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

Exhibit 99.1

 

 

 

World Headquarters

 

358 Hall Avenue

Wallingford, CT 06492

Telephone (203) 265-8900

 

FOR IMMEDIATE RELEASE

 

 

 

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.