarter and first six months of 2021 was $6.9, or 6.1% of net sales, and $15.4, or 7.4% of net sales, respectively, compared to $8.4, or 9.4% of net sales, and $14.8, or 8.6% of net sales, for the second quarter and first six months of 2020, respectively.

The decrease in operating margin for the Cable Products and Solutions segment for the second quarter and first six months of 2021 relative to the comparable periods in 2020 is primarily driven by the impact of the more challenging commodity and supply chain environment experienced to date in 2021.

Interest expense for the second quarter and first six months of 2021 was $29.1 and $57.7, respectively, compared to $30.2 and $59.0 for the second quarter and first six months of 2020, 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 first quarter of 2021 was at an effective tax rate of 23.9%, compared to 15.9% for the first quarter of 2020.

For the first quarter of 2021 and 2020, 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 table below.

For the first quarter 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 table 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 months ended March 31, 2021 and 2020 was 24.5% for both periods, as reconciled in the table below to the comparable effective tax rate based on GAAP results.

Provision for income taxes for the second quarter and first six months of 2021 was at an effective tax rate of 17.5% and 20.6%, respectively.

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.

For the second quarter and first six months of 2021 and 2020, 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 second quarter and first six months of 2021, the effective tax rate was further impacted by the tax effect of acquisition-related expenses and the discrete tax benefit related to the settlement of uncertain tax positions in certain non-U.S.

jurisdictions, each of which had the impact on the effective tax rate and 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 a non-U.S.

jurisdiction 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.

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, 2021 and 2020 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 $329.6 and $0.53, respectively, for the first quarter of 2021, compared to $242.1 and $0.40, respectively, for the first quarter of 2020.

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 $327.0 and $0.52, respectively, for the first quarter of 2021, compared to $217.2 and $0.35, respectively, for the first quarter of 2020.

The following table reconciles 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 months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Net income from continuing operations attributable to Amphenol Corporation and Net income (from continuing operations) per common share attributable to Amphenol Corporation - Diluted (“Diluted EPS”) were $367.2 and $0.59, respectively, for the second quarter of 2021, compared to $257.7 and $0.42, respectively, for the second quarter of 2020.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income from continuing operations 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 $377.6 and $0.61, respectively, for the second

quarter of 2021, compared to $245.3 and $0.40, respectively, for the second quarter of 2020.

Net income from continuing operations attributable to Amphenol Corporation and Diluted EPS were $696.7 and $1.12, respectively, for the first six months of 2021, compared to $499.8 and $0.82, respectively, for the first six months of 2020.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income from continuing operations attributable to Amphenol Corporation and Adjusted Diluted EPS were $704.4 and $1.13, respectively, for the first six months of 2021, compared to $462.5 and $0.76, respectively, for the first six months of 2020.

The following tables reconcile Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income from continuing operations attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (all on a continuing operations basis only, as 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, 2021 and 2020:

Three Months Ended June 30,

Reported (GAAP)

Acquisition-related expenses

Excess tax benefits related to stock-based compensation

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Adjusted (non-GAAP) (2)

Six Months Ended June 30,

Reported (GAAP)

Acquisition-related expenses

Excess tax benefits related to stock-based compensation

Discrete tax item

Adjusted (non-GAAP) (2)

All data in the tables above are on a continuing operations basis only and exclude results associated with discontinued operations.

(1) While the terms “operating margin” and “effective tax rate” are not considered U.S.

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therefore, the sum of the components may not add due to rounding.

Discontinued Operations

Following the acquisition of MTS, the Company concluded that the MTS T&S business met the discontinued operations reporting criteria as of the MTS acquisition date of April 7, 2021 in light of our definitive agreement to sell the MTS T&S business to ITW.

As a result, the financial results of the MTS T&S business are reported as discontinued operations for the three and six months ended June 30, 2021.

Income from discontinued operations attributable to Amphenol Corporation, net of income taxes, was $2.6 for both the second quarter and first six months of 2021.

Income from discontinued operations relates to the results associated with the MTS T&S business that was acquired as part of the MTS acquisition.

The Company will continue to account for the MTS T&S business as discontinued operations until the business is sold to ITW upon the receipt of all required regulatory approvals and the satisfaction of other customary closing conditions, which we expect to occur within one year of the date of the acquisition of MTS.

The Company expects to incur certain transaction fees and other professional and external costs associated with the planned sale of the

MTS T&S business.

Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for further details related to the planned divestiture of the MTS T&S business.

Liquidity and Capital Resources

As of March 31, 2021 and December 31, 2020, the Company had cash, cash equivalents and short-term investments of $2,361.2 and $1,738.1, respectively, with the majority of such funds located outside of the United States.

As of June 30, 2021 and December 31, 2020, the Company had cash, cash equivalents and short-term investments of $1,242.6 and $1,738.1, respectively, with the majority of such funds located outside of the United States.

On April 7, 2021, the Company used a combination of cash and cash equivalents on hand and borrowings under its U.S.

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Tax Cuts and Jobs Act of 2017 (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.

and local tax costs related to the repatriation.

state and local tax costs related to the repatriation.

The associated tax payments are due as the repatriations are made.

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 March 31, 2021, and intends to indefinitely reinvest all remaining post-2017 foreign earnings.

state and local taxes, if applicable, on those earnings as appropriate as of June 30, 2021, 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 debt service requirements consist primarily of principal and interest on the Company’s Senior Notes, and to the extent of any amounts outstanding, the Revolving Credit Facility and the Commercial Paper Programs (all as defined below).

The Company may also use cash to fund all or part of the cost of acquisitions, as was the case with the recent acquisition of MTS in April 2021.

The Company may also use cash to fund all or part of the cost of acquisitions, as was the case with the recent acquisition of MTS.

Cash Flow Summary

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the three months ended March 31, 2021 and 2020, as reflected in the Condensed Consolidated Statements of Cash Flow:

Three Months Ended March 31,

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the six months ended June 30, 2021 and 2020, as reflected in the Condensed Consolidated Statements of Cash Flow:

Six Months Ended June 30,

Net cash provided by operating activities from continuing operations

Net cash used in investing activities from continuing operations

Net cash provided by (used in) financing activities from continuing operations

Net cash change from discontinued operations

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Due to the immateriality of the Company’s discontinued operations associated with the MTS T&S business discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements, the following discussion related to the Company’s cash flows is on a continuing operations basis only, unless otherwise noted.

Operating Activities

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 $ 321.0 in the first three months of 2021 compared to $384.3 in the first three months of 2020.

The decrease in Operating Cash Flow for the first three months of 2021 compared to the first three months of 2020 is primarily due to an increase in the components of working capital, partially offset by an increase in net income.

In the first three months of 2021, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $114.6, excluding the impact of acquisitions and foreign currency translation, due to an increase in inventories of $85.7 and decreases in accounts payable of $52.6 and accrued liabilities, including income taxes, of $16.4, partially offset by decreases in accounts receivable of $32.1 and prepaid expenses and other current assets of $8.0.

In the first three months of 2020, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow decreased $43.8, excluding the impact of acquisitions and foreign currency translation, primarily due to a decrease in accounts receivable of $166.0, partially offset by an increase in inventories of $37.1 and decreases in accrued liabilities, including income taxes, of $35.3 and accounts payable of $33.5.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at March 31, 2021 as compared to December 31, 2020.

Accounts receivable decreased $ 19.8 to $1,931.8, primarily due to slightly lower sales in the first quarter of 2021 relative to the fourth quarter of 2020, along with the effect of translation from exchange rate changes (“Translation”) at March 31, 2021 compared to December 31, 2020, partially offset by the impact of the four acquisitions which closed during the first quarter of 2021 (the “2021 acquisitions”) .

Days sales outstanding at March 31, 2021 and December 31, 2020 were 73 days and 72 days, respectively.

Inventories increased $ 102.9 to $1,565 .1, primarily in response to the recent supply chain disruptions experienced during the first quarter along with the impact of the 2021 acquisitions, partially offset by the effect of Translation.

Inventory days at March 31, 2021 and December 31, 2020 were 85 days and 79 days, respectively.

Prepaid expenses and other current assets decreased $10.3 to $328.6, primarily due to decreases in certain current receivables.

Net cash provided by operating activities from continuing operations (“Operating Cash Flow”) was $ 732.0 in the first six months of 2021 compared to $752.4 in the first six months of 2020.

The decrease in Operating Cash Flow for the first six months of 2021 compared to the first six months of 2020 is primarily due to a higher usage of cash related to the change in working capital, partially offset by an increase in net income from continuing operations.

In the first six months of 2021, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $194.9, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in inventories of $165.4, accounts receivable of $42.4 and prepaid expenses and other current assets of $15.0 and a decrease in accrued liabilities, including income taxes, of $24.6, partially offset by an increase in accounts payable of $52.5.

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, primarily 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.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at June 30, 2021 as compared to December 31, 2020.

Accounts receivable increased $ 121.2 to $2,072.8, primarily due to higher sales in the second quarter of 2021 relative to the fourth quarter of 2020, along with the impact of the MTS acquisition and the other five acquisitions (collectively, the “2021 acquisitions”) that closed during the first six months of 2021, partially offset by the effect of translation from exchange rate changes (“Translation”) at June 30, 2021 compared to December 31, 2020.

Days sales outstanding at June 30, 2021 and December 31, 2020 were 71 days and 72 days, respectively.

Inventories increased $ 309.2 to $1,771 .4, primarily due to higher sales in addition to the impact of recent supply chain disruptions experienced during the first six months of 2021, along with the impact of the 2021 acquisitions, partially offset by Translation.

Inventory days at June 30, 2021 and December 31, 2020 were 85 days and 79 days, respectively.

Prepaid expenses and other current assets increased $33.1 to $372.0, primarily due to increases in certain prepaid expenses and other current receivables as well as the impact of the 2021 acquisitions.

Property, plant and equipment, net, increased $ 114.7 to $1,169.3, primarily due to capital expenditures of $183.3 and the impact of the 2021 acquisitions, partially offset by depreciation of $131.6 and Translation.

Goodwill increased $60.9 to $5,093.0, resulting from goodwill recognized related to the 2021 acquisitions, partially offset by Translation.

Other intangible assets, net increased $12.8 to $410.3, primarily due to the recognition of certain intangible assets related to the 2021 acquisitions, partially offset by amortization.

Accounts payable decreased $50.0 to $1,070.7.

Payable days at March 31, 2021 and December 31, 2020 were 59 days and 61 days, respectively.

Other long-term liabilities, including deferred tax liabilities, increased $22.5 to $728.8, primarily as a result of an increase in deferred tax liabilities.

Goodwill increased $859.6 to $5,891.7, resulting from goodwill recognized related to the 2021 acquisitions, primarily from the MTS acquisition, partially offset by Translation.

Other intangible assets, net increased $223.3 to $620.8, primarily due to the recognition of certain intangible assets related to the 2021 acquisitions, primarily from the MTS acquisition, partially offset by amortization.

Other long-term assets increased $33.8 to $386.1, primarily due to an increase in operating lease right-of-use assets resulting from both leases assumed from the 2021 acquisitions as well as new and renewed lease agreements entered into during the first six months of 2021.

Accounts payable increased $84.0 to $1,204.7, primarily due to increased purchasing activity related to higher sales levels, along with the impact of the 2021 acquisitions.

Payable days at June 30, 2021 and December 31, 2020 were 60 days and 61 days, respectively.

Total accrued expenses, including accrued income taxes, increased $88.8 to $1,042.1, primarily as a result of the MTS acquisition and the other 2021 acquisitions, along with an increase in accrued salaries and wages and other accrued expenses, partially offset by a decrease in accrued income taxes, primarily resulting from certain tax payments.

Other long-term liabilities, including deferred tax liabilities, increased $140.7 to $847.0, primarily as a result of an increase in deferred tax liabilities resulting from the MTS acquisition.

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 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 three months ended March 31, 2021 and 2020.

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

Three Months Ended March 31,

GAAP financial measure for the six months ended June 30, 2021 and 2020.

The decrease in Free Cash Flow was

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

The following table is on a continuing operations basis only and excludes any cash flows related to discontinued operations:

Six Months Ended June 30,

Operating Cash Flow (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 $263.2 in the first quarter of 2021, compared to $70.4 in the first quarter of 2020.

In the first quarter of 2021, net cash used in investing activities was driven primarily by the use of $185.6 to fund acquisitions and capital expenditures (net of disposals) of $77.5, partially offset by net sales and maturities of short-term investments of $2.3.

In the first quarter of 2020, net cash used in investing activities was driven primarily by capital expenditures (net of disposals) of $59.6, and the use of $16.5 to fund acquisitions, partially offset by net sales and maturities of short-term investments of $5.7.

Net cash used in investing activities from continuing operations was $1,721.3 in the first six months of 2021, compared to $151.7 in the first six months of 2020.

In the first six months of 2021, net cash used in investing activities from continuing operations was driven primarily by the use of $1,531.0 to fund acquisitions and capital expenditures (net of disposals) of $181.7, partially offset by net sales and maturities of short-term investments of $2.6.

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.

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 provided by financing activities was $586.2 in the first quarter of 2021, compared to $1,187.4 in the first quarter of 2020.

For the first quarter of 2021, net cash provided by financing activities was driven by (i) net borrowings of $813.1 comprised primarily of borrowings under the U.S.

Commercial Paper Program in anticipation of the closing of the MTS acquisition and (ii) cash proceeds of $21.1 from the exercise of stock options, partially offset by (i) repurchases of the Company’s common stock of $152.8, (ii) dividend payments of $86.8, (iii) distributions to and purchases of noncontrolling interests of $7.6, and (iv) repayments of $0.8 related to other long-term debt.

For the first quarter of 2020, net cash provided by financing activities was driven primarily by (i) net borrowings of $1,352.4 under the Company’s credit facilities, (ii) net cash proceeds from the February 2020 issuance of the 2025 Senior Notes (as defined below) of $399.3, and (iii) cash proceeds of $30.0 from the exercise of stock options, partially offset by (i) repurchases of the Company’s common stock of $257.2, (ii) net repayments related to the Company’s commercial paper programs of $250.4, (iii) dividend payments of $74.4, (iv) distributions to and purchases of noncontrolling interests of $8.1, (v) payments of costs of $3.9 related to debt financing primarily associated with the 2025 Senior Notes, and (vi) repayments of $0.3 related to other long-term debt.

Net cash provided by financing activities from continuing operations was $613.0 in the first six months of 2021, compared to net cash used in financing activities from continuing operations of $191.4 in the first six months of 2020.

For the first six months of 2021, net cash provided by financing activities from continuing operations was driven primarily by (i) net borrowings of $1,402.7 comprised primarily of borrowings under the U.S.

Commercial Paper Program, most of the proceeds of which were used for the MTS acquisition and (ii) cash proceeds of $103.3 from the exercise of stock options, partially offset by (i) debt repayments of $387.1, primarily related to the repayment of the then-outstanding MTS senior notes, (ii) repurchases of the Company’s common stock of $320.1, (iii) dividend payments of $173.4, (iv) distributions to and purchases of noncontrolling interests of $8.3, and (v) payments of $4.1 associated with the deferred purchase price related to acquisitions.

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

Senior Notes due April 2020 and other debt of $401.3, (ii) net repayments related to the Company’s commercial paper programs of $385.2, (iii) repurchases of the Company’s common stock of $257.2, (iv) dividend payments of $148.4, (v) payment related to acquisition-related contingent consideration of $75.0, (vi) distributions to and purchases of noncontrolling interests of $9.7, (vii) 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 (viii) net repayments under the Company’s credit facilities of $0.7, partially offset by the (i) 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 (ii) cash proceeds of $152.5 from the exercise of stock options.

The Company has significant flexibility to meet its financial commitments.

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

As of March 31, 2021 and December 31, 2020, there were no outstanding borrowings under the Revolving Credit Facility.

As of June 30, 2021 and December 31, 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 March 31, 2021, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

At June 30, 2021, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

Pursuant to the terms of the U.S.

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Commercial Paper Program”).

The amount of USCP Notes outstanding as of March 31, 2021 was $811.0, with a weighted average interest rate of 0.20%.

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

The amount of USCP Notes outstanding as of June 30, 2021 was $1,401.0, with a weighted average interest rate of 0.21%.

On April 7, 2021, a combination of borrowings under the U.S.

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dollars or other currencies.

As of March 31, 2021 and December 31, 2020, there were no ECP Notes outstanding.

The maximum aggregate principal amount outstanding of ECP Notes at any time is $2,000.0.

As of June 30, 2021 and December 31, 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 principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper or similar programs, along with outstanding amounts under the Revolving Credit Facility, at any time to $2,500.0 in the aggregate.

In addition, the maximum aggregate principal amount outstanding of USCP Notes and ECP Notes at any time is $2,500.0 and $2,000.0, respectively.

The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by

Moody’s and are currently backstopped by the Revolving Credit Facility, as amounts undrawn under the Company’s Revolving Credit Facility are available to repay Commercial Paper, if necessary.

The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by Moody’s and are currently backstopped by the Revolving Credit Facility, as amounts undrawn under the Company’s Revolving Credit Facility are available to repay Commercial Paper, if necessary.

Net proceeds of the issuances of Commercial Paper are expected to be used for general corporate purposes.

The Company reviews its optimal mix of short-term and long-term debt regularly and may replace certain amounts of Commercial Paper, short-term debt and current maturities of long-term debt with new issuances of long-term debt in the future.

As of March 31, 2021, the Company has outstanding senior notes (the “Senior Notes”) as follows:

As of June 30, 2021, the Company has outstanding senior notes (the “Senior Notes”) as follows:

September 2021

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Senior Notes, subject to certain terms and conditions.

The remaining principal amounts outstanding associated with the Company’s 3.125% Senior Notes due in September 2021 and 4.00% Senior Notes due in February 2022 are each recorded, net of the related unamortized discount and debt issuance costs, within Current portion of long-term debt in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2021.

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 the “0.750% Euro Senior Notes” and collectively with the Euro Notes due October 2028, the “Euro Notes”).

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

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”).

During the three months ended March 31, 2021, the Company repurchased 2.4 million shares of its Common Stock for $152.8, under the 2018 Stock Repurchase Program.

Of the total repurchases during the first three months of 2021, 0.3 million shares, or $19.8, have been retained in Treasury stock at time of repurchase;

In April 2018, the Company’s Board of Directors authorized a stock repurchase program under which the Company could 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”).

During the three and six months ended June 30, 2021, the Company repurchased 0.8 million and 3.1 million shares of its Common Stock for $51.0 and $203.8, respectively, under the 2018 Stock Repurchase Program.

As a result of these purchases, the Company completed all purchases authorized under the 2018 Stock Repurchase Program and, therefore, the 2018 Stock Repurchase Program has terminated.

Of the total repurchases made during the first six months of 2021, 0.3 million shares, or $19.8, have been retained in Treasury stock at the time of repurchase;

the remaining 2.8 million shares, or $184.0, have been retired by the Company.

During the three months ended March 31, 2020, the Company repurchased 5.4 million shares of its Common Stock for $257.2, under the 2018 Stock Repurchase Program.

All of the repurchases during the first three months of 2020 were retired by the Company.

In April 2021, the Company repurchased 0.8 million additional shares of its Common Stock for $51.0, which completed the 2018 Stock Repurchase Program.

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 5.4 million shares of its Common Stock for $257.2 under the 2018 Stock Repurchase Program.

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

On April 27, 2021, the Company’s Board of Directors authorized a new 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 27, 2024 (the “2021 Stock Repurchase Program”) in accordance with the requirements of Rule 10b-18 of the Exchange Act.

As of April 27, 2021, the Company has not repurchased any shares of its Common Stock under the 2021 Stock Repurchase Program.

During the three months ended June 30, 2021, the Company repurchased 1.7 million shares of its Common Stock for $116.3 under the 2021 Stock Repurchase Program.

All of the shares repurchased under the 2021 Stock Repurchase Program during the second quarter of 2021 have been or will be retired by the Company.

From July 1, 2021 to July 27, 2021, the Company repurchased 0.7 million additional shares of its Common Stock for $48.8 under the 2021 Stock Repurchase Program, and has remaining authorization to purchase up to $1,834.9 of its Common Stock under the 2021 Stock Repurchase Program.

The price and timing of any future purchases under the 2021 Stock Repurchase Program will depend on a number of factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends paid, economic and market conditions and the price of the Company’s common stock.

Contingent upon declaration by the Company’s 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 months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Contingent upon declaration by the Company’s Board of Directors, the Company 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, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

Dividends declared per share

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Acquisitions and Divestitures

During the first three months of 2021, the Company completed four acquisitions, all but one of which is included within the Interconnect Products and Assemblies segment, for approximately $185.6, net of cash acquired.

During the first six months of 2021, the Company completed six acquisitions, all but one of which is included within the Interconnect Products and Assemblies segment, for approximately $1,531.0, net of cash acquired.

These 2021 acquisitions were not material, either individually or in the aggregate, to the Company.

Acquisition of MTS and Anticipated Divestiture of MTS T&S Business

Acquisition of MTS and Planned Divestiture of MTS T&S Business

On April 7, 2021, pursuant to a definitive agreement dated December 9, 2020, by and among the Company and MTS, the Company completed the acquisition of MTS for a purchase price of approximately $1,300, net of cash acquired and including the repayment of certain outstanding debt and liabilities at closing.

In addition to the purchase price, the Company also assumed MTS’s then outstanding senior notes due August 15, 2027, which the Company repaid and settled shortly after the closing, including accrued interest, for approximately $355.

The MTS acquisition was funded through a combination of borrowings under the U.S.

Commercial Paper Program and cash and cash equivalents on hand.

In addition to the purchase price, the Company also assumed MTS’s then-outstanding $350.0 principal amount of senior notes due August 15, 2027, which the Company repaid and settled shortly after the closing for approximately $387.3, which included accrued interest and a make-whole premium incurred as a result of the early extinguishment of the senior notes.

MTS is a leading global supplier of precision sensors, advanced test systems and motion simulators.

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The MTS Sensors segment represents a highly complementary offering of high-technology, harsh environment sensors sold into diverse end markets and applications.

The MTS Sensors business will further expand the Company’s range of sensor and sensor-based products across a wide array of industries and will be reported as part of our continuing operations and within our Interconnect Products and Assemblies segment.

The Company has incurred and will continue to incur certain acquisition-related expenses such as non-cash purchase accounting-related charges, costs related to the early extinguishment of the MTS senior notes, external transaction costs, severance costs and other costs associated with the MTS acquisition, which is currently expected to be approximately $85, or $0.12 per diluted share, for the second quarter of 2021.

On January 19, 2021, the Company entered into an agreement to sell the MTS T&S business to Illinois Tool Works Inc.

The agreed-upon sale price is approximately $750, subject to certain post-closing adjustments and excluding

transaction-related expenses, and the closing is subject to the receipt of all required regulatory approvals and the satisfaction of other customary closing conditions.

For further discussion of the Company’s first quarter acquisitions, refer to Note 11 of the Notes to Condensed Consolidated Financial Statements.

For further details related to the MTS acquisition, as well as the planned divestiture of the MTS T&S business, refer to Note 16 of the Notes to Condensed Consolidated Financial Statements.

The MTS Sensors business further expands the Company’s range of sensor and sensor-based products across a wide array of industries and is reported as part of our continuing operations and within our Interconnect Products and Assemblies segment.

In the second quarter of 2021, the Company incurred $55.4 ($44.6 after-tax, or $0.07 per diluted share) of acquisition-related expenses, primarily comprised of transaction, severance, restructuring and certain non-cash costs related to the MTS acquisition.

On January 19, 2021 and prior to the closing of the MTS acquisition, the Company entered into a definitive agreement to sell the MTS T&S business to Illinois Tool Works Inc.

The agreed-upon sale price is approximately $750, subject to certain post-closing adjustments and excluding any outstanding net debt assumed by Amphenol related to the MTS T&S business.

The Company expects to close on the sale of the MTS T&S business upon the receipt of all required regulatory approvals and the satisfaction of other customary closing conditions, which is expected to be within one year of the date of the acquisition of MTS.

The MTS T&S business meets the “held for sale” accounting criteria, and its results and related cash flows are reported as discontinued operations, effective as of the MTS acquisition date, in the accompanying Condensed Consolidated Financial Statements.

Such classification as discontinued operations will continue until the MTS T&S business is sold to ITW as currently anticipated.

The Company did not assign the MTS T&S business to either of our two reportable business segments due to its planned sale.

Amphenol will not have any continuing involvement with the MTS T&S business after the date of its divestiture.

For further discussion of the Company’s 2021 acquisitions, including MTS, refer to Note 11 of the Notes to Condensed Consolidated Financial Statements.

For further details related to the Company’s discontinued operations as

well as the planned divestiture of the MTS T&S business, refer to Note 12 of the Notes to Condensed Consolidated Financial Statements.

Environmental Matters

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Management believes that these non-GAAP financial measures may be helpful to investors in assessing the Company’s overall financial performance, trends and period-over-period comparative results, in addition to the reasons noted below.

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.

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

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.

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

Non-GAAP financial measures and their most directly comparable U.S.

GAAP financial measures presented within this Item 2 are on a continuing operations basis only and exclude any results associated with discontinued operations.

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 months ended March 31, 2021 and 2020 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.

GAAP financial measures for the three and six months ended June 30, 2021 and 2020 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 from continuing operations (as reported in accordance with U.S.

GAAP), excluding income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the periods presented.

Adjusted Diluted EPS is calculated as Adjusted Net Income attributable to Amphenol Corporation, as defined below, divided by the weighted average outstanding diluted shares as reported in the Condensed Consolidated Statements of Income.

● Adjusted Effective Tax Rate is defined as Provision for income taxes, as reported in the Condensed Consolidated Statements of Income, expressed as a percentage of Income before income taxes, as reported in the Condensed Consolidated Statements of Income, each excluding the income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the periods presented.

● Adjusted Net Income attributable to Amphenol Corporation is defined as Net income attributable to Amphenol Corporation, as reported in the Condensed Consolidated Statements of Income, excluding income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the periods presented.

Adjusted Diluted EPS is calculated as Adjusted Net Income from continuing operations attributable to Amphenol Corporation, as defined below, divided by the weighted average outstanding diluted shares as reported in the Condensed Consolidated Statements of Income.

● Adjusted Effective Tax Rate is defined as Provision for income taxes, as reported in the Condensed Consolidated Statements of Income, expressed as a percentage of Income from continuing operations before income taxes, as reported in the Condensed Consolidated Statements of Income, each excluding the income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the periods presented.

● Adjusted Net Income from continuing operations attributable to Amphenol Corporation is defined as Net income from continuing operations attributable to Amphenol Corporation, as reported in the Condensed Consolidated

Statements of Income, excluding income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the periods presented.

● Adjusted Operating Income is defined as Operating income, as reported in the Condensed Consolidated Statements of Income, excluding income and expenses that are not directly related to the Company’s operating performance during the periods presented.

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● Constant Currency Net Sales Growth is defined as the period-over-period percentage change in net sales growth, excluding the impact of changes in foreign currency exchange rates.

Amphenol’s results are subject to volatility related to foreign currency translation fluctuations.

The Company’s results are subject to volatility related to foreign currency translation fluctuations.

As such, management evaluates the Company’s sales performance based on actual sales growth in U.S.

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

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

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

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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 (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.

● 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 (described above), which is outside the control of the Company, and (ii) acquisitions, both of which are taken as a percentage of the respective prior period(s) net sales.

The acquisition impact represents the percentage impact on net sales resulting from acquisitions that have closed during the prior twelve months that have not been included in the Company's consolidated results for the full current period(s) and/or prior comparable period(s) presented.

Such net sales related to these acquisitions 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