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 September 30, 2022 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 or other jurisdiction of incorporation or organization)	(I.R.S. 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 October 25, 2022, the total number of shares outstanding of the Registrant’s Class A Common Stock was 595,094,540.

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 September 30, 2022 and December 31, 2021	2
	Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flow for the Nine Months Ended September 30, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47
Part II	Other Information
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signature		51

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions)

	September 30,		December 31,
	2022		2021
ASSETS
Current Assets:
Cash and cash equivalents	$	1,189.0	$	1,197.1
Short-term investments		63.0		44.3
Total cash, cash equivalents and short-term investments		1,252.0		1,241.4
Accounts receivable, less allowance for doubtful accounts of $55.6 and $43.5, respectively		2,640.1		2,454.8
Inventories		2,080.1		1,894.1
Prepaid expenses and other current assets		354.7		367.9
Total current assets		6,326.9		5,958.2
Property, plant and equipment, less accumulated depreciation of $1,904.1 and $1,961.6, respectively		1,166.9		1,175.3
Goodwill		6,337.5		6,376.8
Other intangible assets, net		753.8		756.9
Other long-term assets		512.8		411.2
Total Assets	$	15,097.9	$	14,678.4
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities:
Accounts payable	$	1,393.6	$	1,312.0
Accrued salaries, wages and employee benefits		369.0		366.2
Accrued income taxes		124.5		88.8
Accrued dividends		119.0		119.8
Other accrued expenses		645.9		556.3
Current portion of long-term debt		2.9		4.0
Total current liabilities		2,654.9		2,447.1
Long-term debt, less current portion		4,750.3		4,795.9
Accrued pension and postretirement benefit obligations		165.3		193.4
Deferred income taxes		442.4		424.2
Other long-term liabilities		436.1		438.7
Total Liabilities		8,449.0		8,299.3
Redeemable noncontrolling interest		20.2		19.0
Equity:
Common stock		0.6		0.6
Additional paid-in capital		2,565.1		2,409.0
Retained earnings		4,775.1		4,278.9
Treasury stock, at cost		(97.5)		(100.0)
Accumulated other comprehensive loss		(672.4)		(286.5)
Total stockholders’ equity attributable to Amphenol Corporation		6,570.9		6,302.0
Noncontrolling interests		57.8		58.1
Total Equity		6,628.7		6,360.1
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	15,097.9	$	14,678.4

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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net sales	$	3,295.2	$	2,818.5	$	9,383.8	$	7,849.5
Cost of sales		2,235.2		1,928.6		6,393.1		5,388.9
Gross profit		1,060.0		889.9		2,990.7		2,460.6
Acquisition-related expenses		12.0		—		12.0		55.4
Selling, general and administrative expenses		366.9		318.7		1,059.0		893.0
Operating income		681.1		571.2		1,919.7		1,512.2
Interest expense		(32.8)		(29.0)		(91.3)		(86.7)
Other income (expense), net		2.6		—		6.6		(0.3)
Income from continuing operations before income taxes		650.9		542.2		1,835.0		1,425.2
Provision for income taxes		(150.4)		(120.5)		(429.2)		(302.8)
Net income from continuing operations		500.5		421.7		1,405.8		1,122.4
Less: Net income from continuing operations attributable to noncontrolling interests		(3.9)		(2.9)		(11.0)		(6.9)
Net income from continuing operations attributable to Amphenol Corporation		496.6		418.8		1,394.8		1,115.5
Income from discontinued operations attributable to Amphenol Corporation, net of income taxes of ($1.5) and ($1.8) for 2021, respectively		—		7.7		—		10.3
Net income attributable to Amphenol Corporation	$	496.6	$	426.5	$	1,394.8	$	1,125.8
Net income per common share attributable to Amphenol Corporation — Basic:
Continuing operations	$	0.83	$	0.70	$	2.34	$	1.87
Discontinued operations, net of income taxes		—		0.01		—		0.02
Net income attributable to Amphenol Corporation — Basic	$	0.83	$	0.71	$	2.34	$	1.88
Weighted average common shares outstanding — Basic		595.3		597.7		596.6		597.8
Net income per common share attributable to Amphenol Corporation — Diluted:
Continuing operations	$	0.80	$	0.67	$	2.24	$	1.79
Discontinued operations, net of income taxes		—		0.01		—		0.02
Net income attributable to Amphenol Corporation — Diluted	$	0.80	$	0.68	$	2.24	$	1.80
Weighted average common shares outstanding — Diluted		619.3		625.8		621.5		624.6

Note: Per share amounts may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

3

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in millions)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income from continuing operations	$	500.5	$	421.7	$	1,405.8	$	1,122.4
Add: Income from discontinued operations attributable to Amphenol Corporation, net of income taxes		—		7.7		—		10.3
Net income before allocation to noncontrolling interests	$	500.5	$	429.4	$	1,405.8	$	1,132.7
Total other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(203.0)		(39.7)		(403.3)		(72.2)
Unrealized gain (loss) on hedging activities		—		(0.5)		1.3		0.4
Pension and postretirement benefit plan adjustment, net of tax of ($1.1) and ($3.2) for 2022, and ($1.6) and ($4.9) for 2021, respectively		3.3		5.1		10.0		15.3
Total other comprehensive (loss) income, net of tax		(199.7)		(35.1)		(392.0)		(56.5)
Total comprehensive income		300.8		394.3		1,013.8		1,076.2
Less: Comprehensive income attributable to noncontrolling interests		(0.7)		(3.0)		(4.9)		(7.8)
Comprehensive income attributable to Amphenol Corporation	$	300.1	$	391.3	$	1,008.9	$	1,068.4

See accompanying notes to condensed consolidated financial statements.

4

AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(dollars in millions)

	Nine Months Ended September 30,
	2022		2021
Cash from operating activities:
Net income from continuing operations	$	1,405.8	$	1,122.4
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization		284.6		274.5
Stock-based compensation expense		64.2		60.2
Deferred income tax provision		17.6		24.9
Net change in components of working capital		(274.3)		(414.1)
Net change in other long-term assets and liabilities		(28.6)		(7.5)
Net cash provided by operating activities from continuing operations		1,469.3		1,060.4
Net cash provided by operating activities from discontinued operations		—		9.1
Net cash provided by operating activities		1,469.3		1,069.5
Cash from investing activities:
Capital expenditures		(290.2)		(274.2)
Proceeds from disposals of property, plant and equipment		4.5		2.4
Purchases of investments		(304.6)		(128.0)
Sales and maturities of investments		220.6		129.3
Acquisitions, net of cash acquired		(288.2)		(1,531.0)
Other, net		7.4		(8.5)
Net cash used in investing activities from continuing operations		(650.5)		(1,810.0)
Net cash used in investing activities from discontinued operations		—		(4.7)
Net cash used in investing activities		(650.5)		(1,814.7)
Cash from financing activities:
Proceeds from issuance of senior notes and other long-term debt		2.9		749.9
Repayments of senior notes and other long-term debt		(7.5)		(616.2)
Proceeds from short-term borrowings		44.9		—
Repayments of short-term borrowings		(44.9)		—
Borrowings (repayments) under commercial paper programs, net		111.9		925.0
Payment of costs related to debt financing		(0.4)		(6.1)
Payment of deferred purchase price related to acquisitions		—		(4.1)
Purchase of treasury stock		(560.1)		(491.0)
Proceeds from exercise of stock options		114.1		180.9
Distributions to and purchases of noncontrolling interests		(4.4)		(11.3)
Dividend payments		(358.4)		(260.0)
Transfers to discontinued operations		—		(28.7)
Net cash (used in) provided by financing activities from continuing operations		(701.9)		438.4
Net cash used in financing activities from discontinued operations		—		(0.1)
Net cash (used in) provided by financing activities		(701.9)		438.3
Effect of exchange rate changes on cash and cash equivalents		(125.0)		(15.5)
Net decrease in cash and cash equivalents		(8.1)		(322.4)
Cash and cash equivalents balance, beginning of period		1,197.1		1,702.0
Cash and cash equivalents balance, end of period	$	1,189.0	$	1,379.6
Less: Cash and cash equivalents included in Current assets held for sale, end of period		—		111.5
Cash and cash equivalents balance of continuing operations, end of period	$	1,189.0	$	1,268.1
Cash paid for:
Interest	$	86.3	$	78.8
Income taxes, net		387.8		305.4

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, unless otherwise noted)

Note 1—Basis of Presentation and Principles of Consolidation

The Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, the related Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021, and the related Condensed Consolidated Statements of Cash Flow for the nine months ended September 30, 2022 and 2021 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 nine months ended September 30, 2022 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, 2021 (the “2021 Annual Report”).

New Reportable Business Segments

Effective January 1, 2022, the Company aligned its businesses into three newly formed reportable business segments: (i) Harsh Environment Solutions, (ii) Communications Solutions and (iii) Interconnect and Sensor Systems. This new alignment replaces our historic reportable business segments. As a result of this new alignment, the Company began reporting under its new reportable segments in connection with the Company’s Quarterly Report on Form 10-Q for the first quarter of 2022. As part of this Quarterly Report on Form 10-Q, the Company has included the recasting of relevant prior year period segment information in order to enable year-over-year segment comparisons. Refer to Note 13 herein for further details related to the Company’s change in its reportable business segments effective January 1, 2022.

We have determined that the Company’s reporting units are the three new reportable business segments. As a result of the new reporting segment structure, the Company utilized the relative fair value allocation approach to reallocate the historical goodwill associated with the previous Interconnect Products and Assemblies segment, while the historical goodwill associated with the previous Cable Products and Solutions segment has been allocated in full to the newly formed Communications Solutions segment. The Company will continue to perform its evaluation for the impairment of goodwill associated with its reporting units on an annual basis as of each July 1, or more frequently if an event occurs or circumstances change that would indicate that a reporting unit’s carrying amount may be impaired. Refer to Note 12 herein for further details related to the carrying amount of goodwill by segment, as well as the results from the annual evaluation for impairment that was performed in the third quarter of 2022.

Discontinued Operations

The Company reports a component of an entity or group of components of an entity as a discontinued operation and held for sale upon acquisition, if the Company has (i) executed a plan to sell the business as of the acquisition date or (ii) has begun to formulate a plan to sell the business and either currently meets or expects to meet the held for sale criteria within three months. An entity meets the held for sale criteria when (a) management, having the authority to approve the action, commits to a plan to sell the discontinued operation, the plan of which is unlikely to have any significant changes or to be withdrawn, (b) the completed sale is probable within one year, and (c) an active program to locate a buyer has been initiated with the operation actively marketed for sale at a price that is reasonable in relation to its current fair value and for immediate sale in its present condition. The Company separately accounts for the operating results and related cash flows associated with discontinued operations until such operations are divested; such discontinued operations are reported separately from the operating results and related cash flows associated with continuing operations in the accompanying Condensed Consolidated Financial Statements. For further information related to the Company’s discontinued operations, refer to Note 11 herein.

6

Note 2—New Accounting Pronouncements

The United Kingdom’s Financial Conduct Authority (the “FCA”), 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. In December 2020, the ICE Benchmark Administration published a consultation on its intention to extend the publication of certain U.S. dollar LIBOR (“USD LIBOR”) rates until June 30, 2023. Subsequently in March 2021, the FCA announced some USD LIBOR tenors (overnight, 1-month, 3-month, 6-month and 12-month) will continue to be published until June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, identified the Secured Overnight Financing Rate (the “SOFR”) as its preferred benchmark alternative to USD LIBOR. The 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying accounting principles generally accepted in the United States (“U.S. GAAP” or “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. In January 2021, the FASB also issued ASU No. 2021-01 Reference Rate Reform (Topic 848): Scope, which permits entities to elect certain optional expedients and exceptions when accounting for derivatives and certain hedging relationships affected by changes in interest rates and the transition. Effective November 30, 2021, the Company’s Revolving Credit Facility (as defined in Note 4 herein) no longer references LIBOR for interest rate determinations. Due to our current limited reliance on borrowings tied to LIBOR, the Company currently believes that the LIBOR transition will not have a material impact on its financial condition, results of operations or cash flows.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which amends ASC 805 by requiring acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination. Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. The intent of ASU 2021-08 is to address diversity in practice and improve comparability for both the recognition and measurement of acquired revenue contracts by providing (i) guidance on how to determine whether a contract liability is recognized by the acquirer in a business combination and (ii) specific guidance on how to recognize and measure contract assets and contract liabilities from revenue contracts in a business combination. ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, and the amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. While the Company continues to evaluate ASU 2021-08, the impact of ASU 2021-08 on our financial condition, results of operations or cash flows will be dependent upon the nature of any future business combinations.

In September 2022, the FASB issued ASU No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”), which amends ASC 405 by requiring entities to provide more detailed disclosures regarding supplier finance programs used in connection with the purchase of goods and services. The intent of ASU 2022-04 is to enhance transparency of these programs by requiring entities to disclose (i) the key terms of the program(s), including the payment terms and assets pledged as security or other forms of guarantees, (ii) the amount of obligations outstanding at the end of the reporting period and a description of where those obligations are presented on the balance sheet, and (iii) annual rollforward information of the activity of such obligations during the reporting period. ASU 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, with the exception of the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023. Disclosure requirements under ASU 2022-04 must be applied retrospectively covering each period for which a balance sheet is presented, with the exception of the rollforward information which shall be applied prospectively. The Company is currently evaluating ASU 2022-04 and its potential impact on our condensed consolidated financial statements.

7

Note 3—Inventories

Inventories consist of:

	September 30,		December 31,
	2022		2021
Raw materials and supplies	$	919.4	$	818.4
Work in process		566.2		511.5
Finished goods		594.5		564.2
	$	2,080.1	$	1,894.1

Note 4—Debt

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

	September 30, 2022				December 31, 2021
	Carrying		Approximate		Carrying		Approximate
	Amount		Fair Value		Amount		Fair Value
Revolving Credit Facility	$	—	$	—	$	—	$	—
U.S. Commercial Paper Program		903.8		903.8		795.2		795.2
Euro Commercial Paper Program		—		—		—		—
Term Loan Credit Facility		—		—		—		—
3.20% Senior Notes due April 2024		349.9		342.6		349.9		363.5
2.050% Senior Notes due March 2025		399.7		373.8		399.6		407.4
0.750% Euro Senior Notes due May 2026		486.2		442.6		565.5		579.0
2.000% Euro Senior Notes due October 2028		486.0		440.2		565.4		626.7
4.350% Senior Notes due June 2029		499.7		474.2		499.7		567.7
2.800% Senior Notes due February 2030		899.5		753.1		899.4		928.3
2.200% Senior Notes due September 2031		747.5		578.0		747.3		733.4
Other debt		6.7		6.7		8.6		8.6
Less: unamortized deferred debt issuance costs		(25.8)		—		(30.7)		—
Total debt		4,753.2		4,315.0		4,799.9		5,009.8
Less: current portion		2.9		2.9		4.0		4.0
Total long-term debt	$	4,750.3	$	4,312.1	$	4,795.9	$	5,005.8

Revolving Credit Facility

On November 30, 2021, the Company amended and restated its $2,500.0 unsecured revolving credit facility (the “Revolving Credit Facility”). As a result, the Revolving Credit Facility no longer references LIBOR for interest rate determinations. The Revolving Credit Facility maintains the lenders’ aggregate commitments under the facility at $2,500.0. The Revolving Credit Facility matures in November 2026 and gives the Company the ability to borrow, in various currencies, at a spread that varies, based on the Company’s debt rating, over certain currency-specific benchmark rates, which benchmark rates in the case of U.S. dollar borrowings are either the base rate or the adjusted term SOFR. The Company may utilize the Revolving Credit Facility for general corporate purposes. At September 30, 2022 and December 31, 2021, 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). Any outstanding borrowings under the Revolving Credit Facility are classified as long-term debt in the accompanying Condensed Consolidated Balance Sheets. The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants. On September 30, 2022, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

8

Term Loan Credit Facility

On April 19, 2022, the Company entered into a two-year, $750.0 unsecured delayed draw term loan credit agreement (the “2022 Term Loan”), which is scheduled to mature on April 19, 2024. The 2022 Term Loan was undrawn at closing and may be drawn on up to five occasions over the life of the facility. The 2022 Term Loan may be repaid at any time without premium or penalty, and, once repaid, cannot be reborrowed. When drawn upon, the proceeds from the 2022 Term Loan are expected to be used for general corporate purposes. Interest rates under the 2022 Term Loan are based on a spread over either the base rate or the adjusted term SOFR, which spread varies based on the Company’s debt rating. The carrying value of any borrowings under the 2022 Term Loan would approximate its fair value due primarily to its market interest rates and would be classified as Level 2 in the fair value hierarchy (Note 5). As of September 30, 2022, the Company had not yet drawn upon the 2022 Term Loan, and as such, there were no outstanding borrowings under the 2022 Term Loan. The 2022 Term Loan requires payment of certain commitment fees and requires that the Company satisfy certain financial covenants, which financial covenants are the same as those under the Revolving Credit Facility. On September 30, 2022, the Company was in compliance with the financial covenants under the 2022 Term Loan.

Commercial Paper Programs

The Company has a commercial paper program (the “U.S. Commercial Paper Program”) pursuant to which the Company may issue short-term unsecured commercial paper notes (the “USCP Notes”) in one or more private placements in the United States. 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. The maximum aggregate principal amount outstanding of USCP Notes at any time is $2,500.0. The Company utilizes borrowings under the U.S. Commercial Paper Program for general corporate purposes, which recently has included fully or partially funding acquisitions, as well as to repay certain outstanding senior notes. In the third quarter of 2021, the Company used borrowings under the U.S. Commercial Paper Program to redeem its unsecured 3.125% Senior Notes due September 15, 2021, of which $227.7 aggregate principal amount was outstanding. As of September 30, 2022, the amount of USCP Notes outstanding was $903.8, with a weighted average interest rate of 3.40%. As of December 31, 2021, the amount of USCP Notes outstanding was $795.2, with a weighted average interest rate of 0.29%.

The Company and one of its wholly owned European subsidiaries (the “Euro Issuer”) also have a commercial paper program (the “Euro Commercial Paper Program” and, together with the U.S. Commercial Paper Program, the “Commercial Paper Programs”), pursuant to which the Euro Issuer may issue short-term unsecured commercial paper notes (the “ECP Notes” and, together with the USCP Notes, the “Commercial Paper”), which are guaranteed by the Company and are to be issued outside of the United States.  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 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.  The maximum aggregate principal amount outstanding of ECP Notes at any time is $2,000.0. As of September 30, 2022, there were no ECP Notes outstanding.

Amounts available under the Commercial Paper Programs may be borrowed, repaid and re-borrowed from time to time. In conjunction with the Revolving Credit Facility, as of September 30, 2022, the authorization from the Company’s Board of Directors (the “Board”) limits the maximum principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper or similar programs, along with outstanding amounts under the Revolving Credit Facility, at any time to $2,500.0 in the aggregate. The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by Moody’s and, based on the Board’s authorization described above, are currently backstopped by the Revolving Credit Facility, as amounts undrawn under the Company’s Revolving Credit Facility are available to repay Commercial Paper, if necessary. Net proceeds of the issuances of Commercial Paper are expected to be used for general corporate purposes. The 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 carrying value of Commercial Paper approximates its fair value, due primarily to its market interest rates and is classified as Level 2 in the fair value hierarchy (Note 5). 

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U.S. Senior Notes

On September 14, 2021, the Company issued $750.0 principal amount of unsecured 2.200% Senior Notes due September 15, 2031 at 99.634% of face value (the “2031 Senior Notes”). The 2031 Senior Notes are unsecured and rank equally in right of payment with the Company’s and the Euro Issuer’s other unsecured senior indebtedness. Interest on the 2031 Senior Notes is payable semiannually on March 15 and September 15 of each year, commencing on March 15, 2022. Prior to June 15, 2031, the Company may, at its option, redeem some or all of the 2031 Senior Notes at any time by paying the redemption price (which includes a make-whole premium), plus accrued and unpaid interest, if any, to, but not including, the date of redemption. If redeemed on or after June 15, 2031, the Company may, at its option, redeem some or all of the 2031 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. The Company used the net proceeds from the 2031 Senior Notes to repay certain outstanding borrowings under the U.S. Commercial Paper Program.

All of the Company’s outstanding senior notes in the United States (the “U.S. Senior Notes”) are unsecured and rank equally in right of payment with the Company’s and the Euro Issuer’s other unsecured senior indebtedness. 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.

Euro Senior Notes

The Euro Issuer has two outstanding senior notes in Europe (collectively, the “Euro Notes” and, together with the U.S. Senior Notes, the “Senior Notes”), each of which were issued with a principal amount of €500.0. The 0.750% Euro Senior Notes, which were issued in May 2020 at 99.563% of face value, mature on May 4, 2026, while the 2.000% Euro Senior Notes, which were issued in October 2018 at 99.498% of face value, mature on October 8, 2028. The Company’s Euro Notes are unsecured and rank equally in right of payment with the Company’s and the Euro Issuer’s other unsecured senior indebtedness, and are fully and unconditionally guaranteed on a senior unsecured basis by the Company. Interest on each series of Euro Notes is payable annually. The Company may, at its option, redeem some or all of either series of Euro Notes at any time, subject to certain terms and conditions, which include paying 100% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, and, with certain exceptions, a make-whole premium.

The fair value of each series of 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 Company’s Senior Notes impose certain obligations on the Company and prohibit various actions by the Company unless it satisfies certain financial requirements. On September 30, 2022, the Company was in compliance with all requirements under its Senior Notes.

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.

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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 currently subject to such standards with fair value disclosure requirements are primarily debt instruments, pension plan assets, short- and long-term investments, and derivative instruments. Each of these assets and liabilities is discussed below, with the exception of debt instruments, pension plan assets, and the fair value of assets acquired and liabilities assumed as part of acquisition accounting, which are covered in Note 4, Note 10 and Note 11, respectively, herein, in addition to the Notes to Consolidated Financial Statements in the 2021 Annual Report. Substantially all of the Company’s short- and long-term investments consist of certificates of deposit, which are considered as Level 2 in the fair value hierarchy. Long-term investments, the vast majority of which have original maturities of two years, are recorded in Other long-term assets in the accompanying Condensed Consolidated Balance Sheets. The carrying amounts of these short-term and long-term instruments, the vast majority of which are in non-U.S. bank accounts, approximate their respective fair values. The Company’s derivative instruments primarily consist of 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 impact of the credit risk related to these financial assets is immaterial.

The Company reviews the fair value hierarchy classifications on a quarterly basis and determines the appropriate classification of such assets and liabilities subject to the fair value hierarchy standards based on, among other things, the ability to observe valuation inputs. The fair values of the Company’s financial and non-financial assets and liabilities subject to such standards as of September 30, 2022 and December 31, 2021 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)
September 30, 2022:
Short-term investments	$	63.0	$	—	$	63.0	$	—
Long-term investments		49.8		—		49.8		—
Forward contracts		4.0		—		4.0		—
Redeemable noncontrolling interest		(20.2)		—		—		(20.2)
Total	$	96.6	$	—	$	116.8	$	(20.2)
December 31, 2021:
Short-term investments	$	44.3	$	44.3	$	—	$	—
Forward contracts		(0.4)		—		(0.4)		—
Redeemable noncontrolling interest		(19.0)		—		—		(19.0)
Total	$	24.9	$	44.3	$	(0.4)	$	(19.0)

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The Company utilizes foreign exchange forward contracts, hedging instruments accounted for as cash flow hedges, in the management of foreign currency exposures. In addition, the Company also enters into foreign exchange forward contracts, accounted for as net investment hedges, to hedge our exposure to variability in the U.S. dollar equivalent of the net investments in certain foreign subsidiaries. As of September 30, 2022, the fair value of such foreign exchange forward contracts in the table above consisted of (i) various outstanding foreign exchange forward contracts accounted for as net investment hedges and (ii) various outstanding foreign exchange forward contracts that are not designated as hedging instruments. The amounts recognized in Accumulated other comprehensive income (loss) associated with foreign exchange forward contracts and the amounts reclassified from Accumulated other comprehensive income (loss) to foreign exchange gain (loss), included in Cost of sales in the accompanying Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2022 and 2021 were not material. The fair values of the Company’s 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.

Certain acquisitions may result in noncontrolling interest holders who, in certain cases, are entitled to a put option, giving them the ability to put some or all of their redeemable interest in the shares of the acquiree to the Company. Specifically, if exercised by the noncontrolling interest holder, Amphenol would be required to purchase some or all of the option holder’s redeemable interest, at a redemption price during specified time period(s) stipulated in the respective acquisition agreement. The redeemable noncontrolling interest as of September 30, 2022 and December 31, 2021 is related to the acquisition of Halo Technology Limited (“Halo”), which closed in December 2021, and based on the terms of the agreement, will remain in temporary equity until the put option is either fully exercised or expires. The redemption value of the redeemable noncontrolling interest is generally calculated using Level 3 unobservable inputs based on a multiple of earnings, which, for the redeemable noncontrolling interest currently outstanding, approximates fair value. As such, the redemption value is classified as Level 3 in the fair value hierarchy, and is recorded as Redeemable noncontrolling interest on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021. Refer to Note 7 herein for a rollforward of the Redeemable noncontrolling interest for the three and nine months ended September 30, 2022, as well as Note 1 of the Notes to Consolidated Financial Statements in the 2021 Annual Report for further discussion of the Company’s redeemable noncontrolling interest.

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.

Note 6—Income Taxes

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Provision for income taxes	$	(150.4)		$	(120.5)		$	(429.2)		$	(302.8)
Effective tax rate		23.1	%		22.2	%		23.4	%		21.2	%

For the three months ended September 30, 2022 and 2021, stock option exercise activity had the impact of decreasing our Provision for income taxes by $10.6 and $12.3, respectively, and decreasing our effective tax rate by approximately 160 basis points and 230 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 three months ended September 30, 2022, acquisition-related expenses had the effect of increasing our effective tax rate by approximately 20 basis points.

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For the nine months ended September 30, 2022 and 2021, stock option exercise activity had the impact of decreasing our Provision for income taxes by $21.9 and $34.3, respectively, and decreasing our effective tax rate by approximately 120 basis points and 240 basis points, respectively. For the nine months ended September 30, 2022, acquisition-related expenses had the effect of increasing our effective tax rate by approximately 10 basis points. For the nine months ended September 30, 2021, the effective tax rate included a discrete tax benefit of $14.9 related to the settlement of uncertain tax positions in certain non-U.S. jurisdictions, which had the effect of decreasing our effective tax rate by approximately 100 basis points, as well as the impact of acquisition-related expenses, which had the effect of increasing our effective tax rate by approximately 20 basis points.

The United States federal government enacted the Tax Cuts and Jobs Act (“Tax Act”) in December 2017. As a result, in 2017, the Company recorded a transition tax (“Transition Tax”) related to the deemed repatriation of the accumulated unremitted earnings and profits of the Company’s foreign subsidiaries. The Company paid its fifth annual installment of the Transition Tax, net of applicable tax credits and deductions, in the second quarter of 2022, and will pay the balance of the Transition Tax, net of applicable tax credits and deductions, 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 Accrued income taxes and Other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021.

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 2017 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 September 30, 2022, the amount of unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $183.5. 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 $10.9.

Inflation Reduction Act of 2022

On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022 (the “IRA”), a tax and spending package that introduces several tax-related provisions, including a 15% corporate alternative minimum tax (“CAMT”) on certain large corporations and a 1% excise tax on certain corporate stock buybacks. Companies will be required to reassess their valuation allowances for certain affected deferred tax assets in the period of enactment but will not need to remeasure deferred tax balances for the related tax accounting implications of the CAMT. The impact of these provisions, which will become effective for Amphenol beginning on January 1, 2023, will depend on several factors, including interpretive regulatory guidance which has not yet been released. The Company continues to review and assess the provisions of the IRA, including several other non-tax related provisions, and its potential impact on our financial condition, results of operations, liquidity and cash flows.