What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-07 compared with 2023-02-08 · 186 added, 213 removed, 438 unchanged (48% of the section changed)

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● a broad range of industrial applications and traditional, hybrid and electric automotive applications;

● military and commercial aerospace applications.

● defense and commercial aerospace applications.

The Company’s products are used in a wide variety of applications by a broad array of customers around the world.

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Reportable Business Segments

Effective January 1, 2022, the Company aligned its businesses into the following three newly formed reportable business segments:

• Harsh Environment Solutions – the Harsh Environment Solutions segment designs, manufactures and markets a broad range of ruggedized interconnect products, including connectors and interconnect systems, printed circuits and printed circuit assemblies and other products for use in the industrial, military, commercial aerospace, automotive, mobile networks and information technology and data communications end markets.

• Communications Solutions – the Communications Solutions segment designs, manufactures and markets a broad range of connector and interconnect systems, including high speed, radio frequency, power, fiber optic and other products, together with antennas, for use in the information technology and data communications, mobile devices, industrial, mobile networks, broadband communications, automotive, commercial aerospace and military end markets.

• Interconnect and Sensor Systems – the Interconnect and Sensor Systems segment designs, manufactures and markets a broad range of sensors, sensor-based systems, connectors and value-add interconnect systems used in the automotive, industrial, information technology and data communications, mobile networks, military and commercial aerospace end markets.

This new alignment replaced our historic reportable business segments.

All businesses previously reported in the Interconnect Products and Assemblies segment have been aligned with one o f the three newly formed segments.

All businesses previously reported in the Cable Products and Solutions segment have been aligned with our newly formed Communications Solutions segment.

This new alignment reinforces the Company’s entrepreneurial culture and the clear accountability of each of our business unit general managers, while enhancing the scalability of Amphenol’s business for the future.

The Company began reporting under its new reportable segments in connection with its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 and for each quarterly period thereafter.

T hroughout this Annual Report, the Company is reporting under the new reportable segments structure, which includes the recasting of relevant segment information for the years ended December 31, 2021 and 2020, in order to enable year-over-year segment comparisons .

F or further details related to the Company’s change in its reportable business segments effective January 1, 2022, refer to Note 13 of the Notes to Consolidated Financial Statements herein.

The Company aligns its businesses into the following three reportable business segments:

● Harsh Environment Solutions – the Harsh Environment Solutions segment designs, manufactures and markets a broad range of ruggedized interconnect products, including connectors and interconnect systems, printed circuits and printed circuit assemblies and other products for use in the industrial, defense, commercial aerospace, automotive, mobile networks and information technology and data communications end markets.

● Communications Solutions – the Communications Solutions segment designs, manufactures and markets a broad range of connector and interconnect systems, including high speed, radio frequency, power, fiber optic and other products, together with antennas, for use in the information technology and data communications, mobile devices, industrial, mobile networks, broadband communications, automotive, commercial aerospace and defense end markets.

● Interconnect and Sensor Systems – the Interconnect and Sensor Systems segment designs, manufactures and markets a broad range of sensors, sensor-based systems, connectors and value-add interconnect systems used in the automotive, industrial, information technology and data communications, mobile networks, defense and commercial aerospace end markets.

This alignment reinforces the Company’s entrepreneurial culture and the clear accountability of each of our business unit general managers, while enhancing the scalability of Amphenol’s business for the future.

F or further details related to the Company’s reportable business segments, refer to Note 13 of the Notes to Consolidated Financial Statements herein.

The Company’s strategy is to provide our customers with comprehensive design capabilities, a broad selection of products and a high level of quality and service on a worldwide basis, while maintaining continuing programs of productivity improvement and cost control.

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● Foster collaborative, entrepreneurial management.

In 2022 , the Company reported net sales, operating income and net income from continuing operations attributable to Amphenol Corporation of $12,623.0, $2,585.8 and $1,902.3, respectively, representing an increase of 16%, 23% and 21%, respectively, from 2021.

In 2022, the Company’s net income from continuing operations attributable to Amphenol Corporation was impacted by (a) excess tax benefits of $56.0 related to stock-based compensation resulting from stock option exercises, partially offset by (b) acquisition-related expenses of $21.5 ($18.4 after-tax) comprised primarily of the amortization related to the value associated with acquired backlog resulting from two acquisitions that closed in 2022,

along with external transaction costs .

In 2021, the Company’s net income from continuing operations attributable to Amphenol Corporation was impacted by (a) excess tax benefits of $63.4 related to stock-based compensation resulting from stock option exercises and (b) a discrete tax benefit of $14.9 related to the settlement of uncertain tax positions in certain non-U.S.

jurisdictions, partially offset by (c) acquisition-related expenses of $70.4 ($57.3 after-tax) comprised primarily of transaction, severance, restructuring and certain non-cash purchase accounting costs related to the acquisition of MTS Systems Corporation (“MTS”) in the second quarter of 2021 and external transaction costs and certain non-cash purchase accounting costs related to the acquisition of Halo Technology Limited (“Halo”) in the fourth quarter of 2021.

Excluding the effects of these items, Adjusted Operating Income and Adjusted Net Income from continuing operations attributable to Amphenol Corporation, each as defined in the “Non-GAAP Financial Measures” section below and reconciled within this Part II, Item 7, increased by 20% and 20%, respectively, in 2022 compared to 2021.

In 2023 , the Company reported net sales and operating income of $12,554.7 and $2,559.6, respectively, each representing a decrease of 1% from 2022, while net income from continuing operations attributable to Amphenol Corporation of $1,928.0 represented an increase of 1% from 2022.

In 2023, the Company’s net income from continuing operations attributable to Amphenol Corporation was impacted by (a) excess tax benefits of $82.4 related to stock-based compensation resulting from stock option exercises and (b) the gain of $5.4 on a bargain purchase acquisition that closed in the second quarter of 2023, partially offset by (c) acquisition-related expenses of $34.6 ($30.2 after-tax) comprised primarily of external transaction costs, as well as the amortization of $12.4 related to the value associated with acquired backlog resulting from three of the acquisitions that closed in 2023 .

Excluding the effects of these items, Adjusted Operating Income decreased by 1%, while Adjusted Net Income from continuing operations attributable to Amphenol Corporation increased slightly in 2023 compared to 2022.

Adjusted Operating Income and Adjusted Net

Income from continuing operations attributable to Amphenol Corporation are both non-GAAP financial measures, each as defined in the “Non-GAAP Financial Measures” section below and reconciled within this Part II, Item 7.

Sales and profitability trends are discussed in detail in “Results of Operations” below.

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The Company uses Operating Cash Flow to fund capital expenditures and acquisitions, repurchase shares of the Company’s Class A Common Stock (“Common Stock”), pay dividends and reduce indebtedness.

In 2022, the Company generated Operating Cash Flow of $2,174.6 and Free Cash Flow of $1,796.4.

In 2023, the Company generated Operating Cash Flow of $2,528.7 and Free Cash Flow of $2,159.9, compared to Operating Cash Flow of $2,174.6 and Free Cash Flow of $1,796.4 in 2022.

Free Cash Flow, a non-GAAP financial measure, is defined in the “Non-GAAP Financial Measures” section below and reconciled within this Part II, Item 7.

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

Since early 2020, the COVID-19 pandemic has disrupted our offices and manufacturing facilities around the world, as well as the facilities of our suppliers, customers and our customers’ contract manufacturers.

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.

During much of 2022, COVID-19 outbreaks in China resulted in local or regional government-imposed lockdowns and restrictions, which impacted the ability of several of our operations and manufacturing facilities to operate in the ordinary course.

As of December 31, 2022, there continue to be isolated COVID-19 outbreaks in certain regions of the world, particularly in China, but these outbreaks have not had a significant impact on our operations.

The extent to which the COVID-19 pandemic will continue to impact our business, operations, financial condition, liquidity and results of operations in 2023 and beyond remains uncertain and unpredictable.

For further discussion on the risks and uncertainties associated with the COVID-19 pandemic, refer to Part I, Item 1A.

Risk Factors herein.

Inflation Reduction Act of 2022

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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 impact of these provisions, which became effective for Amphenol beginning on January 1, 2023, is dependent on several factors, including interpretive regulatory guidance, which has not yet been released.

The Company has reviewed and assessed the provisions of the IRA, including several other non-tax related provisions, and the Company does not currently believe that the IRA will have a material impact on its financial condition, results of operations, liquidity and cash flows.

The IRA provisions, which became effective for Amphenol beginning on January 1, 2023, did not have a material impact on the Company during the year ended December 31, 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 its financial condition, results of operations, liquidity and cash flows.

Pillar Two Framework

The Organization for Economic Co-operation and Development (OECD)/G20 Inclusive Framework, known as Pillar Two, provides guidance for a global minimum tax.

This guidance lays out a common approach for adopting the global minimum tax and enacting local legislation codifying the provisions that all 142 countries in the Inclusive Framework agreed to by consensus.

The European Union (“EU”) member states have agreed to adopt these rules in two stages with the first component effective on January 1, 2024, while the second component will be effective January 1, 2025.

Non-EU countries have enacted or are expected to enact legislation on a similar timeline.

Certain countries in which we operate have already enacted legislation to adopt the Pillar Two framework, while several other countries are expected to also implement similar legislation with varying effective dates in the future.

When and how this framework is adopted or enacted by the various countries in which we do business will increase tax complexity and may increase uncertainty and adversely affect our provision for income taxes in the U.S.

jurisdictions.

The Company has done a preliminary review of currently enacted legislation and does not expect the initial implementation to materially impact future results.

However, the Company will continue to evaluate the potential impact of Pillar Two on the Company and its future results, as additional countries adopt legislation and issue individual guidance on their enacted legislation.

Results of Operations

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Interest expense

Gain on bargain purchase acquisition

Other income (expense), net

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2023 Compared to 2022

Net sales were $12,623.0 for the year ended December 31, 2022 compared to $10,876.3 for the year ended December 31, 2021, which represented an increase of 16% in U.S.

dollars, 19% in constant currencies and 15% organically (excluding both currency and acquisition impacts) over the prior year.

The increase in net sales in 2022 was driven by robust growth across all three reportable business segments, as described below.

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

Net sales to the automotive market increased (approximately $470.1), reflecting broad-based growth across our global automotive market, including the Company’s strength in next-generation electronics, in particular electric and hybrid drive trains, power management, infotainment communications, antenna and antenna assemblies, charging stations, and safety and security systems.

Net sales to the information technology and data communications market increased (approximately $414.6), as we continue to benefit from our strong technology solutions and leading position across a broad array of applications as customers continue to support higher demand for increased bandwidth and cloud storage, along with contributions from acquisitions.

Net sales to the industrial market increased (approximately $399.7), with broad-based growth across nearly all market segments of the global industrial market, with particular strength in e-mobility applications primarily in heavy and commercial vehicles, along with strong growth in factory automation, alternative energy, medical, and transportation applications, as well as contributions from acquisitions.

Net sales to the broadband communications market increased (approximately $241.2), driven by increased overall demand from broadband service operators related to data network upgrades and expansions, along with contributions from acquisitions.

Net sales to the commercial aerospace market increased (approximately $85.6), primarily due to the continued recovery in travel and demand for aircraft, along with contributions from acquisitions.

Net sales to the military market increased (approximately $47.9), driven by strength in space-related applications, unmanned aerial vehicles, ground vehicles, and avionics, as well as contributions from acquisitions.

Net sales to the mobile networks market increased (approximately $46.4), driven by a continued recovery in demand from mobile networks equipment manufacturers and mobile operators, along with contributions from acquisitions.

Net sales to the mobile devices market increased (approximately $41.2), driven by growth in products incorporated into smartphones and wearable devices, partially offset by moderations in sales of tablets, hearable devices and laptops.

Net sales were $12,554.7 for the year ended December 31, 2023 compared to $12,623.0 for the year ended December 31, 2022, which represented a decrease of 1% in U.S.

dollars and 3% organically (excluding both currency and acquisition impacts), while flat in constant currencies compared to the prior year.

The decrease in net sales in 2023 was driven by a sales decline in the Communications Solutions segment, partially offset by growth in the Harsh Environment Solutions and Interconnect and Sensor Systems segments, as described below.

From an end market standpoint, the decrease in net sales was driven by organic declines in the information technology and data communications (“IT datacom”), mobile networks, mobile devices, industrial and broadband communications markets, partially offset by robust organic growth in the automotive, defense and commercial aerospace markets, along with contributions from the Company’s acquisition program.

Net sales to the automotive market increased approximately $310.5, reflecting broad-based strength across our global automotive markets, in particular, next-generation electronics, including electric and hybrid drive trains.

Net sales to the defense market increased approximately $237.6, driven by broad-based strength across virtually all defense applications, particularly related to naval, aircraft engines, helicopters, communications, and space-related applications, as well as contributions from acquisitions.

Net sales to the commercial aerospace market increased approximately $117.9, primarily due to increased broad-based demand across all aircraft applications, in particular larger passenger planes.

Net sales to the industrial market remained flat, as contributions from acquisitions, along with growth in medical, oil and gas, mass transit and transportation applications were offset by moderations in industrial instrumentation, battery and electric heavy vehicles, factory automation and heavy equipment applications.

Net sales to the IT datacom market decreased approximately $362.8, as we experienced moderations across a broad array of applications including networking equipment, cloud storage, transmission, consumer electronics and servers, partially offset by strong growth in artificial intelligence-related applications.

Net sales to the mobile networks market decreased approximately $163.9, driven by broad-based moderations in demand from mobile network operators and wireless equipment manufacturers, partially offset by contributions from acquisitions.

Net sales to the mobile devices market decreased approximately $161.5, driven by declines in sales in laptops, wearable devices, tablets and production-related products, partially offset by growth in smartphones.

Net sales to the broadband communications market decreased approximately $46.4, driven by moderations in demand from broadband service operators.

Net sales in the Harsh Environment Solutions segment (approximately 28% of net sales) increased 14% in U.S.

dollars, 14% in constant currencies and 9% organically, in 2023, compared to 2022.

The sales growth in 2022 was driven by strong organic growth in the industrial, automotive and commercial aerospace markets, and moderate organic growth in the military, mobile networks and information technology and data communications markets, along with contributions from the Company’s acquisition program.

Net sales in the Communications Solutions segment (approximately 45% of net sales) increased 17% in U.S.

The sales growth in 2023 was primarily driven by strong organic growth in the defense, commercial aerospace, automotive 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.

Net sales in the Communications Solutions segment (approximately 39% of net sales) decreased 13% in U.S.

dollars, 12% in constant currencies and 13% organically, in 2023, compared to 2022.

The sales growth in 2022 was driven by strong organic growth across several end markets, in particular the information technology and data communications, broadband communications and automotive markets, and moderate organic growth in the mobile devices, industrial and mobile networks markets, along with contributions from the Company’s acquisition program.

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

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

dollars, 7% in constant currencies and 3% organically, in 2023, compared to 2022.

The sales growth in 2022 was driven primarily by strong organic growth in the automotive, industrial, information technology and data communications, military and commercial aerospace markets, along with contributions from the Company’s acquisition program, partially offset by a moderate decline in the mobile networks market.

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

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

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

The increase in foreign net sales in 2022 compared to 2021 was driven by strong growth in both Europe and Asia.

The decrease in foreign net sales in 2023 compared to 2022 was primarily driven by sales declines in Asia.

The comparatively stronger U.S.

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Selling, general and administrative expenses were $1,489.9, or 11.9% of net sales for 2023, compared to $1,420.9, or 11.3% of net sales, for 2022.

Selling, general and administrative expenses as a percentage of net sales in 2022 remained flat as the leverage on the higher sales volumes during the year was offset by the MTS Sensors business, acquired in early 2021, having higher selling, general and administrative expenses as a percentage of net sales compared to the average of the Company.

The increase in Selling, general and administrative expenses as a percentage of net sales in 2023 was primarily driven by the effect of acquisitions, which currently have higher selling, general and administrative expenses as a percentage of net sales compared to the Company average.

Administrative expenses increased $26.2 in 2023 and represented approximately 4.8% of net sales in 2023 and 4.6% of net sales in 2022.

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Operating income was $2,559.6, or 20.4% of net sales, in 2023, compared to $2,585.8, or 20.5% of net sales, in 2022.

Operating income in 2022 included acquisition-related expenses of $21.5, comprised primarily of the amortization related to the value associated with acquired backlog resulting from two acquisitions that closed in 2022, along with external transaction costs.

Operating income in 2021 included acquisition-related expenses of $70.4, comprised primarily of transaction, severance, restructuring and certain non-cash purchase accounting costs related to the acquisition of MTS in the second quarter of 2021, along with external transaction costs and certain non-cash purchase accounting costs related to the acquisition of Halo in the fourth quarter of 2021.

Operating income in 2023 included acquisition-related expenses of $34.6, comprised primarily of external transaction costs, as well as the amortization related to the value associated with acquired backlog resulting from three of the acquisitions that closed in 2023.

Operating income in 2022 included acquisition-related expenses of $21.5,

comprised primarily of the amortization related to the value associated with acquired backlog resulting from two acquisitions that closed in 2022, along with external transaction costs.

The acquisition-related expenses in 2023 and 2022 had the effect of decreasing net income from continuing operations by $30.2, or $0.05 per share, and $18.4, or $0.03 per share, respectively.

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Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, each as defined in the “Non-GAAP Financial Measures” section below, were $2,594.2 and 20.7% of net sales, respectively, in 2023, and $2,607.3 and 20.7% of net sales, respectively, in 2022.

The increases in Adjusted Operating Income and Adjusted Operating Margin in 2022 relative to 2021 was driven by all three segments, as described below.

While Adjusted Operating Income decreased modestly from 2022, Adjusted Operating Margin remained flat in 2023 relative to 2022, as the benefit of pricing actions and strong operational performance were offset by the 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.

Operating income for the Harsh Environment Solutions segment in 2023 was $943.9, or 26.7% of net sales, compared to $801.6, or 25.8% of net sales in 2022.

The slight increase in operating margin for the Harsh Environment Solutions segment for 2022 compared to 2021 was primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of pricing actions, which were largely offset by the impact of the more challenging cost environment experienced in 2022.

The increase in operating margin for the Harsh Environment Solutions segment for 2023 compared to 2022 was primarily driven by normal operating leverage on the higher sales volumes and strong operational performance, combined with the benefit of pricing actions, all 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 in 2023 was $1,063.5, or 21.6% of net sales, compared to $1,245.7, or 22.0% of net sales in 2022.

The increase in operating margin for the Communications Solutions segment for 2022 compared to 2021 was primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of pricing actions, partially offset by the impact of the more challenging cost environment experienced in 2022.

The decrease in operating margin for the Communications Solutions segment for 2023 compared to 2022 was primarily driven by operating leverage on the lower sales volumes, partially offset by the benefit of pricing actions and strong operational performance.

Operating income for the Interconnect and Sensor Systems segment in 2023 was $753.7, or 18.3% of net sales, compared to $716.5, or 18.5% of net sales in 2022.

The increase in operating margin for the Interconnect and Sensor Systems segment for 2022 compared to 2021 was primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of pricing actions, partially offset by the impact of the more challenging cost environment experienced in 2022.

The modest decrease in operating margin for the Interconnect and Sensor Systems segment for 2023 compared to 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 the normal operating leverage on the higher sales volumes combined with the benefit of pricing actions.

Interest expense was $139.5 in 2023 compared to $128.4 in 2022.

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

Commercial Paper Program.

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

Commercial Paper Program that were outstanding throughout much of 2023.

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

Provision for income taxes was at an effective rate of 20.7% in 2023 and 22.3% in 2022.

Provision for income taxes in 2022 included excess tax benefits of $56.0 from stock option exercises, partially offset by the tax effects related to acquisition-related expenses during the year.

Provision for income taxes in 2023 included excess tax benefits of $82.4 from stock option exercises as well as the effect of the gain from the bargain purchase acquisition that closed in the second quarter of 2023, all of which were partially offset by the tax effects related to acquisition-related expenses during the year.

These items had the aggregate effect of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the table below.

Provision for income taxes in 2021 included (i) excess tax benefits of $63.4 from stock option exercises and (ii) a discrete tax benefit of $14.9 related to the settlement of uncertain tax positions in certain non-U.S.

jurisdictions, all of which was partially offset by the tax effects related to acquisition-related expenses during the year.

Provision for income taxes in 2022 included excess tax benefits of $56.0 from stock option exercises, partially offset by the tax effects related to acquisition-related expenses during the year.

These items had the aggregate effect of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the table below.

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Acquisition-related expenses

Gain on bargain purchase acquisition

Excess tax benefits related to stock-based compensation

Discrete tax item

Adjusted (non-GAAP) (2)

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Net sales were $12,623.0 for the year ended December 31, 2022 compared to $10,876.3 for the year ended December 31, 2021, which represented an increase of 16% in U.S.

dollars, 25% in constant currencies and 18% organically (excluding both currency and acquisition impacts) over the prior year.

dollars, 19% in constant currencies and 15% organically (excluding both currency and acquisition impacts) compared to the prior year.

The increase in net sales in 2022 was driven by robust growth across all three reportable business segments, as described below.

From a market standpoint, the increase in net sales was driven by strong organic growth across nearly all end markets, including the industrial, automotive, information technology and data communications, military and mobile networks markets, moderate growth in the mobile devices market, and contributions from the Company’s acquisition program.

This strong sales growth in 2021 also reflected a recovery in certain markets from the more negative impact resulting from the COVID-19 pandemic during 2020.

This sales growth was partially offset by a decline in the commercial aerospace market, which continued to be negatively impacted by the significant impact of the COVID-19 pandemic on travel and aircraft production.

Net sales to the industrial market increased (approximately $864.6), with broad-based growth across nearly all market segments of the global industrial market, with particular strength in heavy equipment, factory automation, industrial instrumentation, battery and heavy electric vehicle, alternative energy, rail mass transit, and transportation, along with contributions from acquisitions.

Net sales to the automotive market increased (approximately $683.4), reflecting the continued recovery and growth in most regions of the global automotive market, as well as the Company’s expanded position in next-generation electronics, including in particular electric and hybrid drive trains.

Net sales to the information technology and data communications market increased (approximately $482.7), driven primarily by continued strong sales growth to web service providers and broad-based market demand for server, storage and networking related products as customers worked to support higher demand for increased bandwidth.

Net sales to the military market increased (approximately $135.8), driven by strength across nearly all segments of the military market, including missile, military communications and naval and space-related applications, along with a recovery from the impact of pandemic-related production disruptions experienced during the first half of 2020, as well as contributions from acquisitions.

Net sales to the mobile networks market increased (approximately $60.5), driven by a recovery in demand from mobile networks equipment manufacturers and mobile operators, which was primarily driven by increased demand for products used in 5G network build-outs and contributions from acquisitions, offset in part by reductions of sales to certain customers in China that were added to the U.S.

Department of Commerce’s “Entity List”.

Net sales to the mobile devices market increased (approximately $45.7), driven by growth in products incorporated into laptops and wearable devices, along with production-related products, and was partially offset by moderations of sales into smartphones and tablets.

Net sales to the commercial aerospace market decreased (approximately $26.6) primarily due to the continued significant impact of the COVID-19 pandemic on travel and aircraft production during that period.

From an end market standpoint, the increase in net sales was driven by robust organic growth across most end markets, including the automotive, IT datacom, industrial, broadband communications and commercial aerospace markets, moderate organic growth in the defense, mobile networks and mobile devices markets, and contributions from the Company’s acquisition program.

Net sales to the automotive market increased approximately $470.1, reflecting broad-based growth across our global automotive market, including the Company’s strength in next-generation electronics, in particular electric and hybrid drive trains, power management, infotainment communications, antenna and antenna assemblies, charging stations, and safety and security systems.

Net sales to the IT datacom market increased approximately $414.6, as we continue to benefit from our strong technology solutions and leading position across a broad array of applications as customers continue to support higher demand for increased bandwidth and cloud storage, along with contributions from acquisitions.

Net sales to the industrial market increased approximately $399.7, with broad-based growth across nearly all market segments of the global industrial market, with particular strength in e-mobility applications primarily in heavy and commercial vehicles, along with strong growth in factory automation, alternative energy, medical, and transportation applications, as well as contributions from acquisitions.

Net sales to the broadband communications market increased approximately $241.2, driven by increased overall demand from broadband service operators related to data network upgrades and expansions, along with contributions from acquisitions.

Net sales to the commercial aerospace market increased approximately $85.6, primarily due to the continued recovery in travel and demand for aircraft, along with contributions from acquisitions.

Net sales to the defense market increased approximately $47.9, driven by strength in space-related applications, unmanned aerial vehicles, ground vehicles, and avionics, as well as contributions from acquisitions.

Net sales to the mobile networks market increased approximately $46.4, driven by continued recovery in demand from mobile networks equipment manufacturers and mobile operators, along with contributions from acquisitions.

Net sales to the mobile devices market increased approximately $41.2, driven by growth in products incorporated into smartphones and wearable devices, partially offset by moderations in sales of tablets, hearable devices and laptops.

Net sales in the Harsh Environment Solutions segment (approximately 25% of net sales) increased 13% in U.S.

dollars, 16% in constant currencies and 15% organically, in 2022, compared to 2021.

The sales growth in 2021 was driven primarily by strong organic growth in the industrial, automotive, and information technology and data communications markets, moderate organic growth in the military market, and contributions from the Company’s acquisition program, all of which was partially offset by a decline in the commercial aerospace market.

The sales growth in 2022 was driven by strong organic growth in the industrial, automotive and commercial aerospace markets, and moderate organic

growth in the defense, mobile networks and IT datacom markets, along with contributions from the Company’s acquisition program.

Net sales in the Communications Solutions segment (approximately 45% of net sales) increased 17% in U.S.

dollars, 19% in constant currencies and 13% organically, in 2022, compared to 2021.

The sales growth in 2021 was driven by strong organic growth across several end markets, including the information technology and data communications, industrial, and automotive markets, moderate organic growth in the mobile networks, mobile devices, and military markets, and contributions from the Company’s acquisition program.

The sales growth in 2022 was driven by strong organic growth across several end markets, in particular the IT datacom, broadband communications and automotive markets, and moderate organic growth in the mobile devices, industrial and mobile networks markets, along with contributions from the Company’s acquisition program.

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

dollars, 23% in constant currencies and 18% organically, in 2022, compared to 2021.

The sales growth in 2021 was driven primarily by strong organic growth in the automotive, information technology and data communications, industrial and mobile networks markets, along with contributions from the Company’s acquisition program, all of which was partially offset by a decline in the commercial aerospace market in that period.

The sales growth in 2022 was primarily driven by strong organic growth in the automotive, industrial, IT datacom, defense and commercial aerospace markets, along with contributions from the Company’s acquisition program, partially offset by a moderate decline in the mobile networks market.

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

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The increase in foreign net sales in 2022 compared to 2021 was driven by strong growth in both Europe and Asia.

The comparatively weaker U.S.

dollar in 2021 had the effect of increasing sales by approximately $159.1, compared to 2020.

The comparatively stronger U.S.

dollar in 2022 had the effect of decreasing sales by approximately $359.8, compared to 2021.

Selling, general and administrative expenses were $1,420.9, or 11.3% of net sales for 2022, compared to $1,226.3, or 11.3% of net sales, for 2021.

The decrease in selling, general and administrative expenses as a percentage of net sales in 2021 was driven primarily by higher sales during the year, relative to 2020 which was more negatively impacted by the COVID-19 pandemic, slightly offset by the impact of the MTS Sensors business, acquired in 2021, which has higher selling, general and administrative expenses as a percentage of net sales compared to the average of the Company.

Selling, general and administrative expenses as a percentage of net sales in 2022 remained flat as the leverage on the higher sales volumes during the year was offset by the Sensors business (“MTS Sensors”) of MTS Systems Corporation (“MTS”), acquired in early 2021, having higher selling, general and administrative expenses as a percentage of net sales compared to the Company average.

Administrative expenses increased $90.6 in 2022 and represented approximately 4.6% of net sales in 2022 and 4.5% of net sales in 2021.

Research and development expenses increased $57.0 in 2021 primarily related to increases in

expenses for new product development, and represented approximately 2.9% of net sales in 2021 and 3.0% of net sales in 2020.

Research and development expenses increased $5.9 in 2022, primarily related to increases in expenses for new product development, and represented approximately 2.6% of net sales in 2022 and 2.9% of net sales in 2021.

Selling and marketing expenses increased $98.1 in 2022 compared to 2021, and represented approximately 4.1% of net sales in 2022 and 3.8% of net sales in 2021.

Operating income was $2,585.8, or 20.5% of net sales, in 2022, compared to $2,105.1, or 19.4% of net sales, in 2021.

Operating income in 2021 included acquisition-related expenses of $70.4, comprised primarily of transaction, severance, restructuring and certain non-cash purchase accounting costs related to the MTS acquisition in the second quarter of 2021, along with external transaction costs and certain non-cash purchase accounting costs related to the Halo acquisition in the fourth quarter of 2021.

Operating income in 2020 included acquisition-related expenses of $11.5, comprised primarily of external transaction costs related to acquisitions that were announced or closed.

These acquisition-related expenses in 2021 and 2020 had the effect of decreasing net income from continuing operations by $57.3, or $0.09 per share, and $10.7, or $0.02 per share, respectively.

The acquisition-related expenses in 2022 and 2021 had the effect of decreasing net income from continuing operations by $18.4, or $0.03 per share, and $57.3, or $0.09 per share, respectively.

Acquisition-related expenses are presented separately in the Consolidated Statements of Income.

Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, each as defined in the “Non-GAAP Financial Measures” section below, were $2,607.3 and 20.7% of net sales, respectively, in 2022, and $2,175.5 and 20.0% of net sales, respectively, in 2021.

The increase in Adjusted Operating Income and Adjusted Operating Margin in 2021 relative to 2020 was driven by all three segments, and in particular, by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to 2020, partially offset by the impact of the more challenging commodity and supply chain environment experienced in 2021, along with the impact of the Company’s 2021 acquisitions.

The increases in Adjusted Operating Income and Adjusted Operating Margin in 2022 relative to 2021 was driven by all three segments, as described below.

Operating income for the Harsh Environment Solutions segment in 2022 was $801.6, or 25.8% of net sales, compared to $708.2, or 25.7% of net sales in 2021.

The increase in operating margin for the Harsh Environment Solutions segment for 2021 compared to 2020 was primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to 2020, partially offset by the impact of the more challenging commodity, logistics and supply chain environment experienced in 2021.

Operating income for the Communications Solutions segment in 2022 was $1,245.7, or 22.0% of net sales, compared to $1,023.3, or 21.2% of net sales in 2021.

The slight decrease in operating margin for the Communications Solutions segment for 2021 compared to 2020 was primarily driven by the impact of the more challenging commodity, logistics and supply chain environment experienced in 2021, which was largely offset by the normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to 2020.

Operating income for the Interconnect and Sensor Systems segment in 2022 was $716.5, or 18.5% of net sales, compared to $588.1, or 17.9% of net sales in 2021.

The increase in operating margin for the Interconnect and Sensor Systems segment for 2021 compared to 2020 was primarily driven by normal operating leverage on the higher sales volumes combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic compared to 2020, partially offset by the impact of the more challenging commodity, logistics and supply chain environment experienced in 2021, along with the impact of the Company’s 2021 acquisitions, in particular the MTS Sensors business closed in April 2021, which operated at a lower operating margin compared to the average of the Interconnect and Sensor Systems segment.

Interest expense was $128.4 in 2022 compared to $115.5 in 2021.

The increase in interest expense was driven by the higher 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 Consolidated Financial Statements for further information related to the Company’s debt.

Provision for income taxes was at an effective rate of 22.3% in 2022 and 20.6% in 2021.

jurisdictions, all of which was partially offset by the tax effects related to acquisition-related expenses during the year.

Provision for income taxes in 2022 included excess tax benefits of $56.0 from stock option exercises, partially offset by the tax effects related to acquisition-related expenses during the year.

These items had the aggregate effect of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the table below.

Provision for income taxes in 2020 included (i) excess tax benefits of $42.8 from stock option exercises and (ii) a discrete tax benefit of $19.9 related to the settlements of refund claims in a non-U.S.

jurisdiction and the resulting adjustments to deferred taxes, which were partially offset by the tax effects related to acquisition-related expenses during the year.

jurisdictions, all of which were partially offset by the tax effects related to acquisition-related expenses during the year.

These items had the aggregate effect of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the table below.

respectively, as reconciled in the table 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 7, was 24.5% and 24.3% for 2022 and 2021, respectively, as reconciled in the table below to the comparable effective tax rate based on GAAP results.

For additional details related to the reconciliation between the U.S.

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Liquidity and Cash Requirements

At December 31, 2022 and 2021, the Company had cash, cash equivalents and short-term investments of $1,434.2 and $1,241.4, respectively, with the vast majority of the Company’s cash, cash equivalents and short-term investments on hand located outside of the United States.

At December 31, 2023 and 2022, the Company had cash, cash equivalents and short-term investments of $1,660.2 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.

Commercial Paper Program, the Euro Commercial Paper Program, the Revolving Credit Facility, and the Term Loan (all of which are defined and discussed in more detail below within this Item 7).

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 believes that these sources of liquidity, along with access to capital markets (which the Company accessed in March 2023 in connection with the issuance of the 2026 Senior Notes, as defined and discussed in more detail below within this Item 7), provide adequate liquidity to meet both its short-term (next 12 months) and reasonably foreseeable long-term requirements and obligations.

Cash Requirements from Known Contractual and Other 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 (refer to the table below for the Company’s material cash requirements from known contractual and other obligations).

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

The Company expects that capital expenditures in 2023 will be in a range of

3% to 4% of net sales.

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 December 31, 2022, outstanding borrowings under the U.S.

Commercial Paper Program were at a weighted average floating interest rate of 4.69%, while there were no outstanding borrowings under the Revolving Credit Facility, 2022 Term Loan and Euro Commercial Paper Program.

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

Federal Reserve, the floating interest rates related to our U.S.

Commercial Paper Program increased substantially over the course of 2022, a trend that could continue throughout 2023.

Consequently, the Company currently expects the floating interest rates related to its U.S.

Commercial Paper Program (as well as its Revolving Credit Facility and 2022 Term Loan, to the extent either are drawn upon in the future) to continue to increase in the first quarter of 2023 and potentially beyond, which is expected to result in increased interest expense in 2023 as compared to 2022.

Although the Company does not expect changes in interest rates to have a material effect on income or cash flows in 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.

The Company may also use cash to fund all or part of the cost of future acquisitions, as was the case with our 2023 acquisitions.

The Company expects that capital expenditures in 2024 will be in a range of 3% to 4% of net sales.

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 Term Loan (all as defined below).

As of December 31, 2023, the Company had no borrowings outstanding under the Revolving Credit Facility, Term Loan, U.S.

Commercial Paper Program and Euro Commercial Paper Pro gram.

However , the Company borrowed under the U.S.

Commercial Paper Program throughout much of 2023, the proceeds of which were used for general corporate purposes, and the Company may make additional borrowings under any of its debt instruments in the future.

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

Federal Reserve beginning in early 2022 and through the middle of 2023, the floating interest rates related to our U.S.

Commercial Paper Program (as well as our Revolving Credit Facility and Term Loan, to the extent either are drawn upon in the future) have increased substantially over this same period, a trend that could continue into 2024 and potentially beyond.

To the extent that interest rates related to this floating rate debt increase

further 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 in 2024, there can be no assurance that interest rates will not change significantly from current levels.

The following table summarizes the Company’s material short- and long-term cash requirements from known obligations pursuant to certain contracts and commitments as of December 31, 2023, as well as an estimate of the timing in which such obligations and payments are expected to be satisfied.

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The table above reflects the remaining amounts associated with the Transition Tax, which is net of applicable tax credits and deductions.

The fifth installment of the Transition Tax was paid in the second quarter of 2022.

The sixth installment of the Transition Tax was paid in the second quarter of 2023.

(6) As of December 31, 2023, the Company has recorded net liabilities of approximately $207.7 related to unrecognized tax benefits.

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The Company intends to distribute certain 2023 foreign earnings and, as of December 31, 2023, has accrued foreign and U.S.

state and local taxes, where applicable, on those foreign earnings that we intend to repatriate, and intends to indefinitely reinvest the remaining 2022 foreign earnings.

The Company intends to (i) evaluate certain

post-2022 earnings for repatriation, and will accrue for those distributions where appropriate, and (ii) indefinitely reinvest all other foreign earnings.

In addition, the Company paid its fifth annual installment of the Transition Tax, net of applicable tax credits and deductions, in the second quarter of 2022, and will pay the balance of the Transition Tax, net of applicable tax credits and deductions, in annual installments over the remainder of the eight-year period ending 2025, as permitted under the Tax Act.

state and local taxes, where applicable, on those foreign earnings that it intends to repatriate, and intends to indefinitely reinvest the remaining 2023 foreign earnings.

The Company intends to (i) evaluate certain post-2023 earnings for repatriation, and will accrue for those distributions where appropriate, and (ii) indefinitely reinvest all other foreign earnings.

In addition, the Company paid its sixth annual installment of the Transition Tax, net of applicable tax credits and deductions, in the second quarter of 2023, and will pay the balance of the Transition Tax, net of applicable tax credits and deductions, in annual installments over the remainder of the eight-year period ending 2025, as permitted under the Tax Act.

As of December 31, 2023, the Company has not provided for deferred income taxes on undistributed foreign earnings of approximately $1,350 related to certain geographies, as it is the Company’s intention to permanently reinvest such earnings outside the United States.

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Net increase (decrease) in cash and cash equivalents

Net cash change from discontinued operations in the table above includes the proceeds from the sale of the Divested MTS business during the year ended December 31, 2021, as discussed in further detail later within this Item 7.

Net cash change from discontinued operations in the table above, during the year ended December 31, 2021, includes the proceeds from the sale of the Divested MTS business, as defined and discussed in further detail in Note 11 of the Notes to Consolidated Financial Statements.

Operating Activities

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Operating Cash Flow was $2,528.7 in 2023, compared to $2,174.6 in 2022 and $1,523.9 in 2021.

The increase in Operating Cash Flow in 2023 compared to 2022 is primarily due to an overall decrease in the net components of working capital in 2023, as discussed in more detail below.

The increase in Operating Cash Flow in 2022 compared to 2021 was primarily due to both an increase in net income from continuing operations and a lower usage of cash related to the change in working capital as discussed below.

The decrease in Operating Cash Flow in 2021 compared to 2020 was primarily due to a higher usage of cash related to the change in working capital as discussed below, partially offset by an increase in net income from continuing operations.

In 2023, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow decreased $149.8, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accounts receivable of $146.4 and inventories of $71.4, partially offset by a decrease in accounts payable of $34.6 and an increase in prepaid expenses and other current assets of $34.1.

In 2022, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $193.1, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in inventories of $278.5 and accounts receivable of $273.1, partially offset by increases in accrued liabilities, including income taxes, of $246.3 and accounts payable of $62.5, and a decrease in prepaid expenses and other current assets of $49.7.

In 2021, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $496.4, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in accounts receivable, inventories, and prepaid expenses and other current assets of $398.4, $263.0 and $20.2, respectively, partially offset by increases in accounts payable of $131.7 and accrued liabilities, including income taxes, of $53.5.

In 2020, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $38.9, excluding the impact of acquisitions and foreign currency translation, due to increases in accounts receivable, inventories, and prepaid expenses and other current assets of $146.3, $102.0 and $88.6, respectively, partially offset by increases in accounts payable of $204.3 and accrued liabilities, including income taxes, of $93.7.

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

Accounts receivable increased $176.5 to $2,631.3 primarily due to higher sales in the fourth quarter of 2022 relative to the fourth quarter of 2021, along with the impact of the two acquisitions (collectively, the “2022 Acquisitions”) that closed during 2022, partially offset by the effect of translation from exchange rate changes (“Translation”) at December 31, 2022 compared to December 31, 2021.

Accounts receivable decreased $12.9 to $2,618.4, driven by the decrease in days sales outstanding as noted below, which was largely offset by the impact of the 10 acquisitions (collectively, the “2023 Acquisitions”) that closed during 2023 and the effect of translation from exchange rate changes (“Translation”) at December 31, 2023 compared to December 31, 2022.

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

Inventories increased $199.5 to $2,093.6, which was primarily driven by the impact of higher sales and the 2022 Acquisitions, along with the impact of the ongoing supply chain disruptions experienced throughout 2022, partially offset by Translation.

Inventories increased $73.5 to $2,167.1, which was primarily driven by the impact of the 2023 Acquisitions.

Inventory days at December 31, 2023 and 2022 were 85 days and 86 days, respectively.

Prepaid expenses and other current assets decreased $47.9 to $320.0, primarily due to decreases in certain other current receivables.

Property, plant and

equipment, net, increased $29.0 to $1,204.3, primarily due to capital expenditures of $383.8 and the impact of the 2022 Acquisitions, partially offset by depreciation of $306.1, disposals and Translation.

Goodwill increased $69.3 to $6,446.1, primarily driven by goodwill recognized resulting from the 2022 Acquisitions, partially offset by Translation.

Other intangible assets, net, decreased $22.8 to $734.1 due to the amortization of $81.0 related to the Company’s current intangible assets, partially offset by the recognition of certain intangible assets related to recent acquisitions.

Other long-term assets increased $51.4 to $462.6, primarily due to (i) the purchase of long-term certificates of deposit investments and (ii) an increase in operating lease right-of-use assets resulting from new and renewed lease agreements entered into during 2022, along with leases assumed from acquisitions, partially offset by a decrease in prepaid pension assets resulting from a decrease in the overfunded status of certain pension plans primarily in the U.S.

Accounts payable decreased $2.9 to $1,309.1, primarily due to Translation, largely offset by slightly increased purchasing activity related to higher sales levels in the fourth quarter of 2022 relative to the fourth quarter of 2021, along with the effect of the 2022 Acquisitions.

Prepaid expenses and other current assets increased $69.6 to $389.6, primarily due to increases in various prepaid expenses and other current receivables, along with the impact of the 2023 Acquisitions.

Property, plant and equipment, net, increased $110.4 to $1,314.7, primarily due to capital expenditures of $372.8, the impact of the 2023 Acquisitions and Translation, partially offset by depreciation of $313.7 and disposals.

Goodwill increased $646.3 to $7,092.4, primarily driven by goodwill recognized as a result of the 2023 Acquisitions, along with Translation.

Other intangible assets, net, increased $100.7 to $834.8, primarily due to the recognition of certain intangible assets related to the 2023 Acquisitions, partially offset by amortization of $86.0 associated with the Company’s current intangible assets.

Accounts payable increased $41.8 to $1,350.9, primarily due to the impact of the 2023 Acquisitions.

Payable days at December 31, 2023 and 2022 were 55 days and 54 days, respectively.

Total accrued expenses, including accrued income taxes, increased $233.2 to $1,364.3, primarily as a result of increases in accrued income taxes, accrued salaries, wages and employee benefits and certain other accrued expenses, partially offset by Translation.

Accrued pension and postretirement benefit obligations decreased $65.5 to $127.9, primarily driven by a significant decrease in our projected benefit obligations resulting from higher interest rates, along with Translation, partially offset by negative returns on plan assets in 2022.

In 2022, 2021 and 2020, the Company made aggregate cash contributions to its defined benefit pension plans of approximately $6.3, $6.8 and $6.5, respectively.

There is no current requirement for cash contributions to any of the Company’s U.S.

Plans, and the Company plans to evaluate annually, based on actuarial calculations and the investment performance of the Plans’ assets, the timing and amount of cash contributions in the future, if any, as discussed in more detail in Note 9 of the Notes to Consolidated Financial Statements.

Total accrued expenses, including accrued income taxes, increased $83.7 to $1,448.0, primarily due to the impact of the 2023 Acquisitions and increases in certain other accrued expenses, partially offset by modest decreases in accrued salaries, wages and employee benefits and accrued income taxes.

Accrued pension and postretirement benefit obligations increased $15.1 to $143.0.

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.

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GAAP financial measure for the years ended December 31, 2023, 2022 and 2021.

The increase in Free Cash Flow in 2022 compared to 2021 was driven by the increase in Operating Cash Flow, as described above.

The decrease in Free Cash Flow in 2021 compared to 2020 was driven by the increase in capital expenditures to support our strong sales growth and, to a lesser extent, the decrease in Operating Cash Flow, as described above.

The increases in Free Cash Flow in 2023 compared to 2022, as well as in 2022 compared to 2021, were driven by the increase in Operating Cash Flow in each respective year, as described above.

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

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Investing Activities

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.

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 from continuing operations was $1,393.7 in 2023, compared to $731.1 in 2022 and $2,604.4 in 2021.

In 2022, net cash used in investing activities from continuing operations was driven primarily by capital expenditures (net of disposals) of $378.2, the use of $288.2 to fund acquisitions, net purchases of long-term investments of $56.0, and net purchases of short-term investments of $25.2.

In 2021, net cash used in investing activities from continuing operations was driven primarily by the use of $2,225.4 to fund acquisitions, capital expenditures (net of disposals) of $356.7, and net purchases of short-term investments of $8.6.

In 2020, net cash used in investing activities from continuing operations was driven primarily by capital expenditures (net of disposals) of $264.1, the use of $50.4 to fund acquisitions, and net purchases of short-term investments of $18.4.

In 2023, net cash used in investing activities from continuing operations was primarily driven by the use of $970.4 to fund acquisitions, capital expenditures (net of disposals) of $368.8, and net purchases of short-term investments of $59.4.

In 2022, net cash used in investing activities from continuing operations was primarily driven by capital expenditures (net of disposals) of $378.2, the use of $288.2 to fund acquisitions, net purchases of long-term investments of $56.0, and net purchases of short-term investments of $25.2.

In 2021, net cash used in investing activities from continuing operations was primarily driven by the use of $2,225.4 to fund acquisitions, capital expenditures (net of disposals) of $356.7, and net purchases of short-term investments of $8.6.

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.

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 from continuing operations was $1,012.4 in 2023, compared to $1,196.7 in 2022 and $145.1 in 2021.

In 2022, net cash used in financing activities from continuing operations was driven primarily by (i) repurchases of the Company’s Common Stock of $730.5, (ii) dividend payments of $477.4, (iii) net repayments of $159.3, primarily under the U.S.

In 2023, net cash used in financing activities from continuing operations 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 $585.1, (iii) dividend payments of $500.6, (iv) distributions to and purchases of noncontrolling interests of $24.0, (v) other debt repayments of $15.7, (vi) payments of $2.3 related to debt financing costs associated with the Company’s $350.0 principal amount of unsecured 4.750% Senior Notes due March 30, 2026 (the “2026 Senior Notes”), and (vii) payment of $1.5 associated with the deferred purchase price related to an acquisition, partially offset by (a) cash proceeds of $394.5 from the exercise of stock options and (b) net cash proceeds from borrowings of $354.9, primarily related to the issuance of the 2026 Senior Notes.

In 2022, net cash used in financing activities from continuing operations was primarily driven by (i) repurchases of the Company’s Common Stock of $730.5, (ii) dividend payments of $477.4, (iii) net repayments of $159.3, primarily under the U.S.

Commercial Paper Program, (iv) other debt repayments of $55.2, primarily related to short-term debt, and (v) distributions to and purchases of noncontrolling interests of $9.9, partially offset by (a) cash proceeds of $185.3 from the exercise of stock options and (b) proceeds of $50.7 primarily related to short-term borrowings.

In 2021, net cash used in financing activities from continuing operations was driven primarily by (i) debt repayments of $912.6, primarily related to the repayment of the assumed then-outstanding MTS senior notes in the second quarter of 2021 as well as the redemption of the 3.125% Senior Notes (the “2021 Senior Notes”) in the third quarter of 2021 and the redemption of the 4.00% Senior Notes (the “2022 Senior Notes”) in the fourth quarter of 2021, (ii) repurchases of the Company’s Common Stock of $661.7, (iii) dividend payments of $346.7, (iv) 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 the MTS acquisition, (v) distributions to and purchases of noncontrolling interests of $18.9, (vi) payments of $9.3 related to debt financing costs associated with the Company’s $750.0 principal amount of unsecured 2.200% Senior Notes due September 15, 2031 (the “2031 Senior Notes”), and (vii) payments of $4.1 associated with the deferred purchase price related to acquisitions, partially offset by (a) net borrowings of $796.3 primarily under the U.S.

In 2021, net cash used in financing activities from continuing operations was primarily driven by (i) debt repayments of $912.6, primarily related to the repayment of the assumed then-outstanding MTS senior notes in the second quarter of 2021 as well as the redemption of the 3.125% Senior Notes (the “2021 Senior Notes”) in the third quarter of 2021 and the redemption of the 4.00% Senior Notes (the “2022 Senior Notes”) in the fourth quarter of 2021, (ii) repurchases of the Company’s Common Stock of $661.7, (iii) dividend payments of $346.7, (iv) 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 the MTS acquisition, (v) distributions to and purchases of noncontrolling interests of $18.9,

(vi) payments of $9.3 related to debt financing costs associated with the Company’s $750.0 principal amount of unsecured 2.200% Senior Notes due September 15, 2031 (the “2031 Senior Notes”), and (vii) payments of $4.1 associated with the deferred purchase price related to acquisitions, partially offset by (a) net borrowings of $796.3 primarily under the U.S.

Commercial Paper Program, the majority of the proceeds of which were used to fund acquisitions, including MTS, and to redeem the 2021 Senior Notes and the 2022 Senior Notes, (b) net cash proceeds of $752.1, primarily related to the September 2021 issuance of the 2031 Senior Notes, and (c) cash proceeds of $288.5 from the exercise of stock options.

In 2020, net cash used in financing activities from continuing operations was driven primarily by (i) repurchases of the Company’s Common Stock of $641.3, (ii) debt repayments of $404.4 related to the Company’s 2.20% Senior Notes due April 2020 and other debt, (iii) net repayments of $385.8 related to the Company’s Commercial Paper Programs, (iv) dividend payments of $297.6, (v) payment of $75.0 related to acquisition-related contingent consideration, (vi) payment of $16.2 associated with the deferred purchase price related to an acquisition, (vii) distributions to and purchases of noncontrolling interests of $14.9, (vii) payments of $8.7 related to debt financing costs primarily associated with its $400.0 principal amount of unsecured 2.050% Senior Notes due March 1, 2025 (the “2025 Senior Notes”) and 2026 Euro Notes (defined below), and (viii) net repayments of $0.7 under the Company’s credit facilities, partially offset by (a) aggregate net cash proceeds of $942.3 from both the February 2020 issuance of the 2025 Senior Notes and the May 2020 issuance of the 2026 Euro Notes and (b) cash proceeds of $385.7 from the exercise of stock options.

The Company has significant flexibility to meet its financial commitments.

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The Company’s debt financing includes the use of Commercial Paper Programs, the Revolving Credit Facility, the Term Loan, and senior notes as part of its overall cash management strategy.

On November 30, 2021, the Company amended and restated its $2,500.0 unsecured revolving credit facility (the “Revolving Credit Facility”).

As a result, the Revolving Credit Facility no longer references the London Interbank Offered Rate (“LIBOR”) for interest rate determinations.

The Revolving Credit Facility maintains the lenders’ aggregate commitments under the facility at $2,500.0.

The Company has an amended and restated $2,500.0 unsecured revolving credit facility (the “Revolving Credit Facility”).

The Revolving Credit Facility matures in November 2026 and gives the Company the ability to borrow, in various currencies, at a spread that varies, based on the Company’s debt rating, over certain currency-specific benchmark rates, which benchmark rates in the case of U.S.

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On December 31, 2023, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

Although the United Kingdom's Financial Conduct Authority (the “FCA”) , which regulates LIBOR, previously announced its intent to phase out the use of LIBOR in 2023, the Company does not currently have nor does it expect to have any more reliance on borrowings or any other financial instruments tied to LIBOR.

As a result, the LIBOR transition will not have a material impact on our financial condition, results of operations or cash flows.

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

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The 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 Term Loan are expected to be used for general corporate purposes.

Interest rates under the 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.

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The Company utilizes borrowings under the U.S.

Commercial Paper Program for general corporate purposes, which in recent years, have included fully or partially funding acquisitions, as well as repaying certain outstanding senior notes, such as (i) the third quarter 2021 redemption of its unsecured 2021 Senior Notes due September 15, 2021, of which $227.7 aggregate principal amount was then outstanding and (ii) the fourth quarter 2021 redemption of its unsecured 2022 Senior Notes due February 1, 2022, of which $295.0 aggregate principal amount was then outstanding .

The amount of USCP Notes outstanding as of December 31, 2022 was $632.8, with a weighted average interest rate of 4.69% As of December 31, 2021, the amount of USCP Notes outstanding was $795.2, with a weighted average interest rate of 0.29%.

Commercial Paper Program for general corporate purposes, which, in recent years, have included fully or partially funding acquisitions, as well as repaying certain outstanding senior notes as was the case in 2021 with (i) the third quarter 2021 redemption of the 2021 Senior Notes, of which $227.7 aggregate principal amount was then outstanding, and (ii) the fourth quarter 2021 redemption of the 2022 Senior Notes, of which $295.0 aggregate principal amount was then outstanding .

The Company borrowed under the U.S.

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

During the fourth quarter of 2023, the Company repaid all of its USCP Notes then outstanding, and, as of December 31, 2023, there were no USCP Notes outstanding.

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

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

The Company utilizes borrowings under the Euro Commercial Paper Program for general corporate purposes, which may include, for example, fully or partially funding acquisitions.

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

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October 2028 (Euro Notes)

On March 30, 2023, the Company issued the 2026 Senior Notes.

The Company used the net proceeds from the 2026 Senior Notes to repay certain outstanding borrowings under the U.S.

Commercial Paper Program.

On September 14, 2021, the Company issued the 2031 Senior Notes.

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The Euro Issuer has two outstanding unsecured senior notes issued in Europe.

In 2020, the Euro Issuer issued €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 (the “2026 Euro Notes”), the net proceeds of which were used to repay amounts outstanding under the then existing revolving credit facility.

In addition, the Euro Issuer also has €500.0 (approximately $574.6 at date of issuance) principal amount of unsecured 2.000% Senior Notes due October 8, 2028 (the “2028 Euro Notes”, together with the 2026 Euro Notes, the “Euro Notes”, and collectively with the 2026 Euro Notes and the U.S.

The Euro Issuer has €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 (the “2026 Euro Notes”), the net proceeds of which were used to repay amounts outstanding under the then existing revolving credit facility.

Senior Notes, the “Senior Notes”), the net proceeds of which were used to repay a portion of the outstanding amounts under our Commercial Paper Programs, with the remainder of the net proceeds being used for general corporate purposes.

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

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

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

On December 31, 2023, the Company was in compliance with all requirements under its Senior Notes.

Refer to Note 4 of the Notes to 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”).

During the years ended December 31, 2022 and 2021, the Company repurchased 9.9 million and 6.2 million shares of its Common Stock for $730.5 and $457.9, respectively, under the 2021 Stock Repurchase Program.

Of the total repurchases made in 2022 under the 2021 Stock Repurchase Program, 9.3 million shares, or $689.7, have been retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

During the years ended December 31, 2023, 2022 and 2021, the Company repurchased 7.2 million, 9.9 million and 6.2 million shares of its Common Stock for $585.1, $730.5 and $457.9, respectively, under the 2021 Stock Repurchase Program.

Of the total repurchases made in 2023, 5.5 million shares, or $435.8, have been retired

by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

Of the total repurchases made in 2022, 9.3 million shares, or $689.7, have been retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

Of the total repurchases made in 2021 under the 2021 Stock Repurchase Program, 5.8 million shares, or $424.9, were retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

From January 1, 2023 through January 31, 2023, the Company repurchased 0.6 million additional shares of its Common Stock for $48.8, and, as of February 1, 2023, the Company has remaining authorization to purchase up to $762.8 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.

In April 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 year ended December 31, 2021, the Company repurchased 3.1 million shares of its Common Stock for $203.8 under the 2018 Stock Repurchase

From January 1, 2024 through January 31, 2024, the Company did not repurchase any additional shares of its Common Stock, and, as of February 1, 2024, the Company has remaining authorization to purchase up to $226.5 of its Common Stock under the 2021 Stock Repurchase Program.

The timing and amount of any future purchases will depend on a number of factors, such as the 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.

During the year ended December 31, 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 in 2021 under the 2018 Stock Repurchase Program, 2.8 million shares, or $184.0, were retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

During the year ended December 31, 2020, the Company repurchased 12.0 million shares of its Common Stock for $641.3 under the 2018 Stock Repurchase Program.

Of the total repurchases made in 2020, 9.3 million shares, or $487.4, were retired by the Company, with the remainder of the repurchased shares being retained in Treasury stock at the time of repurchase.

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

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.

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.

The following table summ arizes the declared quarterly dividends per share for each of the three years ended December 31, 2023, 2022 and 2021:

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Plans, the “Plans”).

The total liability for accrued pension and postretirement benefit obligations associated with the Company’s underfunded pension and postretirement benefit plans decreased in 2022 to $111.1 from $173.9 in 2021, primarily driven by a significant decrease in our projected benefit obligations resulting from higher interest rates , along with foreign currency exchange translation, partially offset by negative returns on plan assets in 2022.

The total liability for accrued pension and postretirement benefit obligations associated with the Company’s pension and postretirement benefit plans decreased in 2023 to $106.0 from $111.1 in 2022, primarily driven by actual positive returns on plan assets in 2023, partially offset by interest cost and the modest effect of the lower discount rates in 2023 on our projected benefit obligations.

There is no current requirement for cash contributions to any of the U.S.

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Refer to Note 9 of the Notes to Consolidated Financial Statements for further discussion of the Company’s benefit plans and other postretirement benefit plans.

Acquisitions and Divestitures

During 2023, the Company completed 10 acquisitions (the “2023 Acquisitions”) for $970.4, net of cash acquired.

Five of the acquisitions have been included in the Harsh Environment Solutions segment, three acquisitions have been included in the Interconnect and Sensor Systems segment, and two acquisitions have been included in the Communications Solutions segment.

The 2023 Acquisitions were each funded using cash on hand or borrowings under our Commercial Paper Programs, or a combination thereof.

One of the 2023 Acquisitions, which 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 year ended December 31, 2023, which has been recorded separately in the Company’s Consolidated Statements of Income.

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

During 2022, the Company completed two acquisitions (the “2022 Acquisitions”) for $288.2, net of cash acquired.

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

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

One of the 2021 Acquisitions was included in the Harsh Environment Solutions segment, three acquisitions were included in the Communications Solutions segment and three acquisitions were included in the Interconnect and Sensor Systems segment.

The 2021 Acquisitions were not material, either individually or in the aggregate, to the Company’s financial results.

Acquisition of MTS

On April 7, 2021, pursuant to a definitive agreement dated December 9, 2020, by and among the Company and MTS Systems Corporation (“MTS”), the Company completed the acquisition of MTS for a total enterprise value of approximately $1,700, net of cash acquired and including the repayment of all outstanding debt and certain liabilities.

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

Commercial Paper Program and cash on hand.

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 accompanying 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.

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.

The repayment of the outstanding senior notes, including the make-whole premium and excluding interest, was reflected within Net cash used in financing activities from continuing operations in the accompanying Consolidated Statements of Cash Flow for the year ended December 31, 2021.

MTS, a leading global supplier of precision sensors, advanced test systems and motion simulators, was historically organized into two business segments:

Sensors (“MTS Sensors”) and Test & Simulation (“MTS T&S”).

The retained MTS Sensors business provides the Company with a highly complementary offering of high-technology, harsh environment sensors sold into diverse end markets and applications.

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

Sale of the Divested MTS Business

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

Throughout this Annual Report, we refer to MTS (including the MTS T&S business, but excluding the MTS Sensors business) as the “Divested MTS business”.

As a result of the agreement to sell the Divested MTS business to ITW, t he Divested MTS business met the discontinued operations reporting criteria and “held for sale” accounting criteria as of the MTS acquisition date of April 7, 2021, and therefore, the Company did not assign the Divested MTS business to any of its reportable business segments.

Accordingly, t he Company accounted for the operating results and related cash flows associated with the Divested MTS business as discontinued operations in the accompanying Consolidated Financial Statements through December 1, 2021, the date of the sale of the Divested MTS business to ITW.

Income from discontinued operations attributable to Amphenol Corporation, net of income taxes, was $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 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.

Refer to Note 11 of the Notes to Consolidated Financial Statements for further details related to the completed divestiture of the Divested MTS business.

Acquisition of Halo Technology Limited

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 Consolidated Balance Sheets as of December 31, 2022 and 2021, as discussed in more detail in Notes 1 and 5 of the Notes to Consolidated Financial Statements.

The acquisition was funded with cash on hand.

Halo, which is headquartered in the United States (California), is a leading provider of active and passive fiber optic interconnect components, with product offerings that are highly complementary to our existing high-speed and fiber optic interconnect solutions for the communications infrastructure markets.

The operating results for Halo have been included in the Consolidated Statements of Income since the acquisition date.

Halo is reported within our Communications Solutions segment.

Acquisition-related Expenses

In 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 two acquisitions that closed in 2022, along with external transaction costs.

In 2021, the Company incurred $70.4 ($57.3 after-tax) of acquisition-related expenses, comprised primarily of transaction, severance, restructuring and certain non-cash purchase accounting costs related to the MTS acquisition in the second quarter of 2021, along with external transaction costs and certain non-cash purchase accounting costs related to the Halo acquisition in the fourth quarter of 2021.

In 2023, the Company incurred $34.6 ($30.2 after-tax) of acquisition-related expenses, comprised primarily of external transaction costs associated with the 2023 Acquisitions, along with the amortization related to the value associated with acquired backlog resulting from three of the 2023 Acquisitions.

In 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 2022 Acquisitions, along with external transaction costs.

Such acquisition-related expenses are presented separately in the accompanying Consolidated Statements of Income.

For further discussion of the Company’s acquisitions, as well as the Company’s discontinued operations and completed divestiture of the Divested MTS business, refer to Note 11 of the Notes to Consolidated Financial Statements.

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

Subsequent Events

On January 30, 2024, the Company entered into a definitive stock purchase agreement by and between the Company and Carlisle Companies Incorporated (“Carlisle”), agreeing to acquire the Carlisle Interconnect Technologies (“CIT”) business of Carlisle for an aggregate purchase price of $2,025 in cash, subject to customary post-closing adjustments.

The acquisition is expected to be completed by the end of the second quarter of 2024 and is subject to certain regulatory approvals and other customary closing conditions.

The Company expects to finance the CIT acquisition through a combination of cash on hand and debt financing, which could include borrowings under the Company’s existing credit and/or U.S.

Commercial Paper Program.

CIT, headquartered in St.

Augustine, FL, is a leading global supplier of harsh environment interconnect solutions primarily to the commercial aerospace, defense and industrial end markets.

CIT’s wide range of products include wire and cable, cable assemblies, contacts, connectors and sensors, which, management believes, are highly complementary to Amphenol’s existing interconnect and sensor solutions.

If and when the acquisition is consummated, the Company expects to report the CIT business within its Harsh Environment Solutions segment.

Environmental Matters

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However, in certain markets, implementing price increases can be difficult and there is no guarantee that the Company will be successful.

From time to time, the Company may encounter difficulties in obtaining certain raw materials or components necessary for production due to supply chain constraints and logistical challenges, which may include regulatory restrictions and also negatively impact the pricing of materials and components sourced or used by the Company.

While the Company does not currently anticipate significant, broad-based difficulties in obtaining raw materials or components necessary for production, in 2021 and 2022, there were supply chain and logistical challenges that impacted the global economy, including our Company, and caused and continue to cause supply constraints and commodity price increases on certain raw materials and components used by the Company in production , as well as decreased availability of, and increased prices for, freight and logistics, including air, sea and ground freight .

As of December 31, 2022, while some of the supply chain and logistical challenges have eased, inflation continues to impact the cost of certain raw materials and components used by the Company.

Given this environment, the Company may experience supply shortages for discrete raw materials or components in the future, which could be further exacerbated by increased commodity prices and additional inflation.

For a discussion of certain risks related to inflation and costs, refer to the risk factor titled “ The Company and certain of its suppliers and customers have experienced difficulties obtaining certain raw materials and components, and the cost of most of the Company’s raw materials and components is increasing ” in Part I, Item 1A.

These difficulties may also negatively impact the pricing of materials and components sourced or used by the Company.

While the Company does not currently anticipate significant, broad-based difficulties in obtaining raw materials or components necessary for production, inflationary pressures and logistical challenges may impact the cost and availability of certain raw materials and components used by the Company and result in supply shortages for discrete raw materials or components, which could be further exacerbated by increased commodity prices and additional inflation.

For a discussion of certain risks related to inflation and costs, refer to the risk factor titled “ The Company and certain of its suppliers and customers have experienced difficulties obtaining certain raw materials and components, and the cost of certain of the Company’s raw materials and components is increasing ” in Part I, Item 1A.

Risk Factors herein.

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

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

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

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

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GAAP financial measures presented within this Item 7 are on a continuing operations basis only and exclude any results associated with discontinued operations.

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

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 non-GAAP financial measures defined below should be read in conjunction with the Company’s financial statements presented in accordance with U.S.

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

The reconciliations of these non-GAAP financial measures to the

most directly comparable U.S.

GAAP financial measures for the years ended December 31, 2023, 2022 and 2021 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 7:

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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 from continuing operations (“Operating Cash Flow” - as reported in accordance with U.S.

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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.

Recent Accounting Pronouncements

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Revenue Recognition

The Company’s net sales in the Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 are presented under Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers (Topic 606) (collectively with its related subsequent amendments, “Topic 606”).

The Company’s primary source of revenues consist of product sales to either end customers and their appointed contract manufacturers (including original equipment manufacturers) or to distributors.

Our revenues are derived from contracts with customers, which in most cases are customer purchase orders that may be governed by master sales agreements.

For each contract, the promise to transfer the control of the products, each of which is individually distinct, is considered to be the identified

performance obligation.

For each contract, the promise to transfer the control of the products, each of which is individually distinct, is considered to be the identified performance obligation.

As part of the consideration promised in each contract, the Company evaluates the customer’s credit risk.

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Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States.

As of December 31, 2022, the Company has not provided for deferred income taxes on undistributed foreign earnings of approximately $1,100 related to certain geographies, as it is the Company’s intention to permanently reinvest such earnings outside the United States.

As of December 31, 2023, the Company has not provided for deferred income taxes on undistributed foreign earnings of approximately $1,350 related to certain geographies, as it is the

Company’s intention to permanently reinvest such earnings outside the United States.

It is impracticable to calculate the amount of taxes that would be payable if these undistributed foreign earnings were to be repatriated.

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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-K

Item 7. Management’s Discussion and Analysis