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Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-07-29 · 163 added, 145 removed, 279 unchanged (52% of the section changed)

2 unchanged sentences

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

The following discussion and analysis of the financial condition and results of operations for the three and six months ended June 30, 2022 and 2021 has been derived from and should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included in Part I, Item 1 herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our” or “us”).

The following discussion and analysis of the financial condition and results of operations for the three and nine months ended September 30, 2022 and 2021 has been derived from and should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included in Part I, Item 1 herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our” or “us”).

The following discussion and analysis should also be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”).

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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, effective tax rate or other matters, together with any forward-looking statements related in any way to the COVID-19 pandemic, including its future impact on the Company.

Although the Company believes the expectations reflected in all forward-looking statements, including those we may make with regards to expected earnings, revenues, growth, 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.

Although the Company believes the expectations reflected in all forward-looking statements, including those we may make with regards to expected earnings, revenues, growth, liquidity, the Company’s effective tax rate, interest rates, and other matters discussed herein, are based upon reasonable assumptions, the expectations may not be attained or there may be material deviation.

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

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risks associated with our inability to obtain certain raw materials and components in the current challenging supply chain environment, as well as inflationary risks, including the risk that the cost of certain of the Company’s raw materials and components is increasing;

negative impacts caused by extreme weather conditions and natural catastrophic events,

including those caused by climate change and global warming;

risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S.

negative impacts caused by extreme weather conditions and natural catastrophic events, including those caused by climate change and global warming;

risks associated with the improper conduct by any of our

employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S.

government and various foreign jurisdictions;

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The COVID-19 pandemic has affected our offices and manufacturing facilities throughout the world, as well as the facilities of our suppliers, customers and our customers’ contract manufacturers.

The COVID-19 pandemic caused widespread disruptions to our Company during the first half of 2020, and to a lesser extent, those disruptions continued throughout the remainder of 2020, all of 2021 and into 2022.

As of June 30, 2022, we continue to experience some disruptions, and at a minimum, we expect disruptions to continue for the remainder of 2022 and potentially beyond.

The COVID-19 pandemic caused widespread disruptions to our Company during the first half of 2020, and to a lesser extent, those disruptions have continued since then.

As of September 30, 2022, we continue to experience some disruptions, and at a minimum, we expect disruptions to continue for the remainder of 2022 and potentially beyond.

These disruptions have included and may continue to include government regulations that inhibit our ability to operate certain of our facilities in the ordinary course, travel restrictions, supplier constraints, supply chain interruptions, logistics challenges and limitations, labor disruptions and reduced demand from certain customers.

More recently, during most of the first half of 2022, COVID-19 outbreaks in China resulted in new government-imposed lockdowns in certain regions, which impacted the ability of several of our operations and manufacturing facilities to operate in the ordinary course .

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 impact of any additional resurgences from known or new variants, current and future government regulations and actions in response to the crisis, the timing, availability, effectiveness and adoption rates of vaccines and treatments, 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.

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

There can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on our business, operations, financial condition, liquidity and results of operations in the future.

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Refer to Note 13 o f the Notes to Condensed Consolidated Financial Statements, as well as the 2021 Annual Report, for further details related to the Company’s change in its reportable business segments effective January 1, 2022.

Inflation Reduction Act of 2022

On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022 (the “IRA”), a tax and spending package that introduces several tax-related provisions, including a 15% corporate alternative minimum tax (“CAMT”) on certain large corporations and a 1% excise tax on certain corporate stock buybacks.

Companies will be required to reassess their valuation allowances for certain affected deferred tax assets in the period of enactment but will not need to remeasure deferred tax balances for the related tax accounting implications of the CAMT.

The impact of these provisions, which will become effective for Amphenol beginning on January 1, 2023, will depend on several factors, including interpretive regulatory guidance which has not yet been released.

The Company continues to review and assess the provisions of the IRA, including several other non-tax related provisions, and its potential impact on our financial condition, results of operations, liquidity and cash flows.

Results of Operations

Three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021

Net sales were $3,136.8 in the second quarter of 2022 compared to $2,653.9 in the second quarter of 2021, which represented an increase of 18% in U.S.

dollars, 21% in constant currencies and 18% organically, over the respective prior year period.

Net sales were $6,088.6 in the first six months of 2022 compared to $5,031.0 in the first six months of 2021, which represented an increase of 21% in U.S.

dollars, 23% in constant currencies and 18% organically, over the respective prior year period.

The increases in net sales in the second quarter and first six months of 2022 were driven by robust growth across all three reportable business segments, as described below.

From a market standpoint, the increases in net sales were driven by double-digit organic growth across several markets, including the automotive, information technology and data communications, industrial, broadband communications, and commercial aerospace markets and moderate growth in the mobile devices and mobile networks markets, along with contributions from the Company’s acquisition program.

Net sales in the Harsh Environment Solutions segment (approximately 25% of net sales) in the second quarter of 2022 increased 14% in U.S.

dollars, 17% in constant currencies and 16% organically, compared to the second quarter of 2021.

Net sales in the Harsh Environment Solutions segment in the first six months of 2022 increased 15% in U.S.

dollars, 17% in constant currencies and 16% organically, compared to the first six months of 2021.

The increases in the second quarter and first six months of 2022 were driven primarily by strong organic growth in the industrial, automotive,

and commercial aerospace markets and moderate growth in the information technology and data communications market, partially offset by a decline in the mobile networks market.

Net sales in the Communications Solutions segment (approximately 44% of net sales) in the second quarter of 2022 increased 24% in U.S.

dollars, 25% in constant currencies and 19% organically, compared to the second quarter of 2021.

Net sales in the Communications Solutions segment in the first six months of 2022 increased 26% in U.S.

dollars, 27% in constant currencies and 20% organically, compared to the first six months of 2021.

The increases in the second quarter and first six months of 2022 were driven by strong organic growth across several markets, including the information technology and data communications, automotive, broadband communications, industrial, and mobile networks markets, moderate growth in the mobile devices market, and contributions from the Company’s acquisition program.

Net sales in the Interconnect and Sensor Systems segment (approximately 31% of net sales) in the second quarter of 2022 increased 15% in U.S.

dollars, 20% in constant currencies and 19% organically, compared to the second quarter of 2021.

The increase in the second quarter of 2022 was driven primarily by strong organic growth in the automotive and information technology and data communications markets, along with moderate growth in the industrial and military markets.

Net sales in the Interconnect and Sensor Systems segment in the first six months of 2022 increased 20% in U.S.

dollars, 23% in constant currencies and 16% organically, compared to the first six months of 2021.

The increase in the first six months of 2022 was driven primarily by strong organic growth in the automotive, information technology and data communications, and industrial markets, along with contributions from the Company’s acquisition program, partially offset by a decline in the mobile networks market.

Three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021

Net sales were $3,295.2 in the third quarter of 2022 compared to $2,818.5 in the third quarter of 2021, which represented an increase of 17% in U.S.

dollars, 21% in constant currencies and 18% organically, over the prior year period.

Net sales were $9,383.8 in the first nine months of 2022 compared to $7,849.5 in the first nine months of 2021, which represented an increase of 20% in U.S.

dollars, 22% in constant currencies and 18% organically, over the prior year period.

The increases in net sales in the third quarter and first nine months of 2022 were driven by robust growth across all three reportable business segments, as described below.

From a market standpoint, the increase in net sales in the third quarter of 2022 was driven by robust organic growth across virtually all markets, including the automotive, industrial, information technology and data communications, mobile devices, broadband communications, commercial aerospace and mobile networks markets, moderate growth in the military market, and contributions from the Company’s acquisition program.

The increase in net sales in the first nine months of 2022 was driven by robust organic growth across virtually all markets, including the automotive, information technology and data communications, industrial, mobile devices, broadband communications, and commercial aerospace markets, moderate growth in the mobile networks and military markets, and contributions from the Company’s acquisition program.

Net sales in the Harsh Environment Solutions segment (approximately 24% of net sales) in the third quarter of 2022 increased 12% in U.S.

dollars, 17% in constant currencies and 14% organically, compared to the third quarter of 2021.

The increase in the third quarter of 2022 was driven primarily by strong organic growth in the industrial, commercial aerospace, automotive and mobile networks markets and moderate growth in the military market, along with contributions from the Company’s acquisition program.

Net sales in the Harsh Environment Solutions segment (approximately 25% of net sales) in the first nine months of 2022 increased 14% in U.S.

dollars, 17% in constant currencies and 16% organically, compared to the first nine months of 2021.

The increase in the first nine months of 2022 was driven primarily by strong organic growth in the industrial, automotive, and commercial aerospace markets and moderate growth in the information technology and data communications market, along with contributions from the Company’s acquisition program.

Net sales in the Communications Solutions segment (approximately 46% of net sales) in the third quarter of 2022 increased 19% in U.S.

dollars, 22% in constant currencies and 17% organically, compared to the third quarter of 2021.

Net sales in the Communications Solutions segment (approximately 45% of net sales) in the first nine months of 2022 increased 23% in U.S.

dollars, 25% in constant currencies and 19% organically, compared to the first nine months of 2021.

The increases in the third quarter and first nine months of 2022 were driven by strong organic growth across virtually all markets, along with contributions from the Company’s acquisition program.

Net sales in the Interconnect and Sensor Systems segment (approximately 30% of net sales) in the third quarter of 2022 increased 17% in U.S.

dollars, 24% in constant currencies and 23% organically, compared to the third quarter of 2021.

The increase in the third quarter of 2022 was driven primarily by strong organic growth in the automotive, industrial, information technology and data communications, mobile networks and commercial aerospace markets.

Net sales in the Interconnect and Sensor Systems segment (approximately 30% of net sales) in the first nine months of 2022 increased 19% in U.S.

dollars, 24% in constant currencies and 19% organically, compared to the first nine months of 2021.

The increase in the first nine months of 2022 was driven primarily by strong organic growth in the automotive, information technology and data communications, and industrial markets, along with contributions from the Company’s acquisition program, partially offset by moderate declines in the mobile networks and military markets.

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

GAAP financial measures, by segment, geography and consolidated, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021:

GAAP financial measures, by segment, geography and consolidated, for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021:

Percentage Growth (relative to same prior year period) (1)

Sales Growth (4)

Three Months Ended June 30,

Three Months Ended September 30,

Net sales by:

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United States

Six Months Ended June 30,

Nine Months Ended September 30,

Net sales by:

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The comparatively stronger U.S.

dollar for the second quarter of 2022 had the effect of decreasing sales by approximately $82.7, relative to the comparable period in 2021.

The comparatively stronger U.S.

dollar for the first six months of 2022 had the effect of decreasing sales by approximately $110.5, relative to the comparable period in 2021.

Selling, general and administrative expenses increased to $355.4, or 11.3% of net sales, and $692.1, or 11.4% of net sales, for the second quarter and first six months of 2022, respectively, compared 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.

The decrease in selling, general and administrative expenses as a percentage of net sales in the second quarter of 2022 is primarily driven by higher sales during the second quarter of 2022, relative to the comparable period of 2021.

Administrative expenses represented approximately 4.7% and 4.6% of net sales for the second quarter and first six months of 2022, respectively, and represented approximately 4.6% and 4.4% of net sales for the second quarter and first six months of 2021, respectively.

Research and development expenses represented approximately 2.6% and 2.7% of net sales for the second quarter and first six months of 2022, respectively, and represented approximately 3.1% of net sales for both the second

quarter and first six months of 2021.

Selling and marketing expenses represented approximately 4.0% and 4.1% of net sales for the second quarter and first six months of 2022, respectively, and represented approximately 4.1% and 3.9% of net sales for the second quarter and first six months of 2021, respectively.

Operating income was $648.8, or 20.7% of net sales, and $1,238.6, or 20.3% of net sales, for the second quarter and first six months of 2022, respectively, compared to $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.

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, the acquisition-related expenses had the effect of decreasing net income from continuing operations by $44.6, or $0.07 per share.

The increases in Adjusted Operating Income and Adjusted Operating Margin for the second quarter and first six months of 2022 relative to the comparable periods in 2021 were primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

Operating income for the Harsh Environment Solutions segment for the second quarter and first six months of 2022 was $206.5, or 26.1% of net sales, and $389.7, or 25.7% of net sales, respectively, compared to $181.0, or 26.0% of net sales, and $339.3, or 25.6% of net sales, for the second quarter and first six months of 2021, respectively.

The slight increases in operating margin for the Harsh Environment Solutions segment for the second quarter and first six months of 2022 relative to the comparable periods in 2021 were primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, largely offset by the continued impact of the more challenging cost environment.

Operating income for the Communications Solutions segment for the second quarter and first six months of 2022 was $303.0, or 22.0% of net sales, and $585.6, or 21.7% of net sales, respectively, compared to $235.1, or 21.1% of net sales, and $439.6, or 20.5% of net sales, for the second quarter and first six months of 2021, respectively.

The increases in operating margin for the Communications Solutions segment for the second quarter and first six months of 2022 relative to the comparable periods in 2021 were primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

Operating income for the Interconnect and Sensor Systems segment for the second quarter and first six months of 2022 was $177.5, or 18.3% of net sales, and $337.5, or 18.0% of net sales, respectively, compared to $150.5, or 17.9% of net sales, and $285.5, or 18.3% of net sales, for the second quarter and first six months of 2021, respectively.

The increase in operating margin for the Interconnect and Sensor Systems segment for the second quarter of 2022 relative to the comparable period in 2021 was primarily driven by n ormal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

The decrease in operating margin for the Interconnect and Sensor Systems segment for the first six months of 2022 relative to the comparable period in 2021 was primarily driven by the continued impact of the more challenging cost environment along with the impact of the Company’s 2021 acquisitions, in particular the MTS Sensors business which closed in April 2021 and currently operates at a lower operating margin compared to the average of the Interconnect and Sensor Systems segment, all of which was partially offset by normal operating leverage on the higher sales volumes.

Interest expense for the second quarter and first six months of 2022 was $30.5 and $58.6, respectively, compared to $29.1 and $57.7 for the second quarter and first six months of 2021, respectively.

dollar for the third quarter and first nine months of 2022 had the effect of decreasing sales by approximately $120.7 and $231.1, respectively, relative to the comparable periods in 2021.

Selling, general and administrative expenses were $366.9, or 11.1% of net sales, and $1,059.0, or 11.3% of net sales, for the third quarter and first nine months of 2022, respectively, compared to $318.7, or 11.3% of net sales, and $893.0, or 11.4% of net sales, for the third quarter and first nine months of 2021, respectively.

The decrease in selling, general and administrative expenses as a percentage of net sales in the third quarter and first nine months of 2022 is primarily driven by leverage on the higher sales volumes during both periods in 2022, relative to the comparable periods of 2021.

Administrative expenses represented approximately 4.5% and 4.6% of net sales for the third quarter and first nine months of 2022, respectively, and represented approximately 4.6% and 4.5% of net sales for the third quarter and first nine months of 2021, respectively.

Research and development expenses represented approximately 2.6% of net sales for both the third quarter and first nine months of 2022, and represented approximately 2.9% and 3.0% of net sales for the third quarter and first nine months of 2021, respectively.

Selling and marketing expenses represented

approximately 4.1% of net sales for both the third quarter and first nine months of 2022, and represented approximately 3.8% and 3.9% of net sales for the third quarter and first nine months of 2021, respectively.

Operating income was $681.1, or 20.7% of net sales, and $1,919.7, or 20.5% of net sales, for the third quarter and first nine months of 2022, respectively, compared to $571.2, or 20.3% of net sales, and $1,512.2, or 19.3% of net sales, for the third quarter and first nine months of 2021, respectively.

Operating income for both the third quarter and first nine months of 2022 includes $12.0 of acquisition-related expenses (separately presented in the Condensed Consolidated Statements of Income) comprised primarily of external transaction costs as well as the amortization related to the value associated with acquired backlog resulting from an acquisition that closed in 2022.

Operating income for the first nine months of 2021 included $55.4 of acquisition-related expenses comprised primarily of transaction, severance, restructuring and certain non-cash costs related to the acquisition of MTS Systems Corporation (“MTS”).

For both the three and nine months ended September 30, 2022, the acquisition-related expenses had the effect of decreasing net income from continuing operations by $10.5, or $0.02 per share.

For the nine months ended September 30, 2021, the 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 $693.1, or 21.0% of net sales, and $1,931.7, or 20.6% of net sales, for the three and nine months ended September 30, 2022, respectively, and $571.2, or 20.3% of net sales, and $1,567.6, or 20.0% of net sales, for the three and nine months ended September 30, 2021, respectively.

The increases in Adjusted Operating Income and Adjusted Operating Margin for the third quarter and first nine months of 2022 relative to the comparable periods in 2021 were primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

Operating income for the Harsh Environment Solutions segment for the third quarter and first nine months of 2022 was $207.1, or 26.1% of net sales, and $596.8, or 25.8% of net sales, respectively, compared to $184.7, or 26.1% of net sales, and $524.0, or 25.8% of net sales, for the third quarter and first nine months of 2021, respectively.

Operating margin for the Harsh Environment Solutions segment for the third quarter and first nine months of 2022 remained flat relative to the comparable periods in 2021, as normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, were offset by the continued impact of the more challenging cost environment.

Operating income for the Communications Solutions segment for the third quarter and first nine months of 2022 was $341.6, or 22.5% of net sales, and $927.2, or 22.0% of net sales, respectively, compared to $276.7, or 21.8% of net sales, and $716.3, or 21.0% of net sales, for the third quarter and first nine months of 2021, respectively.

The increases in operating margin for the Communications Solutions segment for the third quarter and first nine months of 2022 relative to the comparable periods in 2021 were primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

Operating income for the Interconnect and Sensor Systems segment for the third quarter and first nine months of 2022 was $185.3, or 18.8% of net sales, and $522.8, or 18.3% of net sales, respectively, compared to $146.5, or 17.4% of net sales, and $432.0, or 18.0% of net sales, for the third quarter and first nine months of 2021, respectively.

The increases in operating margin for the Interconnect and Sensor Systems segment for the third quarter and first nine months of 2022 relative to the comparable periods in 2021 were primarily driven by n ormal operating leverage on the higher sales volumes, combined with the benefit of ongoing pricing actions, partially offset by the continued impact of the more challenging cost environment.

Interest expense for the third quarter and first nine months of 2022 was $32.8 and $91.3, respectively, compared to $29.0 and $86.7 for the third quarter and first nine months of 2021, respectively.

The increase in interest expense is driven by the rising interest rate environment and its impact on the balance outstanding under the Company’s U.S.

Commercial Paper Program.

Refer to Note 4 of the Notes to 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 2022 was at an effective tax rate of 23.3% and 23.5%, respectively.

Provision for income taxes for the second quarter and first six months of 2021 was at an

Provision for income taxes for the third quarter and first nine months of 2022 was at an effective tax rate of 23.1% and 23.4%, respectively.

Provision for income taxes for the third quarter and first nine months of 2021 was at an

effective tax rate of 22.2% and 21.2%, respectively.

For the second quarter and first six months of 2022 and 2021, 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.

For the third quarter and first nine months of 2022 and 2021, 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 third quarter and first nine months of 2022, the effective tax rate was further impacted by the tax effect of acquisition-related expenses, which had the impact on the effective tax rate and earnings per share by the amounts noted in the tables below.

For the first nine 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.

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, 2022 and 2021 was 24.5% for all periods, as reconciled in the tables below to the comparable effective tax rate based on GAAP results.

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 nine months ended September 30, 2022 and 2021 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 Notes to Condensed Consolidated Financial Statements for further information related to income taxes.

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 $472.5 and $0.76, respectively, for the second quarter of 2022, compared to $367.2 and $0.59, respectively, for the second quarter of 2021.

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 $465.0 and $0.75, respectively, for the second quarter of 2022, compared to $377.6 and $0.61, respectively, for the second quarter of 2021.

Net income from continuing operations attributable to Amphenol Corporation and Diluted EPS were $898.2 and $1.44, respectively, for the first six months of 2022, compared to $696.7 and $1.12, respectively, for the first six months of 2021.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income from continuing operations attributable to Amphenol Corporation and Adjusted Diluted EPS were $886.9 and $1.42, respectively, for the first six months of 2022, compared to $704.4 and $1.13, respectively, for the first six months of 2021.

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 $496.6 and $0.80, respectively, for the third quarter of 2022, compared to $418.8 and $0.67, respectively, for the third quarter of 2021.

Excluding the effect of the items listed in the tables below, 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 $496.5 and $0.80, respectively, for the third quarter of 2022, compared to $406.5 and $0.65, respectively, for the third quarter of 2021.

Net income from continuing operations attributable to Amphenol Corporation and Diluted EPS were $1,394.8 and $2.24, respectively, for the first nine months of 2022, compared to $1,115.5 and $1.79, respectively, for the first nine months of 2021.

Excluding the effect of the items listed in the tables below, Adjusted Net Income from continuing operations attributable to Amphenol Corporation and Adjusted Diluted EPS were $1,383.4 and $2.23, respectively, for the first nine months of 2022, compared to $1,110.9 and $1.78, respectively, for the first nine months of 2021.

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, 2022 and 2021:

Three Months Ended June 30,

GAAP financial measures for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Reported (GAAP)

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Excess tax benefits related to stock-based compensation

Discrete tax item

Adjusted (non-GAAP) (2)

Six Months Ended June 30,

Nine Months Ended September 30,

Reported (GAAP)

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Liquidity and Capital Resources

As of June 30, 2022 and December 31, 2021, the Company had cash, cash equivalents and short-term investments of $1,334.4 and $1,241.4, respectively, with the majority of the Company’s cash, cash equivalents and short-term investments on hand located outside of the United States.

As of September 30, 2022 and December 31, 2021, the Company had cash, cash equivalents and short-term investments of $1,252.0 and $1,241.4, respectively, with the majority of the Company’s cash, cash equivalents and short-term investments on hand located outside of the United States.

The Company’s primary sources of liquidity are internally generated cash provided by operating activities, our cash, cash equivalents and short-term investments on hand, as well as availability under the U.S.

Commercial Paper Program, the Euro Commercial Paper Program, the Revolving Credit Facility, and the recently executed two-year, $750.0 unsecured delayed draw loan credit agreement (“2022 Term Loan”) (all of which are defined and discussed further below within this Item 2).

The Company believes that these sources of liquidity, along with access to capital markets, provide adequate liquidity to meet both its short-term (next twelve months) and reasonably foreseeable long-term requirements and obligations.

Commercial Paper Program, the Euro Commercial Paper Program, the Revolving Credit Facility, and the recently executed two-year $750.0 unsecured delayed draw loan credit agreement (the “2022 Term Loan”) (all of which are defined and discussed further below within this Item 2).

The Company believes that these sources of liquidity, along with access to capital markets, provide adequate liquidity to meet both its short-term (next 12 months) and reasonably foreseeable long-term requirements and obligations.

The Company’s primary ongoing cash requirements will be for operating and working capital needs, capital expenditures, product development activities, repurchases of our Common Stock, dividends, debt service, payments associated with the one-time tax on the deemed repatriation of all of the Company’s pre-2018 accumulated unremitted earnings and profits of foreign subsidiaries (“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), funding of pension obligations, and other contractual obligations and commitments included in Item 7 of the 2021 Annual Report.

The Company may also use cash to fund all or part of the cost of future acquisitions.

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, Commercial Paper Programs and the recent 2022 Term Loan (all as defined below).

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, Commercial Paper Programs and the 2022 Term Loan (all as defined below).

As of September 30, 2022, outstanding borrowings under the U.S.

Commercial Paper Program were at a weighted average floating interest rate of 3.40%, while there were no outstanding borrowings under the Revolving Credit Facility, 2022 Term Loan and Euro Commercial Paper Program.

As a result of the substantial increases in interest rates during the second and third quarters of 2022 and the expected further increases during the fourth quarter of 2022, the Company currently expects the floating interest rates related to its U.S.

Commercial Paper Program borrowings to continue to increase in the fourth quarter of 2022 and into 2023, which would result in increased interest expense.

Although the Company does not expect changes in interest rates to have a material effect on income or cash flows in 2022, there can be no assurance that interest rates will not increase significantly from current levels.

The Company has previously indicated an intention to repatriate most of its pre-2022 accumulated earnings and has accrued the foreign and U.S.

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The Company intends to indefinitely reinvest the remaining pre-2022 foreign earnings.

As of June 30, 2022, the Company has accrued the foreign and U.S.

As of September 30, 2022, the Company has accrued the foreign and U.S.

state and local taxes associated with the foreign earnings that we intend to repatriate.

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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, 2022 and 2021, 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, 2022 and 2021, as reflected in the Condensed Consolidated Statements of Cash Flow:

Nine Months Ended September 30,

Net cash provided by operating activities from continuing operations

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Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

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 from continuing operations (“Operating Cash Flow”) was $ 893.3 in the first six months of 2022 compared to $732.0 in the first six months of 2021.

The increase in Operating Cash Flow for the first six months of 2022 compared to the first six months of 2021 is primarily due to the increase in net income from continuing operations, partially offset by a higher usage of cash related to the change in working capital.

In the first six months of 2022, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $229.3, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in inventories of $218.8 and accounts receivable of $194.0, partially offset by increases in accounts payable of $104.8 and accrued liabilities, including income taxes, of $48.7, and a decrease in prepaid expenses and other current assets of $30.0 .

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.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at June 30, 2022 as compared to December 31, 2021.

Accounts receivable increased $ 116.8 to $2,571.6, primarily due to slightly higher sales in the second quarter of 2022 relative to the fourth quarter of 2021, along with the impact of one acquisition that closed during the second quarter of 2022 (the “2022 Acquisition”), partially offset by the effect of translation from exchange rate changes (“Translation”) at June 30, 2022 compared to December 31, 2021.

Days sales outstanding at June 30, 2022 and December 31, 2021 were 72 days and 71 days, respectively.

Inventories increased $ 149.6 to $2,043 .7, which was primarily driven by the impact of the ongoing supply chain disruptions that we continued to experience during the first six months of 2022, along with the impacts of higher sales and the 2022 Acquisition, partially offset by Translation.

Inventory days at June 30, 2022 and December 31, 2021

were 86 days and 80 days, respectively.

Property, plant and equipment, net, decreased $ 20.2 to $1,155.1, primarily due to depreciation of $144.2 and Translation, partially offset by capital expenditures of $169.2.

Goodwill decreased $101.8 to $6,275.0, primarily driven by Translation, partially offset by goodwill recorded resulting from the 2022 Acquisition.

Other intangible assets, net decreased $5.7 to $751.2, primarily due to amortization associated with the Company’s current intangible assets along with the effect of Translation, partially offset by the recognition of certain intangible assets related to recent acquisitions.

Other long-term assets increased $82.6 to $493.8, primarily due to the purchase of long-term certificates of deposit investments, along with an increase in operating lease right-of-use assets resulting from new and renewed lease agreements entered into during the first six months of 2022.

Accounts payable increased $60.9 to $1,372.9, primarily due to increased purchasing activity related to higher sales levels in the second quarter of 2022 relative to the fourth quarter of 2021, along with the effect of the 2022 Acquisition, partially offset by Translation.

Payable days at June 30, 2022 and December 31, 2021 were 58 days and 56 days, respectively.

Total accrued expenses, including accrued income taxes, increased $48.6 to $1,179.7, primarily as a result of increases in accrued income taxes and other accrued expenses, partially offset by a decrease in accrued salaries, wages and employee benefits and Translation.

Net cash provided by operating activities from continuing operations (“Operating Cash Flow”) was $ 1,469.3 in the first nine months of 2022 compared to $1,060.4 in the first nine months of 2021.

The increase in Operating Cash Flow for the first nine months of 2022 compared to the first nine months of 2021 is primarily due to the increase in net income from continuing operations, along with a lower usage of cash related to the change in working capital.

In the first nine months of 2022, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $274.3, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in accounts receivable of $341.0 and inventories of $310.4, partially offset by increases in accounts payable of $174.8 and accrued liabilities, including income taxes, of $149.4, and a decrease in prepaid expenses and other current assets of $52.9 .

In the first nine months of 2021, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $414.1, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in inventories of $358.3, accounts receivable of $186.9 and prepaid expenses and other current assets of $50.5, partially offset by increases in accounts payable of $152.9 and accrued liabilities, including income taxes, of $28.7.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at September 30, 2022 as compared to December 31, 2021.

Accounts receivable increased $ 185.3 to $2,640.1, primarily due to higher sales in the third quarter of 2022 relative to the fourth quarter of 2021, along with the impact of two acquisitions that closed during the first nine months of 2022 (the “2022 Acquisitions”), partially offset by the effect of translation from exchange rate changes (“Translation”) at September 30, 2022 compared to December 31, 2021.

Days sales outstanding at both September 30, 2022 and December 31, 2021 were 71 days.

Inventories increased $ 186.0 to $2,080 .1, which was primarily driven by the impact of higher sales and the 2022 Acquisitions, along with the impact of the ongoing supply chain disruptions that we continued to experience during the first nine months of 2022, partially offset by Translation.

Inventory days at September 30, 2022 and December 31, 2021 were 83 days and 80 days, respectively.

Property, plant and equipment, net, decreased $ 8.4 to $1,166.9, primarily due to depreciation of $223.5 and Translation, partially offset by capital expenditures of $290.2 and the impact of the 2022 Acquisitions.

Goodwill decreased $39.3 to $6,337.5, primarily driven by Translation, partially offset by goodwill recorded resulting from the 2022 Acquisitions.

Other long-term assets increased $101.6 to $512.8, primarily due to the purchase of long-term certificates of deposit investments, along with an increase in operating lease right-of-use assets resulting from new and renewed lease agreements entered into during the first nine months of 2022 and leases assumed from acquisitions.

Accounts payable increased $81.6 to $1,393.6, primarily due to increased purchasing activity related to higher sales levels in the third quarter of 2022 relative to the fourth quarter of 2021, along with the effect of the 2022 Acquisitions, partially offset by Translation.

Payable days at both September 30, 2022 and December 31, 2021 were 56 days.

Total accrued expenses, including accrued income taxes, increased $127.3 to $1,258.4, primarily as a result of increases in accrued income taxes and certain other accrued expenses, along with the effect of the 2022 Acquisitions, partially offset by Translation.

Accrued pension and postretirement benefit obligations decreased $28.1 to $165.3, primarily due to Translation.

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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, 2022 and 2021.

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

GAAP financial measure for the nine months ended September 30, 2022 and 2021.

The increase in Free Cash Flow was driven by an increase 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,

Nine Months Ended September 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 purchases (sales and maturities) of short- and long-term investments, and acquisitions.

Net cash used in investing activities from continuing operations was $377.3 in the first six months of 2022, compared to $1,721.3 in the first six months of 2021.

In the first six months of 2022, net cash used in investing activities from continuing operations was driven primarily by capital expenditures (net of disposals) of $166.4, net purchases of short-term investments of $80.2, the use of $74.5 to fund acquisitions, and net purchases of long-term investments of $55.7.

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.

Net cash used in investing activities from continuing operations was $650.5 in the first nine months of 2022, compared to $1,810.0 in the first nine months of 2021.

In the first nine months of 2022, net cash used in investing activities from continuing operations was driven primarily by the use of $288.2 to fund acquisitions, capital expenditures (net of disposals) of $285.7, net purchases of long-term investments of $56.0, and net purchases of short-term investments of $28.0.

In the first nine 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 $271.8, partially offset by net sales and maturities of short-term investments of $1.3.

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 from continuing operations was $439.1 in the first six months of 2022, compared to net cash provided by financing activities from continuing operations of $613.0 in the first six months of 2021.

For the first six months of 2022, net cash used in financing activities from continuing operations was driven primarily by (i) repurchases of the Company’s Common Stock of $389.9, (ii) dividend payments of $239.3, (iii) repayments of $20.1 related to short-term debt, (iv) repayments of $4.9 related to long-term debt, and (v) distributions to and purchases of noncontrolling interests of $4.0, partially offset by (a) net borrowings of $130.7 primarily under the U.S.

Commercial Paper Program, (b) proceeds of $46.6 primarily related to short-term borrowings, and (c) cash proceeds of $42.2 from the exercise of stock options.

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 (a) debt repayments of $387.1, primarily related to the repayment of the then-outstanding MTS senior notes, (b) repurchases of the Company’s Common Stock of $320.1, (c) dividend payments of $173.4, (d) distributions to and purchases of noncontrolling interests of $8.3, and (e) payments of $4.1 associated with the deferred purchase price related to acquisitions.

Net cash used in financing activities from continuing operations was $701.9 in the first nine months of 2022, compared to net cash provided by financing activities from continuing operations of $438.4 in the first nine months of 2021.

For the first nine months of 2022, net cash used in financing activities from continuing operations was driven primarily by (i) repurchases of the Company’s Common Stock of $560.1, (ii) dividend payments of $358.4, (iii) debt repayments of $52.4, primarily related to short-term debt, and (iv) distributions to and purchases of noncontrolling interests of $4.4, partially offset by (a) cash proceeds of $114.1 from the exercise of stock options, (b) net borrowings of $111.9, primarily under the U.S.

Commercial Paper Program, and (c) debt proceeds of $47.8 primarily related to short-term borrowings.

For the first nine months of 2021, net cash provided by financing activities from continuing operations was driven primarily by (i) net borrowings of $925.0, primarily under the U.S.

Commercial Paper Program, the majority of the proceeds of which were used for the MTS acquisition and to redeem the 3.125% Senior Notes, (ii) net cash proceeds of $749.9, primarily related to the September 2021 issuance of the 2031 Senior Notes, and (iii) cash proceeds of $180.9 from the exercise of stock options, partially offset by (a) debt repayments of $616.2, primarily related to the repayment of the assumed and then-outstanding MTS senior notes in the second quarter of 2021 as well as the redemption of the 3.125% Senior Notes in the third quarter of 2021, (b) repurchases of the Company’s Common Stock of $491.0, (c) dividend payments of $260.0, (d) a cash transfer of $28.7 made by the Company’s continuing operations to its discontinued operations in order to fund the September 2021 payment of contingent consideration assumed as part of MTS’s acquisition accounting, (e) distributions to and purchases of noncontrolling interests of $11.3, (f) payments of $6.1 related to debt financing costs associated with the 2031 Senior Notes, and (g) payments of $4.1 associated with the deferred purchase price related to acquisitions.

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 June 30, 2022 and December 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility.

As of September 30, 2022 and December 31, 2021, 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.

On June 30, 2022, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

On September 30, 2022, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

On April 19, 2022, the Company entered into a two-year, $750.0 unsecured delayed draw term loan credit agreement (the “2022 Term Loan”), which is scheduled to mature on April 19, 2024.

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Interest rates under the 2022 Term Loan are based on a spread over either the base rate or the adjusted term SOFR, which spread varies based on the Company’s debt rating.

As of June 30, 2022, there were no outstanding borrowings under the 2022 Term Loan.

The 2022 Term Loan requires payment of certain commitment fees and requires that the Company satisfy certain financial covenants, which financial covenants are the same as those under the Revolving Credit Facility.

On June 30, 2022, the Company was in compliance with the financial covenants under the 2022 Term Loan.

As of September 30, 2022, the Company had not yet drawn upon the 2022 Term Loan, and as such, there were no outstanding borrowings under the 2022 Term Loan.

The 2022 Term Loan requires payment of certain

commitment fees and requires that the Company satisfy certain financial covenants, which financial covenants are the same as those under the Revolving Credit Facility.

On September 30, 2022, the Company was in compliance with the financial covenants under the 2022 Term Loan.

Pursuant to the terms of the U.S.

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Commercial Paper Program for general corporate purposes, which recently has included fully or partially funding acquisitions, as well as to repay certain outstanding senior notes .

The amount of USCP Notes outstanding as of June 30, 2022 was $923.2, with a weighted average interest rate of 1.98%.

In the third quarter of 2021, the Company used borrowings under the U.S.

Commercial Paper Program to redeem the 3.125% Senior Notes, of which $227.7 aggregate principal amount was outstanding.

The amount of USCP Notes outstanding as of September 30, 2022 was $903.8, with a weighted average interest rate of 3.40%.

As of December 31, 2021, the amount of USCP Notes outstanding was $795.2, with a weighted average interest rate of 0.29%.

The Company and one of its wholly owned European subsidiaries (the “Euro Issuer”) also have a commercial paper program (the “Euro Commercial Paper Program” and, together with the U.S.

Commercial Paper Program, the “Commercial Paper Programs”), pursuant to which the Euro Issuer may issue short-term unsecured commercial paper notes (the “ECP Notes” and, together with the USCP Notes, “Commercial Paper”), which are guaranteed by the Company and are to be issued outside of the United States.

Commercial Paper Program, the “Commercial Paper Programs”), pursuant to which the Euro Issuer may issue short-term unsecured commercial paper notes (the “ECP Notes” and, together with the USCP Notes, the “Commercial Paper”), which are guaranteed by the Company and are to be issued outside of the United States.

The ECP Notes may be issued in Euros, Sterling, U.S.

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

As of June 30, 2022 and December 31, 2021, there were no ECP Notes outstanding.

As of September 30, 2022 and December 31, 2021, there were no ECP Notes outstanding.

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

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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 June 30, 2022, the Company has outstanding senior notes (the “Senior Notes”) as follows:

As of September 30, 2022, the Company has outstanding senior notes (the “Senior Notes”) as follows:

February 2030

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The Company’s Senior Notes impose certain obligations on the Company and prohibit various actions by the Company unless it satisfies certain financial requirements.

On June 30, 2022, the Company was in compliance with all requirements under its Senior Notes.

On September 30, 2022, the Company was in compliance with all requirements under its Senior Notes.

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

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

During the three and six months ended June 30, 2022, the Company repurchased 2.7 million and 5.3 million shares of its Common Stock for $186.0 and $389.9, respectively, under the 2021 Stock Repurchase Program.

Of the total repurchases made during the first six months of 2022, 0.3 million shares, or $21.0, were retained in Treasury stock at the time of repurchase.

During the three and nine months ended September 30, 2022, the Company repurchased 2.4 million and 7.6 million shares of its Common Stock for $170.1 and $560.1, respectively, under the 2021 Stock Repurchase Program.

Of the total repurchases made during the first nine months of 2022, 0.6 million shares, or $40.8, were retained in Treasury stock at the time of repurchase.

The remaining 7.0 million shares, or $519.3, have been retired by the Company.

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 the shares of which were retired by the Company.

From July 1, 2022 to July 26, 2022, the Company repurchased 0.7 million additional shares of its Common Stock for $48.0 under the 2021 Stock Repurchase Program, and, as of July 27, 2022, the Company has remaining authorization to purchase up to $1,104.2 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 options exercised by employees, cash requirements for acquisitions, dividends paid, economic and market conditions and the price of the Company’s Common Stock.

On April 24, 2018, the Board 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 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.

During the three and nine months ended September 30, 2021, the Company repurchased 2.3 million and 4.1 million shares of its Common Stock for $170.9 and $287.2, respectively, under the 2021 Stock Repurchase Program.

All of the shares repurchased under the 2021 Stock Repurchase Program during the first nine months of 2021 were retired by the Company.

From October 1, 2022 to October 25, 2022, the Company repurchased 0.6 million additional shares of its Common Stock for $41.9 under the 2021 Stock Repurchase Program, and, as of October 26, 2022, the Company has remaining authorization to purchase up to $940.2 of its Common Stock under the 2021 Stock Repurchase Program.

On April 24, 2018, the Board authorized a stock repurchase program under which the Company could purchase up to $2,000.0 of 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 Exchange Act.

During the nine months ended September 30, 2021, the Company repurchased 3.1 million shares of its Common Stock for $203.8 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 was terminated.

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

Of the total repurchases made during the first nine months of 2021, 0.3 million shares, or $19.8, were retained in Treasury stock at the time of repurchase.

The remaining 2.8 million shares, or $184.0, were retired by the Company.

Contingent upon declaration by the Board, 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, 2022 and 2021:

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, 2022 and 2021:

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 October 26, 2021, the Board approved an increase to its quarterly dividend rate from $0.145 per share to $0.20 per share, effective with dividends declared in the fourth quarter of 2021, contingent upon declaration by the Board.

On October 26, 2021, the Board approved an increase to the Company’s quarterly dividend rate from $0.145 per share to $0.20 per share, effective with dividends declared in the fourth quarter of 2021, and on October 25, 2022,

approved an additional increase to the Company’s quarterly dividend rate from $0.20 per share to $0.21 per share, effective with dividends declared in the fourth quarter of 2022, contingent upon declaration by the Board.

LIBOR Transition

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In March 2020, in response to this transition, the Financial Accounting Standards Board (“FASB”) issued accounting guidance providing certain optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be

discontinued by reference rate reform, and addresses operational issues likely to arise in modifying contracts to replace discontinued reference rates with new rates.

GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued by reference rate reform, and addresses operational issues likely to arise in modifying contracts to replace discontinued reference rates with new rates.

In January 2021, the FASB issued further clarifying guidance surrounding derivatives, as it relates to this transition.

Effective November 30, 2021, the Revolving Credit Facility no longer references LIBOR for interest rate determinations.

Effective November 30, 2021, the Company’s Revolving Credit Facility no longer references LIBOR for interest rate determinations.

Due to our current limited reliance on borrowings tied to LIBOR, the Company currently believes that the LIBOR transition will not have a material impact on its financial condition, results of operations or cash flows.

Acquisitions and Divestitures

In the second quarter of 2022, the Company completed one acquisition for approximately $74.5, net of cash acquired, which has been included in the Harsh Environment Solutions segment.

This acquisition, which was funded through a combination of borrowings under the U.S.

Commercial Paper Program and cash on hand, was not material to the Company’s financial results.

During the nine months ended September 30, 2022, the Company completed two acquisitions for approximately $288.2, net of cash acquired, one of which has been included in the Harsh Environment Solutions segment and the other of which has been included in the Interconnect and Sensor Systems segment.

These acquisitions, which were funded through a combination of borrowings under the U.S.

Commercial Paper Program and cash on hand, were not material, either individually or in the aggregate, to the Company’s financial results.

For both the three and nine months ended September 30, 2022, the Company incurred $12.0 ($10.5 after-tax, or $0.02 per diluted share) of acquisition-related expenses, comprised primarily of external transaction costs as well as the amortization related to the value associated with acquired backlog resulting from an acquisition that closed in 2022.

During 2021, the Company completed seven acquisitions for $2,225.4, net of cash acquired, while also completing the divestiture of the Divested MTS business, as defined and discussed below.

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At closing, the Company paid approximately $1,300, net of cash acquired, for 100% of the common stock of MTS, including certain liabilities settled at closing, which was reflected within Net cash used in investing activities from continuing operations in the Consolidated Statements of Cash Flow for the year ended December 31, 2021.

In addition, the Company also assumed MTS’s then-outstanding $350.0 principal amount of senior notes due August 15, 2027, which were 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.

In addition, the Company also assumed MTS’s then-outstanding $350.0 principal amount of senior notes due August 15, 2027.

Shortly after the closing, the Company repaid and settled the MTS senior notes 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 was historically organized into two business segments:

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The retained MTS Sensors business is reported within our Interconnect and Sensor Systems 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, comprised primarily of transaction, severance, restructuring and certain non-cash purchase accounting costs related to the MTS acquisition.

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

Sale of the Divested MTS Business

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As a result of the agreement to sell the Divested MTS business to ITW, the Divested MTS business met the “held for sale” criteria at its acquisition date, and accordingly, the Company did not assign the Divested MTS business to any of its reportable business segments.

The Company accounted for the operating results and related cash flows associated with the Divested MTS business as discontinued operations in the Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flow, respectively, as of the MTS acquisition date of April 7, 2021 through June 30, 2021, and ultimately, through December 1, 2021, the date of the sale of the Divested MTS business.

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, and $21.4 for the year ended December 31, 2021.

The Company accounted for the operating results and related cash flows associated with the Divested MTS business as discontinued operations in the Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flow, respectively, as of the MTS acquisition date of April 7, 2021 through September 30, 2021, and ultimately, through December 1, 2021, the date of the sale of the Divested MTS business.

Income from discontinued operations attributable to Amphenol Corporation, net of income taxes, was $7.7 and $10.3 for the third quarter and first nine months of 2021, respectively, and $21.4 for the year ended December 31, 2021.

On December 1, 2021, the Company completed the sale of the Divested MTS business for approximately $750, net of cash divested and excluding related transaction fees and expenses.

The proceeds from the sale of the Divested MTS business were included in Net cash provided by investing activities from discontinued operations in the Consolidated Statements of Cash Flow for the year ended December 31, 2021.

Amphenol has no continuing involvement with the Divested MTS business now that its sale has been consummated.

Amphenol has had no continuing involvement with the Divested MTS business after the completion of the sale.

After giving effect to the sale of the Divested MTS business as well as the repayment of the aforementioned MTS senior notes as part of the MTS acquisition, the Company paid approximately $950, net of cash acquired and excluding related transaction fees and expenses, for the retained MTS Sensors business.

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On December 1, 2021, the Company completed the acquisition of approximately 97% of the common stock of Halo Technology Limited (“Halo”) for a purchase price of approximately $694, net of cash acquired.

The sellers retained a noncontrolling interest of less than 3% in Halo, which includes redeemable features that are outside the control of the Company and therefore, has been classified as temporary equity on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, as discussed in more detail in Note 5 of the accompanying Notes to Condensed Consolidated Financial Statements, as well as Note 1 of the Notes to Consolidated Financial Statements in the 2021 Annual Report.

The sellers retained a noncontrolling interest of less than 3% in Halo, which includes redeemable features that are outside the control of the Company and therefore, has been classified as temporary equity on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, as discussed in more detail in Note 5 of the Notes to Condensed Consolidated Financial Statements, as well as Note 1 of the Notes to Consolidated Financial Statements in the 2021 Annual Report.

The acquisition was funded with cash on hand.

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In addition to assessing the Company’s financial condition, results of operations, liquidity and cash flows in accordance with U.S.

GAAP, management utilizes certain non-GAAP financial measures, defined below, as part of its internal reviews for purposes of monitoring, evaluating and forecasting the Company’s financial performance, communicating operating results to the Board and assessing related employee compensation measures.

GAAP, management utilizes certain non-GAAP financial measures, defined below, as part of its

internal reviews for purposes of monitoring, evaluating and forecasting the Company’s financial performance, communicating operating results to the Board and assessing related employee compensation measures.

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.

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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, 2022 and 2021 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, 2022 and 2021 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.

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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