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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 200 added, 207 removed, 181 unchanged (69% of the section changed)

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

The following discussion and analysis of the financial condition and results of operations for the three and nine months ended September 30, 2023 and 2022 has been derived from and should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included in Part I, Item 1 herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our” or “us”).

The following discussion and analysis of the financial condition and results of operations for the three months ended March 31, 2024 and 2023 has been derived from and should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included in Part I, Item 1 herein for Amphenol Corporation (together with its subsidiaries, “Amphenol,” the “Company,” “we,” “our” or “us”).

The following discussion and analysis should also be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”).

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GAAP” or “GAAP”).

For purposes of the following discussion, the terms “constant currencies” and “organically” have the same meaning, respectively, as these aforementioned non-GAAP financial measures.

The following discussion and analysis also includes references to certain non-GAAP financial measures, which are defined in the “Non-GAAP Financial Measures” section below, including “Constant Currency Net Sales Growth” and “Organic Net Sales Growth.” For purposes of the following discussion, the terms “constant currencies” and “organically” have the same meaning, respectively, as these aforementioned non-GAAP financial measures.

Refer to “Non-GAAP Financial Measures” within this Item 2 for more information, including our reasons for including non-GAAP financial measures and material limitations with respect to the usefulness of the measures.

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uncertainties associated with an economic slowdown or recession in any of the Company’s end markets that could negatively affect the financial condition of our customers and could result in reduced demand;

risks and impacts associated with adverse public health developments, including epidemics and pandemics, such as the COVID-19 pandemic, which disrupted our operations from 2020 through early 2023 and could disrupt them again in the future;

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

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

risks and impacts associated with adverse public health developments, including epidemics and pandemics;

risks associated with our inability to obtain certain raw materials and components, as well as the increasing cost of certain of the Company’s raw materials and components;

cybersecurity threats and techniques used to disrupt operations and gain unauthorized access to our information technology systems, including, but not limited to, malware, social engineering/phishing, credential harvesting, ransomware, malfeasance by insiders, human or technological error and other increasingly sophisticated attacks, that continue to expand and evolve, including through the use of artificial intelligence and machine learning, which could, among other things, impair our information technology systems and

disrupt business operations, result in reputational damage that may cause the loss of existing or future customers, loss of our intellectual property, the loss of or inability to access confidential information and critical business, financial or other data, and/or cause the release of highly sensitive confidential or personal information, and potentially lead to litigation and/or governmental investigations, fines and other penalties, among other risks, and risks and impacts associated with a demanding and evolving regulatory environment surrounding information security and privacy, including additional costs;

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

risks associated with the increasing scrutiny and expectations regarding environmental, social and corporate governance matters that could result in additional costs or risks or otherwise adversely impact our business;

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

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the risks associated with the Company’s dependence on attracting, recruiting, hiring and retaining skilled employees, including as part of our various management teams;

risks and difficulties in trying to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time;

the Company’s dependence on end market dynamics to sell its products, particularly in the communications, automotive and military end markets, pricing pressures resulting from large customers that regularly exert pressure on their suppliers, including the Company, and changes in defense expenditures of the U.S.

governments, which are subject to political and budgetary fluctuations and constraints, all of which could adversely affect our operating results;

the Company’s dependence on end market dynamics to sell its products, particularly in the communications, automotive and defense end markets, pricing pressures resulting from large customers that regularly exert pressure on their suppliers, including the Company, and changes in defense expenditures of the U.S.

governments, which are subject to political and budgetary fluctuations and constraints, all of which could adversely affect its operating results;

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

events beyond the Company’s control that could lead to an inability to meet its financial and other covenants and requirements, which could result in a default under the Company’s revolving credit facility, unsecured term loan credit facility or any of our various senior notes;

risks associated with the Company’s inability to access the global capital markets on favorable terms, including as a result of significant deterioration of general economic or capital market conditions, or as a result of a downgrade in the Company’s credit rating;

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governmental export and import controls as well as sanctions and trade embargoes that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions and other laws;

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

changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions and any other regulatory and other legal changes that may arise in any of the jurisdictions in which we operate;

any difficulties in enforcing and protecting the Company’s intellectual property rights;

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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, 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.

commercial aerospace, automotive, mobile networks and information technology and data communications end markets.

Refer to Note 13 o f the Notes to Condensed Consolidated Financial Statements, as well as the 2023 Annual Report, for further details related to the Company’s reportable business segments.

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

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

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

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

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

The IRA provisions, which became effective for Amphenol beginning on January 1, 2023, did not have a material impact on the Company during the three months ended March 31, 2024 and 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.

The first component became effective on January 1, 2024, and the second component will become 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.

The initial implementation did not have a material impact on the Company’s condensed consolidated financial statements during the three months ended March 31, 2024, and it is not currently expected to have a material impact on the Company’s operations, financial condition or cash flows in the future.

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

Results of Operations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Three months ended March 31, 2024 compared to the three months ended March 31, 2023

Net sales were $3,256.3 in the first quarter of 2024 compared to $2,974.0 in the first quarter of 2023, which represented an increase of 9% in U.S.

dollars, 10% in constant currencies and 6% organically (excluding both currency and acquisition impacts), compared to the prior year period.

The organic increase in net sales in the first quarter of 2024 was driven by strong growth in the Communications Solutions segment, along with moderate growth in the Harsh Environment Solutions segment and Interconnect and Sensor Systems segment, as described below.

From an end market standpoint, the increase in net sales in the first quarter of 2024 relative to the prior year period was driven by strong organic growth in the information technology and data communications (“IT datacom”), commercial aerospace, automotive, and defense markets and moderate growth in the mobile devices market, along with contributions from the Company’s acquisition program, partially offset by organic declines in the mobile networks, broadband communications, and industrial markets.

Net sales in the Harsh Environment Solutions segment (approximately 28% of net sales) in the first quarter of 2024 increased 7% in U.S.

dollars, 7% in constant currencies and 3% organically, compared to the first quarter of 2023.

The increase in the first quarter of 2024 was primarily driven by strong organic growth in the commercial aerospace, defense, 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) in the first quarter of 2024 increased 12% in U.S.

dollars, 13% in constant currencies and 11% organically, compared to the first quarter of 2023.

The increase in the first quarter of 2024 was primarily driven by strong organic growth in the IT datacom and automotive markets and moderate growth in the mobile devices market, along with contributions from the Company’s acquisition program, partially offset by organic declines in the broadband communications, mobile networks, and industrial markets.

Net sales in the Interconnect and Sensor Systems segment (approximately 33% of net sales) in the first quarter of 2024 increased 8% in U.S.

dollars, 9% in constant currencies and 2% organically, compared to the first quarter of 2023.

T he increase in the first quarter of 2024 was primarily driven by strong organic growth in the IT datacom market and moderate growth in the automotive market, along with contributions from the Company’s acquisition program, partially offset by organic declines in the industrial, defense, 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.

GAAP financial measures, by segment, geography and consolidated, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

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

Sales Growth (4)

Three Months Ended September 30,

Net sales by:

Harsh Environment Solutions

Communications Solutions

Interconnect and Sensor Systems

Geography (6) :

United States

Nine Months Ended September 30,

Three Months Ended March 31,

Net sales by:

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

The comparatively weaker U.S.

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

The comparatively stronger U.S.

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

Selling, general and administrative expenses were $381.6, or 11.9% of net sales, and $1,095.7, or 11.9% of net sales, for the third quarter and first nine months of 2023, respectively, compared to $366.9, or 11.1% of net sales, and $1,059.0, or 11.3% of net sales, for the third quarter and first nine months of 2022, respectively.

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

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

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

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

Operating income was $657.9, or 20.6% of net sales, and $1,869.6, or 20.3% of net sales, for the third quarter and first nine months of 2023, respectively, compared to $681.1, or 20.7% of net sales, and $1,919.7, or 20.5% of net sales, for the third quarter and first nine months of 2022, respectively.

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

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

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

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

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

Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, were $666.9, or 20.8% of net sales, and $693.1, or 21.0% of net sales, for the three months ended September 30, 2023 and 2022, respectively.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For the third quarter and first nine months of 2023 and 2022, the excess tax benefits resulting from stock option exercise activity had the impact of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the tables below, while the tax effect of acquisition-related expenses impacted the effective tax rate and earnings per share by the amounts noted in the tables below.

For the first nine months of 2023, the effective tax rate was also impacted by the gain from the bargain purchase acquisition that closed in the second quarter, which impacted the effective tax rate and earnings per share by the amounts noted in the tables below.

Excluding the effect of these items, the Adjusted Effective Tax Rate, a non-GAAP financial measure as defined in the “Non-GAAP Financial Measures” section below within this Item 2, for both the three and nine months ended September 30, 2023 was 24.0%, while the Adjusted Effective Tax Rate was 24.5% for both the three and nine months ended September 30, 2022, as reconciled in the tables below to the comparable effective tax rate based on GAAP results.

dollar for the first quarter of 2024 had the effect of decreasing sales by approximately $17.4, relative to the comparable period in 2023.

Selling, general and administrative expenses were $404.2, or 12.4% of net sales for the first quarter of 2024, compared to $346.3, or 11.6% of net sales for the first quarter of 2023.

The increase in Selling, general and administrative expenses as a percentage of net sales in the first quarter of 2024 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 represented approximately 4.8% of net sales for the first quarter of 2024, and represented approximately 4.7% of net sales for the first quarter of 2023.

Research and development expenses represented approximately 3.0% of net sales for the first quarter of 2024, and represented approximately 2.8% of net sales for the first quarter of 2023.

Selling and marketing expenses represented approximately 4.6% of net sales for the first quarter of 2024, and represented approximately 4.2% of net sales for the first quarter of 2023.

Operating income was $684.8, or 21.0% of net sales, for the first quarter of 2024, compared to $591.7, or 19.9% of net sales, for the first quarter of 2023.

Operating income for the first quarter of 2023 included $5.4 of acquisition-related expenses (presented separately in the Condensed Consolidated Statements of Income), comprised of the amortization related to the value associated with acquired backlog resulting from an acquisition that closed in the first quarter of 2023.

For the three months ended March 31, 2023, the acquisition-related expenses had the effect of decreasing net income by $4.0, or $0.01 per share.

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 $684.8, or 21.0% of net sales, for the three months ended March 31, 2024, and $597.1, or 20.1% of net sales, for the three months ended March 31, 2023.

The increase in Adjusted Operating Income and Adjusted Operating Margin for the first quarter

of 2024 relative to the comparable period in 2023 was primarily driven by strong operating performance on the higher sales volumes, partially offset by the negative impact on operating margin related to acquisitions completed within the prior twelve months that are currently operating below the average operating margin of the Company.

Operating income for the Harsh Environment Solutions segment for the first quarter of 2024 was $244.4, or 26.7% of net sales, compared to $226.3, or 26.5% of net sales, for the first quarter of 2023.

The increase in operating margin for the Harsh Environment Solutions segment for the first quarter of 2024 relative to the comparable period in 2023 was primarily driven by strong operating performance on the higher sales volumes, partially offset by the negative impact on operating margin related to acquisitions completed within the prior twelve months that are currently operating below the average operating margin of the Company.

Operating income for the Communications Solutions segment for the first quarter of 2024 was $286.2, or 22.6% of net sales, compared to $230.6, or 20.5% of net sales, for the first quarter of 2023.

The increase in operating margin for the Communications Solutions segment for the first quarter of 2024 relative to the comparable period in 2023 was primarily driven by strong operating performance on the higher sales volumes, partially offset by the negative impact on operating margin related to acquisitions completed within the prior twelve months that are currently operating below the average operating margin of the Company.

Operating income for the Interconnect and Sensor Systems segment for the first quarter of 2024 was $195.4, or 18.2% of net sales, compared to $178.8, or 18.0% of net sales, for the first quarter of 2023.

The increase in operating margin for the Interconnect and Sensor Systems segment for the first quarter of 2024 relative to the comparable period in 2023 was primarily driven by strong operating performance on the higher sales volumes, partially offset by the negative impact on operating margin related to acquisitions completed within the prior twelve months that are currently operating below the average operating margin of the Company.

Interest expense for the first quarter of 2024 was $38.1, compared to $35.9 for the first quarter of 2023.

The slight increase in interest expense was primarily driven by the higher interest rate environment, partially offset by lower average borrowing levels.

Provision for income taxes for the first quarter of 2024 was at an effective tax rate of 16.7%, compared to 20.9%, for the first quarter of 2023.

For the first quarter of 2024 and 2023, the excess tax benefits resulting from stock option exercise activity had the impact of decreasing the effective tax rate and increasing earnings per share by the amounts noted in the table below.

For the first quarter of 2024, the effective tax rate was further impacted by a discrete tax benefit related to the settlement of tax audits and associated lapses of statutes of limitation, along with a difference in a non-U.S.

tax filing position, while for the first quarter of 2023, the effective tax rate was further impacted by the tax effect of acquisition-related expenses, all of which impacted the effective tax rate and earnings per share by the amounts noted in the table below.

Excluding the effect of these items, the Adjusted Effective Tax Rate, a non-GAAP financial measure as defined in the “Non-GAAP Financial Measures” section below within this Item 2, for the three months ended March 31, 2024 and 2023 was 24.0%, as reconciled in the table below to the comparable effective tax rate based on GAAP results.

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

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

Excluding the effect of the items listed in the tables below, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS, non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section below within this Item 2, were $484.0 and $0.78, respectively, for the third quarter of 2023, compared to $496.5 and $0.80, respectively, for the third quarter of 2022.

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

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

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

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

Three Months Ended September 30,

Reported (GAAP)

Acquisition-related expenses

Excess tax benefits related to stock-based compensation

Adjusted (non-GAAP) (2)

Nine Months Ended September 30,

Net income attributable to Amphenol Corporation and Net income attributable to Amphenol Corporation per common share - Diluted (“Diluted EPS”) were $548.7 and $0.87, respectively, for the first quarter of 2024, compared to $439.2 and $0.71, respectively, for the first quarter of 2023.

Excluding the effect of the items listed in the table below, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS, non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section below within this Item 2, were $500.4 and $0.80, respectively, for the first quarter of 2024, compared to $426.1 and $0.69, respectively, for the first quarter of 2023.

The following table reconciles Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (each as defined in the

“Non-GAAP Financial Measures” section below) to the most directly comparable U.S.

GAAP financial measures for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Reported (GAAP)

Acquisition-related expenses

Gain on bargain purchase acquisition

Excess tax benefits related to stock-based compensation

Discrete tax items

Adjusted (non-GAAP) (2)

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Liquidity and Cash Requirements

As of September 30, 2023 and December 31, 2022, the Company had cash, cash equivalents and short-term investments of $1,734.0 and $1,434.2, respectively, with the majority of the Company’s cash, cash equivalents and short-term investments on hand located outside of the United States.

As of March 31, 2024 and December 31, 2023, the Company had cash, cash equivalents and short-term investments of $1,963.5 and $1,660.2, 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 2022 Term Loan (all of which are defined and discussed in more detail below within this Item 2).

The Company believes that these sources of liquidity, along with access to capital markets (including the recent issuance of the 2026 Senior Notes in March 2023, as defined and discussed in more detail below within this Item 2), provide adequate liquidity to meet both its short-term (next 12 months) and reasonably foreseeable long-term requirements and obligations.

Commercial Paper Program, the Euro Commercial Paper Program, and the Revolving Credit Facility.

The Company believes that these sources of liquidity, along with access to capital markets (which the Company accessed in early April 2024 in connection with the issuance of the New Senior Notes), provide adequate liquidity to meet both its short-term (next 12 months) and reasonably foreseeable long-term requirements and obligations.

The Company’s debt instruments are defined and discussed in more detail below within this Item 2.

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 included in Item 7 of the 2023 Annual Report.

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

The Company’s debt service requirements primarily consist of principal and interest on the Company’s Senior Notes, and to the extent of any amounts outstanding, the Revolving Credit Facility, Commercial Paper Programs and the 2022 Term Loan (all as defined below).

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

The Company may also use cash to fund all or part of the cost of future acquisitions, as has been the case in recent years with the Company’s various acquisitions.

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 and Commercial Paper Programs (all as defined below).

As of March 31, 2024 and 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 Program.

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

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

Commercial Paper Program have increased substantially.

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

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

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

However, the Company borrowed under the U.S.

Commercial Paper Program throughout much of the first quarter of 2024, the proceeds of which were used for general corporate purposes.

Although all such borrowings were repaid before the end of the first quarter of 2024, 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 in recent years, the floating interest rates related to our U.S.

Commercial Paper Program (as well as our Revolving Credit Facility, to the extent drawn upon in the future) have increased substantially, a trend that could continue through the

remainder of 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 for the remainder of 2024, there can be no assurance that interest rates will not change significantly from current levels.

Repatriation of Foreign Earnings and Related Income Taxes

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The Company intends to indefinitely reinvest the remaining pre-2024 foreign earnings.

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

As of March 31, 2024, the Company has accrued the foreign and U.S.

state and local taxes associated with the foreign earnings that it intends to repatriate.

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

In addition, the Transition Tax will be paid, net of applicable tax credits and deductions, in annual installments until 2025, as permitted under the Tax Act.

In addition, the Transition Tax is being paid, net of applicable tax credits and deductions, in annual installments until 2025, as permitted under the Tax Act.

Cash Flow Summary

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the nine months ended September 30, 2023 and 2022, as reflected in the Condensed Consolidated Statements of Cash Flow:

Nine Months Ended September 30,

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the three months ended March 31, 2024 and 2023, as reflected in the Condensed Consolidated Statements of Cash Flow:

Three Months Ended March 31,

Net cash provided by operating activities

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Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Operating Activities

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

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

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

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

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

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

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

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

Inventories increased $5.5 to $2,099.1.

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

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

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

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

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

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

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

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

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

There is no current requirement for cash contributions to any of the Company’s defined benefit pension plans in the U.S., and the Company plans to evaluate annually, based on actuarial calculations and the investment performance of the pension plans’ assets, the timing and amount of cash contributions in the future, if any, as discussed in more detail in Note 10 of the Notes to Condensed Consolidated Financial Statements.

Net cash provided by operating activities (“Operating Cash Flow”) was $599.5 in the first three months of 2024 compared to $532.4 in the first three months of 2023.

The increase in Operating Cash Flow for the first three months of 2024 compared to the first three months of 2023 is primarily due to the increase in net income, partially offset by a higher usage of cash related to the change in working capital.

In the first three months of 2024, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $73.9, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accounts payable of $69.9 and accrued liabilities, including income taxes, of $52.3, and an increase in prepaid expenses and other current assets of $20.3 and inventories of $15.1, partially offset by a decrease in accounts receivable of $83.7.

In the first three months of 2023, the components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $23.8, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accounts payable of $147.7 and accrued liabilities, including income taxes, of $119.4, and an increase in prepaid expenses and other current assets of $47.4, partially offset by decreases in accounts receivable of $261.7 and inventories of $29.0.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at March 31, 2024 as compared to December 31, 2023.

Accounts receivable decreased $117.0 to $2,501.4, primarily due to the moderately lower sales in the first quarter of 2024 relative to the fourth quarter of 2023, along with the effect of translation from exchange rate changes (“Translation”) at March 31, 2024 compared to December 31, 2023.

Days sales outstanding at March 31, 2024 and December 31, 2023 were 70 days.

decreased $14.2 to $2,152.9.

Inventory days at March 31, 2024 and December 31, 2023 were 89 days and 85 days, respectively.

The increase in inventory days was primarily driven by the lower sales levels in the first quarter of 2024 compared to the fourth quarter of 2023.

Prepaid expenses and other current assets increased $34.3 to $423.9, primarily due to increases in certain prepaid expenses and other current receivables.

Property, plant and equipment, net, decreased $3.1 to $1,311.6, primarily due to depreciation of $81.4 and Translation, largely offset by capital expenditures of $94.3.

Goodwill increased $8.1 to $7,100.5, primarily driven by measurement period adjustments related to acquisitions that closed late in 2023, which were largely offset by Translation .

Other intangible assets, net, decreased $49.4 to $785.4, primarily due to measurement period adjustments related to certain intangible assets associated with acquisitions that closed late in 2023, as well as the amortization associated with the Company’s current intangible assets.

Other long-term assets increased $34.1 to $483.3, primarily due to an increase in operating lease right-of-use assets resulting from new and renewed lease agreements during the first quarter of 2024.

Accounts payable decreased $86.2 to $1,264.7, primarily due to decreased purchasing activity related to the moderately lower sales levels in the first quarter of 2024 relative to the fourth quarter of 2023, along with Translation.

Payable days at March 31, 2024 and December 31, 2023 were 53 days and 55 days, respectively.

Total accrued expenses, including accrued income taxes, decreased $42.1 to $1,405.9, primarily as a result of decreases in accrued salaries, wages and employee benefits and accrued income taxes.

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

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

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

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

Nine Months Ended September 30,

GAAP financial measure for the three months ended March 31, 2024 and 2023.

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

Three Months Ended March 31,

Operating Cash Flow (GAAP)

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

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

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

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

Net cash used in investing activities was $17.0 in the first quarter of 2024, compared to $256.6 in the first quarter of 2023.

In the first quarter of 2024, net cash used in investing activities was primarily driven by capital expenditures (net of disposals) of $93.8, partially offset by net sales and maturities of short-term investments of $75.7.

In the first quarter of 2023, net cash used in investing activities was primarily driven by the use of $113.2 to fund an acquisition, capital expenditures (net of disposals) of $96.9, and net purchases of short- and long-term investments of $46.7.

Financing Activities

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

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

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

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

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

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

Net cash used in financing activities was $176.2 in the first quarter of 2024, compared to $265.4 in the first quarter of 2023.

In the first quarter of 2024, net cash used in financing activities was primarily driven by (i) repurchases of the Company’s Common Stock of $153.8, (ii) dividend payments of $131.7, (iii) payments of $2.9 related to debt financing costs associated with the Company’s amended and restated revolving credit facility in March 2024, as discussed further below, and (iv) other debt repayments of $1.1, partially offset by cash proceeds of $113.3 from the exercise of stock

In the first quarter of 2023, net cash used in financing activities was primarily driven by (i) net repayments of $387.5 related to the Company’s commercial paper programs, primarily the U.S.

Commercial Paper Program, (ii) repurchases of the Company’s Common Stock of $166.9, (iii) dividend payments of $124.9, (iv) distributions to and purchases of noncontrolling interests of $5.2, (v) other debt repayments of $3.1 related to other long-term debt, and (vi) payments of $2.3 related to debt financing costs associated with the March 2023 issuance of the 2026 Senior Notes (defined below), partially offset by (a) net cash proceeds from borrowings of $350.2, primarily related to the issuance of the 2026 Senior Notes, and (b) cash proceeds of $74.3 from the exercise of stock options .

The Company has significant flexibility to meet its financial commitments.

The Company uses debt financing to lower the overall cost of capital and increase return on stockholders’ equity.

The Company’s debt financing includes the use of commercial paper programs, the Revolving Credit Facility, the 2022 Term Loan, and senior notes as part of its overall cash management strategy.

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.

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

On March 21, 2024, the Company entered into a third amended and restated credit agreement, which amended and restated its $2,500.0 unsecured revolving credit facility, increasing the lenders’ aggregate unsecured revolving commitments under the facility by $500.0 to $3,000.0 (the “Revolving Credit Facility”).

The Revolving Credit Facility matures in March 2029 and gives the Company and certain of its subsidiaries 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.

dollar borrowings, are either the base rate or the adjusted term Secured Overnight Financing Rate (“SOFR”).

The Revolving Credit Facility was undrawn on the date of the amendment.

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

As of September 30, 2023 and December 31, 2022, there were no outstanding borrowings under the Revolving Credit Facility.

As of March 31, 2024 and December 31, 2023, there were no outstanding borrowings under the revolving credit facility then in effect.

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

On September 30, 2023, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

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

The 2022 Term Loan was undrawn at closing and may be drawn on up to five occasions over the life of the facility.

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

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

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

As of September 30, 2023, the Company had not yet drawn upon the 2022 Term Loan, and as such, there were no outstanding borrowings under the 2022 Term Loan.

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

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

On March 31, 2024, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

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

The Term Loan was undrawn at closing and was permitted to be drawn on up to five occasions over the life of the facility.

The Term Loan could be repaid at any time without premium or penalty, and, once repaid, could not be reborrowed.

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

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

As of March 31, 2024, the Company had not drawn upon the Term Loan, and, as such, there were no outstanding borrowings under the Term Loan.

The Term Loan required payment of certain commitment fees and required that the Company satisfy certain financial covenants.

On March 31, 2024, the Company was in compliance with the financial covenants under the Term Loan.

The Term Loan matured on April 19, 2024 without the Company drawing upon it throughout its term.

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

Commercial Paper Program”) pursuant to which the Company may issue short-term unsecured commercial paper notes (the “USCP Notes” or “U.S.

Commercial Paper”) in one or more private placements in the United States (the “U.S.

Commercial Paper Program”).

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

Commercial Paper”) in one or more private placements in the United States.

On March 21, 2024, in conjunction with the increase in the capacity of the Revolving Credit Facility, the Company increased the borrowings available under its U.S.

Commercial Paper Program by $500.0.

As of March 31, 2024, the maximum aggregate principal amount outstanding of USCP Notes at any time is $3,000.0.

The Company utilizes borrowings under the U.S.

Commercial Paper Program for general corporate purposes, which, in recent years, has included fully or partially funding acquisitions, as well as repaying certain outstanding senior notes.

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

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

Commercial Paper Program.

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.

The Company borrowed under the U.S.

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

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

Commercial Paper Program throughout much of the first quarter of 2024, the proceeds of which were used for general corporate purposes.

Before the end of the first quarter of 2024, the Company repaid all of its USCP Notes then outstanding.

As of March 31, 2024 and December 31, 2023, there were no USCP Notes outstanding.

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

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

Commercial Paper Program, the

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

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

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

In the first quarter of 2023, the Company used borrowings under its Euro Commercial Paper Program, along with cash on hand, to fund an acquisition, as discussed in Note 11 of the Notes to Condensed Consolidated Financial Statements.

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

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

The Company did not borrow under the Euro Commercial Paper Program during the first quarter of 2024, and, as of March 31, 2024 and December 31, 2023, there were no ECP Notes outstanding.

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

In conjunction with the Revolving Credit Facility, as of September 30, 2023, the authorization from the Company’s Board of Directors (the “Board”) limits the maximum principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper or similar programs, along with outstanding amounts under the Revolving Credit Facility, at any time to $2,500.0 in the aggregate.

In conjunction with the Revolving Credit Facility, as of March 31, 2024, the authorization from the Company’s Board of Directors (the “Board”) limits the maximum aggregate principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper or similar programs, along with outstanding amounts under the Revolving Credit Facility, at any time to $3,000.0 in the aggregate.

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

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

As of September 30, 2023, the Company has outstanding senior notes (the “Senior Notes”) as follows:

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

As of March 31, 2024, the Company has outstanding senior notes (the “Senior Notes”) as follows:

February 2030

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October 2028 (Euro Notes)

On March 30, 2023, the Company issued $350.0 principal amount of unsecured 4.750% Senior Notes due March 30, 2026 (the “2026 Senior Notes”).

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

On March 30, 2023, the Company issued $350.0 aggregate principal amount of unsecured 4.750% Senior Notes due March 30, 2026 (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 April 1, 2024, the Company used cash on hand to repay the $350.0 aggregate principal amount of unsecured 3.20% Senior Notes due April 1, 2024 upon maturity.

On April 5, 2024, the Company issued three series of unsecured senior notes (collectively, the “New Senior Notes”):

(i) $450.0 aggregate principal amount of unsecured 5.050% Senior Notes due April 5, 2027 at 99.887% of face value (the “2027 Senior Notes”), (ii) $450.0 aggregate principal amount of unsecured 5.050% Senior Notes due April 5, 2029 at 99.900% of face value (the “2029 Senior Notes”) and (iii) $600.0 aggregate principal amount of unsecured 5.250% Senior Notes due April 5, 2034 at 99.900% of face value (the “2034 Senior Notes”).

If the Company’s pending acquisition of the Carlisle Interconnect Technologies (“CIT”) business is not consummated on or prior to an agreed upon date or if the Company notifies the trustee that the acquisition will not be pursued at all, under certain circumstances, each series of the New Senior Notes will be subject to a special mandatory redemption, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest from the date of initial issuance, or the most recent date to which interest has been paid or provided for, whichever is later, to, but not including, the special mandatory redemption date.

Absent a special mandatory redemption, the Company intends to use the net proceeds from the New Senior Notes, together with a combination of cash on hand and other debt financing (which could include borrowings under the Company’s Revolving Credit Facility and/or U.S.

Commercial Paper Program), to fund the cash consideration for the

Company’s pending CIT acquisition, as discussed in Note 11 of the accompanying Notes to Condensed Consolidated Financial Statements herein, along with the fees and expenses related thereto.

To the extent that the net proceeds from the New Senior Notes are not used for such purposes, such net proceeds shall be used for general corporate purposes.

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

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

Senior Notes”) are unsecured and rank equally in right of payment with all of the Company’s other senior unsecured and unsubordinated indebtedness, including the Company’s guarantee of the Euro Issuer’s obligations under the Euro Notes.

Interest on each series of U.S.

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The Euro Issuer has two outstanding unsecured senior notes issued in Europe (collectively, the “Euro Notes” and, together with the U.S.

Senior Notes, the “Senior Notes”), each of which were issued with a principal amount of €500.0, with one series of the Euro Notes maturing in May 2026 and the other in October 2028.

The Euro Notes are unsecured and rank equally in right of payment with the Company’s and the Euro Issuer’s other unsecured senior indebtedness and are fully and unconditionally guaranteed on a senior unsecured basis by the Company.

Senior Notes, the “Senior Notes”), each of which was issued with an aggregate principal amount of €500.0, with one series of the Euro Notes maturing in May 2026 and the other in October 2028.

The Euro Notes are unsecured and rank equally in right of payment with all of the Euro Issuer’s senior unsecured and unsubordinated indebtedness and are fully and unconditionally guaranteed on a senior unsecured basis by the Company.

Interest on each series of Euro Notes is payable annually.

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.

On September 30, 2023, the Company was in compliance with all requirements under its Senior Notes.

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

On March 31, 2024, the Company was in compliance with all requirements under its Senior Notes.

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

On April 27, 2021, the Board authorized a stock repurchase program under which the Company may purchase up to $2,000.0 of the Company’s Class A Common Stock (“Common Stock”) during the three-year period ending April 27, 2024 (the “2021 Stock Repurchase Program”) in accordance with the requirements of Rule 10b-18 of the Exchange Act.

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

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

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

Of the total repurchases made during the first nine months of 2022, 7.0 million shares, or $519.3, were retired by the Company, with the remainder of the repurchased shares retained in Treasury stock at the time of repurchase.

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

The price and timing of any future purchases will depend on a number of factors, such as levels of cash generation from operations, the volume of stock options exercised by employees, cash requirements for acquisitions, dividends paid, economic and market conditions, and the price of the Common Stock.

During the three months ended March 31, 2024, the Company repurchased 1.4 million shares of its Common Stock for $153.8 under the 2021 Stock Repurchase Program.

All of the repurchased shares during the first three months of 2024 were retired by the Company.

During the three months ended March 31, 2023, the Company repurchased 2.1 million shares of its Common Stock for $166.9 under the 2021 Stock Repurchase Program.

All of the repurchased shares during the first three months of 2023 were retired by the Company.

From April 1, 2024 to April 26, 2024, the Company repurchased 0.6 million additional shares of its Common Stock for $71.8, which were the final repurchases under the 2021 Stock Repurchase Program.

On April 23, 2024, the Board authorized a new stock repurchase program under which the Company may purchase up to $2,000.0 of the Company’s Common Stock during the three-year period ending on the close of business on April 28, 2027 (the “2024 Stock Repurchase Program”).

The 2024 Stock Repurchase Program becomes effective on April 29, 2024.

The timing and amount of any future repurchases 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.

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

The following table summarizes the declared quarterly dividends per share as well as the dividends declared and paid during the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the declared quarterly dividends per share as well as the dividends declared and paid during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Dividends declared per share

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Dividends paid (including those declared in the prior year)

On October 25, 2022, the Board approved an increase to the Company’s quarterly dividend rate from $0.20 per share to $0.21 per share, effective with dividends declared in the fourth quarter of 2022, and on October 24, 2023, the Board approved an additional increase to the Company’s quarterly dividend rate from $0.21 per share to $0.22 per share, effective with dividends declared in the fourth quarter of 2023, contingent upon declaration by the Board.

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

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

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

On October 24, 2023, the Board approved an 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.

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 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 the net proceeds from the New Senior Notes, as discussed earlier in this Item 2, together with a combination of cash on hand and other debt financing, which could include borrowings under the Company’s Revolving Credit Facility and/or U.S.

Commercial Paper Program.

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

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

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.

During the year ended December 31, 2023, the Company completed 10 acquisitions (the “2023 Acquisitions”) for approximately $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 was 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 the year ended December 31, 2022, the Company completed two acquisitions for approximately $288.2, net of cash acquired, one of which was included in the Harsh Environment Solutions segment and the other of which was included in the Interconnect and Sensor Systems segment.

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

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

Acquisition-related expenses

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

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

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

During the three months ended March 31, 2023, the Company incurred $5.4 ($4.0 after-tax) of acquisition-related expenses, comprised of the amortization related to the value associated with acquired backlog resulting from an acquisition that closed in the first quarter of 2023.

During the year ended December 31, 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, as well as the amortization related to the value associated with acquired backlog resulting from three of the 2023 Acquisitions.

Environmental Matters

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The Company believes that its operations are currently in substantial compliance with applicable environmental laws and regulations and that the costs of continuing compliance will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

For more information on certain environmental matters, refer to Note 15 of the Notes to Condensed Consolidated Financial Statements.

Non-GAAP Financial Measures

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

Items excluded in 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.

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

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

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

GAAP financial measures for the three and nine months ended September 30, 2023 and 2022 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 2:

GAAP financial measures for the three months ended March 31, 2024 and 2023 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 2:

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis