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, 2020 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

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 21, 2020, the total number of shares outstanding of the registrant’s Class A Common Stock was 298,376,863.

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, 2020 and December 31, 2019	2
	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flow for the Six Months Ended June 30, 2020 and 2019	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	36
Item 4.	Controls and Procedures	36
Part II	Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signature		42

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions)

	June 30,		December 31,
	2020		2019
Assets
Current Assets:
Cash and cash equivalents	$	1,288.3	$	891.2
Short-term investments		25.7		17.4
Total cash, cash equivalents and short-term investments		1,314.0		908.6
Accounts receivable, less allowance for doubtful accounts of $43.6 and $33.6, respectively		1,658.3		1,736.4
Inventories		1,361.9		1,310.1
Prepaid expenses and other current assets		283.8		256.1
Total current assets		4,618.0		4,211.2
Property, plant and equipment, less accumulated depreciation of $1,578.7 and $1,487.2, respectively		1,001.7		999.0
Goodwill		4,867.0		4,867.1
Other intangible assets, net		416.2		442.0
Other long-term assets		301.0		296.2
	$	11,203.9	$	10,815.5
Liabilities & Equity
Current Liabilities:
Accounts payable	$	928.0	$	866.8
Accrued salaries, wages and employee benefits		179.0		171.8
Accrued income taxes		119.1		127.9
Accrued dividends		74.6		74.4
Other accrued expenses		482.2		488.5
Current portion of long-term debt		2.3		403.3
Total current liabilities		1,785.2		2,132.7
Long-term debt, less current portion		3,763.8		3,203.4
Accrued pension and postretirement benefit obligations		187.3		198.8
Deferred income taxes		270.7		260.4
Other long-term liabilities		396.6		424.0
Equity:
Common stock		0.3		0.3
Additional paid-in capital		1,834.5		1,683.3
Retained earnings		3,419.4		3,348.4
Treasury stock, at cost		(21.0)		(70.8)
Accumulated other comprehensive loss		(494.6)		(430.9)
Total shareholders’ equity attributable to Amphenol Corporation		4,738.6		4,530.3
Noncontrolling interests		61.7		65.9
Total equity		4,800.3		4,596.2
	$	11,203.9	$	10,815.5

See accompanying notes to condensed consolidated financial statements.

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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,
	2020		2019		2020		2019
Net sales	$	1,987.5	$	2,015.3	$	3,849.5	$	3,973.8
Cost of sales		1,383.7		1,367.7		2,685.9		2,698.4
Gross profit		603.8		647.6		1,163.6		1,275.4
Acquisition-related expenses		—		8.9		—		25.4
Selling, general and administrative expenses		246.4		239.2		489.3		474.3
Operating income		357.4		399.5		674.3		775.7
Interest expense		(30.2)		(30.0)		(59.0)		(59.7)
Other income, net		1.3		0.1		2.4		3.1
Income before income taxes		328.5		369.6		617.7		719.1
Provision for income taxes		(68.0)		(78.7)		(114.0)		(158.3)
Net income		260.5		290.9		503.7		560.8
Less: Net income attributable to noncontrolling interests		(2.8)		(2.5)		(3.9)		(4.8)
Net income attributable to Amphenol Corporation	$	257.7	$	288.4	$	499.8	$	556.0
Net income per common share — Basic	$	0.87	$	0.97	$	1.68	$	1.87
Weighted average common shares outstanding — Basic		296.6		298.0		297.0		298.1
Net income per common share — Diluted	$	0.85	$	0.93	$	1.64	$	1.80
Weighted average common shares outstanding — Diluted		304.0		308.7		305.2		308.7

See accompanying notes to condensed consolidated financial statements.

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AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	260.5	$	290.9	$	503.7	$	560.8
Total other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		26.4		(17.1)		(74.2)		(14.3)
Unrealized (loss) gain on cash flow hedges		(0.8)		0.2		(0.6)		—
Pension and postretirement benefit plan adjustment, net of tax of ($1.7) and ($3.3) for 2020, and ($1.2) and ($2.4) for 2019, respectively		5.2		3.8		10.3		7.6
Total other comprehensive income (loss), net of tax		30.8		(13.1)		(64.5)		(6.7)
Total comprehensive income		291.3		277.8		439.2		554.1
Less: Comprehensive income attributable to noncontrolling interests		(3.1)		(1.5)		(3.1)		(4.8)
Comprehensive income attributable to Amphenol Corporation	$	288.2	$	276.3	$	436.1	$	549.3

See accompanying notes to condensed consolidated financial statements.

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AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(dollars in millions)

	Six Months Ended June 30,
	2020		2019
Cash from operating activities:
Net income	$	503.7	$	560.8
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		143.6		163.4
Stock-based compensation expense		32.0		29.8
Deferred income tax provision (benefit)		5.1		(23.6)
Net change in components of working capital		70.8		(66.6)
Net change in other long-term assets and liabilities		(2.8)		2.2
Net cash provided by operating activities		752.4		666.0
Cash from investing activities:
Capital expenditures		(128.3)		(149.9)
Proceeds from disposals of property, plant and equipment		1.9		5.5
Purchases of short-term investments		(49.1)		(36.9)
Sales and maturities of short-term investments		40.3		34.4
Acquisitions, net of cash acquired		(16.5)		(756.2)
Net cash used in investing activities		(151.7)		(903.1)
Cash from financing activities:
Proceeds from issuance of senior notes		942.3		499.5
Repayments of senior notes and other long-term debt		(401.3)		(757.8)
Borrowings under credit facilities		1,567.4		—
Repayments under credit facilities		(1,568.1)		—
(Repayments) borrowings under commercial paper programs, net		(385.2)		667.5
Payment of costs related to debt financing		(8.7)		(7.2)
Payment of acquisition-related contingent consideration		(75.0)		—
Proceeds from exercise of stock options		152.5		113.5
Distributions to and purchases of noncontrolling interests		(9.7)		(24.6)
Purchase of treasury stock		(257.2)		(408.7)
Dividend payments		(148.4)		(137.2)
Net cash used in financing activities		(191.4)		(55.0)
Effect of exchange rate changes on cash and cash equivalents		(12.2)		(4.9)
Net change in cash and cash equivalents		397.1		(297.0)
Cash and cash equivalents balance, beginning of period		891.2		1,279.3
Cash and cash equivalents balance, end of period	$	1,288.3	$	982.3
Cash paid for:
Interest	$	47.2	$	57.8
Income taxes, net		141.6		241.7

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, 2020 and December 31, 2019, the related condensed consolidated statements of income and condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2020 and 2019, and the related condensed consolidated statements of cash flow for the six months ended June 30, 2020 and 2019 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, the condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments considered necessary for a fair presentation of the results, in conformity with accounting principles generally accepted in the United States of America. The results of operations for the three and six months ended June 30, 2020 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, 2019 (the “2019 Annual Report”).

Certain reclassifications of prior period amounts have been made to conform to the current period presentation, which had no impact on our condensed consolidated results of operations, financial position or cash flows. Such reclassifications included combining the Net change in accrued pension and postretirement benefits with the Net change in other long-term assets and liabilities line item, within Net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flow.

Note 2—New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduced an approach to estimate credit losses on certain types of financial instruments, including trade receivables, based on expected losses, as well as modified the impairment model for available-for-sale debt securities. ASU 2016-13, which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, required companies to make a cumulative-effect adjustment to retained earnings as of January 1, 2020. The Company adopted ASU 2016-13 effective January 1, 2020, which resulted in the Company recording a cumulative adjustment to reduce beginning retained earnings by $3.8, arising from the estimated credit losses associated with the Company’s accounts receivable balance as of the date of adoption. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position and its consolidated financial statements. Prior periods presented herein remain in accordance with then effective accounting standards.

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 added, amended and removed certain disclosure requirements related to fair value measurements. Among other changes, this standard required 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 adopted ASU 2018-13 effective January 1, 2020, which did not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies income tax accounting in various areas including, but not limited to, the accounting for hybrid tax regimes, tax implications related to business combinations, and interim period accounting

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for enacted changes in tax law, along with some codification improvements. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Certain changes in the standard require retrospective or modified retrospective adoption, while other changes must be adopted prospectively. The Company is currently evaluating ASU 2019-12 and its impact on our consolidated financial statements.

The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced in July 2017 its intent to phase out the use of LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, identified the Secured Overnight Financing Rate (“SOFR”) as its preferred benchmark alternative to U.S. dollar LIBOR. SOFR represents a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is calculated based on directly observable U.S. Treasury-backed repurchase transactions. In March 2020, in response to this transition, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financing Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued by reference rate reform, and addresses operational issues likely to arise in modifying contracts to replace discontinued reference rates with new rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the potential impact of the replacement of LIBOR, which ultimately may or may not be the SOFR, from both a risk management and financial reporting perspective, as well as the guidance under ASU 2020-04. Our current portfolio of debt and financial instruments currently tied to LIBOR consists primarily of our Commercial Paper Programs and Revolving Credit Facility, both of which are discussed in more detail in Note 4 herein. We do not currently believe that this transition will have a material impact on our financial condition, results of operations or cash flows.

On May 20, 2020, the Securities and Exchange Commission (“SEC”) issued a final rule regarding the financial statement requirements for acquisitions and dispositions of a business, which included, among other things, amending (i) certain criteria in the significance tests for acquired or to be acquired businesses, (ii) related pro forma financial information requirements including its form and content, and (iii) related disclosure requirements, including the number of acquiree financial statement periods required to be presented in SEC filings. The final rule is effective for fiscal years beginning after December 31, 2020, with early application permitted. The Company is currently evaluating this SEC final rule and its impact on our SEC filings.

Note 3—Inventories

Inventories consist of:

	June 30,		December 31,
	2020		2019
Raw materials and supplies	$	547.7	$	509.6
Work in process		416.7		395.2
Finished goods		397.5		405.3
	$	1,361.9	$	1,310.1

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Note 4—Debt

The Company’s debt (net of any unamortized discount) consists of the following:

	June 30, 2020				December 31, 2019
	Carrying		Approximate		Carrying		Approximate
	Amount		Fair Value		Amount		Fair Value
Revolving Credit Facility	$	—	$	—	$	—	$	—
U.S. Commercial Paper Program		—		—		160.0		160.0
Euro Commercial Paper Program		—		—		235.5		235.5
2.20% Senior Notes due April 2020		—		—		400.0		400.0
3.125% Senior Notes due September 2021		227.7		233.2		227.6		231.0
4.00% Senior Notes due February 2022		294.9		306.5		294.8		304.0
3.20% Senior Notes due April 2024		349.8		373.7		349.8		363.7
2.050% Senior Notes due March 2025		399.4		417.1		—		—
0.750% Euro Senior Notes due May 2026		559.3		558.2		—		—
2.000% Euro Senior Notes due October 2028		559.4		605.6		558.2		622.8
4.350% Senior Notes due June 2029		499.6		590.4		499.6		562.9
2.800% Senior Notes due February 2030		899.3		960.4		899.3		897.3
Notes payable to foreign banks and other debt		6.4		6.4		5.5		5.5
Less unamortized deferred debt issuance costs		(29.7)		—		(23.6)		—
Total debt		3,766.1		4,051.5		3,606.7		3,782.7
Less current portion		2.3		2.3		403.3		403.3
Total long-term debt	$	3,763.8	$	4,049.2	$	3,203.4	$	3,379.4

Revolving Credit Facility

On January 15, 2019, the Company amended its $2,000.0 unsecured credit facility with a $2,500.0 unsecured credit facility (“Revolving Credit Facility”). The Revolving Credit Facility, which matures January 2024, gives the Company the ability to borrow, in various currencies, at a spread over LIBOR. The Company may utilize the Revolving Credit Facility for general corporate purposes. At March 31, 2020, there were outstanding borrowings of $1,255.6 under the Revolving Credit Facility, at a weighted average interest rate of 1.82%. The outstanding borrowings at March 31, 2020 included €200.0 ($217.4 at date of issuance) of euro-denominated borrowings, with the remainder of the outstanding borrowings denominated in U.S. dollars. The borrowings under the Revolving Credit Facility during the first quarter of 2020 were used in part to repay outstanding balances under the U.S. Commercial Paper Program and the Euro Commercial Paper Program (each as defined below).

During the second quarter of 2020, the Company repaid all of the outstanding borrowings under the Revolving Credit Facility using cash and cash equivalents on hand as well as the net proceeds from the 2026 Euro Notes (defined below). At June 30, 2020 and December 31, 2019, there were no outstanding borrowings under the Revolving Credit Facility. The carrying value of any borrowings under the Revolving Credit Facility would approximate their fair value due primarily to their market interest rates and would be classified as Level 2 in the fair value hierarchy (Note 5). The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants. At June 30, 2020, the Company was in compliance with the financial covenants under the Revolving Credit Facility. Any outstanding borrowings under the Revolving Credit Facility are classified as long-term debt in the accompanying Condensed Consolidated Balance Sheets.

Commercial Paper Programs

The Company has a commercial paper program pursuant to which the Company issues short-term unsecured commercial paper notes (“U.S. Commercial Paper” or “USCP Notes”) in one or more private placements in the United States (the “U.S. Commercial Paper Program”). The maturities of the USCP Notes vary, but may not exceed 397 days from the date of issue. The USCP Notes are sold under customary terms in the commercial paper market and may be issued at par or a discount therefrom, and bear varying interest rates on a fixed or floating basis. There were no USCP Notes outstanding as of June 30, 2020.

8

The Company and one of its wholly owned European subsidiaries (the “Euro Issuer”) also has a euro-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, “Commercial Paper”), which are guaranteed by the Company and are to be issued outside of the United States.  The maturities of the ECP Notes will vary, but may not exceed 183 days from the date of issue.  The ECP Notes are sold under customary terms in the euro-commercial paper market and may be issued at par or a discount therefrom or a premium thereto and bear varying interest rates on a fixed or floating basis. The ECP Notes may be issued in Euros, Sterling, U.S. dollars or other currencies.  In addition, effective April 14, 2020, a subsidiary of the Company is able to issue ECP Notes through the Bank of England’s COVID Corporate Financing Facility (“BOE Facility”). The BOE Facility will be available for at least twelve months from its inception. The Company repaid all of its outstanding ECP Notes in the second quarter of 2020, including under the BOE Facility, and as such, there were no ECP Notes outstanding as of June 30, 2020.

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, the authorization from the Company’s Board of Directors limits the maximum aggregate principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper, euro-commercial paper or similar programs at any time to $2,500.0.  In addition, the maximum aggregate principal amount outstanding of USCP Notes at any time is $2,500.0. The maximum aggregate principal amount outstanding of ECP Notes at any time is $2,000.0. The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by Moody’s and 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. Net proceeds of the issuances of Commercial Paper are expected to be used for general corporate purposes. Any outstanding Commercial Paper is classified as long-term debt in the accompanying Condensed Consolidated Balance Sheets since the Company has the intent and ability to refinance the Commercial Paper on a long-term basis using the Company’s Revolving Credit Facility. The Commercial Paper is actively traded and is therefore classified as Level 1 in the fair value hierarchy (Note 5). The carrying value of Commercial Paper borrowings approximates their fair value.  

U.S. Senior Notes

On February 20, 2020, the Company issued $400.0 principal amount of unsecured 2.050% Senior Notes due March 1, 2025 at 99.829% of face value (the “2025 Senior Notes”). The 2025 Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. Interest on the 2025 Senior Notes is payable semiannually on March 1 and September 1 of each year, commencing on September 1, 2020.  Prior to February 1, 2025, the Company may, at its option, redeem some or all of the 2025 Senior Notes at any time by paying the redemption price (which may include a make-whole premium), plus accrued and unpaid interest, if any, to, but not including, the date of redemption. If redeemed on or after February 1, 2025, the Company may, at its option, redeem some or all of the 2025 Senior Notes at any time by paying the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.  On April 1, 2020, the Company used the net proceeds from the 2025 Senior Notes to repay the $400.0 2.20% Senior Notes due April 1, 2020 upon maturity.

On January 9, 2019, the Company issued $500.0 principal amount of unsecured 4.350% Senior Notes due June 1, 2029 at 99.904% of face value (the “2029 Senior Notes”). The 2029 Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. Interest on the 2029 Senior Notes is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2019.  Prior to March 1, 2029, the Company may, at its option, redeem some or all of the 2029 Senior Notes at any time by paying the redemption price (which may include a make-whole premium), plus accrued and unpaid interest, if any, to, but not including, the date of redemption. If redeemed on or after March 1, 2029, the Company may, at its option, redeem some or all of the 2029 Senior Notes at any time by paying the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In January 2019, the Company used the net proceeds from the 2029 Senior Notes, along with proceeds from borrowings under the U.S. Commercial Paper Program, to repay the $750.0 of 2.55% Senior Notes due in January 2019.   

On September 4, 2019, the Company commenced tender offers (“Tender Offers”) to purchase for cash any and all of the Company’s outstanding (i) $375.0 principal amount of its 3.125% Senior Notes due September 2021 (“2021 Senior Notes”) and (ii) $500.0 principal amount of its 4.00% Senior Notes due February 2022 (“2022 Senior Notes”). On

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September 11, 2019, as a result of the Tender Offers, the Company accepted for payment $147.3 aggregate principal amount of the 2021 Senior Notes and $205.0 aggregate principal amount of the 2022 Senior Notes for 101.9% and 104.5% of par value, respectively (collectively, the “Tendered Notes”), plus accrued and unpaid interest to, but not including, the settlement date of the Tender Offers. The total consideration for the Tendered Notes was $368.8, which in addition to the Tendered Notes, included $13.4 of premiums and fees paid related to the early extinguishment of debt and $3.1 of accrued interest. For the year ended December 31, 2019, the Company recorded a loss on early debt extinguishment of $14.3 ($12.5 after-tax, or $0.04 per diluted share). This charge was primarily comprised of the premiums and fees incurred related to the Tendered Notes, along with the non-cash charge associated with the write-off of the remaining unamortized deferred debt issuance costs associated with the Tendered Notes. The remaining principal amounts associated with the 2021 Senior Notes and 2022 Senior Notes, which were not redeemed as a result of the Tender Offers, remain outstanding as of June 30, 2020, as noted in the table above.

On September 10, 2019, the Company issued $900.0 principal amount of unsecured 2.800% Senior Notes due February 15, 2030 at 99.920% of face value (the “2030 Senior Notes”). The 2030 Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. Interest on the 2030 Senior Notes is payable semiannually on February 15 and August 15 of each year, commencing on February 15, 2020.  Prior to November 15, 2029, the Company may, at its option, redeem some or all of the 2030 Senior Notes at any time by paying the redemption price (which may include a make-whole premium), plus accrued and unpaid interest, if any, to, but not including, the date of redemption. If redeemed on or after November 15, 2029, the Company may, at its option, redeem some or all of the 2030 Senior Notes at any time by paying the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.  In September 2019, the Company used the net proceeds from the 2030 Senior Notes to fund the cash consideration payable in the Tender Offers, with the remaining net proceeds being used for general corporate purposes, including to partially reduce outstanding borrowings related to the U.S. Commercial Paper Program.   

All of the Company’s outstanding senior notes in the United States (“U.S. Senior Notes”) are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. Interest on each series of U.S. Senior Notes is payable semiannually. The Company may, at its option, redeem some or all of any series of U.S. Senior Notes at any time subject to certain terms and conditions, which include paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, and, with certain exceptions, a make-whole premium. The fair value of each series of U.S. Senior Notes is based on recent bid prices in an active market and is therefore classified as Level 1 in the fair value hierarchy (Note 5). The U.S. Senior Notes contain certain financial and non-financial covenants. At June 30, 2020, the Company was in compliance with the financial covenants under its U.S. Senior Notes.

Euro Senior Notes

On May 4, 2020, the Euro Issuer issued €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 at 99.563% of face value (the “2026 Euro Notes” or “0.750% Euro Senior Notes”). The 2026 Euro Notes are unsecured and rank equally in right of payment with the Euro Issuer’s other unsecured senior indebtedness, and are fully and unconditionally guaranteed on a senior unsecured basis by the Company. Interest on the 2026 Euro Notes is payable annually on May 4 of each year, commencing on May 4, 2021. Prior to February 4, 2026, the Company may, at its option, redeem some or all of the 2026 Euro Notes at any time by paying the redemption price (which may include a make-whole premium), plus accrued and unpaid interest, if any, to the date of redemption. If redeemed on or after February 4, 2026, the Company may, at its option, redeem some or all of the 2026 Euro Notes at any time by paying the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The fair value of the 2026 Euro Notes is based on recent bid prices in an active market and is therefore classified as Level 1 in the fair value hierarchy (Note 5). The Company used the net proceeds from the 2026 Euro Notes to repay amounts outstanding under its Revolving Credit Facility.

On October 8, 2018, the Euro Issuer issued €500.0 (approximately $574.6 at date of issuance) principal amount of unsecured 2.000% Senior Notes due October 8, 2028 at 99.498% of face value (the “2028 Euro Notes” or “2.000% Euro Senior Notes”, collectively with the 2026 Euro Notes, “Euro Notes”, and collectively with the U.S. Senior Notes and 2026 Euro Notes, “Senior Notes”). The 2028 Euro Notes are unsecured and rank equally in right of payment with the Euro Issuer’s other unsecured senior indebtedness, and are fully and unconditionally guaranteed on a senior unsecured

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basis by the Company. Interest on the 2028 Euro Notes is payable annually on October 8 of each year, commencing on October 8, 2019.  Prior to July 8, 2028, the Company may, at its option, redeem some or all of the 2028 Euro Notes at any time by paying the redemption price (which may include a make-whole premium), plus accrued and unpaid interest, if any, to the date of redemption. If redeemed on or after July 8, 2028, the Company may, at its option, redeem some or all of the 2028 Euro Notes at any time by paying the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.  The fair value of the 2028 Euro Notes is based on recent bid prices in an active market and is therefore classified as Level 1 in the fair value hierarchy (Note 5). The Company used a portion of the net proceeds from the 2028 Euro Notes to repay a portion of the outstanding amounts under its Commercial Paper Programs, with the remainder of the net proceeds being used for general corporate purposes. 

The Euro Notes contain certain financial and non-financial covenants. At June 30, 2020, the Company was in compliance with the financial covenants under its Euro Notes.

Other Line of Credit Facilities

On March 20, 2020, the Company, through one of its wholly owned foreign subsidiaries, borrowed $100.0 (the maximum borrowing capacity) on an uncommitted line of credit, at a variable LIBOR-based interest rate, initially set at 1.92%. This line of credit, which is guaranteed by the Company and carries an interest rate of LIBOR plus 80 basis points, expires on December 19, 2020. Borrowings under this line of credit arrangement were used for general corporate purposes. The carrying value of this borrowing approximated its fair value due primarily to its market interest rates and was classified as Level 2 in the fair value hierarchy (Note 5). Prior to maturity, on May 5, 2020, the Company repaid, in full, the outstanding borrowing on this uncommitted line of credit, using cash and cash equivalents on hand.

Note 5—Fair Value Measurements

Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. These requirements establish market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis.

The valuation techniques required are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1           Quoted prices for identical instruments in active markets.

Level 2           Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3           Significant inputs to the valuation model are unobservable.

The Company believes that the assets or liabilities subject to such standards with fair value disclosure requirements are primarily debt instruments, pension plan assets, short-term investments, derivative instruments and contingent consideration payments. Each of these assets and liabilities is discussed below, with the exception of debt instruments and pension plan assets, which are covered in Note 4 and Note 10, respectively, herein, in addition to the notes to the consolidated financial statements within the Company’s most recent 2019 Annual Report. Substantially all of the Company’s short-term investments consist of certificates of deposit with original maturities of twelve months or less and as such, are considered as Level 1 in the fair value hierarchy as they are traded in active markets for identical assets. The carrying amounts of these instruments, the majority of which are in non-U.S. bank accounts, approximate their fair value. The Company’s derivative instruments represent foreign exchange forward contracts, which are valued using bank quotations based on market observable inputs such as forward and spot rates and are therefore classified as Level 2 in the fair value hierarchy. The contingent consideration payment (related to the acquisition of SSI Controls Technologies in January 2019) was valued using Level 3 unobservable inputs, such as probability weighted payout

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projections, within the fair value hierarchy. The calculation of the contingent consideration was finalized in the first quarter of 2020 based on actual financial data used for inputs, and the consideration was paid in June of 2020. The impact of the credit risk related to these financial assets is immaterial. The fair values of the Company’s financial and non-financial assets and liabilities subject to such standards at June 30, 2020 and December 31, 2019 are as follows:

	Fair Value Measurements
			Quoted Prices in		Significant		Significant
			Active Markets		Observable		Unobservable
			for Identical		Inputs		Inputs
	Total		Assets (Level 1)		(Level 2)		(Level 3)
June 30, 2020:
Short-term investments	$	25.7	$	25.7	$	—	$	—
Forward contracts		0.1		—		0.1		—
Total	$	25.8	$	25.7	$	0.1	$	—
December 31, 2019:
Short-term investments	$	17.4	$	17.4	$	—	$	—
Forward contracts		(1.3)		—		(1.3)		—
Contingent consideration		(75.0)		—		—		(75.0)
Total	$	(58.9)	$	17.4	$	(1.3)	$	(75.0)

With the exception of the fair value of the assets acquired and liabilities assumed in connection with acquisition accounting, the Company does not have any other significant financial or non-financial assets and liabilities that are measured at fair value on a non-recurring basis.

The amounts recognized in Accumulated other comprehensive income (loss) associated with foreign exchange forward contracts and the amount reclassified from Accumulated other comprehensive income (loss) to foreign exchange gain (loss) in the accompanying Condensed Consolidated Statements of Income during the three and six months ended June 30, 2020 and 2019 were not material. The fair values of the forward contracts are recorded within Prepaid expenses and other current assets, Other long-term assets, Other accrued expenses and Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets, depending on their value and remaining contractual period.

Note 6—Income Taxes

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Provision for income taxes	$	(68.0)		$	(78.7)		$	(114.0)		$	(158.3)
Effective tax rate		20.7	%		21.3	%		18.5	%		22.0	%

For the three months ended June 30, 2020 and 2019, stock option exercise activity had the impact of lowering our Provision for income taxes by $12.4 and $12.9, respectively, and lowering our effective tax rate by 380 basis points and 350 basis points, respectively, due to the recognition of excess tax benefits within Provision for income taxes in the accompanying Condensed Consolidated Statements of Income. For the six months ended June 30, 2020 and 2019, stock option exercise activity had the impact of lowering our Provision for income taxes by $17.4 and $19.7, respectively, and lowering our effective tax rate by 280 basis points and 270 basis points, respectively. For the six months ended June 30, 2020, the effective tax rate also includes a discrete tax benefit related to the settlements of refund claims in certain non-U.S. jurisdictions and the resulting adjustments to deferred taxes, which had the impact of lowering our Provision for income taxes and effective tax rate by $19.9 and 320 basis points, respectively.

On December 22, 2017, the United States federal government enacted the Tax Cuts and Jobs Act (“Tax Act”), marking a change from a worldwide tax system to a modified territorial tax system in the United States. As part of this change, the Tax Act, among other changes, provides for a transition tax on the accumulated unremitted foreign earnings and profits of the Company’s foreign subsidiaries (“Transition Tax”) and a reduction of the U.S. federal corporate income tax rate from 35% to 21%. The Company finalized its accounting of the Tax Act in the fourth quarter of 2018. The Company will pay the third annual installment of the Transition Tax, net of applicable tax credits and deductions, in the third quarter of 2020, and will pay the balance of the Transition Tax over the remainder of the eight-year period ending 2025, as permitted under the Tax Act. The current and long-term portions of the Transition Tax are recorded in

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Accrued income taxes and Other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019.

The Company operates in the U.S. and numerous foreign taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2016 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of June 30, 2020, the amount of unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $153.0. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. Based on information currently available, management anticipates that over the next twelve-month period, audit activity could be completed and statutes of limitations may close relating to existing unrecognized tax benefits of approximately $13.2.

Note 7—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.

A rollforward of consolidated changes in equity for the three months ended June 30, 2020 is as follows:

	Amphenol Corporation Shareholders
											Accumulated
	Common Stock			Treasury Stock							Other
	Shares			Shares			Additional		Retained		Comprehensive		Noncontrolling		Total
	(in millions)	Amount		(in millions)	Amount		Paid-In Capital		Earnings		Loss		Interests		Equity
Balance as of March 31, 2020	296.6	$	0.3	(0.7)	$	(58.5)	$	1,720.6	$	3,248.5	$	(525.1)	$	59.9	$	4,445.7
Net income										257.7				2.8		260.5
Other comprehensive income (loss)												30.5		0.3		30.8
Acquisitions resulting in noncontrolling interest														0.3		0.3
Distributions to shareholders of noncontrolling interests														(1.6)		(1.6)
Purchase of treasury stock				—		—										—
Retirement of treasury stock	—		—	—		—				—						—
Stock options exercised