Amphenol Corporation (NYSE: APH) reported today GAAP diluted
Earnings Per Share (“EPS”) for the first quarter 2020 of $0.79
compared to $0.87 for the comparable 2019 period. GAAP diluted EPS
for the first quarter 2020 included (i) a discrete tax benefit of
approximately $20 million ($0.06 per share) related to the
settlements of refund claims in certain non-U.S. jurisdictions and
the resulting adjustments to deferred taxes and (ii) an excess tax
benefit of approximately $5 million ($0.02 per share) related to
stock options exercised during the quarter. First quarter 2019 GAAP
diluted EPS included acquisition-related expenses of approximately
$17 million ($0.04 per share), partially offset by an excess tax
benefit of approximately $7 million ($0.02 per share) related to
stock options exercised during the quarter. Excluding the effect of
these items, Adjusted Diluted EPS1 for the first quarter 2020 was
$0.71 compared to $0.89 for the first quarter 2019.
Sales for the first quarter 2020 were $1.862 billion compared to
$1.959 billion for the comparable 2019 period. Currency translation
had the effect of decreasing sales by approximately $19 million in
the first quarter 2020 compared to the 2019 period.
Amphenol President and Chief Executive Officer, R. Adam Norwitt,
stated, “The first quarter 2020 was significantly impacted by the
COVID-19 pandemic. Since the shutdown of Wuhan, China on January
23, Amphenol’s entire global organization has been managing through
the extreme challenges created by the outbreak. Starting in late
January, our team in China successfully navigated a nearly
three-week shutdown of all of their manufacturing operations, and
were able to return to full production levels by the beginning of
March. As COVID-19 has spread around the world, our team continues
to execute well amidst very challenging market conditions and
quickly evolving government measures to control the pandemic, all
while prioritizing the safety and health of our more than 75,000
employees worldwide.”
“Amidst this unprecedented crisis, we are proud to have closed
the first quarter 2020 with sales, operating margins and Adjusted
Diluted EPS reaching $1.862 billion, 17.0% and $0.71, respectively.
In addition, our orders in the first quarter reached a higher than
originally expected $2.151 billion, driven in particular by higher
demand from customers supporting expanded capacity of
communications networks as well as for medical equipment. Compared
to the first quarter 2019, sales decreased by 5%, reflecting the
sudden and severe slowdown in certain markets resulting from the
outbreak as well as our limited ability to produce in China during
the month of February and production limitations imposed in other
parts of the world during the month of March. Given the difficult
environment created by the COVID-19 pandemic, our first quarter
results were impressive and illustrate the significant benefits of
the Company’s agile and entrepreneurial management team as well as
our balanced end market and geographic diversity.”
“It is extremely rewarding that even in this difficult
environment, the Company’s experienced management team reacted
quickly to ensure that profitability, cash flow and liquidity
remained strong. Operating cash flow in the quarter was $384
million, a clear confirmation of the quality of the Company’s
earnings. In addition, out of an abundance of caution, at the end
of the first quarter, the Company proactively drew down $1.25
billion from our existing $2.5 billion revolving credit facility,
approximately half of which was allocated to repay existing
maturities under our commercial paper programs. As a result, the
Company finished the quarter in a very strong liquidity position,
with $2.4 billion of cash on hand. The Company continues to deploy
its financial strength in a variety of ways to increase shareholder
value. To that end, the Company purchased 2.7 million shares of its
common stock in the quarter for approximately $257 million and paid
dividends of approximately $74 million.”
“We are proud that the Company continues to execute well amidst
the unprecedented challenges in the current environment. Such
strong execution in difficult times has always been a hallmark of
Amphenol’s performance.”
“As we look ahead, the overall demand and operating environment
remains highly uncertain. The full impact of the COVID-19 pandemic
on our business will depend on many unpredictable future
developments, including the length and severity of the crisis,
potential additional government actions and the overall impact of
the pandemic on the global economy, among many other factors. As a
result, until conditions become more predictable, we believe it is
prudent to withdraw our full-year sales and EPS guidance, and we
will not be providing a specific outlook for the coming quarter.
Given these dynamics, however, we expect sales and EPS in the
second quarter of 2020 to be lower than the levels we achieved in
the first quarter.”
“Despite the significant challenges in the current environment,
we are encouraged by the platform of strength that has been created
by the Company’s consistent superior performance. We remain
confident in the ability of our outstanding, entrepreneurial
management team to dynamically adjust to the current market
conditions, to continue to generate strong financial performance
and to further capitalize on the many opportunities to expand our
market position that exist in any economic cycle. Most importantly,
I am truly grateful to every one of our more than 75,000 employees
around the world for their incredible efforts to protect the safety
and health of our entire team and support our local communities,
all while ensuring that our customers have a ready supply of our
high-technology interconnect products, many of which are being used
by our customers in the fight against the COVID-19 crisis.”
The Company will host a conference call to discuss its first
quarter results at 1:00 PM (EDT) Wednesday, April 22, 2020. The
toll-free dial-in number to participate in this call is
888-455-0949; International dial-in number is +1-773-799-3973;
Passcode: LAMPO. There will be a replay available until 11:59 PM
(EST) on Friday, May 22, 2020. The replay numbers are toll free
866-451-8988; International toll number is +1-203-369-1205;
Passcode: 7183.
A live broadcast as well as a replay can be accessed through the
Investor Relations section of the company’s website at
https://investors.amphenol.com.
Amphenol Corporation is one of the world’s largest designers,
manufacturers and marketers of electrical, electronic and fiber
optic connectors and interconnect systems, antennas, sensors and
sensor-based products and coaxial and high-speed specialty cable.
Amphenol designs, manufactures and assembles its products at
facilities in the Americas, Europe, Asia, Australia and Africa and
sells its products through its own global sales force, independent
representatives and a global network of electronics distributors.
Amphenol has a diversified presence as a leader in high-growth
areas of the interconnect market including: Automotive, Broadband
Communications, Commercial Aerospace, Industrial, Information
Technology and Data Communications, Military, Mobile Devices and
Mobile Networks.
Forward-Looking Statements
This press release may include forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, which relate to future events and are subject to risks and
uncertainties. The forward-looking statements, which address the
Company’s expected business and financial performance and financial
condition, among other matters, may contain words or phrases such
as: “believe,” “continue,” “expect,” “look ahead,” “predict,” or
“will,” and other words and phrases of similar meaning.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about
expected earnings, revenues, growth, liquidity or other financial
matters, together with any statements related in any way to the
COVID-19 pandemic including its impact on the Company. Although the
Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, the expectations
may not be attained or there may be material deviation. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are
made.
Factors that could cause actual results to differ materially
from these forward-looking statements, include, but are not limited
to, the following: future risks and existing uncertainties
associated with the COVID-19 pandemic, which continues to have a
significant adverse impact on our operations including, depending
on the specific location, full or partial shutdowns of our
facilities as mandated by government decree, government actions
limiting our ability to adjust certain costs, significant travel
restrictions, “work-from-home” orders, limited availability of our
workforce, supplier constraints, supply-chain interruptions,
logistics challenges and limitations, and reduced demand from
certain customers; uncertainties associated with a protracted
economic slowdown that could negatively affect the financial
condition of our customers; uncertainties and volatility in the
global capital markets; political, economic, military and other
risks in countries outside of the United States; the impact of
general economic conditions, geopolitical conditions and U.S. trade
policies, legislation, trade disputes, treaties and tariffs,
including those affecting China, on the Company’s business
operations; risks associated with the improper conduct by any of
our employees, customers, suppliers, distributors or any other
business partners which could impair our business reputation and
financial results and could result in our non-compliance with
anti-corruption laws and regulations of the U.S. government and
various foreign jurisdictions; changes in exchange rates of the
various currencies in which the Company conducts business; the
Company’s ability to obtain a consistent supply of materials, at
stable pricing levels; the Company’s dependence on sales to the
communications industry, which markets are dominated by large
manufacturers and operators who regularly exert significant
pressure on suppliers, including the Company; changes in defense
expenditures in the military market, including the impact of
reductions or changes in the defense budgets of U.S. and foreign
governments; the Company’s ability to compete successfully on the
basis of technology innovation, product quality and performance,
price, customer service and delivery time; the Company’s ability to
continue to conceive, design, manufacture and market new products
and upon continuing market acceptance of its existing and future
product lines; difficulties and unanticipated expenses in
connection with purchasing and integrating newly acquired
businesses, including the potential for the impairment of goodwill
and other intangible assets; events beyond the Company’s control
that could lead to an inability to meet its financial covenants
which could result in a default under the Company’s revolving
credit facility; the Company’s ability to access the capital
markets on favorable terms, including as a result of significant
deterioration of general economic or capital market conditions, or
as a result of a downgrade in the Company’s credit rating; changes
in interest rates; government contracting risks that the Company
may be subject to, including laws and regulations governing
performance of U.S. government contracts and related risks
associated with conducting business with the U.S. government or its
suppliers (both directly and indirectly); governmental export and
import controls that certain of our products may be subject to,
including export licensing, customs regulations, economic sanctions
or other laws; cybersecurity threats or incidents that could arise
on our information technology systems which could disrupt business
operations and adversely impact our reputation and operating
results and potentially lead to litigation and/or governmental
investigations; changes in fiscal and tax policies, audits and
examinations by taxing authorities, laws, regulations and guidance
in the United States and foreign jurisdictions, including related
interpretations of certain provisions of the Tax Cuts and Jobs Act
of 2017; any difficulties in protecting the Company’s intellectual
property rights; and litigation, customer claims, product recalls,
governmental investigations, criminal liability or environmental
matters. In addition, 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 potential resurgence of the crisis,
future government actions in response to the crisis 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.
A further description of these uncertainties and other risks can
be found in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2019, Quarterly Reports on Form 10-Q and the
Company’s other reports filed with the Securities and Exchange
Commission. These or other uncertainties may cause the Company’s
actual future results to be materially different from those
expressed in any forward-looking statements. The Company undertakes
no obligation to update or revise any forward-looking statements
except as required by law.
Non-GAAP Financial Measures
The financial statements included within this press release are
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). This press
release also contains certain non-GAAP financial information,
including Adjusted Operating Income, Adjusted Operating Margin,
Adjusted Net Income attributable to Amphenol Corporation, Adjusted
Effective Tax Rate and Adjusted Diluted EPS (collectively,
“non-GAAP financial measures”), which are intended to supplement
the reported GAAP results. Management utilizes these non-GAAP
financial measures as part of its internal reviews for purposes of
monitoring, evaluating and forecasting the Company’s financial
performance, communicating operating results to the Company’s Board
of Directors and assessing related employee compensation measures.
Management believes that such non-GAAP financial measures may be
helpful to investors in assessing the Company’s overall financial
performance, trends and period-over-period comparative results.
Non-GAAP financial measures discussed within this press release
exclude income and expenses that are not directly related to the
Company’s operating performance during the periods presented. Items
excluded in the presentation of the non-GAAP financial measures in
any period may consist of, without limitation, acquisition-related
expenses, refinancing-related costs and certain discrete tax items
including but not limited to the excess tax benefits related to
stock-based compensation as well as the impact of significant
changes in tax law. Reconciliations of non-GAAP financial measures
to the most directly comparable GAAP financial measures are
included at the end of this press release. However, such non-GAAP
financial measures should not be considered in isolation, as a
substitute for or superior to the related GAAP financial measures.
In addition, these non-GAAP financial measures are not necessarily
the same or comparable to similar measures presented by other
companies, as such measures may be calculated differently or may
exclude different items. The non-GAAP financial measures are
defined within the “Supplemental Financial Information” table at
the end of this press release and should be read in conjunction
with the Company’s financial statements presented in accordance
with GAAP.
1 All referenced non-GAAP financial measures are defined in the
tables at the end of this press release.
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(dollars and shares in
millions, except per share data)
Three Months Ended
March 31,
2020
2019
Net sales
$
1,862.0
$
1,958.5
Cost of sales
1,302.2
1,330.7
Gross profit
559.8
627.8
Acquisition-related expenses
—
16.5
Selling, general and administrative
expenses
242.9
235.1
Operating income
316.9
376.2
Interest expense
(28.8
)
(29.7
)
Other income, net
1.1
3.0
Income before income taxes
289.2
349.5
Provision for income taxes (1)
(46.0
)
(79.6
)
Net income
243.2
269.9
Less: Net income attributable to
noncontrolling interests
(1.1
)
(2.4
)
Net income attributable to Amphenol
Corporation
$
242.1
$
267.5
Net income per common share - Basic
$
0.81
$
0.90
Weighted average common shares outstanding
- Basic
297.4
298.1
Net income per common share - Diluted
(2)
$
0.79
$
0.87
Weighted average common shares outstanding
- Diluted
306.5
308.6
_______________________
Note 1 Provision for income taxes for the three months
ended March 31, 2020 and 2019 includes excess tax benefits related
to stock-based compensation of $5.0 million ($0.02 per share) and
$6.8 million ($0.02 per share), respectively. Provision for income
taxes for the three months ended March 31, 2020 also includes a
discrete tax benefit of $19.9 million ($0.06 per share) related to
the settlements of refund claims in certain non-U.S. jurisdictions
and the resulting adjustments to deferred taxes.
Note 2 Net income per share for the three months ended
March 31, 2020 includes (i) the discrete tax benefit and (ii)
excess tax benefits related to stock-based compensation, each
discussed in Note 1. Net income per share for the three months
ended March 31, 2019 includes acquisition-related expenses of $16.5
million ($13.2 million after-tax or $0.04 per share) comprising the
amortization of $12.5 million related to the value associated with
acquired backlog from the SSI acquisition, as well as external
transaction costs of $4.0 million, partially offset by the excess
tax benefits related to stock-based compensation discussed in Note
1.
Excluding these effects, Adjusted Diluted EPS, a non-GAAP
financial measure which is defined and reconciled to its most
comparable GAAP financial measure in this press release, was $0.71
and $0.89 for the three months ended March 31, 2020 and 2019,
respectively.
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(dollars in millions)
March 31,
December 31,
2020
2019
ASSETS
Current Assets:
Cash and cash equivalents
$
2,372.3
$
891.2
Short-term investments
11.3
17.4
Total cash, cash equivalents and
short-term investments
2,383.6
908.6
Accounts receivable, less allowance for
doubtful accounts of $38.8 and $33.6, respectively
1,540.5
1,736.4
Inventories
1,325.0
1,310.1
Prepaid expenses and other current
assets
268.4
256.1
Total current assets
5,517.5
4,211.2
Property, plant and equipment, less
accumulated depreciation of $1,517.7 and $1,487.2, respectively
982.4
999.0
Goodwill
4,846.2
4,867.1
Other intangible assets, net
428.2
442.0
Other long-term assets
303.4
296.2
$
12,077.7
$
10,815.5
LIABILITIES & EQUITY
Current Liabilities:
Accounts payable
$
817.2
$
866.8
Accrued salaries, wages and employee
benefits
160.3
171.8
Accrued income taxes
119.4
127.9
Accrued dividends
74.0
74.4
Other accrued expenses
498.4
488.5
Current portion of long-term debt
500.9
403.3
Total current liabilities
2,170.2
2,132.7
Long-term debt, less current portion
4,591.5
3,203.4
Accrued pension and postretirement benefit
obligations
187.9
198.8
Deferred income taxes
271.4
260.4
Other long-term liabilities
411.0
424.0
Equity:
Common stock
0.3
0.3
Additional paid-in capital
1,720.6
1,683.3
Retained earnings
3,248.5
3,348.4
Treasury stock, at cost
(58.5
)
(70.8
)
Accumulated other comprehensive loss
(525.1
)
(430.9
)
Total shareholders’ equity attributable to
Amphenol Corporation
4,385.8
4,530.3
Noncontrolling interests
59.9
65.9
Total equity
4,445.7
4,596.2
$
12,077.7
$
10,815.5
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW
(Unaudited)
(dollars in millions)
Three Months Ended
March 31,
2020
2019
Cash from operating activities:
Net income
$
243.2
$
269.9
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization
72.1
85.6
Stock-based compensation expense
15.4
14.4
Deferred income tax provision
(benefit)
13.4
(0.7
)
Net change in components of working
capital
43.8
(22.7
)
Net change in other long-term assets and
liabilities
(3.6
)
(2.9
)
Net cash provided by operating
activities
384.3
343.6
Cash from investing activities:
Capital expenditures
(60.8
)
(74.5
)
Proceeds from disposals of property, plant
and equipment
1.2
4.3
Purchases of short-term investments
(12.0
)
(23.1
)
Sales and maturities of short-term
investments
17.7
17.5
Acquisitions, net of cash acquired
(16.5
)
(399.3
)
Net cash used in investing activities
(70.4
)
(475.1
)
Cash from financing activities:
Proceeds from issuance of senior notes
399.3
499.5
Repayments of senior notes and other
long-term debt
(0.3
)
(757.2
)
Borrowings under credit facilities
1,567.4
—
Repayments under credit facilities
(215.0
)
—
(Repayments) borrowings under commercial
paper programs, net
(250.4
)
267.4
Payment of costs related to debt
financing
(3.9
)
(6.9
)
Proceeds from exercise of stock
options
30.0
47.5
Distributions to and purchases of
noncontrolling interests
(8.1
)
(3.2
)
Purchase of treasury stock
(257.2
)
(160.0
)
Dividend payments
(74.4
)
(68.7
)
Net cash provided by (used in) financing
activities
1,187.4
(181.6
)
Effect of exchange rate changes on cash
and cash equivalents
(20.2
)
3.5
Net change in cash and cash
equivalents
1,481.1
(309.6
)
Cash and cash equivalents balance,
beginning of period
891.2
1,279.3
Cash and cash equivalents balance, end of
period
$
2,372.3
$
969.7
Cash paid for:
Interest
$
22.0
$
31.6
Income taxes, net
64.2
104.0
AMPHENOL CORPORATION
SEGMENT INFORMATION
(Unaudited)
(dollars in millions)
Three Months Ended
March 31,
2020
2019
Net
sales:
Interconnect Products and Assemblies
$
1,779.0
$
1,862.7
Cable Products and Solutions
83.0
95.8
Consolidated Net sales
$
1,862.0
$
1,958.5
Operating
income:
Interconnect Products and Assemblies
$
339.8
$
410.0
Cable Products and Solutions
6.3
10.5
Stock-based compensation expense
(15.4
)
(14.4
)
Acquisition-related expenses
—
(16.5
)
Other operating expenses
(13.8
)
(13.4
)
Consolidated Operating income
$
316.9
$
376.2
Operating margin
(%):
Interconnect Products and Assemblies
19.1
%
22.0
%
Cable Products and Solutions
7.6
%
10.9
%
Stock-based compensation expense
-0.8
%
-0.7
%
Acquisition-related expenses
0.0
%
-0.9
%
Other operating expenses
-0.7
%
-0.7
%
Consolidated Operating margin (%)
17.0
%
19.2
%
AMPHENOL CORPORATION SUPPLEMENTAL FINANCIAL
INFORMATION RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited) (dollars in millions, except per share data)
Management utilizes the 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 Company’s Board of Directors
and assessing related employee compensation measures. Management
believes that such non-GAAP financial measures may be helpful to
investors in assessing the Company’s overall financial performance,
trends and period-over-period comparative results. The following
non-GAAP financial measures exclude income and expenses that are
not directly related to the Company’s operating performance during
the periods presented. Items excluded in the presentation of these
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. The following
non-GAAP financial information 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. Such non-GAAP financial measures
should be read in conjunction with the Company’s financial
statements presented in accordance with U.S. GAAP.
The following are reconciliations of non-GAAP financial measures
to the most directly comparable U.S. GAAP financial measures for
the periods presented:
Three Months Ended March
31,
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)
$
316.9
17.0
%
$
242.1
15.9
%
$
0.79
$
376.2
19.2
%
$
267.5
22.8
%
$
0.87
Acquisition-related expenses
-
-
-
-
-
16.5
0.9
13.2
(0.2
)
0.04
Excess tax benefits related to stock-based
compensation
-
-
(5.0
)
1.7
(0.02
)
-
-
(6.8
)
1.9
(0.02
)
Discrete tax item
-
-
(19.9
)
6.9
(0.06
)
-
-
-
-
-
Adjusted (non-GAAP) (2)
$
316.9
17.0
%
$
217.2
24.5
%
$
0.71
$
392.7
20.1
%
$
273.9
24.5
%
$
0.89
_______________________
(1)
While the terms “operating
margin” and “effective tax rate” are not 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
measure.
(2)
The definitions of non-GAAP
financial measures used are as follows:
Adjusted Operating Income is defined as Operating Income
(as reported in the Condensed Consolidated Statements of Income),
excluding income and expenses that are not directly related to the
Company’s operating performance during the periods presented.
Adjusted Operating Margin is defined as Adjusted
Operating Income (as defined above) expressed as a percentage of
Net sales (as reported in the Condensed Consolidated Statements of
Income).
Adjusted Net Income attributable to Amphenol Corporation
is defined as Net Income attributable to Amphenol Corporation (as
reported in the Condensed 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 periods presented.
Adjusted Effective Tax Rate is defined as Provision for
income taxes (as reported in the Condensed Consolidated Statements
of Income) expressed as a percentage of Income before income taxes
(as reported in the Condensed Consolidated Statements of Income),
each excluding the income and expenses and their specific tax
effects that are not directly related to the Company’s operating
performance during the periods presented.
Adjusted Diluted EPS is defined as diluted earnings per
share (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 periods
presented. Adjusted Diluted EPS is calculated as Adjusted Net
Income attributable to Amphenol Corporation, as defined above,
divided by the weighted average outstanding diluted shares (as
reported in the Condensed Consolidated Statements of Income).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200422005182/en/
Craig A. Lampo Senior Vice President and Chief Financial Officer
203-265-8625 www.amphenol.com
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