10-QPeriod: Q2 FY2018

AMPHENOL CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 31, 2018For Securities:APH

Summary

Amphenol Corporation (APH) reported robust performance for the second quarter and first six months of 2018, with net sales increasing by 19% year-over-year in both periods. This growth was primarily driven by strong performance in the Interconnect Products and Assemblies segment, fueled by demand across industrial, automotive, mobile devices, and data communications markets, supported by both organic growth and strategic acquisitions. The company demonstrated solid profitability, with operating income rising and operating margin expanding year-over-year, indicating effective cost management and operational efficiency. Diluted EPS also saw a healthy increase, reflecting the company's ability to translate sales growth into shareholder value. Despite a decrease in cash from operations due to significant contributions to pension plans and tax payments related to the Tax Cuts and Jobs Act, Amphenol maintained a strong liquidity position and continued its shareholder return programs through stock repurchases and dividend increases.

Financial Highlights

51 data points
Beta

Revenue

$1.98B

32.5% Gross Margin

Net Income

$284.80M

14.4% Net Margin

EPS (Diluted)

$0.23

Total Assets

$9.51B

Cash & Equivalents

$964.40M

Free Cash Flow

$185.90M

Financial Statements
Beta
Revenue$1.98B
Cost of Revenue$1.34B
Gross Profit$644.80M
SG&A Expenses$236.60M
Operating Income$408.20M
Interest Expense$26.00M
Net Income$284.80M
EPS (Basic)$0.24
EPS (Diluted)$0.23
Shares Outstanding (Basic)1.20B
Shares Outstanding (Diluted)1.25B

Key Highlights

  • 1Net sales increased by 19% year-over-year for both the three and six months ended June 30, 2018, driven by strong performance in the Interconnect Products and Assemblies segment.
  • 2Operating income and operating margin improved year-over-year, reflecting efficient operations and sales growth. Operating income for Q2 2018 was $408.2 million, up from $336.2 million in Q2 2017.
  • 3Diluted Earnings Per Share (EPS) increased to $0.91 for the second quarter of 2018 from $0.80 in the prior year period, and to $1.75 for the six months ended June 30, 2018, from $1.51 in the prior year period.
  • 4The company repurchased $263.4 million of its common stock under its new $2 billion repurchase program authorized in April 2018, demonstrating a commitment to returning capital to shareholders.
  • 5Dividends per share increased to $0.23 in Q2 2018 from $0.16 in Q2 2017, with a total of $69.0 million declared in dividends for the quarter.
  • 6Cash flow from operating activities decreased year-over-year due to a voluntary pension contribution and tax payments related to the Tax Cuts and Jobs Act, but the company maintains adequate liquidity.
  • 7Goodwill increased by $86.0 million to $4,128.6 million, primarily due to three acquisitions in the Interconnect Products and Assemblies segment.

Frequently Asked Questions

Amphenol's sales growth was primarily driven by strong demand in the Interconnect Products and Assemblies segment, which accounts for the majority of sales. Growth was observed across key end markets including industrial, automotive, mobile devices, information technology, data communications, military, mobile networks, and commercial aerospace. This growth was a combination of organic expansion and contributions from recent acquisitions.

Amphenol demonstrated effective expense management, with selling, general, and administrative expenses as a percentage of net sales decreasing compared to the prior year. This, coupled with increased net sales, led to an expansion in operating income and operating margin. The company also maintained its R&D expenses as a percentage of net sales, indicating continued investment in innovation.

The TCJA, enacted in late 2017, significantly changed U.S. corporate tax law. Amphenol recorded a provisional tax charge of $398.5 million in Q4 2017 for the transition tax on unremitted foreign earnings and other effects. While the company is still finalizing its accounting for the TCJA, it made its first annual installment payment of the Transition Tax in Q2 2018. The TCJA's reduction in the U.S. corporate tax rate to 21% is also impacting the company's effective tax rate, which increased in the current period due to higher stock option tax benefits in the prior year period. The company anticipates future tax payments related to repatriated foreign earnings but does not expect a significant impact on liquidity.

Amphenol is returning capital to shareholders through both stock repurchases and dividend payments. The company authorized a new $2 billion stock repurchase program in April 2018 and actively repurchased shares during the quarter. Additionally, the company increased its quarterly dividend to $0.23 per share in the second quarter of 2018, up from $0.16 in the prior year, reflecting confidence in its financial performance and cash generation.