Amphenol(US:APH)2024-07-26 20:33Part I - Financial Information Item 1. Financial Statements This section presents Amphenol's unaudited condensed consolidated financial statements for Q2 2024, including Balance Sheets, Income, Comprehensive Income, and Cash Flow, with notes on key events Condensed Consolidated Balance Sheets Total assets increased to $18.59 billion by June 30, 2024, driven by acquisitions, while total liabilities grew to $9.54 billion due to increased long-term debt Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $6,971.8 | $6,835.3 | | Goodwill | $8,261.8 | $7,092.4 | | Other intangible assets, net | $1,308.7 | $834.8 | | Total Assets | $18,586.8 | $16,526.4 | | Total current liabilities | $3,455.8 | $3,152.7 | | Long-term debt, less current portion | $5,035.3 | $3,983.5 | | Total Liabilities | $9,536.3 | $8,099.9 | | Total Equity | $9,030.6 | $8,395.8 | Condensed Consolidated Statements of Income Q2 2024 net sales grew 18% to $3.61 billion, with net income at $524.8 million and diluted EPS of $0.41, reflecting strong year-over-year performance Key Income Statement Data (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $3,609.7 | $3,053.9 | $6,866.0 | $6,028.0 | | Gross profit | $1,213.1 | $991.7 | $2,302.1 | $1,935.1 | | Operating income | $698.8 | $619.9 | $1,383.7 | $1,211.6 | | Net income attributable to Amphenol | $524.8 | $460.5 | $1,073.5 | $899.7 | | Diluted EPS | $0.41 | $0.37 | $0.85 | $0.73 | Condensed Consolidated Statements of Cash Flow H1 2024 operating cash flow increased to $1.26 billion, with $2.20 billion used for acquisitions, primarily funded by new debt issuance Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,263.6 | $1,068.8 | | Net cash used in investing activities | $(2,195.7) | $(375.1) | | Net cash provided by (used in) financing activities | $743.4 | $(704.0) | | Net decrease in cash and cash equivalents | $(222.5) | $(48.0) | Notes to Condensed Consolidated Financial Statements Notes detail a two-for-one stock split, $1.5 billion in new senior notes funding $2.1 billion in acquisitions, plus a new $2.1 billion acquisition agreement - A two-for-one stock split was approved on May 20, 2024, and became effective on June 12, 2024 All share and per-share data in the report have been retroactively adjusted to reflect this split2122 - In April 2024, the company issued three series of new senior notes totaling $1.5 billion to help fund the CIT acquisition It also repaid $350 million of 3.20% Senior Notes upon maturity353738 - The company completed two acquisitions for ~$2.1 billion in H1 2024, including the significant acquisition of Carlisle Interconnect Technologies (CIT) for ~$2.0 billion on May 21, 2024 This resulted in $70.0 million of acquisition-related expenses in Q2 2024899092 - On July 18, 2024, the company entered into an agreement to acquire CommScope's Mobile Networks Business for approximately $2.1 billion in cash, with the transaction expected to close in the first half of 2025118 - A new $2.0 billion stock repurchase program was authorized in April 2024 The quarterly dividend was increased from $0.11 to $0.165 per share, effective Q3 20246366 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong Q2 2024 performance, with net sales up 18% to $3.6 billion and adjusted operating margin at 21.3%, highlighting robust liquidity and significant acquisition activity Results of Operations Q2 2024 net sales grew 18% to $3.61 billion (11% organically), driven by Communications Solutions and IT datacom/defense, with adjusted operating margin expanding to 21.3% Net Sales Growth vs. Prior Year Period (Q2 2024) | Segment | Net Sales Growth (GAAP) | Constant Currency Growth | Organic Growth | | :--- | :--- | :--- | :--- | | Harsh Environment Solutions | 18% | 18% | 1% | | Communications Solutions | 24% | 25% | 23% | | Interconnect and Sensor Systems | 12% | 13% | 7% | | Consolidated | 18% | 19% | 11% | - End market growth was driven by strong organic performance in IT datacom and defense, and moderate growth in commercial aerospace, mobile devices, mobile networks, and automotive markets133 Reconciliation of GAAP to Adjusted (Non-GAAP) Results for Q2 2024 | Metric | Reported (GAAP) | Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Operating Income | $698.8M | $768.8M | | Operating Margin | 19.4% | 21.3% | | Net Income | $524.8M | $553.8M | | Diluted EPS | $0.41 | $0.44 | Liquidity and Capital Resources The company maintained strong liquidity and generated $1.26 billion operating cash flow and $1.03 billion free cash flow in H1 2024, primarily funding acquisitions and shareholder returns - Primary sources of liquidity are cash from operations, cash on hand, and availability under its $3.0B Revolving Credit Facility and Commercial Paper Programs158175 Free Cash Flow for Six Months Ended June 30 (in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Operating Cash Flow (GAAP) | $1,263.6 | $1,068.8 | | Capital expenditures (net of disposals) | $(230.2) | $(191.5) | | Free Cash Flow (Non-GAAP) | $1,033.4 | $877.3 | - In H1 2024, the company used cash for acquisitions ($2.1B), stock repurchases ($344.2M), and dividends ($263.8M) This was partly funded by issuing $1.5B in new senior notes170172180 - A new $2.0 billion stock repurchase program was authorized in April 2024, replacing the expiring 2021 program184 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks relate to foreign currency exchange rates and interest rate fluctuations, managed through a mix of fixed and variable rate debt - The company is exposed to market risks from foreign currency exchange rates and changes in interest rates201 - Interest rate risk is managed with a mix of fixed-rate senior notes and variable-rate debt facilities The company is exposed to higher interest costs on its variable-rate debt (Commercial Paper Programs, Revolving Credit Facility) due to recent increases in the federal funds rate204 Item 4. Controls and Procedures Management, including CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report205 - No change in internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal controls206 Part II - Other Information Item 1. Legal Proceedings The company is party to normal course legal actions but does not expect them to have a material adverse effect on its financial condition, results of operations, or cash flows - The company does not expect any existing legal or regulatory action to have a material adverse effect on its financial condition, results of operations or cash flows116207 Item 1A. Risk Factors There have been no material changes to the company's risk factors as disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There have been no material changes to the Company's risk factors from the 2023 Annual Report on Form 10-K208 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A new $2.0 billion stock repurchase program was authorized in April 2024, with 3.1 million shares repurchased for $190.4 million in Q2 2024 - A new $2.0 billion stock repurchase program was authorized by the Board on April 23, 2024, effective through April 28, 2027209 Stock Repurchases for Q2 2024 (in millions, except per share data) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost | | :--- | :--- | :--- | :--- | | April 2024 | 1.26 | $57.07 | $71.8 | | May 2024 | 1.06 | $64.37 | $68.4 | | June 2024 | 0.75 | $67.12 | $50.2 | | Total Q2 | 3.07 | $62.05 | $190.4 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None212 Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2024 - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2024213 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, employee benefit plans, and required certifications