Last10K.com

Amphenol Corp (APH) SEC Filing 10-Q Quarterly report for the period ending Sunday, June 30, 2019

Amphenol Corp

CIK: 820313 Ticker: APH

Exhibit 99.1

 

 

Amphenol

News Release

 

World Headquarters

 

358 Hall Avenue

Wallingford, CT 06492

Telephone (203) 265-8900

 

FOR IMMEDIATE RELEASE

 

 

 

 

For Further Information:

 

Craig A. Lampo

 

Senior Vice President and

 

  Chief Financial Officer

 

203-265-8625

 

www.amphenol.com

 

 

SECOND QUARTER 2019 RESULTS

AND DIVIDEND INCREASE

REPORTED BY AMPHENOL CORPORATION

 

 

Wallingford, Connecticut.  July 24, 2019.  Amphenol Corporation (NYSE: APH) reported today GAAP diluted Earnings Per Share (“EPS”) for the second quarter 2019 of $0.93 compared to $0.91 for the comparable 2018 period.  GAAP diluted EPS for the second quarter 2019 included an excess tax benefit of approximately $13 million ($0.04 per share) related to stock options exercised during the quarter, partially offset by acquisition-related costs of approximately $9 million ($0.03 per share).  Second quarter 2018 GAAP diluted EPS included an excess tax benefit of approximately $3 million ($0.01 per share) related to stock options exercised during the quarter.  Excluding the effect of these items, Adjusted Diluted EPS

1 for the second quarter 2019 was $0.92 compared to $0.90 for the second quarter 2018.  Sales for the second quarter 2019 were $2.015 billion compared to $1.981 billion for the comparable 2018 period. Currency translation had the effect of decreasing sales by approximately $42 million in the second quarter 2019 compared to the 2018 period.

 

For the six months ended June 30, 2019, GAAP Diluted EPS was $1.80, compared to $1.75 for the comparable 2018 period.  GAAP Diluted EPS for the six months ended June 30, 2019, includes acquisition-related costs of approximately $25 million ($0.07 per share), partially offset by an excess tax benefit of approximately $20 million ($0.06 per share) related to stock options exercised during the period.  The comparable 2018 period included an excess tax benefit of approximately $7 million ($0.02 per share).  Excluding the effect of these items, Adjusted Diluted EPS for the six months ended June 30, 2019 and 2018 was $1.81 and $1.73, respectively.  Sales for the six months ended June 30, 2019 were $3.974 billion compared to $3.848 billion for the 2018 period.  Currency translation had the effect of decreasing sales by approximately $89 million for the first six months of 2019 compared to the 2018 period.

 

On July 23, 2019, the Company’s Board of Directors approved a 9% increase in the Company’s dividend.  The quarterly dividend will increase from $0.23 to $0.25 per share to be paid on October 9, 2019 to holders of record of the Company’s Class A common stock as of September 17, 2019.

 

Amphenol President and Chief Executive Officer, R. Adam Norwitt, stated, “We are pleased to close the second quarter 2019 with sales and Adjusted Diluted EPS of $2.015 billion and $0.92, respectively.  Compared to the second quarter 2018, sales increased 2%, driven by contributions from the Company’s successful acquisition program, as well as growth in the military, commercial air, mobile networks and mobile devices markets offset in part by moderations in the broadband, industrial and information technology and data communications markets.  We remain proud of the Company’s leading profitability, with Adjusted Operating Margins of 20.3% in the second quarter.”

 

“The Company continues to expand its growth opportunities through a deep commitment to developing enabling technologies for customers in all markets, an ongoing strategy of market and geographic diversification and an active and successful acquisition program.  As part of that program, we are excited to have recently closed four new acquisitions, which collectively generate annual sales of approximately $150 million.  In June, the Company acquired CONEC Elektronische Bauelemente GmbH (“CONEC”) and Kopek Industries (“Kopek”).  Based in Germany, CONEC designs and manufactures a wide array of connectors, primarily for customers in the industrial market.  Kopek, which is based in China, is a supplier primarily to Amphenol of RF passive interconnect components for the broadband market.  In July, the Company acquired Bernd Richter GmbH (“Bernd Richter”) and the GJM Group (“GJM”).  Based in Germany, Bernd Richter designs and manufactures high-technology cable assemblies primarily for medical equipment customers.  GJM, which is based in Spain, is a provider of interconnect assemblies for automotive applications.  These four excellent acquisitions strengthen the Company’s global capabilities and enhance our product offerings across several of our end markets, all while adding four strong management teams to the Amphenol family.”

 

“Operating cash flow in the quarter was a strong $322 million, another confirmation of the quality of the Company’s earnings.  In addition, the Company continues to deploy its financial strength in a variety of ways to increase shareholder value.  This included the purchase during the second quarter 2019 of 2.6 million shares of the Company’s stock for approximately $249 million under our open market stock repurchase plan.”

 

“As we look ahead, the overall demand environment continues to reflect a heightened level of uncertainty in the global economy.  In addition, we now see a moderation of demand in certain of our end markets, particularly related to communications equipment.  We believe this reduction in demand relates primarily to the current trade environment, including in particular the restrictions imposed by the U.S. government on sales to certain Chinese entities and the resulting impact on overall market demand.  Considering this lower demand environment, together with the contributions from the acquisitions just completed, we expect third quarter 2019 sales to be in the range of $1.960 billion to $2.000 billion and Adjusted Diluted EPS in the range of $0.86 to $0.88.  For the full year 2019, we now expect sales in the range of $7.920 billion to $8.000 billion, a decrease of 2% to 3% over 2018 and Adjusted Diluted EPS to be in the range of $3.56 to $3.60, which is a decrease of 5% to 6% over 2018.  I am very pleased that the Amphenol management team is reacting quickly to this reduction in expected demand through cost reduction actions that are already being taken to protect the profitability of the Company.  Our guidance reflects these actions as well as the effect of our new acquisitions, which currently have operating margins below the Company average.”

 

“While the current demand environment has become more challenging over the last quarter, we remain confident in the platform of strength that has been created by the Company’s consistent and strong performance.  The electronics revolution is still generating exciting long-term growth opportunities for Amphenol across each of our diversified end markets, with customers driving their products and networks to achieve ever higher levels of performance.  We believe this will create a long-term increase in demand for our expanded range of high-technology interconnect, sensor and antenna products.  Our ongoing actions to leverage our competitive advantages and create sustained financial strength, as well as our initiatives to expand our high-technology product offerings, both organically and through our successful acquisition program, have created an excellent base for future performance.  I am confident in the ability of our outstanding, entrepreneurial management team to dynamically adjust to the always changing environment, to continue to generate strong profitability and to further capitalize on the many opportunities to expand our market position regardless of the underlying demand environment.”

 

The Company will host a conference call to discuss its second quarter results at 1:00 PM (EDT) Wednesday, July 24, 2019.  The toll-free dial-in number to participate in this call is 888-455-0949; International dial-in number is +1-773-799-3973; Passcode: LAMPO.  There will be a replay available until 11:59 PM (EDT) on Saturday, August 24, 2019.  The replay numbers are toll free 866-485-6428; International toll number is +1-203-369-1627; Passcode: 7183.

 

A live broadcast as well as a replay can be accessed through the Investor Relations section of the company’s website at  https://investors.amphenol.com.

 

Amphenol Corporation is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.  Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors.  Amphenol has a diversified presence as a leader in high-growth areas of the interconnect market including: Automotive, Broadband Communications, Commercial Aerospace, Industrial, Information Technology and Data Communications, Military, Mobile Devices and Mobile Networks.

 

Forward-Looking Statements

 

This press release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words such as: “anticipate,” “could,” “continue,” “expect,” “estimate,” “forecast,” “ongoing,” “project,” “seek,” “predict,” “target,” “will,” “intend,” “plan,” “optimistic,” “potential,” “guidance,” “may,” “should,”  or “would” and other words and terms of similar meaning.  Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters.  Although the Company believes the expectations reflected in such forward-looking statements, including regarding the third quarter and full year 2019 sales expectations and Adjusted Diluted EPS expectations, are based upon reasonable assumptions, the expectations may not be attained or there may be material deviation.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.

 

Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:  political, economic, military and other risks in countries outside of the United States; the impact of general economic conditions, geopolitical conditions and U.S. trade policies, legislation, trade disputes, treaties and tariffs, including those affecting China, on the Company’s business operations; risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S. government and various foreign jurisdictions; changes in exchange rates of the various currencies in which the Company conducts business; the Company’s ability to obtain a consistent supply of materials, at stable pricing levels; the Company’s dependence on sales to the communications industry, which markets are dominated by large manufacturers and operators who regularly exert significant pressure on suppliers, including the Company; changes in defense

expenditures in the military market, including the impact of reductions or changes in the defense budgets of U.S. and foreign governments; the Company’s ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time; the Company’s ability to continue to conceive, design, source and market new products and upon continuing market acceptance of its existing and future product lines; difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill; events beyond the Company’s control that could lead to an inability to meet its financial covenants which could result in a default under the Company’s revolving credit facility; the Company’s ability to access the 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; changes in interest rates; government contracting risks that the Company may be subject to, including laws and regulations governing performance of U.S. government contracts and related risks associated with conducting business with the U.S. government; governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws; cybersecurity threats or incidents that could arise on our information technology systems which could disrupt business operations and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations; changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions, including related interpretations of certain provisions of the U.S. Tax Cuts and Jobs Act; any difficulties in protecting the Company’s intellectual property rights; and litigation, customer claims, governmental investigations or environmental matters.

 

A further description of these uncertainties and other risks can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the Securities and Exchange Commission.  These or other uncertainties may cause the Company’s actual future results to be materially different than those expressed in any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements.

 

Non-GAAP Financial Measures

 

The financial statements included within this press release are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  This press release also contains certain non-GAAP financial information, including Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (collectively, “non-GAAP financial measures”), which are intended to supplement the reported GAAP results.  Management utilizes these non-GAAP financial measures as part of its internal reviews for purposes of monitoring, evaluating and forecasting the Company’s financial performance, communicating operating results to the Company’s Board of Directors and assessing related employee compensation measures.  Management believes that such non-GAAP financial measures may be helpful to investors in assessing the Company’s overall financial performance, trends and period-over-period comparative results.  Non-GAAP financial measures discussed within this press release 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 the 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 the excess tax benefits related to stock-based compensation as well as the impact of significant changes in tax law.   Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included at the end of this press release.   However, such non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to the related GAAP financial measures.  In addition, these non-GAAP financial measures are not necessarily the same or comparable to similar measures presented by other companies, as such measures may be calculated differently or may exclude different items.  The non-GAAP financial measures are defined within the “Supplemental Financial Information” table at the end of this press release and should be read in conjunction with the Company’s financial statements presented in accordance with GAAP.

 


The following information was filed by Amphenol Corp (APH) on Wednesday, July 24, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
false--12-31Q20000820313AMPHENOL CORP /DE/180000000P5YP10Y0000820313us-gaap:TreasuryStockCommonMember2018-01-012018-06-300000820313aph:StockRepurchaseProgram2018Memberus-gaap:SubsequentEventMember2019-07-230000820313aph:StockRepurchaseProgram2018Member2018-04-242018-04-240000820313aph:StockRepurchaseProgram2017Member2017-01-242017-01-240000820313aph:StockRepurchaseProgram2018Member2018-04-240000820313aph:StockRepurchaseProgram2017Member2017-01-240000820313aph:StockRepurchaseProgram2018Member2019-04-012019-06-300000820313aph:StockRepurchaseProgram2018Member2019-01-012019-06-300000820313aph:StockRepurchaseProgram2018Memberus-gaap:SubsequentEventMember2019-07-012019-07-230000820313aph:StockRepurchaseProgram2018Member2018-04-012018-06-300000820313aph:StockRepurchaseProgram2018AndStockRepurchaseProgram2017Member2018-01-012018-06-300000820313aph:StockRepurchaseProgram2017Member2018-01-012018-03-310000820313aph:StockRepurchaseProgram2017Member2017-01-242018-03-310000820313us-gaap:CommonStockMember2018-01-012018-06-300000820313us-gaap:TreasuryStockCommonMember2019-06-300000820313us-gaap:RetainedEarningsMember2019-06-300000820313us-gaap:NoncontrollingInterestMember2019-06-300000820313us-gaap:AdditionalPaidInCapitalMember2019-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000820313us-gaap:TreasuryStockCommonMember2019-03-310000820313us-gaap:RetainedEarningsMember2019-03-310000820313us-gaap:NoncontrollingInterestMember2019-03-310000820313us-gaap:AdditionalPaidInCapitalMember2019-03-310000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3100008203132019-03-310000820313us-gaap:TreasuryStockCommonMember2018-12-310000820313us-gaap:RetainedEarningsMember2018-12-310000820313us-gaap:NoncontrollingInterestMember2018-12-310000820313us-gaap:AdditionalPaidInCapitalMember2018-12-310000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000820313us-gaap:TreasuryStockCommonMember2018-06-300000820313us-gaap:RetainedEarningsMember2018-06-300000820313us-gaap:NoncontrollingInterestMember2018-06-300000820313us-gaap:AdditionalPaidInCapitalMember2018-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-300000820313us-gaap:TreasuryStockCommonMember2018-03-310000820313us-gaap:RetainedEarningsMember2018-03-310000820313us-gaap:NoncontrollingInterestMember2018-03-310000820313us-gaap:AdditionalPaidInCapitalMember2018-03-310000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-03-3100008203132018-03-310000820313us-gaap:TreasuryStockCommonMember2017-12-310000820313us-gaap:RetainedEarningsMember2017-12-310000820313us-gaap:NoncontrollingInterestMember2017-12-310000820313us-gaap:AdditionalPaidInCapitalMember2017-12-310000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310000820313us-gaap:EmployeeStockOptionMember2018-01-012018-12-310000820313us-gaap:EmployeeStockOptionMember2019-03-310000820313us-gaap:EmployeeStockOptionMember2018-12-310000820313us-gaap:EmployeeStockOptionMember2019-01-012019-03-310000820313us-gaap:EmployeeStockOptionMember2019-04-012019-06-300000820313us-gaap:EmployeeStockOptionMember2018-04-012018-06-300000820313us-gaap:EmployeeStockOptionMember2018-01-012018-06-300000820313aph:StockPurchaseAndOptionPlan2017Member2019-06-300000820313aph:StockOptionPlanForDirectors2004Member2019-01-012019-06-300000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2018-01-012018-12-310000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2019-03-310000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2018-12-310000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2019-04-012019-06-300000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2019-01-012019-03-310000820313aph:StockPurchaseAndOptionPlan2017Member2019-01-012019-06-300000820313aph:StockPurchaseAndOptionPlan2009Member2019-01-012019-06-300000820313aph:RealEstateLeasesMember2019-01-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313us-gaap:IntersegmentEliminationMemberaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313us-gaap:IntersegmentEliminationMemberaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313country:USaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313country:USaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313country:CNaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313country:CNaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313aph:OtherForeignLocationsMemberaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313aph:OtherForeignLocationsMemberaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMember2019-04-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMember2019-04-012019-06-300000820313us-gaap:IntersegmentEliminationMember2019-04-012019-06-300000820313country:US2019-04-012019-06-300000820313country:CN2019-04-012019-06-300000820313aph:OtherForeignLocationsMember2019-04-012019-06-300000820313aph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313aph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313us-gaap:IntersegmentEliminationMemberaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313us-gaap:IntersegmentEliminationMemberaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313country:USaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313country:USaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313country:CNaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313country:CNaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313aph:OtherForeignLocationsMemberaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313aph:OtherForeignLocationsMemberaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMember2019-01-012019-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMember2019-01-012019-06-300000820313us-gaap:IntersegmentEliminationMember2019-01-012019-06-300000820313country:US2019-01-012019-06-300000820313country:CN2019-01-012019-06-300000820313aph:OtherForeignLocationsMember2019-01-012019-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313us-gaap:IntersegmentEliminationMemberaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313us-gaap:IntersegmentEliminationMemberaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313country:USaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313country:USaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313country:CNaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313country:CNaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313aph:OtherForeignLocationsMemberaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313aph:OtherForeignLocationsMemberaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313us-gaap:SalesChannelThroughIntermediaryMember2018-04-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMember2018-04-012018-06-300000820313us-gaap:IntersegmentEliminationMember2018-04-012018-06-300000820313country:US2018-04-012018-06-300000820313country:CN2018-04-012018-06-300000820313aph:OtherForeignLocationsMember2018-04-012018-06-300000820313aph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313aph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313us-gaap:SalesChannelThroughIntermediaryMemberaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMemberaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313us-gaap:IntersegmentEliminationMemberaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313us-gaap:IntersegmentEliminationMemberaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313country:USaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313country:USaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313country:CNaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313country:CNaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313aph:OtherForeignLocationsMemberaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313aph:OtherForeignLocationsMemberaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313us-gaap:SalesChannelThroughIntermediaryMember2018-01-012018-06-300000820313us-gaap:SalesChannelDirectlyToConsumerMember2018-01-012018-06-300000820313us-gaap:IntersegmentEliminationMember2018-01-012018-06-300000820313country:US2018-01-012018-06-300000820313country:CN2018-01-012018-06-300000820313aph:OtherForeignLocationsMember2018-01-012018-06-300000820313aph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313aph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313aph:UnsecuredSeniorNotes2.55PercentDueInJanuary2019Member2019-01-012019-01-310000820313us-gaap:TreasuryStockCommonMember2019-01-012019-06-300000820313us-gaap:CommonStockMember2019-01-012019-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-06-300000820313us-gaap:AccountingStandardsUpdate201602Member2019-01-010000820313us-gaap:OperatingSegmentsMemberaph:InterconnectProductsAndAssembliesMember2019-04-012019-06-300000820313us-gaap:OperatingSegmentsMemberaph:CableProductsAndSolutionsMember2019-04-012019-06-300000820313us-gaap:OperatingSegmentsMember2019-04-012019-06-300000820313us-gaap:OperatingSegmentsMemberaph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313us-gaap:OperatingSegmentsMemberaph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313us-gaap:OperatingSegmentsMember2019-01-012019-06-300000820313us-gaap:OperatingSegmentsMemberaph:InterconnectProductsAndAssembliesMember2018-04-012018-06-300000820313us-gaap:OperatingSegmentsMemberaph:CableProductsAndSolutionsMember2018-04-012018-06-300000820313us-gaap:OperatingSegmentsMember2018-04-012018-06-300000820313us-gaap:OperatingSegmentsMemberaph:InterconnectProductsAndAssembliesMember2018-01-012018-06-300000820313us-gaap:OperatingSegmentsMemberaph:CableProductsAndSolutionsMember2018-01-012018-06-300000820313us-gaap:OperatingSegmentsMember2018-01-012018-06-300000820313us-gaap:NoncontrollingInterestMember2019-01-012019-06-300000820313us-gaap:NoncontrollingInterestMember2018-01-012018-06-300000820313aph:USCommercialPaperProgramMember2019-01-150000820313aph:UnsecuredCreditFacilityMember2019-01-150000820313aph:CommercialPaperProgramsMember2019-01-150000820313aph:UnsecuredCreditFacilityMember2019-01-140000820313aph:UnsecuredCreditFacilityMember2019-06-300000820313aph:UnsecuredCreditFacilityMember2018-12-310000820313srt:MinimumMember2019-06-300000820313srt:MaximumMember2019-06-300000820313aph:InterconnectProductsAndAssembliesMember2019-01-012019-06-300000820313aph:CableProductsAndSolutionsMember2019-01-012019-06-300000820313aph:InterconnectProductsAndAssembliesMember2019-06-300000820313aph:CableProductsAndSolutionsMember2019-06-300000820313aph:InterconnectProductsAndAssembliesMember2018-12-310000820313aph:CableProductsAndSolutionsMember2018-12-310000820313us-gaap:TechnologyBasedIntangibleAssetsMember2019-06-300000820313us-gaap:CustomerRelationshipsMember2019-06-300000820313aph:BacklogAndOtherMember2019-06-300000820313us-gaap:TechnologyBasedIntangibleAssetsMember2018-12-310000820313us-gaap:CustomerRelationshipsMember2018-12-310000820313aph:BacklogAndOtherMember2018-12-310000820313us-gaap:EmployeeStockOptionMember2019-06-300000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2019-06-300000820313us-gaap:RestrictedStockMemberaph:DirectorsRestrictedStockPlanMember2019-01-012019-06-300000820313us-gaap:EmployeeStockOptionMember2019-01-012019-06-3000008203132017-01-012017-12-310000820313us-gaap:RetainedEarningsMember2019-01-012019-06-300000820313us-gaap:RetainedEarningsMember2018-01-012018-06-300000820313country:US2018-01-012018-12-310000820313country:US2019-01-012019-06-300000820313country:US2018-01-012018-06-300000820313country:USus-gaap:PensionPlansDefinedBenefitMember2019-06-300000820313country:USus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-01-310000820313us-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000820313us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000820313us-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000820313us-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000820313srt:MaximumMemberaph:USCommercialPaperProgramMember2019-01-012019-06-300000820313srt:MaximumMemberaph:EuroCommercialPaperProgramMember2019-01-012019-06-300000820313aph:UnsecuredSeniorNotes4.350PercentDueJune2029Member2019-01-092019-01-090000820313aph:SeniorNotes1Member2019-01-012019-06-300000820313aph:EuroSeniorNotes2.00PercentDueOctober2028Member2018-10-082018-10-080000820313aph:UnsecuredSeniorNotes2.55PercentDueInJanuary2019Member2019-01-310000820313us-gaap:AccountingStandardsUpdate201409Memberus-gaap:RetainedEarningsMember2018-06-300000820313us-gaap:AccountingStandardsUpdate201409Member2018-06-300000820313us-gaap:CommonStockMember2019-06-300000820313us-gaap:CommonStockMember2019-03-310000820313us-gaap:CommonStockMember2018-12-310000820313us-gaap:CommonStockMember2018-06-300000820313us-gaap:CommonStockMember2018-03-310000820313us-gaap:CommonStockMember2017-12-310000820313us-gaap:SubsequentEventMember2019-07-232019-07-2300008203132018-06-3000008203132017-12-310000820313us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310000820313us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310000820313us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310000820313us-gaap:FairValueMeasurementsRecurringMember2018-12-310000820313us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-06-300000820313us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-06-300000820313us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-06-300000820313us-gaap:FairValueMeasurementsRecurringMember2019-06-300000820313aph:SSIControlsTechnologiesMember2019-01-012019-01-310000820313aph:BacklogMember2019-04-012019-06-300000820313aph:SSIControlsTechnologiesMemberaph:BacklogMember2019-01-012019-06-300000820313aph:BacklogMember2019-01-012019-06-300000820313us-gaap:TreasuryStockCommonMember2019-04-012019-06-300000820313us-gaap:RetainedEarningsMember2019-04-012019-06-300000820313us-gaap:NoncontrollingInterestMember2019-04-012019-06-300000820313us-gaap:CommonStockMember2019-04-012019-06-300000820313us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300000820313us-gaap:AdditionalPaidInCapitalMember2019-01-012019-06-300000820313us-gaap:TreasuryStockCommonMember2018-04-012018-06-300000820313us-gaap:RetainedEarningsMember2018-04-012018-06-300000820313us-gaap:NoncontrollingInterestMember2018-04-012018-06-300000820313us-gaap:CommonStockMember2018-04-012018-06-300000820313us-gaap:AdditionalPaidInCapitalMember2018-04-012018-06-300000820313us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-04-012018-06-3000008203132018-04-012018-06-300000820313us-gaap:AdditionalPaidInCapitalMember2018-01-012018-06-300000820313us-gaap:TechnologyBasedIntangibleAssetsMember2019-01-012019-06-300000820313us-gaap:CustomerRelationshipsMember2019-01-012019-06-300000820313aph:BacklogAndOtherMember2019-01-012019-06-3000008203132019-07-230000820313srt:MaximumMember2019-04-012019-06-300000820313srt:MaximumMember2019-01-012019-06-300000820313srt:MaximumMember2018-04-012018-06-300000820313srt:MaximumMember2018-01-012018-06-300000820313srt:MinimumMember2019-01-012019-06-300000820313aph:UnsecuredCreditFacilityMember2019-01-142019-01-1500008203132018-12-3100008203132018-01-012018-06-3000008203132019-06-300000820313aph:UnsecuredSeniorNotes4.350PercentDueJune2029Member2019-01-090000820313aph:EuroSeniorNotes2.00PercentDueOctober2028Member2018-10-080000820313us-gaap:LineOfCreditMemberaph:UnsecuredCreditFacilityMember2019-06-300000820313aph:USCommercialPaperProgramMember2019-06-300000820313aph:UnsecuredSeniorNotes4.35PercentDueJune2029Member2019-06-300000820313aph:UnsecuredSeniorNotes4.00PercentDueFebruary2022Member2019-06-300000820313aph:UnsecuredSeniorNotes3.20PercentDueApril2024Member2019-06-300000820313aph:UnsecuredSeniorNotes3.125PercentDueInSeptember2021Member2019-06-300000820313aph:UnsecuredSeniorNotes2.55PercentDueInJanuary2019Member2019-06-300000820313aph:UnsecuredSeniorNotes2.20PercentDueApril2020Member2019-06-300000820313aph:UnsecuredEuroSeniorNotes2.00PercentDueOctober2028Member2019-06-300000820313aph:NotesPayableToForeignBanksAndOtherDebtMember2019-06-300000820313aph:EuroCommercialPaperProgramMember2019-06-300000820313us-gaap:LineOfCreditMemberaph:UnsecuredCreditFacilityMember2018-12-310000820313aph:USCommercialPaperProgramMember2018-12-310000820313aph:UnsecuredSeniorNotes4.35PercentDueJune2029Member2018-12-310000820313aph:UnsecuredSeniorNotes4.00PercentDueFebruary2022Member2018-12-310000820313aph:UnsecuredSeniorNotes3.20PercentDueApril2024Member2018-12-310000820313aph:UnsecuredSeniorNotes3.125PercentDueInSeptember2021Member2018-12-310000820313aph:UnsecuredSeniorNotes2.55PercentDueInJanuary2019Member2018-12-310000820313aph:UnsecuredSeniorNotes2.20PercentDueApril2020Member2018-12-310000820313aph:UnsecuredEuroSeniorNotes2.00PercentDueOctober2028Member2018-12-310000820313aph:NotesPayableToForeignBanksAndOtherDebtMember2018-12-310000820313aph:EuroCommercialPaperProgramMember2018-12-3100008203132019-04-012019-06-3000008203132019-01-012019-06-30iso4217:USDiso4217:EURxbrli:pureaph:itemxbrli:sharesiso4217:USDxbrli:sharesaph:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-10879

Graphic

AMPHENOL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

22-2785165

(State of Incorporation)

(IRS Employer Identification No.)

358 Hall Avenue

Wallingford, Connecticut 06492

(Address of principal executive offices) (Zip Code)

203-265-8900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value

APH

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

As of July 23, 2019, the total number of shares outstanding of the registrant’s Class A Common Stock was 297,448,178.

Amphenol Corporation

Index to Quarterly Report

on Form 10-Q

    

Page

Part I

Financial Information

Item 1.

Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

2

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018

3

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018

4

Condensed Consolidated Statements of Cash Flow for the Six Months Ended June 30, 2019 and 2018

5

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

Part II

Other Information

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signature

39

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions)

June 30, 

December 31, 

    

2019

    

2018

 

Assets

Current Assets:

Cash and cash equivalents

$

982.3

$

1,279.3

Short-term investments

 

15.0

 

12.4

Total cash, cash equivalents and short-term investments

 

997.3

 

1,291.7

Accounts receivable, less allowance for doubtful accounts of $32.9 and $33.5, respectively

 

1,685.0

 

1,791.8

Inventories

1,275.3

1,233.8

Other current assets

 

264.5

 

254.3

Total current assets

 

4,222.1

 

4,571.6

Property, plant and equipment, less accumulated depreciation of $1,414.5 and $1,314.8, respectively

970.0

875.8

Goodwill

4,706.1

4,103.2

Intangibles, net and other long-term assets

 

735.8

 

494.3

$

10,634.0

$

10,044.9

Liabilities & Equity

Current Liabilities:

Accounts payable

$

814.6

$

890.5

Accrued salaries, wages and employee benefits

 

159.7

 

157.2

Accrued income taxes

 

155.2

 

203.5

Accrued dividends

68.3

68.7

Other accrued expenses

 

452.0

 

367.1

Current portion of long-term debt

 

403.1

 

764.3

Total current liabilities

 

2,052.9

 

2,451.3

Long-term debt, less current portion

 

3,569.4

 

2,806.4

Accrued pension and postretirement benefit obligations

 

184.8

 

190.2

Deferred income taxes

237.5

255.6

Other long-term liabilities

 

386.2

 

277.2

Equity:

Common stock

0.3

0.3

Additional paid-in capital

 

1,541.8

 

1,433.2

Retained earnings

 

3,104.6

 

3,028.7

Treasury stock, at cost

(101.5)

(55.0)

Accumulated other comprehensive loss

 

(396.9)

 

(390.2)

Total shareholders’ equity attributable to Amphenol Corporation

 

4,148.3

 

4,017.0

Noncontrolling interests

 

54.9

 

47.2

Total equity

 

4,203.2

 

4,064.2

$

10,634.0

$

10,044.9

See accompanying notes to condensed consolidated financial statements.

2

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(dollars and shares in millions, except per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

 

Net sales

$

2,015.3

$

1,981.4

$

3,973.8

$

3,848.3

Cost of sales

 

1,367.7

 

1,336.6

 

2,698.4

 

2,596.6

Gross profit

 

647.6

 

644.8

 

1,275.4

 

1,251.7

Acquisition-related expenses

 

8.9

 

 

25.4

 

Selling, general and administrative expenses

 

239.2

 

236.6

 

474.3

 

466.6

Operating income

 

399.5

 

408.2

 

775.7

 

785.1

Interest expense

 

(30.0)

 

(26.0)

 

(59.7)

 

(50.5)

Other income, net

 

0.1

 

0.1

 

3.1

 

2.4

Income before income taxes

 

369.6

 

382.3

 

719.1

 

737.0

Provision for income taxes

 

(78.7)

 

(94.5)

 

(158.3)

 

(180.9)

Net income

 

290.9

 

287.8

 

560.8

 

556.1

Less: Net income attributable to noncontrolling interests

 

(2.5)

 

(3.0)

 

(4.8)

 

(5.7)

Net income attributable to Amphenol Corporation

$

288.4

$

284.8

$

556.0

$

550.4

Net income per common share — Basic

$

0.97

$

0.95

$

1.87

$

1.82

Weighted average common shares outstanding — Basic

 

298.0

 

300.8

 

298.1

 

302.3

Net income per common share — Diluted

$

0.93

$

0.91

$

1.80

$

1.75

Weighted average common shares outstanding — Diluted

 

308.7

 

312.3

 

308.7

 

314.2

See accompanying notes to condensed consolidated financial statements.

3

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

 

Net income

$

290.9

$

287.8

$

560.8

$

556.1

Total other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

 

(17.1)

 

(158.3)

 

(14.3)

 

(99.6)

Unrealized gain on cash flow hedges

 

0.2

 

1.9

 

 

1.0

Defined benefit plan adjustment, net of tax of ($1.2) and ($2.4) for 2019, and ($1.6) and ($3.2) for 2018, respectively

 

3.8

 

4.9

 

7.6

 

9.9

Total other comprehensive (loss) income, net of tax

 

(13.1)

 

(151.5)

 

(6.7)

 

(88.7)

Total comprehensive income

 

277.8

 

136.3

 

554.1

 

467.4

Less: Comprehensive income attributable to noncontrolling interests

 

(1.5)

 

(0.5)

 

(4.8)

 

(4.7)

Comprehensive income attributable to Amphenol Corporation

$

276.3

$

135.8

$

549.3

$

462.7

See accompanying notes to condensed consolidated financial statements.

4

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(dollars in millions)

Six Months Ended June 30, 

 

    

2019

    

2018

 

Cash from operating activities:

Net income

$

560.8

$

556.1

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

 

163.4

 

122.2

Stock-based compensation expense

 

29.8

 

26.0

Deferred income tax benefit

 

(23.6)

(36.9)

Net change in components of working capital

(66.6)

(185.5)

Net change in accrued pension and postretirement benefits

3.7

(78.9)

Net change in other long-term assets and liabilities

(1.5)

(7.7)

 

Net cash provided by operating activities

 

666.0

 

395.3

Cash from investing activities:

Capital expenditures

 

(149.9)

 

(134.1)

Proceeds from disposals of property, plant and equipment

 

5.5

 

1.5

Purchases of short-term investments

 

(36.9)

 

(26.6)

Sales and maturities of short-term investments

 

34.4

 

34.9

Acquisitions, net of cash acquired

 

(756.2)

 

(158.8)

Net cash used in investing activities

 

(903.1)

 

(283.1)

Cash from financing activities:

Proceeds from issuance of senior notes

 

499.5

 

Repayments of long-term debt

 

(757.8)

(3.0)

Borrowings (repayments) under commercial paper programs, net

667.5

(125.6)

Payment of costs related to debt financing

 

(7.2)

 

Proceeds from exercise of stock options

113.5

50.7

Distributions to and purchases of noncontrolling interests

(24.6)

(7.1)

Purchase of treasury stock

 

(408.7)

 

(645.4)

Dividend payments

 

(137.2)

 

(115.5)

Net cash used in financing activities

 

(55.0)

 

(845.9)

Effect of exchange rate changes on cash and cash equivalents

 

(4.9)

 

(21.0)

Net change in cash and cash equivalents

 

(297.0)

 

(754.7)

Cash and cash equivalents balance, beginning of period

 

1,279.3

 

1,719.1

Cash and cash equivalents balance, end of period

$

982.3

$

964.4

Cash paid for:

Interest

$

57.8

$

48.0

Income taxes

 

241.7

 

234.5

See accompanying notes to condensed consolidated financial statements.

5

AMPHENOL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(amounts in millions, except share and per share data)

Note 1—Basis of Presentation and Principles of Consolidation

The condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018, the related condensed consolidated statements of income and condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2019 and 2018, and the related condensed consolidated statements of cash flow for the six months ended June 30, 2019 and 2018 include the accounts of Amphenol Corporation and its subsidiaries (“Amphenol”, the “Company”, “we”, “our”, or “us”). All material intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements included herein are unaudited. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation in conformity with accounting principles generally accepted in the United States of America have been included. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements and the related notes should 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, 2018 (the “2018 Annual Report”).

In accordance with the adoption of the Securities and Exchange Commission Final Rule Release No. 33-10532 Disclosure Update and Simplification, the Company’s rollforward of consolidated changes in equity in Note 6 of the accompanying Condensed Consolidated Financial Statements for the prior period has been conformed to the current period presentation, presenting both the current quarter and year-to-date, which had no impact on our consolidated results of operations, financial position or cash flows. Previously, the rollforward of consolidated changes in equity was presented only for the six months ended June 30, 2018.

Note 2—New Accounting Pronouncements

Recently Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“Topic 842”), which amended, among other things, the existing guidance by requiring lessees to recognize lease right-of-use assets (“ROU assets”) and liabilities arising from operating leases on the balance sheet. Since issuing Topic 842, the FASB has issued various subsequent ASU’s, including but not limited to, ASU 2018-10, Codification Improvements to Topic 842, Leases, which clarified various aspects of the guidance under Topic 842, as well as ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities the option of recognizing the cumulative effect of applying Topic 842 as an adjustment to the opening balance of retained earnings in the year of adoption while continuing to present all prior periods under previous lease accounting guidance.

Prior to adoption, the Company evaluated Topic 842, including the initial review of any necessary changes to existing processes and systems that would be required to implement this standard, in order to determine its impact on our consolidated financial statements and related disclosures. In 2018, the Company implemented a new lease management system that facilitated the adoption of this standard and enabled the Company to fulfill its requirements for both reporting and disclosure purposes, as well as to better manage and monitor the Company’s ongoing lease portfolio. The Company ensured all key system functionality and other requirements were met, and we completed our assessment of the standard and implemented the necessary changes to our existing policies, processes and controls to achieve appropriate compliance with regards to our lease portfolio.

On January 1, 2019, we adopted Topic 842 using the updated modified retrospective transition approach allowed under ASU 2018-11 and did not restate prior periods. The Company recognized ROU assets and related lease liabilities on our Condensed Consolidated Balance Sheets as of January 1, 2019 of approximately $180 related to our operating

6

lease commitments, and there was no cumulative impact on retained earnings as of January 1, 2019. Topic 842 did not have a material impact on our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2019 and our Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2019, nor did it have any impact on our compliance with debt covenants. The adoption of Topic 842 provided various optional practical expedients in transition, some of which we have elected. As part of the adoption, the Company elected the “package of 3” practical expedient, which among other things, permitted us not to reassess the historical lease classifications for existing or expired leases. Going forward, the impact of Topic 842 on the Company’s consolidated financial statements will be dependent upon the Company’s lease portfolio. The accounting for finance leases (formerly referred to as “capital leases”) remains substantially unchanged. Refer to Note 15 herein for further details regarding the impact of the adoption of Topic 842 and other information related to our lease portfolio.

Accounting Standards Issued But Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which adds, amends and removes certain disclosure requirements related to fair value measurements. Among other changes, this standard requires certain additional disclosure surrounding Level 3 assets, including changes in unrealized gains or losses in other comprehensive income and certain inputs in those measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Certain amended or eliminated disclosures in this standard may be adopted early, while certain additional disclosure requirements in this standard can be adopted on its effective date. In addition, certain changes in the standard require retrospective adoption, while other changes must be adopted prospectively. The Company is currently evaluating ASU 2018-13 and its impact on our consolidated financial statements.

Note 3—Revenue Recognition

Revenues consist of product sales to either end customers and their appointed contract manufacturers (including original equipment manufacturers) or to distributors, and the vast majority of our sales are recognized at a point-in-time under the core principle of recognizing revenue when control transfers to the customer. With limited exceptions, the Company recognizes revenue at the point in time when we ship or deliver the product from our manufacturing facility to our customer, when our customer accepts and has legal title of the goods, and where the Company has a present right to payment for such goods. For the three and six months ended June 30, 2019 and 2018, less than 5% of our net sales were recognized over time, where the associated contracts relate to the sale of goods with no alternative use as they are only sold to a single customer and whose underlying contract terms provide the Company with an enforceable right to payment, including a reasonable profit margin, for performance completed to date, in the event of customer termination. Since we typically invoice our customers at the same time that we satisfy our performance obligations, contract assets and contract liabilities recorded in the Company’s Condensed Consolidated Balance Sheets were not significant as of June 30, 2019 and December 31, 2018. These amounts are recorded in the accompanying Condensed Consolidated Balance Sheets within Other current assets or Other accrued expenses as of June 30, 2019 and December 31, 2018.

The Company receives customer orders negotiated with multiple delivery dates that may extend across more than one reporting period until the contract is fulfilled, the end of the order period is reached, or a pre-determined maximum order value has been reached. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions. It is generally expected that a substantial portion of our remaining performance obligations will be fulfilled within three months, and nearly all of our performance obligations are part of contracts that have original durations of one year or less. Since our performance obligations are generally fulfilled within one year, we have not disclosed the aggregate amount of transaction prices associated with unsatisfied or partially unsatisfied performance obligations as of June 30, 2019.

While the Company typically offers standard product warranty coverage which provides assurance that our products will conform to the contractually agreed-upon specifications for a limited period from the date of shipment, the Company’s warranty liabilities as of June 30, 2019 and December 31, 2018, and related warranty expense for the three and six months ended June 30, 2019 and 2018 have not been and were not material in the accompanying Condensed Consolidated Financial Statements.

7

Disaggregation of Net Sales

The following tables show our net sales disaggregated into categories the Company considers meaningful to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors for the three and six months ended June 30, 2019 and 2018:

Interconnect Products

Cable Products

Total Reportable

and Assemblies

and Solutions

Business Segments

Three months ended June 30:

2019

    

2018

    

2019

    

2018

    

2019

    

2018

Net sales by:

Sales channel:

End customers and contract manufacturers

$

1,641.4

 

$

1,587.5

 

$

67.3

 

$

83.8

 

$

1,708.7

 

$

1,671.3

Distributors and resellers

 

284.2

 

282.7

 

22.4

 

27.4

 

306.6

 

310.1

$

1,925.6

$

1,870.2

$

89.7

$

111.2

$

2,015.3

$

1,981.4

Geography:

United States

$

588.7

 

$

522.4

 

$

44.1

 

$

53.9

 

$

632.8

 

$

576.3

China

 

540.6

 

535.9

 

1.9

 

1.1

 

542.5

 

537.0

Other foreign locations

 

796.3

 

811.9

 

43.7

 

56.2

 

840.0

 

868.1

$

1,925.6

$

1,870.2

$

89.7

$

111.2

$

2,015.3

$

1,981.4

Six months ended June 30:

Net sales by:

Sales channel:

End customers and contract manufacturers

$

3,234.2

 

$

3,103.0

 

$

140.2

 

$

153.8

 

$

3,374.4

 

$

3,256.8

Distributors and resellers

 

554.1

 

537.2

 

45.3

 

54.3

 

599.4

 

591.5

$

3,788.3

$

3,640.2

$

185.5

$

208.1

$

3,973.8

$

3,848.3

Geography:

United States

$

1,122.7

 

$

1,001.6

 

$

89.0

 

$

101.7

 

$

1,211.7

 

$

1,103.3

China

 

1,063.0

 

1,063.2

 

2.7

 

1.9

 

1,065.7

 

1,065.1

Other foreign locations

 

1,602.6

 

1,575.4

 

93.8

 

104.5

 

1,696.4

 

1,679.9

$

3,788.3

$

3,640.2

$

185.5

$

208.1

$

3,973.8

$

3,848.3

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

Note 4—Inventories

Inventories consist of:

June 30, 

December 31, 

 

    

2019

    

2018

 

Raw materials and supplies

 

$

506.0

 

$

463.6

Work in process

 

397.2

 

371.1

Finished goods

 

372.1

 

399.1

 

$

1,275.3

 

$

1,233.8

Note 5—Reportable Business Segments

The Company has two reportable business segments: (i) Interconnect Products and Assemblies and (ii) Cable Products and Solutions. The Company organizes its reportable business segments based upon similar economic characteristics and business groupings of products, services and customers. These reportable business segments are determined based upon how the Company reviews its businesses, assesses operating performance and makes investing and resource allocation decisions. The Interconnect Product and Assemblies segment primarily designs, manufactures

8

and markets a broad range of connector and connector systems, value-add products and other products, including antennas and sensors, used in a broad range of applications in a diverse set of end markets. The Cable Products and Solutions segment primarily designs, manufactures and markets cable, value-add products and components for use primarily in the broadband communications and information technology markets as well as certain applications in other markets. The accounting policies of the segments are the same as those for the Company as a whole and are described herein and in Note 1 of the notes to the consolidated financial statements in the Company’s 2018 Annual Report. The Company evaluates the performance of business units on, among other things, profit or loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes, amortization related to certain intangible assets and nonrecurring gains and losses.

The segment results for the three and six months ended June 30, 2019 and 2018 are as follows:

Interconnect Products

Cable Products

Total Reportable

 

and Assemblies

and Solutions

Business Segments

 

Three Months Ended June 30:

    

2019

    

2018

    

2019

    

2018

    

2019

    

2018

 

Net sales:

External

 

$

1,925.6

 

$

1,870.2

 

$

89.7

 

$

111.2

 

$

2,015.3

 

$

1,981.4

Intersegment

 

8.1

 

3.2

 

13.4

 

8.2

 

21.5

 

11.4

Segment operating income

 

428.4

 

419.7

 

8.7

 

14.7

 

437.1

 

434.4

Six Months Ended June 30:

Net sales:

External

 

$

3,788.3

 

$

3,640.2

 

$

185.5

 

$

208.1

 

$

3,973.8

 

$

3,848.3

Intersegment

 

11.0

 

5.8

 

29.1

 

17.0

 

40.1

 

22.8

Segment operating income

 

838.5

 

810.9

 

19.1

 

26.0

 

857.6

 

836.9

A reconciliation of segment operating income to consolidated income before income taxes for the three and six months ended June 30, 2019 and 2018 is summarized as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2019

    

2018

    

2019

    

2018

 

Segment operating income

$

437.1

$

434.4

$

857.6

$

836.9

Interest expense

 

(30.0)

 

(26.0)

 

(59.7)

 

(50.5)

Other income, net

 

0.1

 

0.1

 

3.1

 

2.4

Stock-based compensation expense

 

(15.4)

 

(13.3)

 

(29.8)

 

(26.0)

Acquisition-related expenses

 

(8.9)

 

 

(25.4)

Other operating expenses

 

(13.3)

 

(12.9)

 

(26.7)

 

(25.8)

Income before income taxes

$

369.6

$

382.3

$

719.1

$

737.0

Note 6—Shareholders’ Equity and Noncontrolling Interests

Net income attributable to noncontrolling interests is classified below net income. Earnings per share is determined after the impact of the noncontrolling interests’ share in net income of the Company. In addition, the equity attributable to noncontrolling interests is presented as a separate caption within equity.

9