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Item 2. Management’s Discussion and Analysis

2023-10-27 compared with 2023-07-28 · 147 added, 144 removed, 241 unchanged (55% 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 financial condition and results of operations for the three and six months ended June 30, 2023 and 2022 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, 2023 and 2022 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, 2022 (the “2022 Annual Report”).

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risks associated with our inability to obtain certain raw materials and components;

cybersecurity threats and techniques used to disrupt operations and gain unauthorized access to our information technology systems, including, but not limited to, malware, phishing, credential harvesting, ransomware and other increasingly sophisticated attacks, that continue to expand and evolve globally, which could, among other things, impair our information technology systems and disrupt business operations, result in reputational damage, loss of our intellectual property, the 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 potentially lead to litigation and/or governmental investigations and fines, among other

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

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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 IRA provisions, which became effective for Amphenol beginning on January 1, 2023, did not have a material impact on the Company during the three and six months ended June 30, 2023.

The IRA provisions, which became effective for Amphenol beginning on January 1, 2023, did not have a material impact on the Company during the three and nine months ended September 30, 2023.

While the full impact of these provisions in the future depends on several factors, including interpretive regulatory guidance which has not yet been released, the Company does not currently believe that the provisions of the IRA, including several other non-tax related provisions, will have a material impact on our financial condition, results of operations, liquidity and cash flows.

Results of Operations

Three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022

Net sales were $3,053.9 in the second quarter of 2023 compared to $3,136.8 in the second quarter of 2022, which represented a decrease of 3% in U.S.

dollars, 2% in constant currencies and 4% organically, over the prior year period.

The decrease in net sales in the second quarter of 2023 was driven by a sales decline in the Communications Solutions segment, which was partially offset by growth in the Harsh Environment Solutions segment and Interconnect and Sensor Systems segment.

From a market standpoint, the decrease in net sales in the second quarter of 2023 relative to the respective prior year period was driven by organic declines in the mobile networks, information technology and data communications, industrial, and mobile devices markets, which were partially offset by strong organic growth in the commercial aerospace, military, and automotive markets, along with contributions from the Company’s acquisition program.

Net sales were $6,028.0 in the first six months of 2023 compared to $6,088.6 in the first six months of 2022, which represented a decrease of 1% in U.S.

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

The decrease in net sales in the first six months of 2023 was driven by a sales decline in the Communications Solutions segment, which was partially offset by growth in the Harsh Environment Solutions segment and Interconnect and Sensor Systems segment.

From a market standpoint, the decrease in net sales in the first six months of 2023 relative to the respective prior year period was driven by organic declines in the mobile networks, information technology and data communications, and mobile devices markets, which were partially offset by strong organic growth in the commercial aerospace, military, and automotive markets, moderate growth in the broadband communications market, and contributions from the Company’s acquisition program.

Net sales in the Harsh Environment Solutions segment (approximately 29% of net sales) in the second quarter of 2023 increased 12% in U.S.

dollars, 13% in constant currencies and 9% organically, compared to the second quarter of 2022.

The increase in the second quarter of 2023 was primarily driven by strong organic growth in the commercial aerospace and military markets and moderate growth in the automotive market, along with contributions from the Company’s acquisition program, partially offset by an organic decline in the industrial market.

N et sales in the Harsh Environment Solutions segment in the first six months of 2023 increased 15% in U.S.

dollars, 16% in constant currencies and 11% organically, compared to the first six months of 2022.

The increase in the first six months of 2023 was primarily driven by strong organic growth in the commercial aerospace, military, and automotive markets, along

with contributions from the Company’s acquisition program, partially offset by organic declines in the mobile networks and information technology and data communications markets.

Net sales in the Communications Solutions segment (approximately 38% of net sales) in the second quarter of 2023 decreased 16% in U.S.

dollars, 15% in constant currencies and 16% organically, compared to the second quarter of 2022.

The decrease in the second quarter of 2023 was driven by organic declines in the mobile networks, industrial, information technology and data communications, and mobile devices markets, partially offset by organic growth in the automotive market.

Net sales in the Communications Solutions segment in the first six months of 2023 decreased 15% in U.S.

dollars, 14% in constant currencies and 14% organically, compared to the first six months of 2022.

The decrease in the first six months of 2023 was driven by organic declines in the industrial, mobile networks, information technology and data communications, and mobile devices markets, partially offset by organic growth in the broadband communications and automotive markets.

Net sales in the Interconnect and Sensor Systems segment (approximately 33% of net sales) in the second quarter of 2023 increased 4% in U.S.

dollars, 4% in constant currencies and 1% organically, compared to the second quarter of 2022.

T he increase in the second quarter of 2023 was primarily driven by strong organic growth in the automotive and military markets and moderate growth in the industrial and commercial aerospace markets, along with contributions from the Company’s acquisition program, partially offset by organic declines in the information technology and data communications and mobile networks markets.

Net sales in the Interconnect and Sensor Systems segment in the first six months of 2023 increased 7% in U.S.

dollars, 9% in constant currencies and 5% organically, compared to the first six months of 2022.

The increase in the first six months of 2023 was primarily driven by organic growth in the automotive, industrial, commercial aerospace, and military markets, along with contributions from the Company’s acquisition program, partially offset by organic declines in the information technology and data communications and mobile networks markets.

Three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022

Net sales were $3,199.2 in the third quarter of 2023 compared to $3,295.2 in the third quarter of 2022, which represented a decrease of 3% in U.S.

dollars, 3% in constant currencies and 5% organically, compared to the prior year period.

The decrease in net sales in the third quarter of 2023 was driven by a sales decline in the Communications Solutions segment, which was partially offset by growth in the Harsh Environment Solutions segment and Interconnect and Sensor Systems segment.

From a market standpoint, the decrease in net sales in the third quarter of 2023 relative to the prior year period was driven by organic declines in the mobile networks, mobile devices, industrial, information technology and data communications (“IT datacom”), and broadband communications markets, partially offset by strong organic growth in the commercial aerospace, military, and automotive markets, along with contributions from the Company’s acquisition program.

Net sales were $9,227.2 in the first nine months of 2023 compared to $9,383.8 in the first nine months of 2022, which represented a decrease of 2 % in U.S.

dollars, 1% in constant currencies and 3 % organically, compared to the prior year period.

The decrease in net sales in the first nine months of 2023 was driven by a sales decline in the Communications Solutions segment, which was partially offset by growth in the Harsh Environment Solutions segment and Interconnect and Sensor Systems segment.

From a market standpoint, the decrease in net sales in the first nine months of 2023 relative to the prior year period was driven by organic declines in the mobile networks, IT datacom, mobile devices, and industrial markets, partially offset by strong organic growth in the commercial aerospace, military, and automotive markets, moderate growth in the broadband communications market, and contributions from the Company’s acquisition program.

Net sales in the Harsh Environment Solutions segment (approximately 28% of net sales) in the third quarter of 2023 increased 12% in U.S.

dollars, 11% in constant currencies and 7% organically, compared to the third quarter of 2022.

The increase in the third quarter of 2023 was primarily driven by strong organic growth in the commercial aerospace, automotive, military, and IT datacom markets, along with contributions from the Company’s acquisition program, partially offset by organic declines in the industrial and mobile networks markets.

N et sales in the Harsh Environment Solutions segment (approximately 28% of net sales) in the first nine months of 2023 increased 14 % in U.S.

dollars, 14 % in constant currencies and 10 % organically, compared to the first nine months of 2022.

The increase in the first nine months of 2023 was primarily driven by strong organic growth in the commercial aerospace, military, and automotive markets, moderate growth in the IT datacom market, and contributions from the Company’s acquisition program, partially offset by organic declines in the industrial and mobile networks markets.

Net sales in the Communications Solutions segment (approximately 40% of net sales) in the third quarter of 2023 decreased 16% in U.S.

dollars, 15% in constant currencies and 16% organically, compared to the third quarter of 2022.

The decrease in the third quarter of 2023 was primarily driven by organic declines in the mobile networks, industrial, mobile devices, IT datacom, and broadband communications markets, partially offset by organic growth in the automotive market, along with modest contributions from the Company’s acquisition program.

Net sales in the Communications Solutions segment (approximately 39% of net sales) in the first nine months of 2023 decreased 15 % in U.S.

dollars, 14 % in constant currencies and 15 % organically, compared to the first nine months of 2022.

The decrease in the first nine months of 2023 was driven by organic declines in the mobile networks, industrial, IT datacom, and mobile devices markets, partially offset by strong organic growth in the automotive market and moderate organic growth in the broadband communications market, along with modest contributions from the Company’s acquisition program.

Net sales in the Interconnect and Sensor Systems segment (approximately 32% of net sales) in the third quarter of 2023 increased 5% in U.S.

dollars, 4% in constant currencies and 1% organically, compared to the third quarter of 2022.

T he increase in the third quarter of 2023 was primarily driven by strong organic growth in the automotive and commercial aerospace markets, moderate growth in the military market, along with contributions from the Company’s acquisition program, partially offset by organic declines in the IT datacom, mobile networks, and industrial markets.

Net sales in the Interconnect and Sensor Systems segment (approximately 33% of net sales) in the first nine months of 2023 increased 6 % in U.S.

dollars, 7 % in constant currencies and 4 % organically, compared to the first nine months of 2022.

The increase in the first nine months of 2023 was primarily driven by strong organic growth in the automotive and commercial aerospace markets, moderate growth in the industrial and military markets, along with contributions from the Company’s acquisition program, partially offset by organic declines in the IT datacom and mobile networks 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, 2023 compared to the three and six months ended June 30, 2022:

GAAP financial measures, by segment, geography and consolidated, for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022:

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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(6) Net sales by geographic area are based on the customer location to which the product is shipped.

The comparatively weaker U.S.

dollar for the third quarter of 2023 had the effect of increasing sales by approximately $9.8, relative to the comparable period in 2022.

The comparatively stronger U.S.

dollar for the second quarter and first six months of 2023 had the effect of decreasing sales by approximately $22.6 and $90.8, respectively, relative to the comparable periods in 2022.

Selling, general and administrative expenses were $367.8, or 12.0% of net sales, and $714.1, or 11.8% of net sales, for the second quarter and first six months of 2023, respectively, compared 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.

The increases in selling, general and administrative expenses as a percentage of net sales in the second quarter and first six months of 2023 were primarily driven by lower sales during both periods of 2023, relative to the comparable periods of 2022.

Administrative expenses represented approximately 4.9% and 4.8% of net sales for the second quarter and first six months of 2023, respectively, and represented approximately 4.7% and 4.6% of net sales for the second quarter and first six months of 2022, respectively.

Research and development expenses represented approximately 2.8% of net sales for both the second quarter and first six months of 2023 and represented approximately 2.6% and 2.7% of net sales for the second quarter and first six months of 2022, respectively.

Selling and marketing expenses represented approximately 4.4% and

4.3% of net sales for the second quarter and first six months of 2023, respectively, and represented approximately 4.0% and 4.1% of net sales for the second quarter and first six months of 2022, respectively.

Operating income was $619.9, or 20.3% of net sales, and $1,211.6, or 20.1% of net sales, for the second quarter and first six months of 2023, respectively, compared to $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.

Operating income for the second quarter of 2023 includes $4.0 of acquisition-related expenses (presented separately in the Condensed Consolidated Statements of Income) comprised of external transaction costs related to acquisitions.

Operating income for the first six months of 2023 includes $9.4 of acquisition-related expenses (presented separately in the Condensed Consolidated Statements of Income) comprised of the amortization related to the value associated with acquired backlog resulting from the acquisition that closed in the first quarter of 2023, as well as the external transaction costs incurred in the second quarter of 2023.

For the three and six months ended June 30, 2023, the acquisition-related expenses had the effect of decreasing net income by $3.8, or $0.01 per share, and $7.8, or $0.01 per share, respectively.

Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, were $623.9, or 20.4% of net sales, and $648.8, or 20.7% of net sales, for the three months ended June 30, 2023 and 2022, respectively.

Adjusted Operating Income and Adjusted Operating Margin were $1,221.0, or 20.3% of net sales, and $1,238.6, or 20.3% of net sales, for the six months ended June 30, 2023 and 2022, respectively.

The slight decrease in Adjusted Operating Income and Adjusted Operating Margin for the second quarter of 2023 relative to the comparable period in 2022 was primarily driven by normal operating leverage on the lower sales volumes, along with the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company, which was partially offset by the benefit of pricing actions.

Operating income for the Harsh Environment Solutions segment for the second quarter and first six months of 2023 was $240.3, or 27.0% of net sales, and $466.6, or 26.8% of net sales, respectively, compared to $206.5, or 26.1% of net sales, and $389.7, or 25.7% of net sales, for the second quarter and first six months of 2022, respectively.

The increases in operating margin for the Harsh Environment Solutions segment for both the second quarter and first six months of 2023 relative to the comparable periods in 2022 were primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of pricing actions, partially offset by the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company.

Operating income for the Communications Solutions segment for the second quarter and first six months of 2023 was $238.5, or 20.5% of net sales, and $469.1, or 20.5% of net sales, respectively, compared to $303.0, or 22.0% of net sales, and $585.6, or 21.7% of net sales, for the second quarter and first six months of 2022, respectively.

The decreases in operating margin for the Communications Solutions segment for both the second quarter and first six months of 2023 relative to the comparable periods in 2022 were primarily driven by normal operating leverage on the lower sales volumes, partially offset by the benefit of pricing actions.

Operating income for the Interconnect and Sensor Systems segment for the second quarter and first six months of 2023 was $185.9, or 18.5% of net sales, and $364.7, or 18.3% of net sales, respectively, compared to $177.5, or 18.3% of net sales, and $337.5, or 18.0% of net sales, for the second quarter and first six months of 2022, respectively.

The increases in operating margin for the Interconnect and Sensor Systems segment for the second quarter and first six months of 2023 relative to the comparable periods in 2022 were primarily driven by n ormal operating leverage on the higher sales volumes combined with the benefit of pricing actions, partially offset by the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company.

Interest expense for the second quarter and first six months of 2023 was $35.0 and $71.0, respectively, compared to $30.5 and $58.6 for the second quarter and first six months of 2022, respectively.

The increase in interest expense is driven by the rising interest rate environment, which primarily impacted borrowings under the Company’s U.S.

Commercial Paper Program that were outstanding throughout most of the first six months of 2023.

Provision for income taxes for the second quarter and first six months of 2023 was at an effective tax rate of 21.9%, and 21.4%, respectively.

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.

For the second quarter and first six months of 2023 and 2022, 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 2023, the effective tax rate was further impacted by the tax effect of acquisition-related expenses, as well as the gain from the bargain purchase acquisition that closed in the second quarter, which impacted 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 both the three and six months ended June 30, 2023 was 24.0%, while the Adjusted Effective Tax Rate was 24.5% for both the three and six months ended June 30, 2022, as reconciled in the tables below to the comparable effective tax rate based on GAAP results.

dollar for the first nine months of 2023 had the effect of decreasing sales by approximately $81.0, relative to the comparable period in 2022.

Selling, general and administrative expenses were $381.6, or 11.9% of net sales, and $1,095.7, or 11.9% of net sales, for the third quarter and first nine months of 2023, respectively, compared to $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.

The increases in selling, general and administrative expenses as a percentage of net sales in the third quarter and first nine months of 2023 were primarily driven by lower sales during both periods of 2023, relative to the comparable periods of 2022.

Administrative expenses represented approximately 4.9% and 4.8% of net sales for the third quarter and first nine months of 2023, respectively, and represented approximately 4.5% and 4.6% of net sales for the third quarter and first nine months of 2022, respectively.

Research and development expenses represented approximately 2.7% of net sales for both the third quarter and first nine months of 2023, and represented approximately 2.6% of net sales for both the third quarter and first nine months of 2022.

Selling and marketing expenses represented approximately 4.3% of net sales for both the third quarter and first nine months of 2023, and represented approximately 4.1% of net sales for both the third quarter and first nine months of 2022.

Operating income was $657.9, or 20.6% of net sales, and $1,869.6, or 20.3% of net sales, for the third quarter and first nine months of 2023, respectively, compared to $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.

Operating income for the third quarter of 2023 includes $9.0 of acquisition-related expenses (presented separately in the Condensed Consolidated Statements of Income), comprised of external transaction costs related to acquisitions.

Operating income for the first nine months of 2023 includes $18.4 of acquisition-related expenses (presented separately in the Condensed Consolidated Statements of Income), comprised of external transaction costs incurred in the second and third quarters of 2023, as well as the amortization related to the value associated with acquired backlog resulting from the acquisition that closed in the first quarter of 2023.

Operating income for both the third quarter and first nine months of 2022 includes $12.0 of acquisition-related expenses (presented separately 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.

For the three and nine months ended September 30, 2023, the acquisition-related expenses had the effect of decreasing net income by $8.4, or $0.01 per share, and $16.2, or $0.03 per share, respectively.

For both the three and nine months ended September 30, 2022, the acquisition-related expenses had the effect of decreasing net income by $10.5, or $0.02 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 $666.9, or 20.8% of net sales, and $693.1, or 21.0% of net sales, for the three months ended September 30, 2023 and 2022, respectively.

Adjusted Operating Income and Adjusted Operating Margin were $1,888.0, or 20.5% of net sales, and $1,931.7, or 20.6% of net sales, for the nine months ended September 30, 2023 and 2022, respectively.

The slight decreases in Adjusted Operating Income and Adjusted Operating Margin for the third quarter and first nine months of 2023 relative to the comparable periods in 2022 were primarily driven by normal operating leverage on the lower sales volumes, along with the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company, all partially offset by the benefit of pricing actions.

Operating income for the Harsh Environment Solutions segment for the third quarter and first nine months of 2023 was $239.1, or 26.9% of net sales, and $705.7, or 26.8% of net sales, respectively, compared to $207.1, or 26.1% of net sales, and $596.8, or 25.8% of net sales, for the third quarter and first nine months of 2022, respectively.

The increases in operating margin for the Harsh Environment Solutions segment for both the third quarter and first nine months of 2023 relative to the comparable periods in 2022 were primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of pricing actions, partially offset by the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company.

Operating income for the Communications Solutions segment for the third quarter and first nine months of 2023 was $283.3 or 22.1% of net sales, and $752.4, or 21.1% of net sales, respectively, compared to $341.6, or 22.5% of net sales, and $927.2, or 22.0% of net sales, for the third quarter and first nine months of 2022, respectively.

The decreases in operating margin for the Communications Solutions segment for both the third quarter and first nine months of 2023 relative to the comparable periods in 2022 were primarily driven by normal operating leverage on the lower sales volumes, partially offset by the benefit of pricing actions.

Operating income for the Interconnect and Sensor Systems segment for the third quarter and first nine months of 2023 was $188.9, or 18.3% of net sales, and $553.6, or 18.3% of net sales, respectively, compared to $185.3, or 18.8% of net sales, and $522.8, or 18.3% of net sales, for the third quarter and first nine months of 2022, respectively.

The decrease in operating margin for the Interconnect and Sensor Systems segment for the third quarter of 2023 relative to the comparable period in 2022 was primarily driven by the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company, partially offset by n ormal operating leverage on the higher sales volumes combined with the benefit of pricing actions.

The operating margin for the Interconnect and Sensor Systems segment was flat for the first nine months of 2023 relative to the comparable period in 2022, as the n ormal operating leverage on the higher sales volumes combined with the benefit of pricing actions were offset by the negative impact on operating margin related to acquisitions that are currently operating below the average operating margin of the Company.

Interest expense for the third quarter and first nine months of 2023 was $33.6 and $104.5, respectively, compared to $32.8 and $91.3 for the third quarter and first nine months of 2022, respectively.

The increases in interest expense are driven by the rising interest rate environment, which primarily impacted borrowings under the Company’s U.S.

Commercial Paper Program that were outstanding throughout much of the first nine months of 2023.

Provision for income taxes for the third quarter and first nine months of 2023 was at an effective tax rate of 18.2%, and 20.3%, respectively.

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.

For the third quarter and first nine months of 2023 and 2022, 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, while the tax effect of acquisition-related expenses impacted the effective tax rate and earnings per share by the amounts noted in the tables below.

For the first nine months of 2023, the effective tax rate was also impacted by the gain from the bargain purchase acquisition that closed in the second quarter, which impacted 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 both the three and nine months ended September 30, 2023 was 24.0%, while the Adjusted Effective Tax Rate was 24.5% for both the three and nine months ended September 30, 2022, 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 attributable to Amphenol Corporation and Net income per common share attributable to Amphenol Corporation - Diluted (“Diluted EPS”) were $460.5 and $0.74, respectively, for the second quarter of 2023, compared to $472.5 and $0.76, respectively, for the second quarter of 2022.

Excluding the effect of the items listed in the tables below, 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 $447.0 and $0.72, respectively, for the second quarter of 2023, compared to $465.0 and $0.75, respectively, for the second quarter of 2022.

Net income attributable to Amphenol Corporation and Diluted EPS were $899.7 and $1.45, respectively, for the first six months of 2023, compared to $898.2 and $1.44, respectively, for the first six months of 2022.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS were $873.1 and $1.41, respectively, for the first six months of 2023, compared to $886.9 and $1.42, respectively, for the first six months of 2022.

Net income attributable to Amphenol Corporation and Net income per common share attributable to Amphenol Corporation - Diluted (“Diluted EPS”) were $513.9 and $0.83, respectively, for the third quarter of 2023, compared to $496.6 and $0.80, respectively, for the third quarter of 2022.

Excluding the effect of the items listed in the tables below, 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 $484.0 and $0.78, respectively, for the third quarter of 2023, compared to $496.5 and $0.80, respectively, for the third quarter of 2022.

Net income attributable to Amphenol Corporation and Diluted EPS were $1,413.6 and $2.28, respectively, for the first nine months of 2023, compared to $1,394.8 and $2.24, respectively, for the first nine months of 2022.

Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS were $1,357.1 and $2.19, respectively, for the first nine months of 2023, compared to $1,383.4 and $2.23, respectively, for the first nine months of 2022.

The following tables reconcile Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (each 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, 2023 and 2022:

Three Months Ended June 30,

GAAP financial measures for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Reported (GAAP)

Acquisition-related expenses

Gain on bargain purchase acquisition

Excess tax benefits related to stock-based compensation

Adjusted (non-GAAP) (2)

Six Months Ended June 30,

Nine Months Ended September 30,

Reported (GAAP)

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Liquidity and Cash Requirements

As of June 30, 2023 and December 31, 2022, the Company had cash, cash equivalents and short-term investments of $1,503.0 and $1,434.2, 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, 2023 and December 31, 2022, the Company had cash, cash equivalents and short-term investments of $1,734.0 and $1,434.2, 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.

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The Company’s debt service requirements primarily consist 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 June 30, 2023, there were no outstanding borrowings under the Revolving Credit Facility, 2022 Term Loan, U.S.

As of September 30, 2023, there were no outstanding borrowings under the Revolving Credit Facility, 2022 Term Loan, U.S.

Commercial Paper Program and Euro Commercial Paper Program.

As a result of recent increases in the federal funds rate by the U.S.

Federal Reserve beginning in March 2022 through the first half of 2023, the floating interest rates related to our U.S.

Federal Reserve beginning in March 2022 through the first nine months of 2023, the floating interest rates related to our U.S.

Commercial Paper Program have increased substantially.

Although the Company has repaid all outstanding borrowings under its U.S.

Commercial Paper Program as of June 30, 2023, to the extent that interest rates related to our floating rate debt continue to increase and the Company borrows under its floating interest rate instruments in the future, interest expense may increase for the remainder of 2023.

Although the Company has no outstanding borrowings under the Revolving Credit Facility, 2022 Term Loan, U.S.

Commercial Paper Program and Euro Commercial Paper Program as of September 30, 2023, to the extent that interest rates related to this floating rate debt continue to increase and the Company borrows under any of these floating interest rate instruments in the future, interest expense and interest payments would increase.

Although the Company does not expect changes in interest rates to have a material effect on income or cash flows for the remainder of 2023, primarily due to our current expected limited reliance on borrowings tied to floating rates of interest, there can be no assurance that interest rates will not change significantly from current levels.

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The Company intends to indefinitely reinvest the remaining pre-2023 foreign earnings.

As of June 30, 2023, the Company has accrued the foreign and U.S.

As of September 30, 2023, the Company has accrued the foreign and U.S.

state and local taxes associated with the foreign earnings that it intends 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, 2023 and 2022, 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, 2023 and 2022, as reflected in the Condensed Consolidated Statements of Cash Flow:

Nine Months Ended September 30,

Net cash provided by operating activities

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Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (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 (“Operating Cash Flow”) was $1,068.8 in the first six months of 2023 compared to $893.3 in the first six months of 2022.

The increase in Operating Cash Flow for the first six months of 2023 compared to the first six months of 2022 is primarily due to a lower usage of cash related to the change in working capital.

In the first six months of 2023, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $57.7, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accounts payable of $203.2 and accrued liabilities, including income taxes, of $156.6, and an increase in prepaid expenses and other current assets of $19.3 , partially offset by decreases in accounts receivable of $199.9 and inventories of $121.5.

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.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at June 30, 2023 as compared to December 31, 2022.

Accounts receivable decreased $187.8 to $2,443.5, primarily due to lower sales in the second quarter of 2023 relative to the fourth quarter of 2022, along with the effect of translation from exchange rate changes (“Translation”) at June 30, 2023 compared to December 31, 2022, partially offset by the impact of two acquisitions that closed during the first six months of 2023 (the “2023 Acquisitions”).

Days sales outstanding at June 30, 2023 and December 31, 2022 were 71 days and 73 days, respectively.

Inventories decreased $95.8 to $1,997.8, primarily driven by lower sales in the second quarter of 2023 relative to the fourth quarter of 2022, along with Translation, partially offset by the impact of the 2023 Acquisitions.

Inventory days at June 30, 2023 and December 31, 2022 were 87 days and 86 days, respectively.

Prepaid expenses and other current assets increased $57.0 to $377.0, primarily due to increases in various prepaid expenses and other current receivables.

Net cash provided by operating activities (“Operating Cash Flow”) was $1,686.9 in the first nine months of 2023 compared to $1,469.3 in the first nine months of 2022.

The increase in Operating Cash Flow for the first nine months of 2023 compared to the first nine months of 2022 is primarily due to a lower usage of cash related to the change in working capital.

In the first nine months of 2023, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $81.2, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accrued liabilities, including income taxes, of $90.3 and accounts payable of $88.1, and an increase in prepaid expenses and other current assets of $17.2 , partially offset by decreases in accounts receivable of $83.8 and inventories of $30.6.

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.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at September 30, 2023 as compared to December 31, 2022.

Accounts receivable decreased $60.1 to $2,571.2, primarily due to the moderately lower sales in the third quarter of 2023 relative to the fourth quarter of 2022, along with the effect of translation from exchange rate changes (“Translation”) at September 30, 2023 compared to December 31, 2022, partially offset by the impact of six acquisitions that closed during the first nine months of 2023 (the “2023 Acquisitions”).

Days sales outstanding at September 30, 2023 and December 31, 2022 were 70 days and 73 days, respectively.

Inventories increased $5.5 to $2,099.1.

Inventory days at September 30, 2023 and December 31, 2022 were 87 days and 86 days, respectively.

Prepaid expenses and other current assets increased $49.0 to $369.0, primarily due to the impact of the 2023 Acquisitions, along with increases in various prepaid expenses and other current receivables.

Property, plant and equipment, net, increased $42.3 to $1,246.6, primarily due to capital expenditures of $267.8 and the impact of the 2023 Acquisitions, partially offset by depreciation of $227.0 and Translation.

Goodwill increased $72.5 to $6,518.6, primarily driven by goodwill recognized associated with the 2023 Acquisitions, along with Translation.

Other intangible assets, net, decreased $10.6 to $723.5, primarily due to amortization associated with the Company’s current intangible assets, partially offset by the recognition of certain intangible assets related to acquisitions.

Goodwill increased $128.4 to $6,574.5, primarily driven by goodwill recognized associated with the 2023 Acquisitions, partially offset by Translation.

Other intangible assets, net, increased $10.1 to $744.2, primarily due to the recognition of certain intangible assets related to the 2023 Acquisitions, partially offset by amortization associated with the Company’s current intangible assets.

Other long-term assets decreased $42.2 to $420.4, primarily due to certain long-term certificate of deposit investments becoming current during the second quarter of 2023.

Accounts payable decreased $192.3 to $1,116.8, primarily due to decreased purchasing activity related to lower sales levels in the second quarter of 2023 relative to the fourth quarter of 2022, along with Translation, partially offset by the impact of the 2023 Acquisitions.

Payable days at June 30, 2023 and December 31, 2022 were 48 days and 54 days, respectively.

Total accrued expenses, including accrued income taxes, decreased $123.2 to $1,241.1, primarily as a result of decreases in accrued salaries, wages and employee benefits and accrued income taxes, along with Translation, partially offset by the impact of the 2023 Acquisitions.

pension plans’ assets, the timing and amount of cash contributions in the future, if any, as discussed in more detail in Note 10 of the Notes to Condensed Consolidated Financial Statements.

Accounts payable decreased $60.2 to $1,248.9, primarily due to decreased purchasing activity related to the moderately lower sales levels in the third quarter of 2023 relative to the fourth quarter of 2022, along with Translation, partially offset by the impact of the 2023 Acquisitions.

Payable days at September 30, 2023 and December 31, 2022 were 52 days and 54 days, respectively.

Total accrued expenses, including accrued income taxes, decreased $60.0 to $1,304.3, primarily as a result of decreases in accrued income taxes and accrued salaries, wages and employee benefits, along with Translation, partially offset by the impact of the 2023 Acquisitions.

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, if any, as discussed in more detail in Note 10 of the Notes to Condensed Consolidated Financial Statements.

In addition to Operating Cash Flow, the Company also considers Free Cash Flow, a non-GAAP financial measure defined in the “Non-GAAP Financial Measures” section below, as a key metric in measuring the Company’s ability to generate cash.

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

GAAP financial measure for the six months ended June 30, 2023 and 2022.

The increase in Free Cash Flow was driven by an increase in Operating Cash Flow, as described above, partially offset by an increase in capital expenditures:

Six Months Ended June 30,

GAAP financial measure for the nine months ended September 30, 2023 and 2022.

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:

Nine Months Ended September 30,

Operating Cash Flow (GAAP)

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Cash flows from investing activities primarily consist 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 was $375.1 in the first six months of 2023, compared to $377.3 in the first six months of 2022.

In the first six months of 2023, net cash used in investing activities was primarily driven by capital expenditures (net of disposals) of $191.5, the use of $113.2 to fund acquisitions, and net purchases of short-term and long-term investments of $75.4.

In the first six months of 2022, net cash used in investing activities was primarily driven 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.

Net cash used in investing activities was $704.4 in the first nine months of 2023, compared to $650.5 in the first nine months of 2022.

In the first nine months of 2023, net cash used in investing activities was primarily driven by the use of $292.6 to fund acquisitions, capital expenditures (net of disposals) of $265.7, and net purchases of short-term and long-term investments of $151.0.

In the first nine months of 2022, net cash used in investing activities was primarily driven 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.

Financing Activities

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

Net cash used in financing activities was $704.0 in the first six months of 2023, compared to $439.1 in the first six months of 2022.

In the first six months of 2023, net cash used in financing activities was primarily driven by (i) net repayments of $632.6 related to the Company’s commercial paper programs, primarily the U.S.

Commercial Paper Program, (ii) repurchases of the Company’s Common Stock of $320.5, (iii) dividend payments of $249.9, (iv) other debt repayments of $7.1 related to other long-term debt, (v) distributions to and purchases of noncontrolling interests of $6.5, and (vi) payments of $2.3 related to debt financing costs associated with the March 2023 issuance of the 2026 Senior Notes (defined below), partially offset by (a) net cash proceeds from borrowings of $351.8, primarily related to the issuance of the 2026 Senior Notes and (b) cash proceeds of $163.1 from the exercise of stock options.

For the first six months of 2022, net cash used in financing activities was primarily driven 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.

Net cash used in financing activities was $822.4 in the first nine months of 2023, compared to $701.9 in the first nine months of 2022.

In the first nine months of 2023, net cash used in financing activities was primarily driven by (i) net repayments of $632.6 related to the Company’s commercial paper programs, primarily the U.S.

Commercial Paper Program, (ii) repurchases of the Company’s Common Stock of $469.8, (iii) dividend payments of $375.0, (iv) other debt repayments of $10.3, (v) distributions to and purchases of noncontrolling interests of $8.0, (vi) payments of $2.3 related to debt financing costs associated with the March 2023 issuance of the 2026 Senior Notes (as defined below), and (vii) payment of $1.5 associated with the deferred purchase price related to an acquisition, partially offset by (a) net cash proceeds from borrowings of $354.0, primarily related to the issuance of the 2026 Senior Notes and (b) cash proceeds of $323.1 from the exercise of stock options.

For the first nine months of 2022, net cash used in financing activities was primarily driven 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.

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, 2023 and December 31, 2022, there were no outstanding borrowings under the Revolving Credit Facility.

As of September 30, 2023 and December 31, 2022, 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, 2023, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

On September 30, 2023, 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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The 2022 Term Loan may be repaid at any time without premium or penalty, and, once repaid, cannot be reborrowed.

When drawn upon, the proceeds from the 2022 Term Loan are expected to be used for general corporate purposes.

If drawn upon, the proceeds from the 2022 Term Loan are expected to be used for general corporate purposes.

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, 2023, the Company had not yet drawn upon the 2022 Term Loan, and as such, there were no outstanding borrowings under the 2022 Term Loan.

As of September 30, 2023, 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 June 30, 2023, the Company was in compliance with the financial covenants under the 2022 Term Loan.

On September 30, 2023, the Company was in compliance with the financial covenants under the 2022 Term Loan.

The Company has a commercial paper program (the “U.S.

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As of December 31, 2022, the amount of USCP Notes outstanding was $632.8, with a weighted average interest rate of 4.69%.

In the first quarter of 2023, the Company used net proceeds from the 2026 Senior Notes (defined below) to repay certain outstanding borrowings under the U.S.

In the first quarter of 2023, the Company used net proceeds from the 2026 Senior Notes (as defined below) to repay certain outstanding borrowings under the U.S.

Commercial Paper Program.

During the second quarter of 2023, the Company repaid all of its USCP Notes then outstanding, and, therefore, as of June 30, 2023, there were no USCP Notes outstanding.

The Company borrowed under the U.S.

Commercial Paper Program throughout much of the first nine months of 2023, the proceeds of which were used for general corporate purposes.

During the third quarter of 2023, the Company repaid all of its USCP Notes then outstanding, and, as of September 30, 2023, there were no USCP Notes outstanding.

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.

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These borrowings under the Euro Commercial Paper Program were repaid in their entirety by the end of the first quarter of 2023.

As of June 30, 2023 and December 31, 2022, there were no ECP Notes outstanding.

As of September 30, 2023 and December 31, 2022, 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, as of June 30, 2023, the authorization from the Company’s Board of Directors (the “Board”) 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 conjunction with the Revolving Credit Facility, as of September 30, 2023, the authorization from the Company’s Board of Directors (the “Board”) 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.

The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by Moody’s and, based on the Board’s authorization described above, 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 Company reviews its optimal mix of short- 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, 2023, the Company has outstanding senior notes (the “Senior Notes”) as follows:

The Company reviews its optimal mix of short- 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 September 30, 2023, 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, 2023, the Company was in compliance with all requirements under its Senior Notes.

On September 30, 2023, 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 Class A Common Stock (“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, 2023, the Company repurchased 2.0 million and 4.1 million shares of its Common Stock for $153.6 and $320.5, respectively, under the 2021 Stock Repurchase Program.

All of the repurchased shares during the first six months of 2023 have been retired by the Company.

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, 5.0 million shares, or $368.9, were retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

From July 1, 2023 to July 25, 2023, the Company repurchased 0.5 million additional shares of its Common Stock for $39.4, and, as of July 26, 2023, the Company has remaining authorization to purchase up to $451.8 of its Common Stock under the 2021 Stock Repurchase Program.

During the three and nine months ended September 30, 2023, the Company repurchased 1.7 million and 5.8 million shares of its Common Stock for $149.3 and $469.8, respectively, under the 2021 Stock Repurchase Program.

Of the total repurchases made during the first nine months of 2023, 4.1 million shares, or $320.5, were retired by the Company, with the remainder of the repurchased shares 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, 7.0 million shares, or $519.3, were retired by the Company, with the remainder of the repurchased shares retained in Treasury stock at the time of repurchase.

From October 1, 2023 to October 24, 2023, the Company repurchased 0.4 million additional shares of its Common Stock for $33.5, and, as of October 25, 2023, the Company has remaining authorization to purchase up to $308.3 of its Common Stock under the 2021 Stock Repurchase Program.

The price and timing of any future purchases 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 Common Stock.

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 during the three and six months ended June 30, 2023 and 2022:

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 during the three and nine months ended September 30, 2023 and 2022:

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)

During the six months ended June 30, 2023, the Company completed two acquisitions, the 2023 Acquisitions, for approximately $113.2, net of cash acquired.

One acquisition, which closed in the first quarter of 2023 and was funded through a combination of borrowings under the Euro Commercial Paper Program and cash on hand, was included in the Harsh Environment Solutions segment, while the other acquisition, which closed in the second quarter of 2023, was included in the Communications Solutions segment.

The Company’s acquisition in the second quarter of 2023 represented a bargain purchase, where the estimated fair value of assets acquired, net of liabilities assumed, exceeded the purchase price.

The Company recognized a non-cash gain of $5.4 on the bargain purchase acquisition during the three and six months ended June 30, 2023, which has been recorded separately in the Company’s Condensed Consolidated Statements of Income.

On October 25, 2022, the Board approved an 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, and on October 24, 2023, the Board approved an additional increase to the Company’s quarterly dividend rate from $0.21 per share to $0.22 per share, effective with dividends declared in the fourth quarter of 2023, contingent upon declaration by the Board.

During the nine months ended September 30, 2023, the Company completed six acquisitions for approximately $292.6, net of cash acquired.

Four of the acquisitions have been included in the Harsh Environment Solutions segment, one acquisition has been included in the Interconnect and Sensor Systems segment, and one acquisition, which closed in the second quarter of 2023, has been included in the Communications Solutions segment.

One of the 2023 acquisitions, which closed in the first quarter of 2023, was funded through a combination of borrowings under the Euro Commercial Paper Program and cash on hand, while the other acquisitions were each funded using either cash on hand or a combination of cash on hand and borrowings under the U.S.

Commercial Paper Program.

The acquisition that closed in the second quarter of 2023 represented a bargain purchase, where the estimated fair value of assets acquired, net of liabilities assumed, exceeded the purchase price.

The Company recognized a non-cash gain of $5.4 on the bargain purchase acquisition during the nine months ended September 30, 2023, which has been recorded separately in the Company’s Condensed Consolidated Statements of Income.

The 2023 acquisitions were not material, either individually or in the aggregate, to the Company’s financial results.

During the three months ended June 30, 2023, the Company incurred $4.0 ($3.8 after-tax) of acquisition-related expenses, comprised of external transaction costs related to acquisitions.

During the six months ended June 30, 2023, the Company incurred $9.4 ($7.8 after-tax) of acquisition-related expenses, comprised of the amortization related to the value associated with acquired backlog resulting from the acquisition that closed in the first quarter of 2023, as well as the external transaction costs incurred in the second quarter.

During the year ended December 31, 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.

During the year ended December 31, 2022, the Company completed two acquisitions for approximately $288.2, net of cash acquired, one of which was included in the Harsh Environment Solutions segment and the other of which was 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.

During the year ended December 31, 2022, the Company incurred $21.5 ($18.4 after-tax) of acquisition-related expenses, primarily comprised of the amortization related to the value associated with acquired backlog resulting from these two acquisitions, along with external transaction costs.

Acquisition-related expenses

During the three months ended September 30, 2023, the Company incurred $9.0 ($8.4 after-tax) of acquisition-related expenses, comprised of external transaction costs related to acquisitions.

During the nine months ended September 30, 2023, the Company incurred $18.4 ($16.2 after-tax) of acquisition-related expenses, comprised of external transaction costs incurred in the second and third quarters of 2023, as well as the amortization related to the value associated with acquired backlog resulting from the acquisition that closed in the first quarter of 2023.

During the year ended December 31, 2022, the Company incurred $21.5 ($18.4 after-tax) of acquisition-related expenses, comprised primarily of the amortization related to the value associated with acquired backlog resulting from the acquisitions that closed in 2022, along with external transaction costs.

Environmental Matters

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

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

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

GAAP financial measures.

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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, 2023 and 2022 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, 2023 and 2022 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 2:

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

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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.

dollars, as well as Organic Net Sales Growth (as 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.

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

GAAP), net of

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

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

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

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

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

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

Critical Accounting Policies and Estimates

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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