AMPHENOL CORPORATION

(APH)
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AMPHENOL CORP /DE/ Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

02/09/2022 | 04:46pm EDT

(amounts in millions, except share and per share data, unless otherwise noted)




The following discussion and analysis of the results of operations and financial
condition for the years ended December 31, 2021, 2020 and 2019 has been derived
from and should be read in conjunction with the Consolidated Financial
Statements and the accompanying Notes to Consolidated Financial Statements
included in Part II, Item 8, herein for Amphenol Corporation (together with its
subsidiaries, "Amphenol," the "Company," "we," "our," or "us"). The Consolidated
Financial Statements have been prepared in U.S. dollars, in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP" or "GAAP"). Any references to the Company's results in this Item 7 are
specifically to our continuing operations only and exclude discontinued
operations, unless otherwise noted. The following discussion and analysis also
includes references to certain non-GAAP financial measures, which are defined in
the "Non-GAAP Financial Measures" section below, including "Constant Currency
Net Sales Growth" and "Organic Net Sales Growth". For purposes of the following
discussion, the terms "constant currencies" and "organically" have the same
meaning, respectively, as these aforementioned non-GAAP financial measures.
Refer to "Non-GAAP Financial Measures" within this Item 7 for more information,
including our reasons for including non-GAAP financial measures and material
limitations with respect to the usefulness of the measures.



In addition to historical information, the following discussion and analysis
also contains certain forward-looking statements that are subject to risks and
uncertainties, including but not limited to the risk factors described in Part
I, Item 1A herein, as well as the risks and uncertainties that exist with the
use of forward-looking statements as described in the "Cautionary Note Regarding
Forward-Looking Statements" section included herein at the beginning of this
Annual Report on Form 10-K ("Annual Report").



Stock Split


On January 27, 2021, the Company announced that its Board of Directors (the
"Board") approved a two-for-one split of the Company's Class A Common Stock
("Common Stock"). The stock split was effected in the form of a stock dividend
paid to stockholders of record as of the close of business on February 16, 2021.
The additional shares were distributed on March 4, 2021, and the Company's
Common Stock began trading on a split-adjusted basis on March 5, 2021. As a
result of the stock split, stockholders received one additional share of Common
Stock for each share held as of the record date. All current and prior year data
impacted by the stock split and presented in this Item 7 and throughout this
Annual Report, including number of shares and per share information, earnings
per share, and dividends per share amounts, among others, have been
retroactively adjusted to reflect the effect of the stock split. Refer to Note 1
of the Notes to Consolidated Financial Statements for further information
related to the stock split.



Overview



General



Amphenol is one of the world's largest designers, manufacturers and marketers of
electrical, electronic and fiber optic connectors and interconnect systems,
antennas, sensors and sensor-based products and coaxial and high-speed specialty
cable. Through December 31, 2021, the Company operated through two reporting
segments: (i) Interconnect Products and Assemblies and (ii) Cable Products and
Solutions. In 2021, approximately 71% of the Company's sales were outside the
United States. The primary end markets for our products are:



? information technology and communication devices and systems for the converging

technologies of voice, video and data communications;

? a broad range of industrial applications and traditional, hybrid and electric

automotive applications; and

? military and commercial aerospace applications.

The Company's products are used in a wide variety of applications by a wide
array of customers around the world. The Company competes primarily on the basis
of technology innovation, product quality and performance, price, customer
service and delivery time. A trend among customers has been to consolidate their
lists of qualified suppliers to companies that have the ability to meet certain
technical, quality, delivery and other standards while maintaining competitive
prices. The Company has focused its global resources to position itself to
compete effectively in this environment. The Company believes that its global
presence is an important competitive advantage as it allows the Company to
provide quality products on a timely and worldwide basis to its multinational
customers.



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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. All businesses
previously reported in the Interconnect Products and Assemblies segment have now
been aligned with one of the three newly formed segments. All businesses
previously reported in the Cable Products and Solutions segment have now been
aligned with our newly formed Communications Solutions segment. This new
alignment reinforces the Company's entrepreneurial culture and the clear
accountability of each of our business unit general managers, while enhancing
the scalability of Amphenol's business for the future. The Company will begin
reporting its new reportable segments in connection with its Quarterly Report on
Form 10-Q for the quarterly period ending March 31, 2022, including the
recasting of relevant prior year period segment information for conformity of
presentation. For further details related to the Company's change in its
reportable business segments effective January 1, 2022, refer to Note 16 of the
Notes to Consolidated Financial Statements herein.



Strategy



The Company's strategy is to provide its customers with comprehensive design
capabilities, a broad selection of products and a high level of service on a
worldwide basis, while maintaining continuing programs of productivity
improvement and cost control. The Company focuses its research and development
efforts through close collaboration with its customers to develop highly
engineered products that meet customer needs and have the potential for broad
market applications and significant sales within a one- to three-year period.
The Company is also focused on controlling costs. The Company does this by
investing in modern manufacturing technologies, controlling purchasing processes
and expanding into lower cost areas.



The Company's strategic objective is to further enhance its position in its served markets by pursuing the following success factors:

? Pursue broad market diversification;

? Develop high-technology performance-enhancing solutions;


 ? Expand global presence;


 ? Control costs;

? Pursue strategic acquisitions and investments; and

? Foster collaborative, entrepreneurial management.





In 2021, the Company reported net sales, operating income and net income from
continuing operations attributable to Amphenol Corporation of $10,876.3,
$2,105.1 and $1,569.4, respectively, representing an increase of 26%, 28% and
30%, respectively, from 2020. In 2021, the Company's net income from continuing
operations attributable to Amphenol Corporation was impacted by (a) excess tax
benefits of $63.4 related to stock-based compensation resulting from stock
option exercises and (b) a discrete tax benefit of $14.9 related to the
settlement of uncertain tax positions in certain non-U.S. jurisdictions,
partially offset by (c) acquisition-related expenses of $70.4 ($57.3 after-tax)
comprised primarily of transaction, severance, restructuring and certain
non-cash purchase accounting costs related to the acquisition of MTS Systems
Corporation ("MTS") in the second quarter of 2021 and external transaction costs
and certain non-cash purchase accounting costs related to the acquisition of
Halo Technology Limited ("Halo") in the fourth quarter of 2021. In 2020, the
Company's net income from continuing operations attributable to Amphenol
Corporation was impacted by (a) excess tax benefits of $42.8 related to
stock-based compensation resulting from stock option exercises and (b) a
discrete tax benefit of $19.9 related to the settlements of refund claims in a
non-U.S. jurisdiction and the resulting adjustments to deferred taxes, partially
offset by (c) acquisition-related expenses of $11.5 ($10.7 after-tax) comprised
primarily of external transaction costs related to acquisitions that were
announced or closed. Excluding the effects of these items, Adjusted Operating
Income and Adjusted Net Income from continuing operations attributable to
Amphenol Corporation, as defined in the "Non-GAAP Financial Measures" section
below and reconciled within this Part II, Item 7, increased by 32% and 34%,
respectively, in 2021 compared to 2020. Sales and profitability trends are
discussed in detail in "Results of Operations" below. In addition, a strength of
the Company has been its ability to consistently generate net cash provided by
operating activities from continuing operations ("Operating Cash Flow"). The
Company uses Operating Cash Flow to fund capital expenditures and acquisitions,
repurchase shares of its Common Stock, pay dividends and reduce indebtedness. In
2021, the Company generated Operating Cash Flow of $1,523.9 and Free Cash Flow
of $1,167.2. Free Cash Flow, a non-GAAP financial measure, is defined in the
"Non-GAAP Financial Measures" section below and reconciled within this Part
II,
Item 7.



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Impact of COVID-19 on our Business, Operations, Financial Condition, Liquidity and Results of Operations

The COVID-19 pandemic has affected our offices and manufacturing facilities
throughout the world, as well as the facilities of our suppliers, customers and
our customers' contract manufacturers. The COVID-19 pandemic caused widespread
disruptions to our Company during the first half of 2020, and to a lesser
extent, those disruptions continued during the second half of 2020 and
throughout all of 2021. As of December 31, 2021, we continue to experience some
disruptions, and at a minimum, particularly given the surge of cases resulting
from the Omicron variant, we expect those disruptions to continue into 2022 and
potentially beyond. These disruptions have included and may continue to include
government regulations that inhibit our ability to operate certain of our
facilities in the ordinary course, travel restrictions, supplier constraints,
supply-chain interruptions, logistics challenges and limitations, labor
disruptions and reduced demand from certain customers. During 2021 and into
2022, there have been resurgences in COVID-19 cases in several regions around
the world, particularly related to new variant strains, including Delta and
Omicron. The extent to which the COVID-19 pandemic will continue to impact our
business and financial results going forward will be dependent on future
developments such as the length and severity of the crisis, the impact of the
recent resurgence of the crisis due to the Omicron variant, as well as any
additional future resurgences from known or new variants, future government
regulations and actions in response to the crisis, the timing, availability,
effectiveness and adoption rates of vaccines and treatments, and the overall
impact of the COVID-19 pandemic on the global economy and capital markets, among
many other factors, all of which remain highly uncertain and unpredictable. In
addition, the COVID-19 pandemic could impact the health of our management team
and other employees. Given these uncertainties, we expect the pandemic to
continue to have an impact on our business, operations, financial condition,
liquidity and results of operations in 2022 and potentially beyond. There can be
no assurance that the COVID-19 pandemic will not have a material and adverse
effect on our business, operations, financial condition, liquidity and results
of operations in the future. For further discussion on the risks and
uncertainties associated with the COVID-19 pandemic, refer to Part I, Item
1A.
Risk Factors.



Results of Operations


The following table sets forth the components of net income attributable to Amphenol Corporation as a percentage of net sales for the years indicated.




                                                             Year Ended December 31,
                                                           2021        2020       2019
Net sales                                                  100.0 %     100.0 %    100.0 %
Cost of sales                                               68.7        69.0       68.2
Acquisition-related expenses                                 0.6         0.1        0.3
Selling, general and administrative expenses                11.3        11.8       11.8
Operating income                                            19.4        19.1       19.7
Interest expense                                           (1.1)       (1.3)      (1.4)
Loss on early extinguishment of debt                           -           -      (0.2)
Other (expense) income, net                                    -           -        0.1
Income from continuing operations before income taxes       18.3        17.8       18.2
Provision for income taxes                                 (3.8)       (3.7)      (4.1)
Net income from continuing operations                       14.5        

14.1 14.1 Net income from continuing operations attributable to noncontrolling interests

                                   (0.1)       

(0.1) (0.1) Net income from continuing operations attributable to Amphenol Corporation

                                        14.4        

14.0 14.0 Income from discontinued operations attributable to Amphenol Corporation

                                         0.2           -          -
Net income attributable to Amphenol Corporation             14.6 %      14.0 %     14.0 %




2021 Compared to 2020



Net sales were $10,876.3 for the year ended December 31, 2021 compared to
$8,598.9 for the year ended December 31, 2020, which represented an increase of
26% in U.S. dollars, 25% in constant currencies, and 18% organically (excluding
both currency and acquisition impacts), over the prior year. The increase in net
sales in 2021 was driven by growth in several markets in the Interconnect
Products and Assemblies segment, as described below.



Net sales in the Interconnect Products and Assemblies segment (approximately 96%
of net sales) increased 27% in U.S. dollars, 25% in constant currencies, and 19%
organically, in 2021, compared to 2020. The sales growth in 2021 was driven by
strong growth across nearly all end markets, including the industrial,
automotive, information technology and data communications, military and mobile
networks markets, along with moderate growth in the mobile devices

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market and contributions from the Company's acquisition program. This sales
growth was partially offset by a decline in the commercial aerospace market,
which continued to be negatively impacted by the significant impact of the
COVID-19 pandemic on travel and aircraft production. The strong sales growth in
2021 in the Interconnect Products and Assemblies segment also reflected a
recovery in certain markets from the more negative impact resulting from the
COVID-19 pandemic during 2020. Net sales to the industrial market increased
(approximately $864.6), with broad-based growth across nearly all market
segments of the global industrial market, with particular strength in heavy
equipment, factory automation, industrial instrumentation, battery and heavy
electric vehicle, alternative energy, rail mass transit, and transportation,
along with contributions from acquisitions. Net sales to the automotive market
increased (approximately $683.4), reflecting the continued recovery and growth
in most regions of the global automotive market, as well as the Company's
expanded position in next-generation electronics, including in particular
electric and hybrid drive trains. Net sales to the information technology and
data communications market increased (approximately $482.7), driven primarily by
continued strong sales growth to web service providers and broad-based market
demand for server, storage and networking related products as customers worked
to support higher demand for increased bandwidth. Net sales to the military
market increased (approximately $135.8), driven by strength across nearly all
segments of the military market, including missile, military communications and
naval and space-related applications, along with a recovery from the impact of
pandemic-related production disruptions experienced during the first half of
2020, as well as contributions from acquisitions. Net sales to the mobile
networks market increased (approximately $60.5), driven by a recovery in demand
from mobile networks equipment manufacturers and mobile operators, which was
primarily driven by increased demand for products used in 5G network build-outs
and contributions from acquisitions, offset in part by reductions of sales to
certain customers in China that were added to the U.S. Department of Commerce's
"Entity List". Net sales to the mobile devices market increased (approximately
$45.7), driven by growth in products incorporated into laptops and wearable
devices, along with production-related products, and was partially offset by
moderations of sales into smartphones and tablets. Net sales to the commercial
aerospace market decreased (approximately $26.6) primarily due to the continued
significant impact of the COVID-19 pandemic on travel and aircraft production.



Net sales in the Cable Products and Solutions segment (approximately 4% of net
sales), which primarily serves the broadband communications market, increased
21% in U.S. dollars, 20% in constant currencies and 15% organically in 2021,
compared to 2020. The increase in net sales in the Cable Products and Solutions
segment was primarily driven by increased market demand from broadband operators
and mobile network service providers, as well as the contribution from one
acquisition in this segment that closed during the first quarter of 2021.



The table below reconciles Constant Currency Net Sales Growth and Organic Net
Sales Growth to the most directly comparable U.S. GAAP financial measures, by
segment, geography and consolidated, for the year ended December 31, 2021
compared to the year ended December 31, 2020:




                                                                                          Percentage Growth (relative to prior year) (1)

                                                                      Net sales              Foreign              Constant                             Organic
                                                                      growth in             currency            Currency Net          Acquisition     Net Sales
                                                                   U.S. Dollars (2)        impact (3)         Sales Growth (4)        impact (5)      Growth (4)
Net sales by:                             2021         2020             (GAAP)             (non-GAAP)            (non-GAAP)           (non-GAAP)      (non-GAAP)
Segment:
Interconnect Products and Assemblies   $ 10,430.9    $ 8,229.9           27 %                  2 %                   25 %                  6 %            19 %
Cable Products and Solutions                445.4        369.0           21
%                  - %                   20 %                  5 %            15 %
Consolidated                           $ 10,876.3    $ 8,598.9           26 %                  2 %                   25 %                  6 %            18 %

Geography (6):
United States                          $  3,155.9    $ 2,494.0           27 %                  - %                   26 %                  9 %            17 %
Foreign                                   7,720.4      6,104.9           26 %                  2 %                   24 %                  5 %            19 %
Consolidated                           $ 10,876.3    $ 8,598.9           26 %                  2 %                   25 %                  6 %            18 %


(1) Percentages in this table were calculated using actual, unrounded results;

therefore, the sum of the components may not add due to rounding.

Net sales growth in U.S. dollars is calculated based on Net sales as reported

in the Consolidated Statements of Income and Note 14 of the Notes to

Consolidated Financial Statements. While the term "net sales growth in U.S. (2) dollars" is not considered a U.S. GAAP financial measure, for purposes of

this table, we derive the reported (GAAP) measure based on GAAP results,

which serves as the basis for the reconciliation to its comparable non-GAAP

    financial measures.


    Foreign currency translation impact, a non-GAAP measure, represents the

percentage impact on net sales resulting from foreign currency exchange rate (3) changes in the current reporting year compared to the prior reporting year.

Such amount is calculated by subtracting current year net sales translated at

average foreign currency exchange rates for the prior year from current year

reported net sales, taken as a percentage of the prior year's net sales.

(4) Constant Currency Net Sales Growth and Organic Net Sales Growth are non-GAAP

financial measures as defined in the "Non-GAAP Financial Measures" section.

Acquisition impact, a non-GAAP measure, represents the percentage impact on

net sales resulting from acquisitions that have not been included in the (5) Company's consolidated results for the full current year and/or prior

comparable year presented. Such net sales related to these acquisitions do

not reflect the underlying growth of the Company on a comparative basis.



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




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The increase in foreign net sales in 2021 compared to 2020 was driven by strong
growth in both Europe and Asia. The comparatively weaker U.S. dollar in 2021 had
the effect of increasing sales by approximately $159.1, compared to 2020.



Selling, general and administrative expenses were $1,226.3, or 11.3% of net
sales for 2021, compared to $1,014.2, or 11.8% of net sales for 2020. The
decrease in selling, general and administrative expenses as a percentage of net
sales in 2021 was driven primarily by higher sales during the year, relative to
2020 which was more negatively impacted by the COVID-19 pandemic, slightly
offset by the impact of MTS's Sensors business, acquired in 2021, which
currently has higher selling, general and administrative expenses as a
percentage of net sales compared to the average of the Company. Administrative
expenses increased $78.6 in 2021, and represented approximately 4.5% of net
sales in 2021 and 4.8% of net sales in 2020. Research and development expenses
increased $57.0 in 2021 primarily related to increases in expenses for new
product development, and represented approximately 2.9% of net sales in 2021 and
3.0% of net sales in 2020. Selling and marketing expenses increased $76.5 in
2021 compared to 2020, and represented approximately 3.8% of net sales in 2021
and 4.0% of net sales in 2020.



Operating income was $2,105.1, or 19.4% of net sales in 2021, compared to
$1,638.4, or 19.1% of net sales in 2020. Operating income in 2021 included
acquisition-related expenses of $70.4, comprised primarily of transaction,
severance, restructuring and certain non-cash purchase accounting costs related
to the MTS acquisition in the second quarter of 2021, along with external
transaction costs and certain non-cash purchase accounting costs related to the
Halo acquisition in the fourth quarter of 2021. Operating income in 2020
included acquisition-related expenses of $11.5, comprised primarily of external
transaction costs related to acquisitions that were announced or closed. These
acquisition-related expenses in 2021 and 2020 had the effect of decreasing net
income from continuing operations by $57.3, or $0.09 per share, and $10.7, or
$0.02 per share, respectively. Acquisition-related expenses are separately
presented in the Consolidated Statements of Income. Excluding the effect of
these acquisition-related expenses, Adjusted Operating Income and Adjusted
Operating Margin, as defined in the "Non-GAAP Financial Measures" section below,
were $2,175.5 and 20.0% of net sales, respectively, in 2021, and $1,649.9 and
19.2% of net sales, respectively, in 2020. The increase in Adjusted Operating
Income and Adjusted Operating Margin in 2021 relative to 2020 was primarily
driven by the Interconnect Products and Assemblies segment, as discussed further
below.



Operating income for the Interconnect Products and Assemblies segment in 2021
was $2,296.8, or 22.0% of net sales, compared to $1,741.2, or 21.2% of net sales
in 2020. The increase in operating margin for the Interconnect Products and
Assemblies segment for 2021 compared to 2020 is driven by normal operating
leverage on the higher sales volumes combined with the benefit of a lower cost
impact resulting from the COVID-19 pandemic compared to 2020, partially offset
by the impact of the more challenging commodity and supply chain environment
experienced in 2021.



Operating income for the Cable Products and Solutions segment in 2021 was $22.8,
or 5.1% of net sales, compared to $35.4, or 9.6% of net sales in 2020. The
decrease in operating margin for the Cable Products and Solutions segment in
2021 compared to 2020 is driven by the impact of the more challenging commodity,
logistics and supply chain environment experienced in 2021.



Interest expense was $115.5 in 2021 compared to $115.4 in 2020. Refer to Note 4 of the Notes to Consolidated Financial Statements for further information related to the Company's debt.




Provision for income taxes was at an effective rate of 20.6% in 2021 and 20.5%
in 2020. Provision for income taxes in 2021 included (i) excess tax benefits of
$63.4 from stock option exercises and (ii) a discrete tax benefit of $14.9
related to the settlement of uncertain tax positions in certain non-U.S.
jurisdictions, all of which was partially offset by the tax effects related to
acquisition-related expenses during the year. These items had the aggregate
effect of decreasing the effective tax rate and increasing earnings per share by
the amounts noted in the table below. Provision for income taxes in 2020
included (i) excess tax benefits of $42.8 from stock option exercises and (ii) a
discrete tax benefit of $19.9 related to the settlements of refund claims in a
non-U.S. jurisdiction and the resulting adjustments to deferred taxes, which
were partially offset by the tax effects related to acquisition-related expenses
during the year. These items had the aggregate effect of decreasing the
effective tax rate and increasing earnings per share by the amounts noted in the
table below. Excluding the effect of these items, the Adjusted Effective Tax
Rate, a non-GAAP financial measure as defined in the "Non-GAAP Financial
Measures" section below within this Item 7, was 24.3% and 24.5% for 2021 and
2020, respectively, as reconciled in the table below to the comparable effective
tax rate based on GAAP results. For additional details related to the
reconciliation between the U.S. statutory federal tax rate and the Company's
effective tax rate for these years, refer to Note 6 of the Notes to Consolidated
Financial Statements.



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Net income from continuing operations attributable to Amphenol Corporation and
Net income from continuing operations per common share attributable to Amphenol
Corporation-Diluted ("Diluted EPS") were $1,569.4 and $2.51, respectively, for
2021, compared to $1,203.4 and $1.96, respectively, for 2020. Excluding the
effect of the aforementioned items discussed above, Adjusted Net Income from
continuing operations attributable to Amphenol Corporation and Adjusted Diluted
EPS, non-GAAP financial measures as defined in the "Non-GAAP Financial Measures"
section below within this Item 7, were $1,548.4 and $2.48, respectively, for
2021, compared to $1,151.4 and $1.87, respectively, for 2020.



The following table reconciles Adjusted Operating Income, Adjusted Operating
Margin, Adjusted Net Income from continuing operations attributable to Amphenol
Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (all on a
continuing operations basis only, as defined in the "Non-GAAP Financial
Measures" section below) to the most directly comparable U.S. GAAP financial
measures for the years ended December 31, 2021 and 2020:




                                                         2021                                                                 2020
                                                       Net Income                                                           Net Income
                                                      attributable     Effective                                           attributable     Effective
                           Operating    Operating      to Amphenol        Tax       Diluted     Operating    Operating      to Amphenol        Tax       Diluted
                             Income     Margin (1)     Corporation     Rate (1)       EPS         Income     Margin (1)     Corporation     Rate (1)       EPS
Reported (GAAP)            $  2,105.1         19.4 %  $     1,569.4         20.6 %  $   2.51    $  1,638.4         19.1 %  $     1,203.4         20.5 %  $   1.96
Acquisition-related
expenses                         70.4          0.6             57.3        (0.2)        0.09          11.5          0.1             10.7        (0.1)        0.02
Excess tax benefits
related to stock-based
compensation                        -            -           (63.4)          3.2      (0.10)             -            -           (42.8)          2.8      (0.07)
Discrete tax item                   -            -           (14.9)          0.7      (0.02)             -            -           (19.9)          1.3      (0.03)

Adjusted (non-GAAP) (2) $ 2,175.5 20.0 % $ 1,548.4 24.3 % $ 2.48 $ 1,649.9 19.2 % $ 1,151.4 24.5 %

 $   1.87



Note: All data in the tables above are on a continuing operations basis only and exclude results associated with discontinued operations

While the terms "operating margin" and "effective tax rate" are not (1) considered U.S. GAAP financial measures, for purposes of this table, we

derive the reported (GAAP) measures based on GAAP results, which serve as the

basis for the reconciliation to their comparable non-GAAP financial measures.

All percentages and per share amounts in this table were calculated using (2) actual, unrounded results; therefore, the sum of the components may not add

    due to rounding.






2020 Compared to 2019



Net sales were $8,598.9 for the year ended December 31, 2020 compared to
$8,225.4 for the year ended December 31, 2019, which represented an increase of
5% in U.S. dollars, 4% in constant currencies, and 2% organically (excluding
both currency and acquisition impacts), over the prior year. The increase in net
sales in 2020 was driven by strong growth in several markets, which was
partially offset by the sudden and severe slowdown in certain of our markets
resulting from the global outbreak of the COVID-19 pandemic, which also caused
production disruptions in many parts of the world during much of the first
half
of 2020.



Net sales in the Interconnect Products and Assemblies segment (approximately 96%
of net sales) increased 5% in U.S. dollars, 4% in constant currencies, and 2%
organically, in 2020, compared to 2019. The sales growth was driven by strong
growth in the industrial, information technology and data communications, and
mobile devices markets, along with moderate growth in the military market, and
contributions from the Company's acquisition program. This sales growth was
partially offset by declines in the commercial aerospace, mobile networks and
automotive markets, all of which were negatively impacted by the COVID-19
pandemic. Net sales to the industrial market increased (approximately $246.4),
primarily driven by strength in battery and electric vehicle, industrial
instrumentation, heavy equipment, alternative energy and medical applications,
along with contributions from acquisitions. Net sales to the information
technology and data communications market increased (approximately $234.0),
driven primarily by strong sales growth to data center customers and market
demand for storage and networking related products as customers worked to
support higher demand for increased bandwidth to support work, school and
entertainment activities during the pandemic, along with contributions from
acquisitions. Net sales to the mobile devices market increased (approximately
$179.9), driven by strength in products incorporated into laptops, tablets,
wearable devices, and accessories along with production-related products, and
was partially offset by a slight moderation of sales into smartphones. Net sales
to the military market increased (approximately $32.2), driven by strength
across multiple segments of the military market, offset in part by the impact of
pandemic-related production disruptions experienced during the first half of the
year. Net sales to the commercial aerospace market decreased significantly
(approximately $135.3) primarily due to the significant impact of the COVID-19
pandemic on travel and aircraft production. Net sales

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to the mobile networks market decreased (approximately $98.5), which reflected
the impact of the 2019 U.S. Government restrictions on certain Chinese customers
as well as reduced demand from both mobile networks equipment manufacturers and
mobile operators, partially as a result of the negative impact of the COVID-19
pandemic, offset in part by contributions from acquisitions. Net sales to the
automotive market decreased (approximately $86.0), due to a significant
reduction in demand resulting from customer factory shutdowns together with
production disruptions in the first half of 2020 resulting from the COVID-19
pandemic, which was partially offset by a strong recovery of demand during
the
second half of the year.


Net sales in the Cable Products and Solutions segment (approximately 4% of net
sales), which primarily serves the broadband communications market, decreased 4%
in U.S. dollars, 1% in constant currencies and 1% organically in 2020, compared
to 2019. The decrease in net sales in the Cable Products and Solutions segment
was largely driven by the negative impact of the COVID-19 pandemic primarily
during the first half of 2020, as well as an overall weakness in market demand.



The table below reconciles Constant Currency Net Sales Growth and Organic Net
Sales Growth to the most directly comparable U.S. GAAP financial measures, by
segment, geography and consolidated, for the year ended December 31, 2020
compared to the year ended December 31, 2019:




                                                                                      Percentage Growth (relative to prior year) (1)

                                                                     Net sales           Foreign            Constant                            Organic
                                                                     growth in           currency         Currency Net        Acquisition      Net Sales
                                                                  U.S. Dollars (2)      impact (3)      Sales Growth (4)       impact (5)     Growth (4)
Net sales by:                            2020         2019             (GAAP)           (non-GAAP)         (non-GAAP)          (non-GAAP)     (non-GAAP)
Segment:
Interconnect Products and Assemblies   $ 8,229.9    $ 7,840.3             5 %                1 %                 4 %               2 %               2 %
Cable Products and Solutions               369.0        385.1           (4)
%              (3) %               (1) %               - %             (1) %
Consolidated                           $ 8,598.9    $ 8,225.4             5 %                1 %                 4 %               2 %               2 %

Geography (6):
United States                          $ 2,494.0    $ 2,524.7           (1) %                - %               (1) %               4 %             (5) %
Foreign                                  6,104.9      5,700.7             7 %                1 %                 7 %               2 %               5 %
Consolidated                           $ 8,598.9    $ 8,225.4             5 %                1 %                 4 %               2 %               2 %


(1) Percentages in this table were calculated using actual, unrounded results;

therefore, the sum of the components may not add due to rounding.

Net sales growth in U.S. dollars is calculated based on Net sales as reported

in the Consolidated Statements of Income and Note 14 of the Notes to

Consolidated Financial Statements. While the term "net sales growth in U.S. (2) dollars" is not considered a U.S. GAAP financial measure, for purposes of

this table, we derive the reported (GAAP) measure based on GAAP results,

which serves as the basis for the reconciliation to its comparable non-GAAP

    financial measures.


    Foreign currency translation impact, a non-GAAP measure, represents the

percentage impact on net sales resulting from foreign currency exchange rate (3) changes in the current reporting year compared to the prior reporting year.

Such amount is calculated by subtracting current year net sales translated at

average foreign currency exchange rates for the prior year from current year

reported net sales, taken as a percentage of the prior year's net sales.

(4) Constant Currency Net Sales Growth and Organic Net Sales Growth are non-GAAP

financial measures as defined in the "Non-GAAP Financial Measures" section.

Acquisition impact, a non-GAAP measure, represents the percentage impact on

net sales resulting from acquisitions that have not been included in the (5) Company's consolidated results for the full current year and/or prior

comparable year presented. Such net sales related to these acquisitions do

not reflect the underlying growth of the Company on a comparative basis.

(6) Net sales by geographic area are based on the customer location to which the

    product is shipped.




The increase in foreign net sales in 2020 compared to 2019 was driven primarily
by strong growth in Asia. The comparatively weaker U.S. dollar in 2020 had an
insignificant effect on net sales compared to 2019.



Selling, general and administrative expenses were $1,014.2, or 11.8% of net
sales for 2020, compared to $971.4, or 11.8% of net sales for 2019.
Administrative expenses increased $27.5 in 2020, and represented approximately
4.8% of net sales in 2020 and 4.7% of net sales in 2019. Research and
development expenses increased $26.5 in 2020 primarily related to increases in
expenses for new product development, and represented approximately 3.0% of net
sales in 2020 and 2.8% of net sales in 2019. Selling and marketing expenses
decreased $11.2 in 2020 compared to 2019, and represented approximately 4.0% of
net sales in 2020 and 4.3% of net sales in 2019.



Operating income was $1,638.4, or 19.1% of net sales in 2020, compared to
$1,619.2, or 19.7% of net sales in 2019. Operating income in 2020 included
acquisition-related expenses of $11.5, comprised primarily of external
transaction costs related to acquisitions that were announced or closed.
Operating income in 2019 included acquisition-related expenses of $25.4,
comprised of the amortization of $15.7 related to the value associated with the
acquired backlog resulting from two of our 2019 acquisitions, with the remainder
representing external transaction costs. These acquisition-related expenses in
2020 and 2019 had the effect of decreasing net income from continuing operations
by $10.7, or $0.02 per share, and $21.0, or $0.03 per share, respectively.
Acquisition-related expenses are separately

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presented in the Consolidated Statements of Income. Excluding the effect of
these acquisition-related expenses, Adjusted Operating Income and Adjusted
Operating Margin, as defined in the "Non-GAAP Financial Measures" section below,
were $1,649.9 and 19.2% of net sales, respectively, in 2020, and $1,644.6 and
20.0% of net sales, respectively, in 2019.



Operating income for the Interconnect Products and Assemblies segment in 2020
was $1,741.2, or 21.2% of net sales, compared to $1,722.7, or 22.0% of net sales
in 2019. The decrease in operating margin for the Interconnect Products and
Assemblies segment for 2020 compared to 2019 was primarily driven by the
significant incremental costs incurred, primarily during the first half of 2020,
related to the COVID-19 pandemic. This decrease in the operating margin during
the first half of 2020 was partly offset by strong operating leverage on higher
sales volumes during the second half of 2020.



Operating income for the Cable Products and Solutions segment in 2020 was $35.4,
or 9.6% of net sales, compared to $39.5, or 10.2% of net sales in 2019. The
decrease in operating margin for the Cable Products and Solutions segment in
2020 compared to 2019 was primarily driven by lower volumes as well as the
negative impact of the COVID-19 pandemic, primarily during the first half of
2020.


Interest expense was $115.4 in 2020 compared to $117.6 in 2019. Refer to Note 4 of the Notes to Consolidated Financial Statements for further information related to the Company's debt.




Loss on early extinguishment of debt was $14.3 in 2019, which related to
refinancing-related costs, specifically premiums and fees incurred associated
with the early extinguishment of certain redeemed principal amounts of the
3.125% Senior Notes due September 2021 (the "2021 Senior Notes") and 4.00%
Senior Notes due February 2022 (the "2022 Senior Notes") (collectively, the
"Tendered Notes") as a result of the tender offers in September 2019. Refer to
Note 4 of the accompanying Consolidated Financial Statements for further
information related to the Tendered Notes.



Provision for income taxes was at an effective rate of 20.5% in 2020 and 22.2%
in 2019. Provision for income taxes in 2020 included (i) excess tax benefits of
$42.8 from stock option exercises and (ii) a discrete tax benefit of $19.9
related to the settlements of refund claims in a non-U.S. jurisdiction and the
resulting adjustments to deferred taxes, which were partially offset by the tax
effects related to acquisition-related expenses during the year. These items had
the aggregate effect of decreasing the effective tax rate and increasing
earnings per share by the amounts noted in the table below. Provision for income
taxes in 2019 included excess tax benefits of $38.1 from stock option exercises,
which was partially offset by the tax effects related to (i) acquisition-related
expenses during the year and (ii) refinancing-related costs associated with the
early extinguishment of debt. These items had the aggregate effect of decreasing
the effective tax rate and increasing earnings per share by the amounts noted in
the table below. Excluding the effect of these items, the Adjusted Effective Tax
Rate, a non-GAAP financial measure as defined in the "Non-GAAP Financial
Measures" section below within this Item 7, was 24.5% for both 2020 and 2019, as
reconciled in the table below to the comparable effective tax rate based on GAAP
results. For additional details related to the reconciliation between the U.S.
statutory federal tax rate and the Company's effective tax rate for these years,
refer to Note 6 of the Notes to Consolidated Financial Statements.



Net income from continuing operations attributable to Amphenol Corporation and
Diluted EPS were $1,203.4 and $1.96, respectively, for 2020, compared to
$1,155.0 and $1.88, respectively, for 2019. Excluding the effect of the
aforementioned items discussed above, Adjusted Net Income from continuing
operations attributable to Amphenol Corporation and Adjusted Diluted EPS,
non-GAAP financial measures as defined in the "Non-GAAP Financial Measures"
section below within this Item 7, were $1,151.4 and $1.87, respectively, for
2020, compared to $1,150.4 and $1.87, respectively, for 2019.



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The following table reconciles Adjusted Operating Income, Adjusted Operating
Margin, Adjusted Net Income from continuing operations attributable to Amphenol
Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (all on a
continuing operations basis only, as defined in the "Non-GAAP Financial
Measures" section below) to the most directly comparable U.S. GAAP financial
measures for the years ended December 31, 2020 and 2019:




                                                         2020                                                                 2019
                                                       Net Income                                                           Net Income
                                                      attributable     Effective                                           attributable     Effective
                           Operating    Operating      to Amphenol        Tax       Diluted     Operating    Operating      to Amphenol        Tax       Diluted
                             Income     Margin (1)     Corporation     Rate (1)       EPS         Income     Margin (1)     Corporation     Rate (1)       EPS
Reported (GAAP)            $  1,638.4         19.1 %  $     1,203.4         20.5 %  $   1.96    $  1,619.2         19.7 %  $     1,155.0         22.2 %  $   1.88
Acquisition-related
expenses                         11.5          0.1             10.7        (0.1)        0.02          25.4          0.3             21.0        (0.1)        0.03
Loss on early
extinguishment of debt              -            -                -            -           -             -            -             12.5        (0.1)        0.02
Excess tax benefits
related to stock-based
compensation                        -            -           (42.8)          2.8      (0.07)             -            -           (38.1)          2.5      (0.06)
Discrete tax item                   -            -           (19.9)          1.3      (0.03)             -            -                -            -           -

Adjusted (non-GAAP) (2) $ 1,649.9 19.2 % $ 1,151.4 24.5 % $ 1.87 $ 1,644.6 20.0 % $ 1,150.4 24.5 %

 $   1.87



Note: All data in the tables above are on a continuing operations basis only and exclude results associated with discontinued operations

While the terms "operating margin" and "effective tax rate" are not (1) considered U.S. GAAP financial measures, for purposes of this table, we

derive the reported (GAAP) measures based on GAAP results, which serve as the

basis for the reconciliation to their comparable non-GAAP financial measures.

All percentages and per share amounts in this table were calculated using (2) actual, unrounded results; therefore, the sum of the components may not add

    due to rounding.



Liquidity and Capital Resources

Liquidity and Cash Requirements




At December 31, 2021 and 2020, the Company had cash, cash equivalents and
short-term investments of $1,241.4 and $1,738.1, respectively, with the majority
of the Company's cash, cash equivalents and short-term investments on hand
located outside of the United States. On April 7, 2021, the Company used a
combination of cash on hand and borrowings under its U.S. Commercial Paper
Program (defined below) to fund the acquisition of MTS. In addition, on December
1, 2021, the Company used cash on hand to fund the acquisition of Halo.



The Company's primary sources of liquidity are internally generated cash
provided by operating activities, our cash, cash equivalents and short-term
investments on hand, the U.S. Commercial Paper Program, the Euro Commercial
Paper Program, and the Revolving Credit Facility (each as defined and discussed
further below within this Item 7).  The Company believes that its cash, cash
equivalents and short-term investment position on hand, ability to generate
future cash from operating activities, availability under its Revolving Credit
Facility, and access to capital markets (including the recent issuance of the
Company's $750.0 principal amount of unsecured 2.200% Senior Notes due September
15, 2031 (the "2031 Senior Notes") in September 2021, along with borrowings
under the U.S. Commercial Paper Program), provide adequate liquidity to meet
both its short-term (next twelve months) and reasonably foreseeable long-term
requirements and obligations.


Cash Requirements from Known Contractual and Other Obligations




The Company's primary ongoing cash requirements will be for operating and
working capital needs, capital expenditures, product development activities,
repurchases of our Common Stock, dividends, debt service, payments associated
with the one-time tax on the deemed repatriation of all of the Company's
pre-2018 accumulated unremitted earnings and profits of foreign subsidiaries
("Transition Tax") which is payable in annual installments until 2025, taxes due
upon the repatriation of foreign earnings (which will be payable upon the
repatriation of such earnings), funding of pension obligations, and other
contractual obligations and commitments (refer to the table below for the
Company's material cash requirements from known contractual and other
obligations). The Company may also use cash to fund all or part of the cost of
future acquisitions. The Company's debt service requirements consist primarily
of principal and interest on the Company's Senior Notes, and to the extent of
any amounts outstanding, the Revolving Credit Facility and the Commercial Paper
Programs (all as defined below). The Company expects that capital expenditures
in 2022 will be in a range of 3% to 4% of net sales.



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The following table summarizes the Company's material short- and long-term cash
requirements from known obligations pursuant to certain contracts and
commitments as of December 31, 2021, as well as an estimate of the timing in
which such obligations and payments are expected to be satisfied.




                                                            Payment Due By Period
Contractual Obligations                               Less than       1-3         3-5       More than
(dollars in millions)                     Total        1 year        years       years       5 years
Debt (1)                                $ 4,830.6    $       4.0    $ 351.2    $ 1,763.0    $  2,712.4
Interest related to senior notes            707.9           99.7      193.8
       164.7         249.7
Operating leases (2)                        267.3           75.0       99.3         48.6          44.4
Purchase obligations (3)                    838.3          793.6       40.6          2.8           1.3
Accrued pension and postretirement
benefit obligations (4)                      59.8            7.3       11.5         12.7          28.3
Transition tax (5)                           86.2           15.8       69.1          1.3             -
Total (6)                               $ 6,790.1    $     995.4    $ 765.5    $ 1,993.1    $  3,036.1

The Company has excluded expected interest payments on the Revolving Credit

Facility, U.S. Commercial Paper Program and Euro Commercial Paper Program

from the above table, as this calculation is largely dependent on average

debt levels the Company expects to have during each of the years presented.

The actual interest payments made related to the Company's Revolving Credit (1) Facility and both Commercial Paper Programs combined, in 2021, were

approximately $2.4. Expected debt levels, and therefore expected interest

payments, are difficult to predict, as they are significantly impacted by

items such as future acquisitions, repurchases of Common Stock and dividend

payments, as well as payments or additional borrowings made to reduce or

    increase the underlying revolver balance.



The Company's operating lease payments included in this table reflect the

future minimum undiscounted fixed lease payments, which serve as the basis

for calculating the Company's operating lease liabilities as of December 31, (2) 2021. The table above excludes any variable lease payments not included in

the measurement of the Company's right-of-use assets and operating lease

liabilities, due to their uncertainty. Finance leases are not material to the

Company individually or in the aggregate and as such have been excluded from

    the table above.



Purchase obligations relate primarily to open purchase orders for goods and (3) services, including but not limited to, raw materials and components to be

    used in production.



This table includes estimated benefit payments expected to be made under the

Company's unfunded pension and postretirement benefit plans, as well as the

anticipated minimum required contributions under the Company's funded pension

plans, the most significant funded plan of which covers certain of its U.S.

employees. Over the past several years, there has been no minimum requirement

for Company contributions to our defined benefit pension plans in the United (4) States ("U.S. Plans") due to prior contributions made in excess of minimum

requirements, and as a result, there was no anticipated minimum required

contribution included in the table above related to the U.S. Plans for 2022.

The Company did not make any voluntary contributions to its U.S. Plans in

2021 and 2020. It is not possible to reasonably estimate expected required

contributions in the above table after 2022 since several assumptions are

required to calculate minimum required contributions, such as the discount

    rate and expected returns on pension assets.



As a result of the enactment of the U.S. Tax Cuts and Jobs Act of 2017 ("Tax

Act") in December 2017, the United States changed to a modified territorial

tax system, which significantly reduced the U.S. tax expense associated with

the remittance of foreign earnings, among other changes. The Tax Act also

imposed the Transition Tax associated with all of the Company's pre-2018

accumulated unremitted earnings and profits of foreign subsidiaries. As a (5) result, on December 31, 2017, the Company recorded a provisional U.S. tax

expense for the Transition Tax, which was adjusted and finalized in 2018. The

Transition Tax is to be paid in annual installments over the eight-year

period until 2025, as permitted under the Tax Act. The table above reflects

    the remaining amounts associated with the Transition Tax, which is net of
    applicable tax credits and deductions. The fourth installment of the
    Transition Tax was paid in the second quarter of 2021.




    As of December 31, 2021, the Company has recorded net liabilities of

approximately $176.5 related to unrecognized tax benefits. These liabilities (6) have been excluded from the above table due to the high degree of uncertainty

regarding the timing of potential future cash flows. It is difficult to make

a reasonably reliable estimate of the amount and period in which all of these

    liabilities might be paid.



Repatriation of Foreign Earnings and Related Income Taxes




Following the enactment of the Tax Act in December 2017, the Company has
previously indicated an intention to repatriate most of its pre-2021 accumulated
earnings and has accrued the foreign and U.S. state and local taxes, if
applicable, on those earnings, as appropriate. The associated tax payments are
due as the repatriations are made. The Company intends to indefinitely reinvest
the remaining pre-2021 foreign earnings. The Company intends to distribute
certain 2021 foreign earnings and has accrued foreign and U.S. state and local
taxes, where applicable, on those earnings, as of December 31, 2021, and intends
to indefinitely reinvest the remaining 2021 foreign earnings. The Company
intends to evaluate certain post-2021 earnings for repatriation, and accrue for
those distributions where appropriate, and to indefinitely reinvest all other
foreign earnings. As of December 31, 2021, the Company has not provided for
deferred income taxes on undistributed foreign earnings of approximately $1,000
related to certain geographies, as it is the Company's intention to permanently
reinvest such earnings outside the United States. It is impracticable to
calculate the amount of taxes that would be payable if these undistributed
foreign earnings were to be repatriated.



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Cash Flow Summary


The following table summarizes the Company's cash flows from operating, investing and financing activities for the years ended December 31, 2021, 2020 and 2019, as reflected in the Consolidated Statements of Cash Flow:




                                                            Year Ended December 31,
                                                        2021          2020          2019
Net cash provided by operating activities from
continuing operations                                $   1,523.9    $ 1,592.0    $   1,502.3
Net cash used in investing activities from
continuing operations                                  (2,604.4)      (333.5)      (1,228.8)
Net cash used in financing activities from
continuing operations                                    (145.1)      (516.6)        (648.4)
Net cash change from discontinued operations               733.0            -              -
Effect of exchange rate changes on cash and cash
equivalents                                               (12.3)         68.9         (13.2)
Net (decrease) increase in cash and cash
equivalents                                          $   (504.9)    $   810.8    $   (388.1)




Note: Net cash change from discontinued operations in the table above includes
the proceeds from the sale of the Divested MTS business during the year ended
December 31, 2021, as discussed in further detail later within this Item 7.


Operating Activities


The ability to generate cash from operating activities has been one of the
Company's fundamental financial strengths. Net cash provided by operating
activities from continuing operations ("Operating Cash Flow") was $1,523.9 in
2021, compared to $1,592.0 in 2020 and $1,502.3 in 2019. The decrease in
Operating Cash Flow in 2021 compared to 2020 is primarily due to a higher usage
of cash related to the change in working capital as discussed below, partially
offset by an increase in net income from continuing operations. The increase in
Operating Cash Flow in 2020 compared to 2019 was primarily due to the increase
in net income from continuing operations, along with a lower usage of cash
related to the change in working capital as discussed below.



In 2021, the components of working capital as presented on the accompanying
Consolidated Statements of Cash Flow increased $496.4, excluding the impact of
acquisitions and foreign currency translation, primarily due to increases in
accounts receivable, inventories, and prepaid expenses and other current assets
of $398.4, $263.0 and $20.2, respectively, partially offset by increases in
accounts payable of $131.7 and accrued liabilities, including income taxes, of
$53.5. In 2020, the components of working capital as presented on the
accompanying Consolidated Statements of Cash Flow increased $38.9, excluding the
impact of acquisitions and foreign currency translation, due to increases in
accounts receivable, inventories, and prepaid expenses and other current assets
of $146.3, $102.0 and $88.6, respectively, partially offset by increases in
accounts payable of $204.3 and accrued liabilities, including income taxes, of
$93.7. In 2019, the components of working capital as presented on the
accompanying Consolidated Statements of Cash Flow increased $81.6, excluding the
impact of acquisitions and foreign currency translation, primarily due to
decreases in accrued liabilities, including income taxes, of $129.3 and accounts
payable of $60.2, partially offset by a decrease in accounts receivable of
$117.3.



The following describes the significant changes in the amounts as presented on
the accompanying Consolidated Balance Sheets at December 31, 2021 compared to
December 31, 2020. Accounts receivable increased $503.2 to $2,454.8 primarily
due to higher sales in the fourth quarter of 2021 relative to the fourth quarter
of 2020, along with the impact of the seven acquisitions (collectively, the
"2021 Acquisitions") that closed during 2021, in particular the MTS and Halo
acquisitions, all of which was partially offset by the effect of translation
from exchange rate changes ("Translation") at December 31, 2021 compared to
December 31, 2020. Days sales outstanding at December 31, 2021 and 2020 were 71
days and 72 days, respectively. Inventories increased $431.9 to $1,894.1,
primarily due to higher sales, along with the impact of our 2021 Acquisitions,
partially offset by Translation. Inventory days at December 31, 2021 and 2020
were 80 days and 79 days, respectively. Prepaid expenses and other current
assets increased $29.0 to $367.9, primarily due to increases in certain prepaid
expenses and other current receivables as well as the impact of the 2021
Acquisitions. Property, plant and equipment, net, increased $120.7 to $1,175.3,
primarily due to capital expenditures of $360.4 and the impact of the 2021
Acquisitions, partially offset by depreciation of $302.9, disposals and
Translation. Goodwill increased $1,344.7 to $6,376.8, resulting from goodwill
recognized related to the 2021 Acquisitions, primarily from the MTS and Halo
acquisitions, partially offset by Translation. Other intangible assets, net,
increased $359.4 to $756.9 due to the recognition of certain intangible assets
related to the 2021 Acquisitions, primarily from the MTS and Halo acquisitions,
partially offset by amortization of $86.4 related to the Company's intangible
assets. Other long-term assets increased $58.9 to $411.2, primarily due to
increases in (i) overfunded pension plans primarily in the U.S. and (ii)
operating lease right-of-use assets resulting from both leases assumed from the
2021 Acquisitions as well as new and renewed lease agreements entered into
during the year. Accounts payable increased $191.3 to $1,312.0, primarily as a
result of increased purchasing activity related to higher sales levels, along
with the

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impact of the 2021 Acquisitions. Payable days at December 31, 2021 and 2020 were
56 days and 61 days, respectively. Total accrued expenses, including accrued
income taxes, increased $177.8 to $1,131.1, primarily as a result of the MTS
acquisition and the other 2021 Acquisitions, along with an increase in accrued
salaries, wages and employee benefits, and other accrued expenses, partially
offset by a decrease in accrued income taxes, primarily resulting from U.S.
federal tax payments. Accrued pension and postretirement benefit obligations
decreased $35.2 to $193.4, primarily due to the impact of higher discount rates
used to calculate our projected benefit obligation, along with Translation.
Other long-term liabilities, including deferred tax liabilities, increased
$156.6 to $862.9, primarily as a result of an increase in deferred tax
liabilities resulting from the MTS and Halo acquisitions, along with an increase
in long-term operating lease liabilities resulting from both leases assumed from
the 2021 Acquisitions as well as new and renewed lease agreements entered into
during the year.



In 2021, 2020 and 2019, the Company made aggregate cash contributions to its
defined benefit pension plans of approximately $6.8, $6.5 and $6.6,
respectively. There is no current requirement for cash contributions to any of
the Company's U.S. Plans, and the Company plans to evaluate annually, based on
actuarial calculations and the investment performance of the Plans' assets, the
timing and amount of cash contributions in the future, as discussed in more
detail in Note 9 of the Notes to Consolidated Financial Statements.



In addition to Operating Cash Flow, the Company also considers Free Cash Flow, a
non-GAAP financial measure defined in the "Non-GAAP Financial Measures" section
below, as a key metric in measuring the Company's ability to generate cash. The
following table reconciles Free Cash Flow to its most directly comparable U.S.
GAAP financial measure for the years ended December 31, 2021, 2020 and 2019. The
decrease in Free Cash Flow in 2021 compared to 2020 was driven by the increase
in capital expenditures to support our strong sales growth and, to a lesser
extent, the decrease in Operating Cash Flow, as described above. The increase in
Free Cash Flow in 2020 compared to 2019 was driven by the increase in Operating
Cash Flow, as described above, and, to a lesser extent, a decrease in capital
expenditures. The following table is on a continuing operations basis only and
excludes any cash flows related to discontinued operations:




                                                 2021          2020          2019
Operating Cash Flow (GAAP)                    $  1,523.9    $  1,592.0    $  1,502.3
Capital expenditures (GAAP)                      (360.4)       (276.8)       (295.0)
Proceeds from disposals of property, plant
and equipment (GAAP)                                 3.7          12.7           7.4
Free Cash Flow (non-GAAP)                     $  1,167.2    $  1,327.9    $  1,214.7




Investing Activities



Cash flows from investing activities consist primarily of cash flows associated
with capital expenditures, proceeds from disposals of property, plant and
equipment, purchases (sales and maturities) of short-term investments, net,
and
acquisitions.



Net cash used in investing activities from continuing operations was $2,604.4 in
2021, compared to $333.5 in 2020 and $1,228.8 in 2019. In 2021, net cash used in
investing activities from continuing operations was driven primarily by the use
of $2,225.4 to fund acquisitions, capital expenditures (net of disposals) of
$356.7, and net purchases of short-term investments of $8.6. In 2020, net cash
used in investing activities from continuing operations was driven primarily by
capital expenditures (net of disposals) of $264.1, the use of $50.4 to fund
acquisitions, and net purchases of short-term investments of $18.4. In 2019, net
cash used in investing activities from continuing operations was driven
primarily by the use of $937.4 to fund acquisitions, capital expenditures (net
of disposals) of $287.6, and net purchases of short-term investments of $3.8.



Financing Activities


Cash flows from financing activities consist primarily of cash flows associated with borrowings and repayments of the Company's credit facilities and other long-term debt, repurchases of Common Stock, proceeds from stock option exercises, dividend payments, and distributions to and purchases of noncontrolling interests.

Net cash used in financing activities from continuing operations was $145.1 in
2021, compared to $516.6 in 2020 and $648.4 in 2019. In 2021, net cash used in
financing activities from continuing operations was driven primarily by (i) debt
repayments of $912.6, primarily related to the repayment of the assumed
outstanding MTS senior notes in the

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second quarter of 2021 as well as the redemption of the 3.125% Senior Notes in
the third quarter of 2021 and the redemption of the 4.00% Senior Notes in the
fourth quarter of 2021, (ii) repurchases of the Company's Common Stock of
$661.7, (iii) dividend payments of $346.7, (iv) a cash transfer of $28.7 made by
the Company's continuing operations to its discontinued operations in order to
fund the September 2021 payment of contingent consideration assumed as part of
the MTS acquisition, (v) distributions to and purchases of noncontrolling
interests of $18.9, (vi) payments of $9.3 related to debt financing costs
associated with the 2031 Senior Notes, and (vii) payments of $4.1 associated
with the deferred purchase price related to acquisitions, partially offset by
(a) net borrowings of $796.3 primarily under the U.S. Commercial Paper Program,
the majority of the proceeds of which were used to fund acquisitions and to
redeem the 3.125% Senior Notes and the 4.00% Senior Notes, (b) net cash proceeds
of $752.1, primarily related to the September 2021 issuance of the 2031 Senior
Notes, and (c) cash proceeds of $288.5 from the exercise of stock options. In
2020, net cash used in financing activities from continuing operations was
driven primarily by (i) repurchases of the Company's Common Stock of $641.3,
(ii) debt repayments of $404.4 related to the Company's 2.20% U.S. Senior Notes
due April 2020 and other debt, (iii) net repayments of $385.8 related to the
Company's Commercial Paper Programs, (iv) dividend payments of $297.6, (v)
payment of $75.0 related to acquisition-related contingent consideration, (vi)
payment of $16.2 associated with the deferred purchase price related to an
acquisition, (vii) distributions to and purchases of noncontrolling interests of
$14.9, (vii) payments of $8.7 related to debt financing costs primarily
associated with the 2025 Senior Notes and 2026 Euro Notes (each as defined
below), and (viii) net repayments of $0.7 under the Company's credit facilities,
partially offset by (a) aggregate net cash proceeds of $942.3 from both the
February 2020 issuance of the 2025 Senior Notes and the May 2020 issuance of the
2026 Euro Notes and (b) cash proceeds of $385.7 from the exercise of stock
options. In 2019, net cash used in financing activities from continuing
operations was driven primarily by (i) the aggregate debt repayments of $1,111.5
associated with certain of the Company's senior notes (the 2.55% U.S. Senior
Notes due January 2019 and the early extinguishment of the Tendered Notes in
September 2019) and other long-term debt, (ii) repurchases of the Company's
Common Stock of $601.7, (iii) dividend payments of $279.5, (iv) net repayments
of $229.0 related to the Company's Commercial Paper Programs, (v) distributions
to and purchases of noncontrolling interests of $43.3, (vi) payments of $14.9
related to debt financing costs primarily associated with the Revolving Credit
Facility, the 4.350% Senior Notes due June 2029 (the "2029 Senior Notes"), and
the 2.800% Senior Notes due February 2030 (the "2030 Senior Notes"), and (vii)
premiums and fees paid of $13.4 related to the early extinguishment of the
Tendered Notes, partially offset by (a) aggregate net cash proceeds of $1,398.8
from the issuances of the 2029 Senior Notes and the 2030 Senior Notes and (b)
cash proceeds of $246.1 from the exercise of stock options.



The Company has significant flexibility to meet its financial commitments. The
Company uses debt financing to lower the overall cost of capital and increase
return on stockholders' equity. The Company's debt financing includes the use of
the Commercial Paper Programs, the Revolving Credit Facility and senior notes as
part of its overall cash management strategy.



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 Secured
Overnight Financing Rate ("SOFR"). The Company may utilize the Revolving Credit
Facility for general corporate purposes. At December 31, 2021, there were no
outstanding borrowings under the Revolving Credit Facility. The Revolving Credit
Facility requires payment of certain annual agency and commitment fees and
requires that the Company satisfy certain financial covenants. At December 31,
2021, the Company was in compliance with the financial covenants under the
Revolving Credit Facility.



The Company has a 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 "U.S. Commercial Paper
Program"). The maximum aggregate principal amount outstanding of USCP Notes at
any time is $2,500.0. On April 7, 2021, a combination of borrowings under the
U.S. Commercial Paper Program and cash on hand were used to fund the acquisition
of MTS. The Company also used borrowings under the U.S. Commercial Paper Program
to (i) redeem, in the third quarter of 2021, its unsecured 3.125% Senior Notes
due September 15, 2021, of which $227.7 aggregate principal amount was
outstanding and (ii) redeem, in the fourth quarter of 2021, its unsecured 4.00%
Senior Notes due February 1, 2022, of which $295.0 aggregate principal amount
was outstanding. As of December 31, 2021, the amount of USCP Notes outstanding
was $795.2, with a weighted average interest rate of 0.29%.



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In July 2018, the Company and one of its wholly owned European subsidiaries (the
"Euro Issuer") entered into 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 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
December 31, 2021, 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 December 31, 2021, the authorization from 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 Company reviews its optimal mix of
short-term and long-term debt regularly and may replace certain amounts of
Commercial Paper, short-term debt and current maturities of long-term debt with
new issuances of long-term debt in the future.



As of December 31, 2021, the Company has outstanding senior notes (the "Senior
Notes") as follows:




 Principal    Interest
  Amount        Rate              Maturity
$     350.0       3.20 %         April 2024
      400.0      2.050 %         March 2025
      500.0      4.350 %          June 2029
      900.0       2.80 %        February 2030
      750.0      2.200 %       September 2031

€     500.0      0.750 %    May 2026 (Euro Notes)
      500.0       2.00 %  October 2028 (Euro Notes)




On September 14, 2021, the Company issued the 2031 Senior Notes due September
15, 2031. The Company used the net proceeds from the 2031 Senior Notes to repay
certain outstanding borrowings under the U.S. Commercial Paper Program.



On February 20, 2020, the Company issued $400.0 principal amount of unsecured
2.050% Senior Notes due March 1, 2025 (the "2025 Senior Notes"). On April 1,
2020, the Company used the net proceeds from the 2025 Senior Notes, together
with cash on hand, to repay the $400.0 outstanding principal amount of unsecured
2.20% Senior Notes due April 1, 2020 upon maturity.



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.



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 (the
"2026 Euro Notes"). The Company used the net proceeds from the 2026 Euro Notes
to repay amounts outstanding under the then existing revolving credit facility.



In 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
(the "2028 Euro Notes", collectively with the 2026 Euro Notes, "Euro Notes", and
collectively with the 2026 Euro Notes and the U.S. Senior Notes, the "Senior
Notes"). 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 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


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Company. Interest on each series of Euro Notes is payable annually. The Company
may, at its option, redeem some or all of any series of Euro Notes at any time,
subject to certain terms and conditions.



The Senior Notes impose certain obligations on the Company and prohibit various
actions by the Company unless it satisfies certain financial requirements. On
December 31, 2021, the Company was in compliance with all requirements under its
Senior Notes. Refer to Note 4 of the Notes to Consolidated Financial Statements
for further information related to the Company's debt.



In April 2018, the Board authorized a stock repurchase program under which the
Company could purchase up to $2,000.0 of the Company's Common Stock during the
three-year period ending April 24, 2021 (the "2018 Stock Repurchase Program") in
accordance with the requirements of Rule 10b-18 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). During the year ended December 31,
2021, the Company repurchased 3.1 million shares of its Common Stock for $203.8
under the 2018 Stock Repurchase Program. As a result of these purchases, the
Company completed all purchases authorized under the 2018 Stock Repurchase
Program and, therefore, the 2018 Stock Repurchase Program has terminated. Of the
total repurchases made in 2021 under the 2018 Stock Repurchase Program, 0.3
million shares, or $19.8, were retained in Treasury stock at the time of
repurchase; the remaining 2.8 million shares, or $184.0, were retired by the
Company. During the years ended December 31, 2020 and 2019, the Company
repurchased 12.0 million and 13.1 million shares of its Common Stock for $641.3
and $601.7, respectively, under the 2018 Stock Repurchase Program. Of the total
repurchases made in 2020, 2.7 million shares, or $153.9, were retained in
Treasury stock at the time of repurchase; the remaining 9.3 million shares, or
$487.4, were retired by the Company. Of the total repurchases made in 2019, 2.0
million shares, or $87.6, were retained in Treasury stock at the time of
repurchase; the remaining 11.1 million shares, or $514.1, were retired by the
Company.



On April 27, 2021, the Board authorized a new stock repurchase program under
which the Company may purchase up to $2,000.0 of the Company's Common Stock
during the three-year period ending April 27, 2024 (the "2021 Stock Repurchase
Program") in accordance with the requirements of Rule 10b-18 of the Exchange
Act. During the year ended December 31, 2021, the Company repurchased 6.2
million shares of its Common Stock for $457.9 under the 2021 Stock Repurchase
Program. Of the total repurchases made in 2021 under the 2021 Stock Repurchase
Program, 0.4 million shares, or $33.0, have been retained in Treasury stock at
the time of repurchase; the remaining 5.8 million shares, or $424.9, have been
or will be retired by the Company. From January 1, 2022 through January 31,
2022, the Company repurchased 0.6 million additional shares of its Common Stock
for $50.0 under the 2021 Stock Repurchase Program, and, as of February 1, 2022,
has remaining authorization to purchase up to $1,492.1 of its Common Stock under
the 2021 Stock Repurchase Program. The price and timing of any future purchases
under the 2021 Stock Repurchase Program will depend on a number of factors such
as levels of cash generation from operations, the volume of stock options
exercised by employees, cash requirements for acquisitions, dividends paid,
economic and market conditions and the price of the Company's Common Stock.



Contingent upon declaration by the Board, the Company pays a quarterly dividend
on shares of its Common Stock. On October 20, 2020, the Board approved an
increase to its quarterly dividend rate from $0.125 per share to $0.145 per
share effective with dividends declared in the fourth quarter of 2020, and then
on October 26, 2021, approved a further increase to its quarterly dividend rate
from $0.145 per share to $0.20 per share effective with dividends declared in
the fourth quarter of 2021, contingent upon declaration by the Board. The
following table summarizes the declared quarterly dividends per share for each
of the three years ended December 31, 2021, 2020 and 2019:




                  2021      2020      2019
First Quarter    $ 0.145   $ 0.125   $ 0.115
Second Quarter     0.145     0.125     0.115
Third Quarter      0.145     0.125     0.125
Fourth Quarter      0.20     0.145     0.125
Total            $ 0.635   $  0.52   $  0.48



The following table summarizes the dividends declared and paid for the years ended December 31, 2021, 2020 and 2019:




                                                        2021       2020       2019
Dividends declared                                    $  379.7   $  310.0   $  285.3
Dividends paid (including those declared in the
prior year)                                              346.7      297.6      279.5






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LIBOR Transition


In July 2017, the United Kingdom's Financial Conduct Authority (the "FCA"),
which regulates the London Interbank Offered Rate ("LIBOR"), announced 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 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 guidance providing certain 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. In January 2021, the FASB issued further clarifying guidance surrounding
derivatives, as it relates to this transition. Effective November 30, 2021, the
Revolving Credit Facility 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.



Pensions



The Company and certain of its subsidiaries in the United States have defined
benefit pension plans ("U.S. Plans"), which cover certain U.S. employees and
which represent the majority of the plan assets and benefit obligations of the
aggregate defined benefit plans of the Company. The U.S. Plans' benefits are
generally based on years of service and compensation and are generally
noncontributory. The majority of U.S. employees are not covered by the U.S.
Plans and are instead covered by various defined contribution plans. Certain
foreign subsidiaries also have defined benefit plans covering their employees
(the "Foreign Plans" and, together with the U.S. Plans, the "Plans"). The total
liability for accrued pension and postretirement benefit obligations associated
with the Company's underfunded pension and postretirement benefit plans
decreased in 2021 to $173.9 from $211.0 in 2020, primarily due to the impact of
higher discount rates on our projected benefit obligation, along with actual
returns on plan assets. There is no current requirement for cash contributions
to any of the U.S. Plans, and the Company plans to evaluate annually, based on
actuarial calculations and the investment performance of the Plans' assets, the
timing and amount of cash contributions in the future.



Refer to Note 9 of the Notes to Consolidated Financial Statements for further discussion of the Company's benefit plans and other postretirement benefit plans.




Acquisitions and Divestitures



During 2021, the Company completed seven acquisitions for $2,225.4, net of cash
acquired, while also completing the divestiture of the Divested MTS business, as
defined and discussed below. All but one of the 2021 Acquisitions were included
in the Interconnect Products and Assemblies segment. The 2021 Acquisitions were
not material, either individually or in the aggregate, to the Company.



Acquisition of MTS



On April 7, 2021, pursuant to a definitive agreement dated December 9, 2020, by
and among the Company and MTS Systems Corporation ("MTS"), the Company completed
the acquisition of MTS for a total enterprise value of approximately $1,700, net
of cash acquired and including the repayment of all outstanding debt and certain
liabilities. The MTS acquisition was funded through a combination of borrowings
under the U.S. Commercial Paper Program and cash on hand. At closing, the
Company paid approximately $1,300, net of cash acquired, for 100% of the common
stock of MTS, including certain liabilities settled at closing, which is
reflected within Net cash used in investing activities from continuing
operations in the accompanying Consolidated Statements of Cash Flow for the year
ended December 31, 2021. In addition, the Company also assumed MTS's
then-outstanding $350.0 principal amount of senior notes due August 15, 2027.
Shortly after the closing, the Company repaid and settled the MTS senior notes
for approximately $387.3, which included accrued interest and a make-whole
premium incurred as a result of the early extinguishment of the senior notes.
The repayment of the outstanding senior notes, including the make-whole premium
and excluding

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interest, was reflected within Net cash used in financing activities from
continuing operations in the accompanying Consolidated Statements of Cash Flow
for the year ended December 31, 2021. Prior to the acquisition, MTS was a
leading global supplier of precision sensors, advanced test systems and motion
simulators. MTS was historically organized into two business segments: Sensors
("MTS Sensors") and Test & Simulation ("MTS T&S"). The MTS Sensors business
provides the Company with a highly complementary offering of high-technology,
harsh environment sensors sold into diverse end markets and applications. The
MTS Sensors business further expands the Company's range of sensor and
sensor-based products across a wide array of industries and is reported as part
of our continuing operations and within our Interconnect Products and Assemblies
segment. In the second quarter of 2021, the Company incurred $55.4 ($44.6
after-tax, or $0.07 per diluted share) of acquisition-related expenses,
comprised primarily of transaction, severance, restructuring and certain
non-cash purchase accounting costs related to the MTS acquisition.



Sale of the Divested MTS Business




On January 19, 2021 and prior to the closing of the MTS acquisition, the Company
entered into a definitive agreement to sell MTS (including the MTS T&S business,
but excluding the MTS Sensors business) to Illinois Tool Works Inc. ("ITW").
Throughout this Annual Report, we refer to MTS (including the MTS T&S business,
but excluding the MTS Sensors business) as the "Divested MTS business". As a
result of the agreement to sell the Divested MTS business to ITW, the Company
concluded that the Divested MTS business met the discontinued operations
reporting criteria and "held for sale" accounting criteria as of the MTS
acquisition date of April 7, 2021, and consequently, the Company did not assign
the Divested MTS business to either of its two reportable business segments.
Accordingly, the Company accounted for the operating results and related cash
flows associated with the Divested MTS business as discontinued operations
through the date of its sale to ITW in the accompanying Consolidated Financial
Statements. Income from discontinued operations attributable to Amphenol
Corporation, net of income taxes, was $21.4 for the year ended December 31,
2021. On December 1, 2021, the Company completed the sale of the Divested MTS
business for approximately $750, net of cash divested and excluding related
transaction fees and expenses. The proceeds from the sale of the Divested MTS
business were included in Net cash provided by investing activities from
discontinued operations in the Consolidated Statements of Cash Flow for the year
ended December 31, 2021. Amphenol has no continuing involvement with the
Divested MTS business now that its sale has been consummated. After giving
effect to the sale of the Divested MTS business as well as the repayment of the
aforementioned MTS senior notes as part of the MTS acquisition, the Company paid
approximately $950, net of cash acquired and excluding related transaction fees
and expenses, for the retained MTS Sensors business. Refer to Note 12 of the
Notes to Consolidated Financial Statements for further details related to the
completed divestiture of the Divested MTS business.



Acquisition of Halo Technology Limited

On December 1, 2021, the Company completed the acquisition of approximately 97%
of the common stock of Halo Technology Limited ("Halo") for a purchase price of
approximately $694, net of cash acquired. The sellers retained a less than 3%
noncontrolling interest in Halo, which includes redeemable features that are
outside the control of the Company and therefore, has been classified as
temporary equity on the Consolidated Balance Sheet as of December 31, 2021, as
discussed in more detail in Notes 1 and 5 of the Notes to Consolidated Financial
Statements. The acquisition was funded with cash on hand. Halo, which is
headquartered in the United States (California), is a leading provider of active
and passive fiber optic interconnect components, with product offerings that are
highly complementary to our existing high-speed and fiber optic interconnect
solutions for the communications infrastructure markets. The operating results
for Halo have been included within continuing operations in the Consolidated
Statements of Income since the acquisition date.



For further discussion of the Company's acquisitions, as well as the Company's
discontinued operations and completed divestiture of the Divested MTS business,
refer to Note 11 and Note 12, respectively, of the Notes to Consolidated
Financial Statements.



Environmental Matters



Certain operations of the Company are subject to environmental laws and
regulations that govern the discharge of pollutants into the air and water, as
well as the handling and disposal of solid and hazardous wastes. The Company
believes that its operations are currently in substantial compliance with
applicable environmental laws and regulations and that the costs of continuing
compliance will not have a material adverse effect on the Company's financial
condition, results of operations or cash flows. For more information on certain
environmental matters, refer to Note 15 of the Notes to Consolidated Financial
Statements.



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Inflation and Costs



The cost of the Company's products is influenced by the cost of a wide variety
of raw materials. The Company strives to offset the impact of increases in the
cost of raw materials, labor and services through price increases, productivity
improvements and cost saving programs. However, in certain markets, particularly
in communications related markets, implementing price increases can be difficult
and there is no guarantee that the Company will be successful. From time to
time, the Company may encounter difficulties in obtaining certain raw materials
or components necessary for production due to supply chain constraints and
logistical challenges, which may also negatively impact the pricing of materials
and components sourced or used by the Company. While the Company does not
currently anticipate any significant, broad-based difficulties in obtaining raw
materials or components necessary for production, beginning in 2021 and into
2022, there have been supply chain and logistical challenges that have impacted
the global economy, including our Company, and have caused supply constraints
and commodity price increases on certain raw materials and components used by
the Company in production, as well as lower availability of, and increased
prices for, freight and logistics, including air, sea and ground freight.
Consequently, the Company may experience supply shortages for discrete raw
materials or components in the future, which could be further exacerbated by
increased commodity prices and additional inflation. For a discussion of certain
risks related to inflation and costs, refer to the risk factor titled "The
Company and certain of its suppliers and customers are experiencing difficulties
obtaining certain raw materials and components, and the cost of most of the
Company's raw materials and components is increasing" in Part I, Item 1A herein.



Foreign Currency Exchange Rates




The Company conducts business in many foreign currencies through its worldwide
operations, and as a result is subject to foreign exchange exposure due to
changes in exchange rates of the various currencies, including possible currency
devaluations. Changes in exchange rates can positively or negatively affect the
Company's sales, operating margins and equity. The Company attempts to minimize
currency exposure risk in a number of ways including producing its products in
the same country or region in which the products are sold, thereby generating
revenues and incurring expenses in the same currency, cost reduction and pricing
actions, working capital management and hedging contracts. However, there can be
no assurance that these actions will be fully effective in managing currency
risk, including in the event of a significant and sudden decline in the value of
any of the foreign currencies of the Company's worldwide operations. For further
discussion of foreign exchange exposures, risks and uncertainties, refer to the
risk factor titled "The Company's results have at times been negatively affected
by foreign currency exchange rates" in Part I, Item 1A herein.



Non-GAAP Financial Measures



In addition to assessing the Company's financial condition, results of
operations, liquidity and cash flows in accordance with U.S. GAAP, management
utilizes certain non-GAAP financial measures defined below as part of its
internal reviews for purposes of monitoring, evaluating and forecasting the
Company's financial performance, communicating operating results to the Board
and assessing related employee compensation measures. Management believes that
these non-GAAP financial measures may be helpful to investors in assessing the
Company's overall financial performance, trends and year-over-year comparative
results, in addition to the reasons noted below. Non-GAAP financial measures
related to operating income, operating margin, net income from continuing
operations attributable to Amphenol Corporation, effective tax rate and diluted
EPS from continuing operations exclude income and expenses that are not directly
related to the Company's operating performance during the years presented. Items
excluded in the presentation of such non-GAAP financial measures in any period
may consist of, without limitation, acquisition-related expenses,
refinancing-related costs, and certain discrete tax items including but not
limited to (i) the excess tax benefits related to stock-based compensation and
(ii) the impact of significant changes in tax law. Non-GAAP financial measures
related to net sales exclude the impact of foreign currency exchange rates and
acquisitions. Non-GAAP financial measures and their most directly comparable
U.S. GAAP financial measures presented within this Item 7 are on a continuing
operations basis only and exclude any results associated with discontinued
operations. The non-GAAP financial information contained herein is included for
supplemental purposes only and should not be considered in isolation, as a
substitute for or superior to the related U.S. GAAP financial measures. In
addition, these non-GAAP financial measures are not necessarily the same or
comparable to similar measures presented by other companies as such measures may
be calculated differently or may exclude different items.



The non-GAAP financial measures defined below should be read in conjunction with
the Company's financial statements presented in accordance with U.S. GAAP. The
reconciliations of these non-GAAP financial measures to the

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most directly comparable U.S. GAAP financial measures for the years ended December 31, 2021, 2020 and 2019 are included in "Results of Operations" and "Liquidity and Capital Resources" within this Item 7:

Adjusted Diluted EPS is defined as diluted earnings per share from continuing

operations (as reported in accordance with U.S. GAAP), excluding income and

expenses and their specific tax effects that are not directly related to the

? Company's operating performance during the years presented. Adjusted Diluted

EPS is calculated as Adjusted Net Income from continuing operations

attributable to Amphenol Corporation, as defined below, divided by the weighted

average outstanding diluted shares as reported in the Consolidated Statements

   of Income.




   Adjusted Effective Tax Rate is defined as Provision for income taxes, as

reported in the Consolidated Statements of Income, expressed as a percentage of

? Income from continuing operations before income taxes, as reported in the

Consolidated Statements of Income, each excluding income and expenses and their

specific tax effects that are not directly related to the Company's operating

   performance during the years presented.




   Adjusted Net Income from continuing operations attributable to Amphenol

Corporation is defined as Net income from continuing operations attributable to

? Amphenol Corporation, as reported in the Consolidated Statements of Income,

excluding income and expenses and their specific tax effects that are not

   directly related to the Company's operating performance during the years
   presented.



Adjusted Operating Income is defined as Operating income, as reported in the

? Consolidated Statements of Income, excluding income and expenses that are not

   directly related to the Company's operating performance during the years
   presented.



Adjusted Operating Margin is defined as Adjusted Operating Income (as defined

? above) expressed as a percentage of Net sales (as reported in the Consolidated

   Statements of Income).



Constant Currency Net Sales Growth is defined as the year-over-year percentage

change in net sales growth, excluding the impact of changes in foreign currency

exchange rates. The Company's results are subject to volatility related to

? foreign currency translation fluctuations. As such, management evaluates the

Company's sales performance based on actual sales growth in U.S. dollars, as

well as Organic Net Sales Growth (defined below) and Constant Currency Net

Sales Growth, and believes that such information is useful to investors to

   assess the underlying sales trends.



Free Cash Flow is defined as (i) Net cash provided by operating activities from

continuing operations ("Operating Cash Flow" - as reported in accordance with

U.S. GAAP) less (ii) capital expenditures (as reported in accordance with U.S.

GAAP), net of proceeds from disposals of property, plant and equipment (as

? reported in accordance with U.S. GAAP), all of which are derived from the

Consolidated Statements of Cash Flow. Free Cash Flow is an important liquidity

measure for the Company, as we believe it is useful for management and

investors to assess our ability to generate cash, as well as to assess how much

cash can be used to reinvest in the growth of the Company or to return to

   stockholders through either stock repurchases or dividends.



Organic Net Sales Growth is defined as the year-over-year percentage change in

net sales growth resulting from operating volume and pricing changes, and

excludes the impact of (i) changes in foreign currency exchange rates

(described above), which is outside the control of the Company, and (ii)

acquisitions, both of which are taken as a percentage of the respective prior

year period(s) net sales. The acquisition impact represents the percentage

? impact on net sales resulting from acquisitions that have not been included in

the Company's consolidated results for the full current year period(s) and/or

prior comparable year period(s) presented. Such net sales related to these

acquisitions do not reflect the underlying growth of the Company on a

comparative basis. Management evaluates the Company's sales performance based

on actual sales growth in U.S. dollars, as well as Constant Currency Net Sales

Growth (defined above) and Organic Net Sales Growth, and believes that such

information is useful to investors to assess the underlying sales trends.

Recent Accounting Pronouncements

Refer to Note 1 of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements, including those adopted by the Company.





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Critical Accounting Estimates




The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Management bases its estimates on historical experience along with other
assumptions that we believe are reasonable in formulating our bases for making
judgements regarding the carrying amounts of assets and liabilities that are not
readily apparent elsewhere. Estimates are adjusted as new information becomes
available. Actual results could differ from those estimates. The Company
believes that the following accounting policies and estimates are most critical
since they require significant assumptions and judgments that inherently are
subject to risks and uncertainties. The significant accounting policies are more
fully described in Note 1 of the Notes to Consolidated Financial Statements.



Revenue Recognition



Topic 606



The Company's net sales in the Consolidated Statements of Income for the years
ended December 31, 2021, 2020 and 2019 are presented under Accounting Standards
Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606)
(collectively with its related subsequent amendments, "Topic 606"). The
Company's primary source of revenues consist of product sales to either end
customers and their appointed contract manufacturers (including original
equipment manufacturers) or to distributors. Our revenues are derived from
contracts with customers, which in most cases are customer purchase orders that
may be governed by master sales agreements. For each contract, the promise to
transfer the control of the products, each of which is individually distinct, is
considered to be the identified performance obligation. As part of the
consideration promised in each contract, the Company evaluates the customer's
credit risk. Our contracts do not have any significant financing components, as
payment terms are generally due net 30 to 120 days after delivery. Although
products are almost always sold at fixed prices, in determining the transaction
price, we evaluate whether the price is subject to refund (due to returns) or
adjustment (due to volume discounts, rebates, or price concessions) to determine
the net consideration we expect to be entitled to. We allocate the transaction
price to each distinct product based on its relative standalone selling price.
Taxes assessed by governmental authorities and collected from the customer,
including but not limited to sales and use taxes and value-added taxes, are not
included in the transaction price.



The vast majority of our sales are recognized at a point-in-time under the core
principle of recognizing revenue when control transfers to the customer, which
generally occurs when we ship or deliver the product from our manufacturing
facility to our customers, when our customer accepts and has legal title of the
goods, and where the Company has a present right to payment for such goods.
Based on the respective contract terms, most of our contracts' revenues are
recognized either (i) upon shipment based on free on board ("FOB") shipping
point or (ii) when the product arrives at its destination. For the years ended
December 31, 2021, 2020 and 2019, less than 5% of our net sales were recognized
over time, where the associated contracts relate to the sale of goods with no
alternative use as they are only sold to a single customer and whose underlying
contract terms provide the Company with an enforceable right to payment,
including a reasonable profit margin, for performance completed to date, in the
event of customer termination. For the contracts recognized over time, we
typically record revenue using the input method, based on the materials and
labor costs incurred to date relative to the contract's total estimated costs.
This method reasonably depicts when and as control of the goods transfers to the
customer, since it measures our progress in producing the goods which is
generally commensurate with this transfer of control. Since we typically invoice
our customers at the same time that we satisfy our performance obligations,
contract assets and contract liabilities related to our contracts with customers
recorded in the Consolidated Balance Sheets were not material as of December 31,
2021 and 2020.



Standard product warranty coverage, which provides assurance that our products
will conform to the contractually agreed-upon specifications for a limited
period from the date of shipment, is typically offered, while extended or
separately priced warranty coverage is typically not offered. The warranty claim
is generally limited to a credit equal to the purchase price or a promise to
repair or replace the product for a specified period of time at no additional
charge. We estimate our warranty liability based on historical experience,
product history, and current trends.



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  Table of Contents

Income Taxes



Deferred income taxes are provided for revenue and expenses which are recognized
in different periods for income tax and financial statement reporting purposes.
The Company recognizes the effects of changes in tax laws and rates on deferred
income taxes in the period in which legislation is enacted. Deferred income
taxes are provided on undistributed earnings of foreign subsidiaries in the
period in which the Company determines it no longer intends to permanently
reinvest such earnings outside the United States. As of December 31, 2021, the
Company has not provided for deferred income taxes on undistributed foreign
earnings of approximately $1,000 related to certain geographies, as it is the
Company's intention to permanently reinvest such earnings outside the United
States. It is impracticable to calculate the amount of taxes that would be
payable if these undistributed foreign earnings were to be repatriated. In
addition, the Company remains indefinitely reinvested with respect to its
financial statement basis in excess of tax basis of its investments in foreign
subsidiaries. It is not practicable to determine the deferred tax liability with
respect to such basis differences. Deferred tax assets are regularly assessed
for recoverability based on both historical and anticipated earnings levels and
a valuation allowance is recorded when it is more likely than not that these
amounts will not be recovered.



The tax effects of an uncertain tax position taken or expected to be taken in
income tax returns are recognized only if it is "more likely than not" to be
sustained on examination by the taxing authorities, based on its technical
merits as of the reporting date.  The tax benefits recognized in the financial
statements from such a position are measured based on the largest benefit that
has a greater than fifty percent likelihood of being realized upon ultimate
settlement.  The Company includes estimated interest and penalties related to
unrecognized tax benefits in the provision for income taxes.



As a result of the Tax Act, the global intangible low-taxed income ("GILTI")
provision imposed a tax on certain earnings of foreign subsidiaries. The Company
elected an accounting policy to account for GILTI as a period cost. The U.S.
Treasury Department has issued final interpretive guidance relating to certain
provisions of the Tax Act and proposed additional guidance related to the same
provisions. The Company will account for the impact of additional guidance in
the period in which any new guidance is released, if appropriate.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2022 12 101 M - -
Net income 2022 1 777 M - -
Net Debt 2022 3 317 M - -
P/E ratio 2022 23,2x
Yield 2022 1,23%
Capitalization 39 322 M 39 322 M -
EV / Sales 2022 3,52x
EV / Sales 2023 3,29x
Nbr of Employees 90 000
Free-Float 99,2%
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Managers and Directors
Richard Adam Norwitt President, Chief Executive Officer & Director
Craig Anthony Lampo Chief Financial Officer & Senior Vice President
Martin H. Loeffler Director
Linda Chan Vice President-Information Technology
Edward G. Jepsen Independent Director
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