10-QPeriod: Q3 FY2017

AMPHENOL CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:APH

Summary

Amphenol Corporation reported a strong third quarter and year-to-date performance ending September 30, 2017, characterized by robust sales growth across its key segments and markets, including industrial, automotive, and information technology. Net sales increased by 13% year-over-year for the quarter and 9% for the nine-month period, driven by both organic growth and strategic acquisitions. The company demonstrated healthy profitability, with operating income increasing by 16% in the quarter and 19% year-to-date. This was achieved while maintaining stable gross profit margins and effectively managing operating expenses. The balance sheet remains solid, with a significant increase in cash and cash equivalents and a well-managed debt structure, including the successful refinancing of senior notes. Amphenol continues to return value to shareholders through increased dividends and a substantial share repurchase program.

Financial Highlights

53 data points
Beta

Revenue

$1.84B

32.9% Gross Margin

Net Income

$277.50M

15.1% Net Margin

EPS (Diluted)

$0.22

Total Assets

$9.61B

Cash & Equivalents

$1.45B

Free Cash Flow

$142.60M

Financial Statements
Beta
Revenue$1.84B
Cost of Revenue$1.23B
Gross Profit$606.10M
SG&A Expenses$228.20M
Operating Income$377.90M
Interest Expense$24.60M
Net Income$277.50M
EPS (Basic)$0.23
EPS (Diluted)$0.22
Shares Outstanding (Basic)1.22B
Shares Outstanding (Diluted)1.26B

Key Highlights

  • 1Net sales increased by 13% in Q3 2017 and 9% for the first nine months of 2017 compared to the prior year periods.
  • 2Operating income grew significantly, up 16% for the quarter and 19% for the nine-month period, indicating strong operational leverage.
  • 3Gross profit margin remained stable at approximately 32.9%-33.0% for the periods, reflecting effective cost management.
  • 4The company executed a substantial share repurchase program, buying back $555.6 million in the first nine months of 2017.
  • 5Cash and cash equivalents and short-term investments increased to $1,489.6 million as of September 30, 2017, up from $1,173.2 million at the end of 2016.
  • 6Interest expense increased due to higher average debt levels, reflecting strategic financing activities like senior note issuances and share buybacks.
  • 7The company reported a lower effective tax rate in 2017 compared to 2016, partly due to the adoption of a new accounting standard for stock-based compensation.

Frequently Asked Questions

Net sales growth was primarily driven by increases in the industrial, automotive, military, and information technology and data communications markets. This growth was a combination of organic expansion within existing businesses and contributions from recent acquisitions, partially offset by a decline in the mobile networks market.

Amphenol's liquidity position strengthened, with cash, cash equivalents, and short-term investments increasing to $1,489.6 million. The company managed its debt effectively, issuing new senior notes and repaying older ones. While interest expense increased due to higher debt levels, the company has significant financial flexibility with its revolving credit facility and commercial paper program.

The adoption of ASU 2016-09 starting in 2017 requires excess tax benefits and deficiencies from stock compensation to be recognized as a discrete income tax item in the income statement, rather than directly in equity. This has led to a lower effective tax rate and fluctuations in reported income tax provisions, but it also simplifies cash flow reporting by classifying these benefits within operating activities.

Amphenol has a substantial goodwill balance, largely from acquisitions. The company performs annual goodwill impairment assessments. For 2017, a qualitative assessment indicated that it was more likely than not that the fair value of reporting units exceeded their carrying amounts, thus avoiding a quantitative assessment and the recognition of any goodwill impairment charges for the period.