Note 5—Equity

Stock-Based Compensation:

The Company’s income before income taxes was reduced by $49.7, $47.6 and $44.2 for the years ended December 31, 2017, 2016 and 2015, respectively, related to the expense incurred for stock-based compensation plans, which is included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Income. In addition, for the years ended December 31, 2017, 2016 and 2015, the Company recognized income tax benefits in the provision for income taxes in the accompanying Consolidated Statements of Income associated with stock-based compensation of $78.3, $11.4 and $11.3, respectively. The income tax benefit during the year ended December 31, 2017 includes the excess tax benefit of $66.6 from option exercises during the year in accordance with the adoption of ASU 2016-09. Under previous accounting guidance, these excess tax benefits would have been recorded directly to equity.

Stock Options

In May 2017, the Company adopted the 2017 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (the “2017 Employee Option Plan”). The Company also continues to maintain the 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended (the “2009 Employee Option Plan”) and the 2000 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended (the “2000 Employee Option Plan”). No additional stock options will be granted under the 2009 Employee Option Plan. The 2000 Employee Option Plan expired in May 2011, except that the terms continue with respect to any outstanding options granted thereunder. A committee of the Company’s Board of Directors has been authorized to grant stock options pursuant to the 2017 Employee Option Plan. The number of shares of the Company’s Class A Common Stock (“Common Stock”) reserved for issuance under the 2017 Employee Option Plan is 30,000,000 shares. As of December 31, 2017, there were 22,991,400 shares of Common Stock available for the granting of additional stock options under the 2017 Employee Option Plan. Options granted under the 2017 Employee Option Plan and the 2009 Employee Option Plan generally vest ratably over a period of five years from the date of grant and are generally exercisable over a period of ten years from the date of grant. Options granted under the 2000 Employee Option Plan are fully vested and are generally exercisable over a period of ten years from the date of grant.

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “2004 Directors Option Plan”). The 2004 Directors Option Plan is administered by the Company’s Board of Directors. The 2004 Directors Option Plan expired in May 2014, except that the terms continue with respect to any outstanding options granted thereunder. Options were last granted under the 2004 Directors Option Plan in May 2011. Options granted under the 2004 Directors Option Plan are fully vested and are generally exercisable over a period of ten years from the date of grant.

Stock option activity for 2015, 2016 and 2017 was as follows:


				Weighted
				Average	Aggregate
		Weighted		Remaining	Intrinsic
		Average		Contractual	Value
	Options	Exercise Price		Term (in years)	(in millions)
Options outstanding at January 1, 2015	27,787,920	$	31.60	7.09
Options granted	6,490,200		57.85
Options exercised	(2,718,745)		23.71
Options forfeited	(422,900)		41.73
Options outstanding at December 31, 2015	31,136,475		37.62	6.92
Options granted	7,560,450		57.72
Options exercised	(5,703,254)		25.80
Options forfeited	(727,280)		50.17
Options outstanding at December 31, 2016	32,266,391		44.14	7.03
Options granted	7,029,600		72.98
Options exercised	(5,773,287)		31.87
Options forfeited	(300,340)		55.16
Options outstanding at December 31, 2017	33,222,364	$	52.27	7.05	$	1,180.3
Vested and non-vested options expected to vest at December 31, 2017	31,214,883	$	51.61	6.96	$	1,129.8
Exercisable options at December 31, 2017	13,621,924	$	39.48	5.40	$	658.2

A summary of the status of the Company’s non-vested options as of December 31, 2017 and changes during the year then ended is as follows:


		Weighted Average
		Fair Value
	Options	at Grant Date
Non-vested options at January 1, 2017	18,725,570	$	7.99
Options granted	7,029,600		8.78
Options vested	(5,854,390)		7.91
Options forfeited	(300,340)		8.10
Non-vested options at December 31, 2017	19,600,440	$	8.29

The weighted average fair value at the grant date of options granted during 2016 and 2015 was $7.39 and $8.47, respectively.

During the years ended December 31, 2017, 2016 and 2015, the following activity occurred under the Company’s option plans:



	2017		2016		2015
Total intrinsic value of stock options exercised	$	268.7	$	197.2	$	88.1
Total fair value of stock options vested		46.3		43.1		39.9

As of December 31, 2017, the total compensation cost related to non-vested options not yet recognized was approximately $120.3, with a weighted average expected amortization period of 3.30 years.

The grant date fair value of each option grant under the 2000 Employee Option Plan, the 2009 Employee Option Plan, the 2017 Employee Option Plan and the 2004 Directors Option Plan is estimated using the Black-Scholes option pricing model. The grant date fair value of each share grant is determined based on the closing share price of the Company’s Common Stock on the date of the grant. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model for option grants requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility is calculated based on the historical volatility of the Common Stock and implied volatility derived from related exchange traded options. The average expected life is based on the contractual term of the option and expected exercise and historical post-vesting termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issuances with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.

Restricted Stock

In 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “2012 Directors Restricted Stock Plan”). The 2012 Directors Restricted Stock Plan is administered by the Company’s Board of Directors. As of December 31, 2017, the number of restricted shares available for grant under the 2012 Directors Restricted Stock Plan was 124,164. Restricted shares granted under the 2012 Directors Restricted Stock Plan generally vest on the first anniversary of the grant date. Grants under the 2012 Directors Restricted Stock Plan entitle the holder to receive shares of the Company’s Common Stock without payment.

Restricted share activity for 2015, 2016 and 2017 was as follows:


				Weighted
				Average
		Fair Value		Remaining
	Restricted	at Grant		Amortization
	Shares	Date		Term (in years)
Restricted shares outstanding at January 1, 2015	18,340	$	47.72	0.39
Restricted shares granted	17,948		57.85
Shares vested and issued	(19,032)		47.98
Restricted shares outstanding at December 31, 2015	17,256		57.97	0.39
Restricted shares granted	16,905		57.99
Shares vested and issued	(17,256)		57.97
Restricted shares outstanding at December 31, 2016	16,905		57.99	0.38
Restricted shares granted	12,905		73.25
Shares vested and issued	(16,905)		57.99
Restricted shares outstanding at December 31, 2017	12,905	$	73.25	0.37

The total fair value of restricted share awards that vested during 2017, 2016, and 2015 was $1.0, $1.0, and $0.9, respectively. As of December 31, 2017, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $0.4 with a weighted average expected amortization period of 0.37 years.

Stock Repurchase Program:

In January 2015, the Company’s Board of Directors authorized a stock repurchase program under which the Company could repurchase up to 10 million shares of its Common Stock during the two-year period ended January 20, 2017 (the “2015 Stock Repurchase Program”). During the years ended December 31, 2016 and 2015, the Company repurchased 5.5 million and 4.5 million shares of its Common Stock for $325.8 and $248.9, respectively. These treasury shares have been retired by the Company and Common Stock and retained earnings were reduced accordingly. At December 31, 2016, the Company had repurchased all of the shares authorized under the 2015 Stock Repurchase Program.

On January 24, 2017, the Company’s Board of Directors authorized a new stock repurchase program under which the Company may purchase up to $1,000.0 of the Company’s Common Stock during the two-year period ending January 24, 2019 in accordance with the requirements of Rule 10b-18 of the Exchange Act (the “2017 Stock Repurchase Program”). During the year ended December 31, 2017, the Company repurchased 8.4 million shares of its Common Stock for $618.0. These treasury shares have been retired by the Company and Common Stock and retained earnings were reduced accordingly. From January 1, 2018 through January 31, 2018, the Company repurchased approximately 1.1 million additional shares of Common Stock for $105.5, leaving approximately $276.5 available to purchase under the 2017 Stock Repurchase Program. The price and timing of any future purchases under the 2017 Stock Repurchase Program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price.

Dividends:

Contingent upon declaration by the Board of Directors, the Company generally pays a quarterly dividend on shares of its Common Stock. The following table summarizes the declared quarterly dividends per share for each of the three years ended December 31, 2017, 2016 and 2015:


	2017		2016		2015
First Quarter	$	0.16	$	0.14	$	0.125
Second Quarter		0.16		0.14		0.125
Third Quarter		0.19		0.14		0.14
Fourth Quarter		0.19		0.16		0.14

Dividends declared and paid for the years ended December 31, 2017, 2016 and 2015 were as follows:


	2017		2016		2015
Dividends declared	$	213.7	$	178.8	$	163.7
Dividends paid (including those declared in the prior year)		205.0		172.7		159.3

Accumulated Other Comprehensive Income (Loss):

Balances of related after-tax components comprising Accumulated other comprehensive income (loss) included in equity at December 31, 2017, 2016 and 2015 are as follows:


	Foreign		Unrealized		Defined		Accumulated
	Currency		Gain (Loss)		Benefit		Other
	Translation		on Cash		Plan		Comprehensive
	Adjustments		Flow Hedges		Adjustment		Income (Loss)
Balance at January 1, 2015	$	(13.4)	$	(1.3)	$	(191.1)	$	(205.8)
Other comprehensive income (loss) before reclassifications, net of tax of nil, $0.1 and $5.5, respectively		(151.5)		(0.4)		(10.0)		(161.9)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($10.1)		—		—		18.2		18.2
Balance at December 31, 2015		(164.9)		(1.7)		(182.9)		(349.5)
Other comprehensive income (loss) before reclassifications, net of tax of nil, ($0.3) and $12.3, respectively		(108.6)		1.6		(28.8)		(135.8)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($8.9)		—		—		16.3		16.3
Balance at December 31, 2016		(273.5)		(0.1)		(195.4)		(469.0)
Other comprehensive income (loss) before reclassifications, net of tax of nil, $0.1 and ($3.4), respectively		240.3		(0.1)		10.7		250.9
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($9.1)		—		—		17.1		17.1
Balance at December 31, 2017	$	(33.2)	$	(0.2)	$	(167.6)	$	(201.0)

The amounts reclassified from Accumulated other comprehensive income (loss) for defined benefit plan liabilities, are included within Cost of sales and Selling, general and administrative expenses and for unrealized gain (loss) on cash flow hedges, are included in Cost of sales within the Company’s Consolidated Statements of Income.