Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Amphenol Corporation

Wallingford, Connecticut

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Amphenol Corporation and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, changes in equity, and cash flow for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Hartford, Connecticut

February 13, 2019

We have served as the Company's auditor since 1997.

AMPHENOL CORPORATION

Consolidated Statements of Income

(dollars and shares in millions, except per share data)

		Year Ended December 31,
		2018			2017			2016
Net sales		$	8,202.0		$	7,011.3		$	6,286.4
Cost of sales			5,547.1			4,701.4			4,246.4
Gross profit			2,654.9			2,309.9			2,040.0
Acquisition-related expenses			8.5			4.0			36.6
Selling, general and administrative expenses			959.5			878.3			798.2
Operating income			1,686.9			1,427.6			1,205.2
Interest expense			(101.7)			(92.3)			(72.6)
Other income, net			3.2			17.1			8.5
Income before income taxes			1,588.4			1,352.4			1,141.1
Provision for income taxes			(371.5)			(691.7)			(308.5)
Net income			1,216.9			660.7			832.6
Less: Net income attributable to noncontrolling interests			(11.9)			(10.2)			(9.7)
Net income attributable to Amphenol Corporation		$	1,205.0		$	650.5		$	822.9
Net income per common share — Basic		$	4.00		$	2.13		$	2.67
Weighted average common shares outstanding — Basic			301.2			305.7			308.3
Net income per common share — Diluted		$	3.85		$	2.06		$	2.61
Weighted average common shares outstanding — Diluted			312.6			316.5			315.2
Dividends declared per common share		$	0.88		$	0.70		$	0.58

See accompanying notes to consolidated financial statements.

AMPHENOL CORPORATION

Consolidated Statements of Comprehensive Income

(dollars in millions)

		Year Ended December 31,
		2018			2017			2016
Net income		$	1,216.9		$	660.7		$	832.6
Total other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments			(167.0)			243.3			(110.7)
Unrealized gain (loss) on cash flow hedges			0.4			(0.1)			1.6
Defined benefit plan adjustment			(1.8)			27.8			(12.5)
Total other comprehensive (loss) income, net of tax			(168.4)			271.0			(121.6)
Total comprehensive income			1,048.5			931.7			711.0
Less: Comprehensive income attributable to noncontrolling interests			(9.2)			(13.2)			(7.6)
Comprehensive income attributable to Amphenol Corporation		$	1,039.3		$	918.5		$	703.4

See accompanying notes to consolidated financial statements.

AMPHENOL CORPORATION

Consolidated Balance Sheets

(dollars and shares in millions, except per share data)

		December 31,
		2018			2017
Assets
Current Assets:
Cash and cash equivalents		$	1,279.3		$	1,719.1
Short-term investments			12.4			34.6
Total cash, cash equivalents and short-term investments			1,291.7			1,753.7
Accounts receivable, less allowance for doubtful accounts of $33.5 and $23.0, respectively			1,791.8			1,598.6
Inventories:
Raw materials and supplies			463.6			386.2
Work in process			371.1			358.0
Finished goods			399.1			362.7
			1,233.8			1,106.9
Other current assets			254.3			196.8
Total current assets			4,571.6			4,656.0
Property, plant and equipment:
Land and improvements			29.3			32.6
Buildings and improvements			325.7			322.3
Machinery and equipment			1,835.6			1,662.0
			2,190.6			2,016.9
Accumulated depreciation			(1,314.8)			(1,200.1)
			875.8			816.8
Goodwill			4,103.2			4,042.6
Intangibles, net and other long-term assets			494.3			488.5
		$	10,044.9		$	10,003.9
Liabilities & Equity
Current Liabilities:
Accounts payable		$	890.5		$	875.6
Accrued salaries, wages and employee benefits			157.2			151.6
Accrued income taxes			203.5			154.2
Accrued dividends			68.7			58.1
Other accrued expenses			367.1			338.8
Current portion of long-term debt			764.3			1.1
Total current liabilities			2,451.3			1,579.4
Long-term debt, less current portion			2,806.4			3,541.5
Accrued pension and postretirement benefit obligations			190.2			272.0
Deferred income taxes			255.6			241.2
Other long-term liabilities			277.2			326.4
Commitments and contingent liabilities
Equity:
Class A Common Stock, $0.001 par value; 1,000.0 shares authorized; 299.2 shares issued and 298.5 shares outstanding as of December 31, 2018; 305.7 shares issued and outstanding as of December 31, 2017			0.3			0.3
Additional paid-in capital			1,433.2			1,249.0
Retained earnings			3,028.7			2,941.5
Treasury stock, at cost; 0.7 shares as of December 31, 2018			(55.0)			—
Accumulated other comprehensive loss			(390.2)			(201.0)
Total shareholders’ equity attributable to Amphenol Corporation			4,017.0			3,989.8
Noncontrolling interests			47.2			53.6
Total equity			4,064.2			4,043.4
		$	10,044.9		$	10,003.9

See accompanying notes to consolidated financial statements.

AMPHENOL CORPORATION

Consolidated Statements of Changes in Equity

(dollars and shares in millions, except per share data)

																		Accumulated
												Additional						Other
		Common Stock					Treasury Stock					Paid-in			Retained			Comprehensive			Noncontrolling			Total
		Shares		Amount			Shares		Amount			Capital			Earnings			Loss			Interests			Equity
Balance January 1, 2016		308		$	0.3		—		$	—		$	783.3		$	2,804.4		$	(349.5)		$	39.9		$	3,278.4
Net income																822.9						9.7			832.6
Other comprehensive loss																			(119.5)			(2.1)			(121.6)
Acquisitions resulting in noncontrolling interests																						7.5			7.5
Distributions to shareholders of noncontrolling interests																						(6.8)			(6.8)
Purchase of treasury stock							(6)			(325.8)															(325.8)
Retirement of treasury stock		(6)					6			325.8						(325.8)									—
Stock options exercised, including tax benefit		6											190.0												190.0
Dividends declared ($0.58 per common share)																(178.8)									(178.8)
Stock-based compensation expense													47.6												47.6
Balance December 31, 2016		308			0.3		—			—			1,020.9			3,122.7			(469.0)			48.2			3,723.1
Net income																650.5						10.2			660.7
Other comprehensive income																			268.0			3.0			271.0
Acquisitions resulting in noncontrolling interests																						11.1			11.1
Purchase of noncontrolling interest													(5.5)									(10.3)			(15.8)
Distributions to shareholders of noncontrolling interests																						(8.6)			(8.6)
Purchase of treasury stock							(8)			(618.0)															(618.0)
Retirement of treasury stock		(8)					8			618.0						(618.0)									—
Stock options exercised		6											183.9												183.9
Dividends declared ($0.70 per common share)																(213.7)									(213.7)
Stock-based compensation expense													49.7												49.7
Balance December 31, 2017		306			0.3		—			—			1,249.0			2,941.5			(201.0)			53.6			4,043.4
Cumulative effect of adoption of revenue recognition standard (Note 1)																3.2									3.2
Reclassification of income tax effects resulting from the Tax Act (ASU 2018-02) (Note 1)																23.5			(23.5)						—
Net income																1,205.0						11.9			1,216.9
Other comprehensive loss																			(165.7)			(2.7)			(168.4)
Acquisitions resulting in noncontrolling interests																						0.3			0.3
Purchase of noncontrolling interest													(2.3)									(5.4)			(7.7)
Distributions to shareholders of noncontrolling interests																						(10.5)			(10.5)
Purchase of treasury stock							(11)			(935.2)															(935.2)
Retirement of treasury stock		(10)					10			880.2						(880.2)									—
Stock options exercised		3											130.9												130.9
Dividends declared ($0.88 per common share)																(264.3)									(264.3)
Stock-based compensation expense													55.6												55.6
Balance December 31, 2018		299		$	0.3		(1)		$	(55.0)		$	1,433.2		$	3,028.7		$	(390.2)		$	47.2		$	4,064.2

See accompanying notes to consolidated financial statements.

AMPHENOL CORPORATION

Consolidated Statements of Cash Flow

(dollars in millions)

		Year Ended December 31,
		2018			2017			2016
Cash from operating activities:
Net income		$	1,216.9		$	660.7		$	832.6
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			299.7			226.8			217.0
Stock-based compensation expense			55.6			49.7			47.6
Deferred income tax (benefit) provision			(12.0)			186.3			(29.9)
Excess tax benefits from stock-based compensation payment arrangements			—			—			(44.4)
Net change in operating assets and liabilities:
Accounts receivable, net			(237.9)			(146.5)			(165.9)
Inventories			(173.3)			(100.4)			(14.2)
Other current assets			(47.7)			(75.9)			29.9
Accounts payable			48.8			140.5			47.8
Accrued income taxes			(9.7)			11.2			91.7
Other accrued liabilities			57.4			13.0			61.9
Accrued pension and postretirement benefits			(76.6)			5.0			2.5
Other long-term assets and liabilities			(8.5)			173.8			1.0
Net cash provided by operating activities			1,112.7			1,144.2			1,077.6
Cash from investing activities:
Capital expenditures			(310.6)			(226.6)			(190.8)
Proceeds from disposals of property, plant and equipment			5.0			4.1			7.1
Purchases of short-term investments			(44.5)			(40.2)			(232.4)
Sales and maturities of short-term investments			67.2			148.0			108.5
Acquisitions, net of cash acquired			(158.9)			(265.5)			(1,305.1)
Net cash used in investing activities			(441.8)			(380.2)			(1,612.7)
Cash from financing activities:
Proceeds from issuance of senior notes			571.7			749.3			—
Repayments of long-term debt			(15.2)			(375.0)			—
(Repayments) borrowings under commercial paper programs, net			(544.6)			154.1			183.2
Payment of costs related to debt financing			(5.6)			(5.2)			(3.0)
Purchase of treasury stock			(935.2)			(618.0)			(325.8)
Proceeds from exercise of stock options			130.7			184.1			147.2
Excess tax benefits from stock-based compensation payment arrangements			—			—			44.4
Distributions to and purchases of noncontrolling interests			(18.2)			(24.4)			(6.8)
Dividend payments			(253.7)			(205.0)			(172.7)
Net cash used in financing activities			(1,070.1)			(140.1)			(133.5)
Effect of exchange rate changes on cash and cash equivalents			(40.6)			60.6			(34.0)
Net change in cash and cash equivalents			(439.8)			684.5			(702.6)
Cash and cash equivalents balance, beginning of year			1,719.1			1,034.6			1,737.2
Cash and cash equivalents balance, end of year		$	1,279.3		$	1,719.1		$	1,034.6
Cash paid during the year for:
Interest		$	94.2		$	84.3		$	68.5
Income taxes			393.2			325.2			246.8

See accompanying notes to consolidated financial statements.

AMPHENOL CORPORATION

Notes to Consolidated Financial Statements

(All amounts included in the following Notes to Consolidated Financial Statements are presented in millions, except share and per share data, unless otherwise noted)

Note 1—Summary of Significant Accounting Policies

Business

Amphenol Corporation (together with its subsidiaries, “Amphenol”, the “Company”, “we”, “our”, or “us”) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. The Company sells its products to customers worldwide.

The Company operates through two reportable business segments:

	·		Interconnect Products and Assemblies – The Interconnect Products and Assemblies segment primarily designs, manufactures and markets a broad range of connector and connector systems, value-add products and other products, including antennas and sensors, used in a broad range of applications in a diverse set of end markets.

	·		Cable Products and Solutions – The Cable Products and Solutions segment primarily designs, manufactures and markets cable, value-add products and components for use primarily in the broadband communications and information technology markets as well as certain applications in other markets.

Use of 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. The Company’s management evaluates these significant estimates and assumptions that affect the consolidated financial statements and related disclosures. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements are prepared in U.S. dollars and include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The results of companies acquired are included in the Consolidated Financial Statements from the effective date of acquisition.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and liquid investments with an original maturity of less than three months. The carrying amounts approximate fair values of those instruments, the majority of which are in non-U.S. bank accounts.

Short-term Investments

Short-term investments consist primarily of certificates of deposit with original maturities of twelve months or less. The carrying amounts approximate fair values of those instruments, the vast majority of which are in non-U.S. bank accounts.

Accounts Receivable

Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable reserves as necessary whenever events or circumstances indicate the carrying value may not be recoverable.

Inventories

Inventories are stated at the lower of standard cost, which approximates average cost, or net realizable value. The principal components of cost included in inventories are materials, direct labor and manufacturing overhead. The Company regularly reviews inventory quantities on hand, evaluates the realizability of inventories and adjusts the carrying value as necessary based on forecasted product demand. Provisions for slow-moving and obsolete inventory are made based on historical experience and product demand.

Depreciable Assets

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the respective asset lives determined on a composite basis by asset group or on a specific item basis using the estimated useful lives of such assets, which generally range from 3 to 12 years for machinery and equipment and 20 to 40 years for buildings. Leasehold building improvements are depreciated over the shorter of the lease term or estimated useful life. The Company periodically reviews fixed asset lives. Depreciation expense is included in both Cost of sales and Selling, general and administrative expenses in the Consolidated Statements of Income, dependent upon the specific categorization and use of the underlying asset being depreciated. The Company assesses the impairment of property and equipment subject to depreciation, whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of the use of the asset, significant changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. There have been no impairments recorded as a result of such reviews during any of the periods presented.

Goodwill

The Company performs its evaluation for the impairment of goodwill for the Company’s two reporting units on an annual basis as of each July 1 or more frequently if an event occurs or circumstances change that would indicate that a reporting unit’s carrying amount may be impaired. The Company has defined its reporting units as the two reportable business segments “Interconnect Products and Assemblies” and “Cable Products and Solutions”, as the components of these reportable business segments have similar economic characteristics.

In 2018 and 2017 as part of our annual evaluations, the Company utilized the option to first assess qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment assessment. As part of this assessment, the Company reviews qualitative factors which include, but are not limited to, economic, market and industry conditions, as well as the financial performance of each reporting unit. In accordance with applicable guidance, an entity is not required to calculate the fair value of a reporting unit if, after assessing these qualitative factors, the Company determines that it is more likely than not that the fair value of each of its reporting units is greater than its respective carrying amount. As of July 1, 2018 and 2017, the Company determined that it was more likely than not that the fair value of its reporting units exceeded their respective carrying amounts and therefore, a quantitative assessment was not required. There has been no goodwill impairment in 2018, 2017 or 2016 in connection with our impairment tests.

Intangible Assets

Intangible assets are included in Intangibles, net and other long-term assets and consist primarily of proprietary technology, customer relationships and license agreements and are generally amortized over the estimated periods of benefit. The Company assesses and reviews its long-lived assets, other than goodwill, for potential impairment including identifiable intangible assets subject to amortization whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of the use of the asset, changes in historical trends in operating performance,

significant changes in projected operating performance, anticipated future cash flows and significant negative economic trends. Indefinite-lived intangible assets that are not subject to amortization are reviewed at least annually for impairment. In the third quarter of 2018, the Company performed its annual assessment of these identifiable indefinite-lived intangible assets. Based on our qualitative assessment, the Company determined that it was more likely than not that the fair value of the indefinite-lived intangible assets exceeded their respective carrying amounts. There has been no intangible asset impairment in 2018, 2017 or 2016 as a result of such reviews.

Revenue Recognition

Adoption of Topic 606

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”, and collectively with its related subsequent amendments, “Topic 606”). Topic 606 supersedes previous revenue recognition guidance and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods or services. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Under this transition method, the Company’s results in the Consolidated Statements of Income for the year ended December 31, 2018 are presented under Topic 606, while the comparative results for the years ended December 31, 2017 and 2016 were not retrospectively adjusted. Results for the years ended December 31, 2017 and 2016 were recognized in accordance with the Company’s revenue recognition policy then in effect under ASC Topic 605, Revenue Recognition (“Topic 605”), as discussed below. The adoption of Topic 606 resulted in accounting policy changes surrounding revenue recognition which replaced the related previous policies under Topic 605. The following is a summary of the Company’s revenue recognition and related accounting policies and disclosures resulting from the adoption of 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, and 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. 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. With limited exceptions, the Company recognizes revenue at the point in time when we ship or deliver the product from our manufacturing facility to our customer, when our customer accepts and has legal title of the goods, and 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, (ii) when the product arrives at its destination or (iii) when the product is pulled from consignment inventory. For the year ended December 31, 2018, less than 5% of our net sales are recognized over time, as 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, we do not have significant contract assets or contract liabilities related to our contracts with customers recorded in the Consolidated Balance Sheets as of December 31, 2018.

The Company receives customer orders negotiated with multiple delivery dates that may extend across more than one reporting period until the contract is fulfilled, the end of the order period is reached, or a pre-determined maximum order value has been reached. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions, and it is generally expected that a substantial portion of our remaining performance obligations will be fulfilled within three months. Nearly all of our performance obligations are fulfilled within one year. Since our performance obligations are part of contracts that generally have original durations of one year or less, we have not disclosed the aggregate amount of transaction prices associated with unsatisfied or partially unsatisfied performance obligations as of December 31, 2018.

Sales to Distributors and Resellers

Sales to certain distributors and resellers are made under terms allowing certain price adjustments and limited rights of return of the Company’s products held in their inventory or upon sale to their end customers. The Company maintains a reserve for unprocessed and estimated future price adjustment claims and returns as a refund liability. The reserve is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on an analysis of historical claims and returns over a period of time to appropriately account for current pricing and business trends. Similarly, sales returns and allowances are recorded based on historical return rates, as a reduction to revenue with a corresponding reduction to cost of sales for the estimated cost of inventory that is expected to be returned. These reserves were not material upon the adoption of Topic 606 on January 1, 2018, nor were they material in the Consolidated Balance Sheet as of December 31, 2018.

Warranty

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, and record warranty expense in cost of sales in the Consolidated Statements of Income. Warranty liabilities and related warranty expense have not been and were not material in the accompanying Consolidated Financial Statements as of and for the years ended December 31, 2018, 2017 and 2016.

Shipping and Handling Costs

The Company accounts for shipping and handling activities related to contracts with customers as a cost to fulfill our promise to transfer control of the related product, including any such costs incurred after the customer has obtained control of the goods. Shipping and handling costs are generally charged to and paid by the majority of our customers as part of the contract. For a nominal portion of our customer contracts, primarily for certain customers in the broadband communications market (a market primarily in the Cable Products and Solutions segment), such costs are not separately charged to the customers. Shipping and handling costs are included in Cost of sales in the accompanying Consolidated Statements of Income.

Contract Assets and Contract Liabilities

The Company records contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Contract assets represent unbilled receivables, which generally arise when revenue recognized over time exceed amounts billed to customers. Contract liabilities represent billings or advanced consideration received from customers in excess of revenue recognized to date. As the Company’s performance obligations are typically less than one year, these amounts are generally recorded as current in the accompanying Consolidated Balance Sheets within Other current assets or Other accrued expenses as of December 31, 2018. Contract assets and contract liabilities recorded in the Company’s Consolidated Balance Sheets were not material both at the date of adoption and as of December 31, 2018.

Contract Costs

The Company’s policy is to capitalize any incremental costs incurred to obtain a customer contract, only to the extent that such costs are explicitly chargeable to the customer and the benefit associated with the costs is expected to be longer than one year. Otherwise, such costs are expensed as incurred and recorded within Selling, general and

administrative expenses in the accompanying Consolidated Statements of Income. Incremental costs to fulfill customer orders, which are mostly comprised of pre-production and set-up costs, are generally capitalized to the extent such costs are contractually guaranteed to be reimbursed by the customer. Otherwise, such costs are expensed as incurred. Capitalized contract costs to obtain a contract or to fulfill a contract that are not accounted for under other existing accounting standards are recorded as either other current or long-term assets on the accompanying Consolidated Balance Sheets, depending on the timing of when the Company expects to recognize the expense, and are generally amortized consistent with the timing of when transfer of control of the related goods occurs. Such capitalized contract costs were not material both at the date of adoption and as of December 31, 2018, and the related amortization expense was not material for the year ended December 31, 2018.

Pre-adoption of Topic 606

The Company adopted Topic 606 using the modified retrospective method and as such, comparative results for the years ended December 31, 2017 and 2016 were not retrospectively adjusted. For the years ended December 31, 2017 and 2016, revenue from sales of the Company’s products was recognized at the time the goods were delivered, title passed and the risks and rewards of ownership passed to the customer, provided the earnings process was complete and revenue was measurable. Such recognition generally occurred when the products reached the shipping point, the sales price was fixed and determinable, and collection was reasonably assured. Delivery was determined by the Company’s shipping terms, which was primarily freight on board shipping point. Revenue was recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and reserves were determined and adjusted as needed based upon historical experience, contract terms and other related factors. The shipping costs for the majority of the Company’s sales were paid directly by the Company’s customers. In the broadband communications market (approximately 6% of net sales in 2017), the Company paid for shipping costs to the majority of its customers. Shipping costs were also paid by the Company for certain customers in the Interconnect Products and Assemblies segment.

Retirement Pension Plans

Costs for retirement pension plans include current service costs and amortization of prior service costs over the average working life expectancy. It is the Company’s policy to fund current pension costs taking into consideration minimum funding requirements and maximum tax deductible limitations. The expense of retiree medical benefit programs is recognized during the employees’ service with the Company. The recognition of expense for retirement pension plans and medical benefit programs is significantly impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets, mortality projections and future health care costs. The Company uses third-party specialists to assist management in appropriately measuring the expense and obligations associated with pension and other postretirement plan benefits. The defined benefit plan obligation is based on significant assumptions such as mortality rates, discount rates and plan asset rates of return as determined by the Company in consultation with the respective benefit plan actuaries and investment advisors.

Stock-Based Compensation

The Company accounts for its stock option and restricted share awards based on the fair value of the award at the date of grant and recognizes compensation expense over the service period that the awards are expected to vest. The Company recognizes expense for stock-based compensation with graded vesting on a straight-line basis over the vesting period of the entire award. Stock-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates. Changes in estimated forfeitures are recognized in the period of change and impact the amount of expense to be recognized in future periods.

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, 2018, the Company has not provided for deferred income taxes on undistributed foreign earnings related to certain geographies of approximately $800, as it is the Company’s intention to permanently reinvest such earnings outside the United States. The amount of taxes that would

be payable if these undistributed foreign earnings were to be repatriated would not be material. 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.

For the year ended December 31, 2017, as a result of the Tax Cuts and Jobs Act (“Tax Act”), the Company recorded (i) a provisional income tax charge related to the deemed repatriation of the accumulated unremitted earnings and profits of foreign subsidiaries, (ii) a provisional income tax charge related to changes in the Company’s permanent reinvestment assertion with regards to prior accumulated unremitted earnings from certain foreign subsidiaries, partially offset by (iii) a provisional income tax benefit associated with the remeasurement of its net deferred tax liabilities due to the U.S. federal corporate tax rate reduction, and included these amounts in its consolidated financial statements. Beginning in 2018, the Tax Act also included a global intangible low-taxed income ("GILTI") provision, which imposes a tax on foreign earnings in excess of a deemed return on tangible assets of foreign subsidiaries. The Company has elected an accounting policy to account for GILTI as a period cost if incurred, rather than recognizing deferred taxes for temporary basis differences expected to reverse as GILTI. The U.S. Treasury Department has not yet released final interpretive guidance relating to certain provisions of the Tax Act. The Company will account for the impact of additional guidance in the period in which any new guidance is released, if appropriate.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) (subsequently codified under ASU 2018-05, as discussed below) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In 2017, the Company recorded a provisional income tax charge as a result of the Tax Act. Due to the timing of the Tax Act’s enactment and the complexity of its provisions, the Company had not completed its accounting for the impact of the Tax Act in 2017. The Company analyzed guidance and technical interpretations issued in 2018 related to the provisions of the Tax Act, and refined, analyzed and updated the underlying data, computations and assumptions used to prepare this provisional income tax charge. As a result, the Company completed its accounting and recorded an income tax benefit of $14.5 in 2018.

Foreign Currency Translation

The financial position and results of operations of the Company’s significant foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated into U.S. dollars at current exchange rates and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments is included as a component of Accumulated other comprehensive income (loss) within equity. Transaction gains and losses related to operating assets and liabilities are included in Cost of sales.

Research and Development

Costs incurred in connection with the development of new products and applications are expensed as incurred. Research and development expenses for the creation of new and improved products and processes were $220.9, $193.7 and $166.1, for the years 2018, 2017 and 2016, respectively, and are included in Selling, general and administrative expenses.

Acquisitions

The Company accounts for acquisitions using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The purchase price of acquisitions is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on estimated fair values, and any excess purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill. Any subsequent adjustments to the purchase price allocation prior to the completion of the measurement period will be reflected as an adjustment to goodwill in the period in which the adjustments are identified.

The Company may use independent valuation specialists to assist in determining the estimated fair values of assets acquired and liabilities assumed, which could require certain significant management assumptions and estimates.

Environmental Obligations

The Company recognizes the potential cost for environmental remediation activities when site assessments are made, remediation efforts are probable and related amounts can be reasonably estimated; potential insurance reimbursements are not recorded. The Company assesses its environmental liabilities as necessary and appropriate through regular reviews of contractual commitments, site assessments, feasibility studies and formal remedial design and action plans.

Net Income per Common Share

Basic income per common share is based on the net income attributable to Amphenol Corporation for the year divided by the weighted average number of common shares outstanding. Diluted income per common share assumes the exercise of outstanding dilutive stock options using the treasury stock method.

Treasury Stock

Treasury stock purchases are recorded at cost. Any issuances from treasury shares are recorded using the weighted-average cost method.

Derivative Financial Instruments

Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges resulting from changes in fair value are recorded in Accumulated other comprehensive income (loss), and subsequently reflected in Cost of sales in the Consolidated Statements of Income in a manner that matches the timing of the actual income or expense of such instruments with the hedged transaction. Any ineffective portion of the change in the fair value of designated hedging instruments is included in the Consolidated Statements of Income.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Revenue Recognition

As discussed above, the Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. The vast majority of our sales continue to be recognized when products are shipped from our facilities or delivered to our customers, depending on the respective contractual terms. For a nominal portion of our contracts where the accounting did change, the adoption of Topic 606 resulted in an increase to the opening balance of retained earnings of approximately $3.2 as of January 1, 2018. This impact was primarily due to the acceleration of net sales and associated net income related to certain uncompleted contracts for the manufacture of goods with no alternative use and for which we have an enforceable right to payment, including a reasonable profit margin, from the customer for performance completed to date. For these contracts, we now recognize revenue over time as control of the goods transfers, rather than when the goods are delivered, and title, risk and reward of ownership are passed to the customer, as under previous guidance.

The adoption of Topic 606 did not have a material impact on our consolidated financial statements as of January 1, 2018 and for the year ended December 31, 2018. Refer to Note 11 herein for further discussion regarding the Company’s disaggregation of revenue.

Other Recently Adopted Accounting Standards

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), requiring employers to provide more details about the components of costs related to retirement benefits. Specifically, ASU 2017-07 requires employers to report the service costs for providing pensions to employees in the same line item as other

employee compensation costs, while requiring other pension-related costs, such as interest costs, amortization of pension-related costs from prior periods, and the gains or losses on plan assets, to be reported separately and outside of the subtotal of operating income. ASU 2017-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted ASU 2017-07 in the first quarter of 2018, which did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), which provides guidance to determine which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in Topic 718. ASU 2017-09 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and required prospective application to changes in terms or conditions of awards occurring on or after the adoption date. The Company adopted ASU 2017-09 in the first quarter of 2018, which did not have any impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which amends the standard on comprehensive income by providing an option for an entity to reclassify stranded tax effects, resulting from the enactment of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017, from accumulated other comprehensive income directly to retained earnings. The stranded tax effects result from the remeasurement of net deferred tax positions that were originally recorded in comprehensive income but whose remeasurement was reflected in the income statement in 2017. ASU 2018-02 only applies to the effects of the Tax Act and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. ASU 2018-02 may be applied either at the beginning of the period of adoption or on a retrospective basis to any period in which the impacts of the Tax Act are recognized. The Company early adopted ASU 2018-02 in the fourth quarter of 2018, as of October 1, 2018, which resulted in the reclassification of the stranded tax effects of the Tax Act of approximately $23.5 from Accumulated other comprehensive loss to Retained earnings on the Consolidated Balance Sheets, related to the change in the statutory tax rate. The comparative prior periods were not restated and are reported under the accounting standards in effect for those periods.

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which addresses the application of U.S. GAAP when preparing the initial accounting for the income tax effects of a change in tax laws or rates. SEC Staff Accounting Bulletin No. 118 (“SAB 118”) was issued in December 2017 to provide immediate accounting guidance resulting from the enactment of the Tax Act. ASU 2018-05 codifies the guidance of SAB 118 within FASB ASC Topic 740, Income Taxes (“ASC 740”), including guidance allowing for the recognition of provisional amounts in situations where the related accounting is not complete and reasonable estimates can be made at the time that financial statements are issued covering the reporting period that includes the enactment date of the Tax Act, as well as allowing for a measurement period of up to one year from the enactment date to finalize the accounting related to the Tax Act. Previously, ASC 740 did not directly address incomplete accounting for the effects of a change in tax laws or rates. The Company applied SAB 118 (and subsequently ASU 2018-05) associated with the provisional income tax charge (“Tax Act Charge”) recorded in 2017, as well as the completion of the accounting associated with such charge in 2018. Refer to Note 4 herein for further details regarding the Tax Act.

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which amends the current annual disclosure requirements related to defined benefit pension and other postretirement plans by adding new requirements, removing certain requirements and providing clarification on existing requirements. ASU 2018-14 does not amend the interim disclosure requirements of existing guidance and is effective for fiscal years ending after December 31, 2020, with early adoption permitted and must be applied on a retrospective basis. The Company early adopted ASU 2018-14 in the fourth quarter of 2018, which did not have a material impact on our consolidated financial statements and related disclosures.

The Securities and Exchange Commission has recently issued several final rules, including but not limited to SEC Final Rule Release No. 33-10532 Disclosure Update and Simplification (“Final Rule”), which amends certain redundant, duplicative, outdated, superseded or overlapping disclosure requirements. This Final Rule is intended to facilitate disclosure information provided to investors and simplify compliance without significantly impacting the mix of information provided to investors. The amendments also expand the disclosure requirements regarding the analysis of

stockholders' equity for interim financial statements, in which entities will be required to present a reconciliation for each period for which a statement of comprehensive income is required to be filed. We adopted the Final Rule effective on November 5, 2018, which did not have any material impact on our consolidated financial statements and related disclosures.

Recently Issued Accounting Standards Not Yet Adopted

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02” or “Topic 842”), which amends, among other things, the existing guidance by requiring lessees to recognize lease right-of-use assets (“ROU assets”) and liabilities (for reasonably certain lease payments) arising from operating leases on the balance sheet. For leases with a term of twelve months or less, ASU 2016-02 permits an entity to make an accounting policy election to not recognize a ROU asset nor lease liability, but rather to recognize such leases as lease expense, generally on a straight-line basis over the lease term. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which clarified various aspects of the guidance under ASU 2016-02. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. Originally, entities were required to adopt ASU 2016-02 using a modified retrospective approach, which required prior periods to be presented under Topic 842. However, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities the option of recognizing the cumulative effect of applying Topic 842 as an adjustment to the opening balance of retained earnings in the year of adoption while continuing to present all prior periods under previous lease accounting guidance.

The Company has implemented a new lease management system that will facilitate the adoption of this standard and enable the Company to fulfill its requirements for both reporting and disclosure purposes, and we have reviewed and implemented the necessary changes to our existing policies, processes and controls to achieve appropriate compliance. The Company will adopt Topic 842 in the first quarter of 2019 using the modified retrospective transition approach allowed under ASU 2018-11, and will recognize any cumulative effect of applying the standard as an adjustment to the opening balance of retained earnings as of January 1, 2019. We plan to adopt certain optional practical expedients provided in ASU 2016-02 for both transition and post-adoption. The Company has nearly completed its assessment of ASU 2016-02 and its impact on our consolidated financial statements and related disclosures, and we currently expect the adoption of this standard will result in the recognition of ROU assets and related lease liabilities on our Condensed Consolidated Balance Sheets as of January 1, 2019 of approximately $180 related to our operating lease commitments, with no impact to the opening balance of retained earnings. Topic 842 is not expected to have a material impact on our Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flow. The future impact of Topic 842 on the Company’s consolidated financial statements will be dependent upon the Company’s lease portfolio going forward. In the first quarter of 2019, the Company will also provide new disclosures about our leasing activities as required under Topic 842.

Other Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which adds, amends and removes certain disclosure requirements related to fair value measurements. Among other changes, this standard requires certain additional disclosure surrounding Level 3 assets, including changes in unrealized gains or losses in other comprehensive income and certain inputs in those measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Certain amended or eliminated disclosures in this standard may be adopted early, while certain additional disclosure requirements in this standard can be adopted on its effective date. In addition, certain changes in the standard require retrospective adoption, while other changes must be adopted prospectively. The Company is currently evaluating ASU 2018-13 and its impact on our consolidated financial statements.

Note 2—Long-Term Debt

Long-term debt consists of the following:

				December 31, 2018						December 31, 2017
				Carrying			Approximate			Carrying			Approximate
		Maturity		Amount			Fair Value (1)			Amount			Fair Value (1)
Revolving Credit Facility		March 2021		$	—		$	—		$	—		$	—
U.S. Commercial Paper Program (less unamortized discount of $0.5 and $0.3 at December 31, 2018 and 2017, respectively)		March 2021			554.5			554.5			1,175.4			1,175.4
Euro Commercial Paper Program (plus unamortized premium of nil at December 31, 2018)		March 2021			68.8			68.8			—			—
4.00% Senior Notes (less unamortized discount of $0.4 and $0.5 at December 31, 2018 and 2017, respectively)		February 2022			499.6			508.8			499.5			522.5
2.55% Senior Notes (less unamortized discount of nil and $0.2 at December 31, 2018 and 2017, respectively)		January 2019			750.0			749.4			749.8			752.8
3.125% Senior Notes (less unamortized discount of $0.1 and $0.2 at December 31, 2018 and 2017, respectively)		September 2021			374.9			374.2			374.8			381.2
2.20% Senior Notes (less unamortized discount of $0.1 and $0.2 at December 31, 2018 and 2017, respectively)		April 2020			399.9			395.5			399.8			398.0
3.20% Senior Notes (less unamortized discount of $0.3 and $0.4 at December 31, 2018 and 2017, respectively)		April 2024			349.7			334.5			349.6			351.9
2.000% Euro Senior Notes (less unamortized discount of $2.8 at December 31, 2018)		October 2028			570.5			572.8			—			—
Notes payable to foreign banks and other debt		2019-2032			16.6			16.6			6.6			6.6
Less unamortized deferred debt issuance costs					(13.8)			—			(12.9)			—
Total debt					3,570.7			3,575.1			3,542.6			3,588.4
Less current portion					764.3			763.7			1.1			1.1
Total long-term debt				$	2,806.4		$	2,811.4		$	3,541.5		$	3,587.3

	(1)		The fair value of each series of the Company’s Senior Notes is based on recent bid prices in an active market and is therefore classified as Level 1 in the fair value hierarchy (Note 3).

Revolving Credit Facility

As of December 31, 2018, the Company had a $2,000.0 unsecured credit facility (the “2016 Revolving Credit Facility”), which matured in March 2021 and gave the Company the ability to borrow at a spread over LIBOR. The Company may utilize the 2016 Revolving Credit Facility for general corporate purposes. The carrying value of any borrowings under the 2016 Revolving Credit Facility would approximate their fair value due primarily to their market interest rates and would be classified as Level 2 in the fair value hierarchy (Note 3). At December 31, 2018, there were no borrowings under the 2016 Revolving Credit Facility. The 2016 Revolving Credit Facility required payment of certain annual agency and commitment fees and required that the Company satisfy certain financial covenants.

On January 15, 2019, the Company amended its 2016 Revolving Credit Facility with a new $2,500.0 unsecured credit facility (“2019 Revolving Credit Facility”). The 2019 Revolving Credit Facility, which matures January 2024, increases the aggregate commitments by $500.0 and, consistent with the previous 2016 Revolving Credit Facility, gives the Company the ability to borrow at a spread over LIBOR. The Company intends to utilize the 2019 Revolving Credit Facility for general corporate purposes.

Commercial Paper

The Company has a commercial paper program pursuant to which the Company issues short-term unsecured commercial paper notes (“U.S. Commercial Paper” or “USCP Notes”) in one or more private placements in the United States (the “U.S. Commercial Paper Program”). The maturities of the USCP Notes vary, but may not exceed 397 days from the date of issue. The USCP Notes are sold under customary terms in the commercial paper market and may be issued at a discount from par, or, alternatively, may be sold at par, and bear varying interest rates on a fixed or floating basis. The average interest rate on the U.S. Commercial Paper as of December 31, 2018 and 2017 was 2.88% and 1.71%, respectively.

On July 10, 2018, the Company and one of its wholly owned European subsidiaries (the “Euro Issuer”) entered into a euro-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, “Commercial Paper”), which are guaranteed by the Company and are to be issued outside of the United States. The maturities of the ECP Notes will vary, but may not exceed 183 days from the date of issue. The ECP Notes are sold under customary terms in the euro-commercial paper market and may be issued at par or a discount therefrom or a premium thereto and bear varying interest rates on a fixed or floating basis. The ECP Notes may be issued in Euros, Sterling, U.S. Dollars or other currencies. As of December 31, 2018, the amount of ECP Notes outstanding was €60.0 (approximately $68.8), with an average interest rate of (0.10)%.

Amounts available under the Commercial Paper Programs may be borrowed, repaid and re-borrowed from time to time. As of December 31, 2018, the Company’s Board of Directors’ authorization for the ECP Notes limits the maximum aggregate principal amount outstanding of USCP Notes, ECP Notes, and any other commercial paper, euro-commercial paper or similar programs at any time to $2,000.0, which was then further increased to $2,500.0 in conjunction with the amended 2019 Revolving Credit Facility. The maximum aggregate principal amount outstanding of USCP Notes at any time was also increased to $2,500.0, while the maximum aggregate principal amount outstanding of ECP Notes at any time remains at $2,000.0. The Commercial Paper Programs are rated A-2 by Standard & Poor’s and P-2 by Moody’s and are currently backstopped by the Revolving Credit Facility, as amounts undrawn under the Company’s existing Revolving Credit Facility are available to repay Commercial Paper, if necessary. Net proceeds of the issuances of the Commercial Paper are expected to be used for general corporate purposes. The Commercial Paper is classified as long-term debt in the accompanying Consolidated Balance Sheets since the Company has the intent and ability to refinance the Commercial Paper on a long-term basis using the Company’s revolving credit facility. The Commercial Paper is actively traded and is therefore classified as Level 1 in the fair value hierarchy (Note 3). The carrying value of Commercial Paper borrowings approximates their fair value.

U.S. Senior Notes

All of the Company’s outstanding senior notes in the United States (“U.S. Senior Notes”) are unsecured and rank equally in right of payment with the Company’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, which include paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, and, with certain exceptions, a make-whole premium.

On April 5, 2017, the Company issued $400.0 principal amount of unsecured 2.20% Senior Notes due April 1, 2020 at 99.922% of face value (the “2020 Senior Notes”) and $350.0 principal amount of unsecured 3.20% Senior Notes due April 1, 2024 at 99.888% of face value (the “2024 Senior Notes” and, together with the 2020 Senior Notes, the “2020 and 2024 Notes”). Interest on each of the 2020 and 2024 Notes is payable semiannually on April 1 and October 1 of each year, commencing on October 1, 2017. The Company may, at its option, redeem some or all of the 2020 Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, and if redeemed prior to the date of maturity, a make-whole premium. The Company may, at its option, redeem some or all of the 2024 Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, and if redeemed prior to February 1, 2024, a make-whole premium. In September 2017, the Company used the net proceeds from the 2020 and 2024 Notes to repay all of its outstanding $375.0 principal amount of 1.55% Senior Notes due September 15, 2017, with the remainder of the net proceeds being used for general corporate purposes.

On January 9, 2019, the Company issued $500.0 principal amount of unsecured 4.350% Senior Notes due June 1, 2029 at 99.904% of face value (the “2029 Senior Notes”). The 2029 Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. Interest on the 2029 Senior Notes is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2019. The Company may, at its option, redeem some or all of the 2029 Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, and if redeemed prior to March 1, 2029, a make-whole premium. The Company used the net proceeds from the 2029 Senior Notes, along with borrowings under the U.S. Commercial Paper Program, to repay $750.0 of 2.55% Senior Notes due in January 2019.

Euro Senior Notes

On October 8, 2018, the Euro Issuer issued €500.0 (approximately $574.6) principal amount of unsecured 2.000% Senior Notes due October 8, 2028 at 99.498% of face value (the “2028 Euro Notes” or “2.000% Euro Senior Notes”, and collectively with the U.S. Senior Notes, “Senior Notes”). The 2028 Euro Notes are unsecured and rank equally in right

of payment with the Euro Issuer’s other unsecured senior indebtedness, and are guaranteed on a senior unsecured basis by the Company. Interest on the 2028 Euro Notes is payable annually on October 8 of each year, commencing on October 8, 2019. The Company may, at its option, redeem some or all of the 2028 Euro Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, and if redeemed prior to July 8, 2028, a make-whole premium. 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 Company’s Senior Notes contain certain financial and non-financial covenants.

The maturity of the Company’s debt (exclusive of unamortized deferred debt issuance costs as of December 31, 2018) over each of the next five years ending December 31 and thereafter, is as follows:

2019		$	764.4
2020			400.5
2021			998.6
2022			499.9
2023			0.2
Thereafter			920.9
		$	3,584.5

At December 31, 2018, the Company had approximately $30.0 of uncommitted standby letter of credit facilities, of which $20.5 were issued.

Note 3—Fair Value Measurements

Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. These requirements establish market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis.

The valuation techniques required are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 Quoted prices for identical instruments in active markets.

Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Significant inputs to the valuation model are unobservable.

The Company believes that the assets or liabilities subject to such standards with fair value disclosure requirements are short-term investments and derivative instruments. Substantially all of the Company’s short-term investments consist of certificates of deposit with original maturities of twelve months or less and as such, are considered as Level 1 in the fair value hierarchy as they are traded in active markets for identical assets. The carrying amounts of these instruments, the majority of which are in non-U.S. bank accounts, approximate their fair value. The Company’s derivative instruments represent foreign exchange rate forward contracts, which are valued using bank quotations based on market observable inputs such as forward and spot rates and are therefore classified as Level 2 in the fair value hierarchy. The impact of the credit risk related to these financial assets is immaterial. The fair values of the Company’s

financial and non-financial assets and liabilities subject to such standards at December 31, 2018 and December 31, 2017 are as follows:

		Fair Value Measurements
					Quoted Prices in			Significant			Significant
					Active Markets			Observable			Unobservable
					for Identical			Inputs			Inputs
2018		Total			Assets (Level 1)			(Level 2)			(Level 3)
Short-term investments		$	12.4		$	12.4		$	—		$	—
Forward contracts			2.4			—			2.4			—
Total		$	14.8		$	12.4		$	2.4		$	—
2017
Short-term investments		$	34.6		$	34.6		$	—		$	—
Forward contracts			2.3			—			2.3			—
Total		$	36.9		$	34.6		$	2.3		$	—

The Company does not have any significant financial or non-financial assets and liabilities that are measured at fair value on a non-recurring basis.

For the years ended December 31, 2018 and 2017, a gain (loss) of $0.4 and $(0.1), respectively, was recognized in Accumulated other comprehensive loss associated with foreign exchange rate forward contracts. The amounts reclassified from Accumulated other comprehensive loss to foreign exchange gain (loss) in the accompanying Consolidated Statements of Income during 2018 and 2017 were not material. The fair values of the forward contracts are recorded within Other current assets, Intangibles, net and other long-term assets, Other accrued expenses or Other long-term liabilities in the accompanying Consolidated Balance Sheets, depending on their value and remaining contractual period.

Note 4—Income Taxes

The components of income before income taxes and the provision for income taxes are as follows:

		Year Ended December 31,
		2018			2017			2016
Income before income taxes:
United States		$	194.1		$	153.0		$	87.7
Foreign			1,394.3			1,199.4			1,053.4
		$	1,588.4		$	1,352.4		$	1,141.1
Current tax provision:
United States		$	37.8		$	200.0		$	74.6
Foreign			345.7			305.4			263.8
			383.5			505.4			338.4
Deferred tax provision (benefit):
United States			27.8			51.0			(32.3)
Foreign			(39.8)			135.3			2.4
			(12.0)			186.3			(29.9)
Total provision for income taxes		$	371.5		$	691.7		$	308.5

On December 22, 2017, the United States federal government enacted the Tax Act, marking a change from a worldwide tax system to a modified territorial tax system in the United States. As part of this change, the Tax Act, among other changes, provides for a transition tax on the accumulated unremitted foreign earnings and profits of the Company’s foreign subsidiaries (“Transition Tax”) and a reduction of the U.S. federal corporate income tax rate from 35% to 21%. As a result, in the fourth quarter of 2017, the Company recorded an income tax charge of $398.5 (“Tax Act Charge”) that was comprised of (i) the Transition Tax of $259.4, (ii) a charge of $176.6 related to changes in the Company’s permanent reinvestment assertion with regards to prior accumulated unremitted earnings from certain foreign subsidiaries, partially offset by (iii) a tax benefit of $37.5 associated with the remeasurement of the Company’s U.S. net deferred tax liabilities due to the U.S. federal corporate tax rate reduction. These three components of the Tax Act Charge were provisional amounts recorded in accordance with SAB 118 (now codified in ASU 2018-05), which

addresses the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Due to the timing of the Tax Act’s enactment and the complexity of its provisions, the Company had not completed its accounting for the impact of the Tax Act in 2017.

The Company analyzed guidance and technical interpretations issued in 2018 related to the provisions of the Tax Act, and refined, analyzed and updated the underlying data, computations and assumptions used to prepare the Tax Act Charge. As a result, the Company completed its accounting within the one-year measurement period and recorded an income tax benefit of $14.5 in 2018.

The Company paid its first annual installment in the second quarter of 2018. We will pay the Transition Tax, net of applicable tax credits and deductions, over an eight-year period until 2025, as permitted under the Tax Act. The current and long-term portions of the Transition Tax are recorded in Accrued income taxes and Other long-term liabilities, respectively, on the Consolidated Balance Sheet as of December 31, 2018 and 2017. The Company also recorded a tax charge, related to changes in the Company’s permanent reinvestment assertion, in 2017 due to our intention to repatriate prior accumulated unremitted earnings from certain foreign subsidiaries over time. We will pay such taxes when those respective earnings are repatriated.

At December 31, 2018, the Company had $125.7 of foreign tax loss carryforwards and $48.6 of U.S. state tax loss carryforwards, of which $69.0 and $48.6, respectively, will either expire or be refunded at various dates through 2038 and the balance can be carried forward indefinitely. The Company had $2.9 of foreign tax credit carryforwards and $13.0 of U.S. state tax credit carryforwards, of which $2.7 and $7.3, respectively, will either expire or be refunded at various dates through 2038 and the balance can be carried forward indefinitely.

A valuation allowance of $34.7 and $39.6 at December 31, 2018 and 2017, respectively, has been recorded which relates to the U.S. federal and state and foreign net operating loss carryforwards and U.S. state tax credits. The net change in the valuation allowance for deferred tax assets was an decrease of $4.9 in 2018, which related primarily to foreign net operating loss carryforwards. The net change in the valuation allowance for deferred tax assets was an increase of $2.4 in 2017, which related to foreign net operating loss and U.S. state credit carryforwards.

Differences between the U.S. statutory federal tax rate and the Company’s effective income tax rate are analyzed below:

		Year Ended December 31,
		2018			2017			2016
U.S. statutory federal tax rate		21.0	%		35.0	%		35.0	%
State and local taxes		0.6			0.2			0.1
Foreign earnings and dividends taxed at different rates		2.3			(9.1)			(9.7)
U.S. tax on foreign income		1.8			—			(0.3)
Tax Act - transition tax		0.7			19.2			—
Tax Act - remeasurement of deferred tax liabilities, net		—			(2.8)			—
Tax Act - change in indefinite reinvestment assertion		(1.6)			13.1			—
Excess tax benefits related to stock-based compensation		(1.2)			(4.9)			—
Impact of acquisition-related expenses		—			—			0.5
Other, net		(0.2)			0.4			1.4
Effective tax rate		23.4	%		51.1	%		27.0	%

The components of the Company’s deferred tax assets and liabilities are comprised of the following:

		December 31,
		2018			2017
Deferred tax assets relating to:
Accrued liabilities and reserves		$	39.1		$	31.7
Operating loss and tax credit carryforwards			81.5			84.2
Pensions			29.0			27.8
Inventories			40.4			35.1
Employee benefits			34.0			29.8
Total deferred tax assets			224.0			208.6
Valuation allowance			(34.7)			(39.6)
Total deferred tax assets, net of valuation allowances			189.3			169.0
Deferred tax liabilities relating to:
Goodwill			152.2			135.5
Depreciation and amortization			68.5			61.8
Unremitted foreign earnings			141.3			176.6
Contingent consideration			4.3			4.3
Total deferred tax liabilities			366.3			378.2
Net deferred tax liability		$	177.0		$	209.2
Classification of deferred tax assets and liabilities, as reflected on the Consolidated Balance Sheets:
Intangibles, net and other long-term assets		$	78.6		$	32.0
Deferred income taxes			255.6			241.2
Net deferred tax liability, long-term		$	177.0		$	209.2

A tabular reconciliation of the gross amounts of unrecognized tax benefits excluding interest and penalties at the beginning and end of the year for 2018, 2017 and 2016 is shown below. The gross increases for tax positions in prior periods recorded in 2016 included $78.7 related to acquisitions.

		2018			2017			2016
Unrecognized tax benefits as of January 1		$	127.3		$	106.2		$	29.8
Gross increases for tax positions in prior periods			18.9			32.7			81.9
Gross increases for tax positions in current period			2.0			2.4			7.0
Settlements			(14.1)			(11.0)			(10.8)
Lapse of statute of limitations			(3.6)			(3.0)			(1.7)
Unrecognized tax benefits as of December 31		$	130.5		$	127.3		$	106.2

The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2018, 2017 and 2016, the provision for income taxes included a net expense of $1.1, $3.7 and $6.5, respectively, in estimated interest and penalties. As of December 31, 2018, 2017 and 2016, the liability for unrecognized tax benefits included $40.5, $39.3 and $35.3, respectively, for tax-related interest and penalties.

The Company operates in the U.S. and numerous foreign taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2014 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of December 31, 2018 and 2017, the amount of the liability for unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $141.8 and $130.1, respectively, which is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and the closing of statutes

of limitation. Based on information currently available, management anticipates that over the next twelve-month period, audit activity could be completed and statutes of limitation may close relating to existing unrecognized tax benefits of approximately $33.8.

Note 5—Equity

Stock-Based Compensation:

The Company’s income before income taxes was reduced by $55.6, $49.7 and $47.6 for the years ended December 31, 2018, 2017 and 2016, respectively, related to the expense incurred for stock-based compensation plans, which is included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Income. In addition, for the years ended December 31, 2018, 2017 and 2016, the Company recognized aggregate income tax benefits in the provision for income taxes in the accompanying Consolidated Statements of Income associated with stock-based compensation of $27.5, $78.3 and $11.4, respectively. These aggregate income tax benefits during the years ended December 31, 2018, 2017 and 2016 includes the excess tax benefit of $19.8, $66.6 and nil, respectively, from option exercises during these years. Prior to 2017 and under previous accounting guidance, these excess tax benefits were recorded directly to equity.

Stock Options

In May 2017, the Company adopted the 2017 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (the “2017 Employee Option Plan”). A committee of the Company’s Board of Directors has been authorized to grant stock options pursuant to the 2017 Employee Option Plan. The number of shares of the Company’s Class A Common Stock (“Common Stock”) reserved for issuance under the 2017 Employee Option Plan is 30,000,000 shares. As of December 31, 2018, there were 16,985,620 shares of Common Stock available for the granting of additional stock options under the 2017 Employee Option Plan. The Company also continues to maintain the 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended (the “2009 Employee Option Plan”). No additional stock options will be granted under the 2009 Employee Option Plan. The 2000 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended, expired in May 2011 and all options granted thereunder have been either exercised or forfeited. Options granted under the 2017 Employee Option Plan and the 2009 Employee Option Plan generally vest ratably over a period of five years from the date of grant and are generally exercisable over a period of ten years from the date of grant.

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “2004 Directors Option Plan”). The 2004 Directors Option Plan is administered by the Company’s Board of Directors. The 2004 Directors Option Plan expired in May 2014, except that its terms continue with respect to any outstanding options granted thereunder. Options were last granted under the 2004 Directors Option Plan in May 2011. Options granted under the 2004 Directors Option Plan are fully vested and are generally exercisable over a period of ten years from the date of grant.

Stock option activity for 2016, 2017 and 2018 was as follows:

							Weighted
							Average		Aggregate
				Weighted			Remaining		Intrinsic
				Average			Contractual		Value
		Options		Exercise Price			Term (in years)		(in millions)
Options outstanding at January 1, 2016		31,136,475		$	37.62		6.92
Options granted		7,560,450			57.72
Options exercised		(5,703,254)			25.80
Options forfeited		(727,280)			50.17
Options outstanding at December 31, 2016		32,266,391			44.14		7.03
Options granted		7,029,600			72.98
Options exercised		(5,773,287)			31.87
Options forfeited		(300,340)			55.16
Options outstanding at December 31, 2017		33,222,364			52.27		7.05
Options granted		6,302,100			87.95
Options exercised		(3,464,876)			37.81
Options forfeited		(508,920)			69.03
Options outstanding at December 31, 2018		35,550,668		$	59.77		6.81		$	798.6
Vested and non-vested options expected to vest at December 31, 2018		33,437,668		$	59.06		6.73		$	772.9
Exercisable options at December 31, 2018		16,261,168		$	46.22		5.30		$	566.0

A summary of the status of the Company’s non-vested options as of December 31, 2018 and changes during the year then ended is as follows:

				Weighted Average
				Fair Value
		Options		at Grant Date
Non-vested options at January 1, 2018		19,600,440		$	8.29
Options granted		6,302,100			12.82
Options vested		(6,104,120)			8.35
Options forfeited		(508,920)			9.09
Non-vested options at December 31, 2018		19,289,500		$	9.73

The weighted average fair value at the grant date of options granted during 2017 and 2016 was $8.78 and $7.39, respectively.

During the years ended December 31, 2018, 2017 and 2016, the following activity occurred under the Company’s option plans:

		2018			2017			2016
Total intrinsic value of stock options exercised		$	188.1		$	268.7		$	197.2
Total fair value of stock options vested			51.0			46.3			43.1

As of December 31, 2018, the total compensation cost related to non-vested options not yet recognized was approximately $140.3, with a weighted average expected amortization period of 3.41 years.

The grant date fair value of each option grant under the 2009 Employee Option Plan, the 2017 Employee Option Plan and the 2004 Directors Option Plan is estimated using the Black-Scholes option pricing model. The grant-date fair value of each share grant is determined based on the closing share price of the Company’s Common Stock on the date of the grant. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model for option grants requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility is calculated based on the historical volatility of the Common Stock and implied volatility derived from related exchange traded options. The average expected life is based on the contractual term of the option and expected exercise and historical post-vesting termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issuances with a remaining term equal to

the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.

The fair value of stock options has been estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

		2018			2017			2016
Risk free interest rate		2.9	%		1.7	%		1.3	%
Expected life		4.7	years		4.6	years		4.6	years
Expected volatility		13.0	%		13.0	%		15.0	%
Expected dividend yield		1.0	%		1.0	%		1.0	%

Restricted Stock

In 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “2012 Directors Restricted Stock Plan”). The 2012 Directors Restricted Stock Plan is administered by the Company’s Board of Directors. As of December 31, 2018, the number of restricted shares available for grant under the 2012 Directors Restricted Stock Plan was 109,150. Restricted shares granted under the 2012 Directors Restricted Stock Plan generally vest on the first anniversary of the grant date. Grants under the 2012 Directors Restricted Stock Plan entitle the holder to receive shares of the Company’s Common Stock without payment.

Restricted share activity for 2016, 2017 and 2018 was as follows:

							Weighted Average
				Fair Value			Remaining
		Restricted		at Grant			Amortization
		Shares		Date			Term (in years)
Restricted shares outstanding at January 1, 2016		17,256		$	57.97		0.39
Restricted shares granted		16,905			57.99
Shares vested and issued		(17,256)			57.97
Restricted shares outstanding at December 31, 2016		16,905			57.99		0.38
Restricted shares granted		12,905			73.25
Shares vested and issued		(16,905)			57.99
Restricted shares outstanding at December 31, 2017		12,905			73.25		0.37
Restricted shares granted		15,014			87.84
Shares vested and issued		(13,046)			73.35
Restricted shares outstanding at December 31, 2018		14,873		$	87.89		0.39

The total fair value of restricted share awards that vested during 2018, 2017, and 2016 was $1.0 for each of these years. As of December 31, 2018, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $0.5 with a weighted average expected amortization period of 0.39 years.

Stock Repurchase Program:

On April 24, 2018, the Company’s Board of Directors 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 24, 2021 in accordance with the requirements of Rule 10b-18 of the Exchange Act (the “2018 Stock Repurchase Program”). During the year ended December 31, 2018, the Company repurchased 6.4 million shares of its Common Stock for $553.2 under the 2018 Stock Repurchase Program. Approximately 5.7 million shares, or $498.2, have been retired by the Company; the remaining 0.7 million shares, or $55.0, have been retained in Treasury stock. From January 1, 2019 through January 31, 2019, the Company repurchased approximately 0.6 million additional shares of its Common Stock for $50.6, leaving approximately $1,396.2 available to purchase under the 2018 Stock Repurchase Program. The price and timing of any future purchases under the 2018 Stock Repurchase Program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price.

On January 24, 2017, the Company’s Board of Directors authorized a stock repurchase program under which the Company could purchase up to $1,000.0 of the Company’s Common Stock during the two-year period ending

January 24, 2019 in accordance with the requirements of Rule 10b-18 of the Exchange Act (the “2017 Stock Repurchase Program”). During the three months ended March 31, 2018, the Company repurchased 4.2 million shares of its Common Stock for $382.0, while during the year ended December 31, 2017, the Company repurchased 8.4 million shares of its Common Stock for $618.0. These shares have been retired by the Company. These repurchases of approximately 12.6 million shares for $1,000.0 completed the 2017 Stock Repurchase Program.

In January 2015, the Company’s Board of Directors authorized a stock repurchase program under which the Company could repurchase up to 10 million shares of the Company’s Common Stock during the two-year period ended January 20, 2017 (the “2015 Stock Repurchase Program”). During the year ended December 31, 2016, the Company repurchased 5.5 million shares of its Common Stock for $325.8. These shares have been retired by the Company. At December 31, 2016, the Company had repurchased all of the shares authorized under the 2015 Stock Repurchase Program.

Dividends:

Contingent upon declaration by the Board of Directors, the Company generally pays a quarterly dividend on shares of its Common Stock. The following table summarizes the declared quarterly dividends per share for each of the three years ended December 31, 2018, 2017 and 2016:

		2018			2017			2016
First Quarter		$	0.19		$	0.16		$	0.14
Second Quarter			0.23			0.16			0.14
Third Quarter			0.23			0.19			0.14
Fourth Quarter			0.23			0.19			0.16
Total		$	0.88		$	0.70		$	0.58

The following table summarizes the dividends declared per share as well as the dividends declared and paid for the years ended December 31, 2018, 2017 and 2016:

		2018			2017			2016
Dividends declared		$	264.3		$	213.7		$	178.8
Dividends paid (including those declared in the prior year)			253.7			205.0			172.7

Accumulated Other Comprehensive Income (Loss):

Balances of related after-tax components comprising Accumulated other comprehensive income (loss) included in equity at December 31, 2018, 2017 and 2016 are as follows:

		Foreign			Unrealized			Defined			Accumulated
		Currency			Gain (Loss)			Benefit			Other
		Translation			on Cash			Plan			Comprehensive
		Adjustments			Flow Hedges			Adjustment			Income (Loss)
Balance at January 1, 2016		$	(164.9)		$	(1.7)		$	(182.9)		$	(349.5)
Other comprehensive income (loss) before reclassifications, net of tax of nil, ($0.3) and $12.3, respectively			(108.6)			1.6			(28.8)			(135.8)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($8.9)			—			—			16.3			16.3
Balance at December 31, 2016			(273.5)			(0.1)			(195.4)			(469.0)
Other comprehensive income (loss) before reclassifications, net of tax of nil, $0.1 and ($3.4), respectively			240.3			(0.1)			10.7			250.9
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($9.1)			—			—			17.1			17.1
Balance at December 31, 2017			(33.2)			(0.2)			(167.6)			(201.0)
Other comprehensive income (loss) before reclassifications, net of tax of nil, ($0.1) and $6.6, respectively			(164.3)			0.4			(22.0)			(185.9)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($6.4)			—			—			20.2			20.2
Amounts reclassified from Accumulated other comprehensive income (loss) to retained earnings, resulting from income tax effects of the Tax Act (ASU 2018-02) (Note 1)			—			—			(23.5)			(23.5)
Balance at December 31, 2018		$	(197.5)		$	0.2		$	(192.9)		$	(390.2)

The amounts reclassified from Accumulated other comprehensive income (loss) to earnings for defined benefit plan liabilities are reported within Other income, net in the Consolidated Statements of Income. The amounts reclassified from Accumulated other comprehensive income (loss) for unrealized gain (loss) on cash flow hedges are included in Cost of sales in the Consolidated Statements of Income.

Note 6—Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amphenol Corporation by the weighted average number of common shares outstanding. Diluted EPS is computed by dividing net income attributable to Amphenol Corporation by the weighted average number of common shares and dilutive common shares outstanding, which relates to stock options. A reconciliation of the basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the years ended December 31, 2018, 2017 and 2016 is as follows:

(dollars and shares in millions, except per share data)		2018			2017			2016
Net income attributable to Amphenol Corporation shareholders		$	1,205.0		$	650.5		$	822.9
Basic weighted average common shares outstanding			301.2			305.7			308.3
Effect of dilutive stock options			11.4			10.8			6.9
Diluted weighted average common shares outstanding			312.6			316.5			315.2
Earnings per share attributable to Amphenol Corporation shareholders:
Basic		$	4.00		$	2.13		$	2.67
Diluted		$	3.85		$	2.06		$	2.61

Excluded from the computations above were anti-dilutive common shares of 3.3 million, 1.6 million and 8.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Note 7—Benefit Plans and Other Postretirement Benefits

Defined Benefit Plans

The Company and certain of its domestic subsidiaries have defined benefit pension plans (the “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. Certain U.S. employees not covered by the U.S. Plans are covered by defined contribution plans. Certain foreign subsidiaries have defined benefit plans covering their employees (the “Foreign Plans” and together with the U.S. Plans, the “Plans”). The largest foreign pension plan, in accordance with local regulations, is unfunded and had a projected benefit obligation of approximately $92.7 and $93.0 at December 31, 2018 and 2017, respectively. Total required contributions to be made during 2019 for the unfunded Foreign Plans are included in Other accrued expenses in the accompanying Consolidated Balance Sheets and in the tables below.

The following is a summary of the Company’s defined benefit plans’ funded status as of the most recent actuarial valuations as of December 31 of each year.

		U.S. Plans						Foreign Plans						Total
			2018			2017			2018			2017			2018			2017
Change in projected benefit obligation:
Projected benefit obligation at beginning of year		$	486.7		$	469.8		$	255.0		$	233.5		$	741.7		$	703.3
Service cost			4.5			6.7			2.8			2.9			7.3			9.6
Interest cost			14.9			15.3			4.7			4.7			19.6			20.0
Plan amendments			0.2			—			0.8			—			1.0			—
Actuarial (gain) loss			(33.1)			21.1			(3.1)			(2.2)			(36.2)			18.9
Foreign exchange translation			—			—			(13.0)			26.7			(13.0)			26.7
Benefits paid			(24.3)			(26.2)			(11.9)			(10.6)			(36.2)			(36.8)
Projected benefit obligation at end of year			448.9			486.7			235.3			255.0			684.2			741.7
Change in plan assets:
Fair value of plan assets at beginning of year			389.6			342.1			108.3			97.8			497.9			439.9
Actual return on plan assets			(28.8)			57.2			(0.9)			5.2			(29.7)			62.4
Employer contributions			81.7			16.5			6.6			6.0			88.3			22.5
Foreign exchange translation			—			—			(6.2)			9.9			(6.2)			9.9
Benefits paid			(24.3)			(26.2)			(11.9)			(10.6)			(36.2)			(36.8)
Fair value of plan assets at end of year			418.2			389.6			95.9			108.3			514.1			497.9
Underfunded status at end of year		$	30.7		$	97.1		$	139.4		$	146.7		$	170.1		$	243.8
Amounts recognized on the balance sheet as of December 31:
Other accrued expenses		$	1.0		$	—		$	2.9		$	3.1		$	3.9		$	3.1
Accrued pension and postretirement benefit obligations			29.7			97.1			136.5			143.6			166.2			240.7
Underfunded status at end of year		$	30.7		$	97.1		$	139.4		$	146.7		$	170.1		$	243.8
Accumulated other comprehensive loss, net		$	(140.2)		$	(110.5)		$	(52.7)		$	(53.9)		$	(192.9)		$	(164.4)
Weighted average assumptions used to determine projected benefit obligations:
Discount rate			4.14	%		3.48	%		2.28	%		2.21	%
Rate of compensation increase			3.00	%		3.00	%		1.77	%		1.70	%

The projected benefit obligation decreased in 2018 primarily due to actuarial gains in 2018 resulting from the impact of higher discount rates on our projected benefit obligation. The projected benefit obligation increased in 2017 primarily due to higher actuarial losses in 2017, primarily resulting from the impact of lower discount rates on our projected benefit obligation. The accumulated benefit obligation for the Company’s defined benefit pension plans was $674.5 and $731.2 at December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, the accumulated benefit obligation for the U.S. Plans was $446.4 and $484.4, respectively, and for the Foreign Plans was $228.1 and $246.8, respectively. All of the Company’s U.S. Plans and Foreign Plans have accumulated benefit obligations (and projected benefit obligations) in excess of plan assets as of December 31, 2018 and 2017.

The following is a summary of the components of net pension expense for the Company’s defined benefit plans for the years ended December 31, 2018, 2017 and 2016:

		U.S. Plans									Foreign Plans									Total
		2018			2017			2016			2018			2017			2016			2018			2017			2016
Components of net pension expense:
Service cost		$	4.5		$	6.7		$	6.2		$	2.8		$	2.9		$	2.8		$	7.3		$	9.6		$	9.0
Interest cost			14.9			15.3			15.4			4.7			4.7			5.5			19.6			20.0			20.9
Expected return on plan assets			(34.5)			(27.2)			(26.2)			(3.8)			(3.5)			(3.9)			(38.3)			(30.7)			(30.1)
Amortization of prior service cost			2.3			2.7			2.4			—			—			—			2.3			2.7			2.4
Settlements			—			—			—			0.6			—			—			0.6			—			—
Amortization of actuarial losses			19.0			18.3			18.6			4.2			4.6			3.4			23.2			22.9			22.0
Net pension expense		$	6.2		$	15.8		$	16.4		$	8.5		$	8.7		$	7.8		$	14.7		$	24.5		$	24.2
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate			3.48	%		3.93	%		4.11	%		2.21	%		2.28	%		2.96	%
Expected long-term return on assets			7.75	%		7.75	%		7.75	%		3.69	%		3.80	%		4.29	%
Rate of compensation increase			3.00	%		3.00	%		3.00	%		1.70	%		1.63	%		1.61	%

The pension expense for the Plans is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, including mortality projections as well as a weighted average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on the respective Plans’ assets which are detailed in the table above. The Company records service costs in the same line item as the respective employee compensation costs and within operating income, while all other pension-related costs including interest cost, expected return on plan assets, amortization of prior service cost and amortization of net actuarial losses are reported separately within Other income, net in the Consolidated Statements of Income.

The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The weighted average discount rate for the U.S. Plans on this basis was 4.14% and 3.48% at December 31, 2018 and 2017, respectively. The increase in the discount rate for the U.S. Plans resulted in a decrease in the benefit obligation of approximately $35.0 at December 31, 2018. The weighted average discount rate for the Foreign Plans was 2.28% and 2.21% at December 31, 2018 and 2017, respectively. The increase in the discount rate for the Foreign Plans did not have a material impact on the benefit obligation at December 31, 2018. The Company calculates its service and interest costs by applying a split discount rate approach under which specific spot rates along the selected yield curve are applied to the relevant projected cash flows as the Company believes this method more precisely measures its obligations. The mortality assumptions used by the Company reflect commonly used mortality tables and improvement scales for each plan and increased life expectancies for plan participants.

The Company’s investment strategy for the Plans’ assets is to achieve a rate of return on plan assets equal to or greater than the average for the respective investment classification through prudent allocation and periodic rebalancing between fixed income and equity instruments. The current investment policy includes a strategy to maintain an adequate level of diversification, subject to portfolio risks. The target allocations for the U.S. Plans are generally 60% equity and 40% fixed income. Short-term strategic ranges for investments are established within these long term target percentages. The Company invests in a diversified investment portfolio through various investment managers and evaluates its plan assets for the existence of concentration risks. As of December 31, 2018, there were no significant concentrations of risks in the Company’s defined benefit plan assets. The Company does not invest nor instruct investment managers to invest pension assets in Amphenol securities. The Plans may indirectly hold the Company’s securities as a result of external investment management in certain commingled funds. Such holdings would not be material relative to the Plans’ total assets. The Company’s Foreign Plans primarily invest in equity and debt securities and insurance contracts, as determined by each Plans’ Trustees or investment managers.

In developing the expected long-term rate of return assumption for the U.S. Plans, the Company evaluated input from its external actuaries and investment consultants as well as consideration of long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The Company also considered its historical compounded return of approximately 8.5%, which has been in excess of these broad equity and bond benchmark indices. As described above, the expected long-term rate of return on the U.S. Plans’ assets is based on an asset allocation assumption of approximately 60% with equity managers (with an expected long-term rate of return of approximately 8-9%) and 40% with fixed income managers (with an expected long-term rate of return of approximately

5-6%). The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate.

The Company’s Plan assets, the vast majority of which relate to the U.S. Plans, are reported at fair value and classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The process requires judgment and may have an effect on the placement of the Plan assets within the fair value measurement hierarchy. The fair values of the Company’s pension Plans’ assets at December 31, 2018 and 2017 by asset category are as follows (refer to Note 3 for definitions of Level 1, 2 and 3 inputs):

														Assets
														Measured at
														Net Asset
Asset Category		Total			Level 1			Level 2			Level 3			Value (a)
December 31, 2018
Equity securities:
U.S. equities — large cap		$	139.3		$	104.9		$	34.4		$	—		$	—
U.S. equities — small/mid cap and other			27.5			—			27.5			—			—
International equities — growth			32.7			28.0			4.7			—			—
International equities — other			84.9			—			34.0			—			50.9
Alternative investment funds			19.9			—			—			—			19.9
Fixed income securities:
U.S. fixed income securities — short term			11.2			—			—			—			11.2
U.S. fixed income securities — intermediate term			77.7			77.7			—			—			—
U.S. fixed income securities — high yield			26.4			—			26.4			—			—
International fixed income securities — other			45.9			—			45.9			—			—
Insurance contracts			35.1			—			—			35.1			—
Real estate funds			10.2			—			—			10.2			—
Cash and cash equivalents			3.3			3.3			—			—			—
Total		$	514.1		$	213.9		$	172.9		$	45.3		$	82.0
December 31, 2017
Equity securities:
U.S. equities — large cap		$	141.5		$	106.6		$	34.9		$	—		$	—
U.S. equities — small/mid cap and other			22.0			—			22.0			—			—
International equities — growth			35.6			30.4			5.2			—			—
International equities — other			95.5			—			40.7			—			54.8
Alternative investment funds			12.9			—			—			—			12.9
Fixed income securities:
U.S. fixed income securities — short term			6.1			—			—			—			6.1
U.S. fixed income securities — intermediate term			61.4			61.4			—			—			—
U.S. fixed income securities — high yield			21.9			—			21.9			—			—
International fixed income securities — other			47.4			—			47.4			—			—
Insurance contracts			37.9			—			—			37.9			—
Real estate funds			7.0			—			—			7.0			—
Cash and cash equivalents			8.7			8.7			—			—			—
Total		$	497.9		$	207.1		$	172.1		$	44.9		$	73.8

	(a)		Certain investments measured at fair value using the net asset value (NAV) practical expedient have been removed from the fair value hierarchy but included in the table above in order to permit the reconciliation of the fair value hierarchy to total plan assets.

Equity securities consist primarily of publicly traded U.S. and non-U.S. equities. Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded. Certain equity securities held in commingled funds are valued at unitized net asset value (“NAV”) based on the fair value of the underlying net assets owned by the funds. Alternative investment funds include investments in hedge funds including fund of fund products.

Fixed income securities consist primarily of government securities and corporate bonds. They are valued at the closing price in the active market or at quotes obtained from brokers/dealers or pricing services. Certain fixed income securities held within commingled funds are valued at NAV as determined by the custodian of the funds based on the fair value of the underlying net assets of the funds.

The Level 3 pension plan assets as of December 31, 2018 and 2017 included in the table above consist primarily of contracts with insurance companies related to certain foreign plans. The insurance contracts generally include guarantees in accordance with the policy purchased. Our valuation of Level 3 assets is based on insurance company or third-party actuarial valuations, representing an estimation of the surrender or market values of the insurance contract between the Company and the insurance companies. Our Level 3 pension plan assets also include certain investments in commingled real estate funds which are valued at net asset value, although based on unobservable inputs. The following table sets forth a summary of changes of the fair value of the Level 3 pension plan assets for the years ended December 31, 2018 and 2017:

			2018			2017
Balance on January 1		$	44.9		$	34.0
Unrealized gains (losses), net			1.2			0.6
Purchases, sales and settlements, net			0.9			5.8
Foreign currency translation			(1.7)			4.5
Balance on December 31		$	45.3		$	44.9

The amounts, before tax, included in Accumulated other comprehensive loss at December 31, 2018 and 2017 that have not yet been recognized as expense were as follows:

		U.S.						Foreign
		Plans						Plans						Total
			2018			2017			2018			2017			2018			2017
Net loss		$	178.8		$	167.7		$	63.4		$	70.0		$	242.2		$	237.7
Net prior service cost			5.7			7.7			0.8			—			6.5			7.7

The Company made cash contributions to the Plans of $88.3, $22.5, and $22.2 in 2018, 2017, and 2016, respectively. In January 2018, the Company made voluntary cash contributions of approximately $81.0 to fund the U.S. Plans. 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.

Benefit payments related to the Plans above, including those amounts to be paid out of Company assets and reflecting future expected service as appropriate, are expected to be as follows:

		U.S.			Foreign
		Plans			Plans			Total
2019		$	25.9		$	6.9		$	32.8
2020			27.0			7.0			34.0
2021			28.0			7.4			35.4
2022			29.0			8.8			37.8
2023			29.8			8.6			38.4
2024-2028			152.2			51.9			204.1

The Company also has an unfunded Supplemental Employee Retirement Plan (“SERP”), which provides for the payment of the portion of annual pension which cannot be paid from the retirement plan as a result of regulatory

limitations on average compensation for purposes of the benefit computation. The obligation related to the SERP is included in the accompanying Consolidated Balance Sheets and in the tables above.

Certain foreign subsidiaries of the Company offer certain benefits under local statutory plans which are excluded from the tables above. The net liability for such plans was $13.7 and $16.6 as of December 31, 2018 and 2017, respectively, the majority of which is included within Accrued pension and postretirement benefit obligations in the accompanying Consolidated Balance Sheets.

Other Postretirement Benefit Plans

The Company maintains self-insurance programs for that portion of its health care and workers compensation costs not covered by insurance. The Company also provides certain health care and life insurance benefits to certain eligible retirees in the U.S. through postretirement benefit (“OPEB”) programs. The Company’s share of the cost of such plans for most participants is fixed, and any increase in the cost of such plans will be the responsibility of the retirees. The Company funds the benefit costs for such plans on a pay-as-you-go basis. As of December 31, 2018 and 2017, the total liability associated with postretirement benefit obligations was approximately $8.4 and $13.1, respectively, the majority of which is included in Accrued pension and postretirement benefit obligations on the accompanying Consolidated Balance Sheets. The weighted average discount rate used to determine the projected benefit obligation as of December 31, 2018 and 2017 was 4.06% and 3.29%, respectively. Net postretirement benefit expense on the accompanying Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016 were $0.8, $0.9 and $1.1, respectively. Since the Company’s obligation for postretirement medical plans is fixed and since the benefit obligation and the net postretirement benefit expense are not material in relation to the Company’s financial condition or results of operations, the Company believes any change in medical costs from that estimated will not have a significant impact on the Company.

Defined Contribution Plans

The Company offers various defined contribution plans for certain U.S. and foreign employees. Participation in these plans is based on certain eligibility requirements. Through 2018, the Company matched the majority of employee contributions to the U.S. defined contribution plans with cash contributions up to a maximum of 5% of eligible compensation. The Company provided matching contributions to the U.S. defined contribution plans of approximately $8.6, $6.9 and $5.0 in 2018, 2017 and 2016, respectively. Effective January 1, 2019, the Company increased its matching of employee contributions to the U.S. defined contribution plans to a maximum of 6% of eligible compensation.

Note 8—Leases

At December 31, 2018, the Company was committed under operating leases for buildings, office space, automobiles and equipment, which expire at various dates. Total rent expense under operating leases for the years 2018, 2017 and 2016 was approximately $87.2, $58.5 and $50.5, respectively.

Minimum lease payments under non-cancelable operating leases are as follows:

2019		$	70.5
2020			39.0
2021			25.9
2022			16.5
2023			11.9
Beyond 2023			33.5
Total minimum obligation		$	197.3

Note 9—Acquisitions

During the twelve months ended December 31, 2018, the Company completed three acquisitions, all in the Interconnect Products and Assemblies segment. The Company is in the process of completing its analyses of the fair value of the assets acquired and liabilities assumed. The Company anticipates that the final assessments of values will

not differ materially from the preliminary assessments. These acquisitions were not material to the Company either individually or in the aggregate.

Acquisition-related Expenses

In 2018, the Company incurred approximately $8.5 ($7.2 after-tax) of acquisition-related expenses in the fourth quarter related to external transaction costs. In 2017, the Company incurred approximately $4.0 ($3.7 after-tax) of acquisition-related expenses in the second quarter related to external transaction costs. In 2016, the Company incurred approximately $30.3 ($27.3 after-tax) of acquisition-related expenses related to the acquisition of FCI Asia Pte. Ltd. (“FCI”) in the first quarter, primarily related to external transaction costs, amortization related to the value associated with acquired backlog and post-closing restructuring charges; and approximately $6.3 ($5.8 after-tax) of acquisition-related transaction expenses incurred in the third quarter. Such acquisition-related expenses are separately presented in the accompanying Consolidated Statements of Income.

Acquisition of SSI Controls Technologies (“SSI”)

In January 2019, pursuant to a definitive agreement entered into on November 27, 2018, the Company acquired SSI Controls Technologies (“SSI”), the sensor manufacturing division of SSI Technologies, Inc., for approximately $400, net of cash acquired (subject to customary post-closing adjustments), plus a performance-related contingent payment. SSI, which is headquartered in the United States (Wisconsin), is a leading designer and manufacturer of sensors and sensing solutions for the global automotive and industrial markets. The acquisition of SSI is not material to the Company.

Note 10—Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows:

		Interconnect			Cable
		Products and			Products and
		Assemblies			Solutions			Total
Goodwill at December 31, 2016		$	3,532.5		$	146.3		$	3,678.8
Acquisition-related			233.6			0.2			233.8
Foreign currency translation			130.0			—			130.0
Goodwill at December 31, 2017			3,896.1			146.5			4,042.6
Acquisition-related			126.7			—			126.7
Foreign currency translation			(66.1)			—			(66.1)
Goodwill at December 31, 2018		$	3,956.7		$	146.5		$	4,103.2

Other than goodwill noted above, the following is a summary of the Company’s intangible assets as of December 31, 2018 and 2017:

			December 31, 2018									December 31, 2017
	Weighted		Gross						Net			Gross						Net
	Average		Carrying			Accumulated			Carrying			Carrying			Accumulated			Carrying
	Life (years)		Amount			Amortization			Amount			Amount			Amortization			Amount
Customer relationships	10		$	399.2		$	234.7		$	164.5		$	398.1		$	199.8		$	198.3
Proprietary technology	11			107.5			60.5			47.0			107.5			50.7			56.8
Backlog and other	2			34.0			33.7			0.3			34.0			33.6			0.4
Total intangible assets (definite-lived)	10			540.7			328.9			211.8			539.6			284.1			255.5
Trade names (indefinite-lived)				186.1			—			186.1			186.1			—			186.1
			$	726.8		$	328.9		$	397.9		$	725.7		$	284.1		$	441.6

Intangible assets are included in Intangibles, net and other long-term assets in the accompanying Consolidated Balance Sheets. The amortization expense for the years ended December 31, 2018, 2017 and 2016 was approximately $46.9, $48.6 and $54.6, respectively. The 2016 amortization expense includes $8.0 related to the amortization of acquired backlog. Amortization expense relating to the Company’s current intangible assets estimated for each of the next five fiscal years is approximately $42.6 in 2019, $37.0 in 2020, $32.3 in 2021, $24.9 in 2022 and $22.2 in 2023.

Note 11—Reportable Business Segments and International Operations

The Company has two reportable business segments: (i) Interconnect Products and Assemblies and (ii) Cable Products and Solutions. The Company organizes its reportable business segments based upon similar economic characteristics and business groupings of products, services, and customers. These reportable business segments are determined based upon how the Company reviews its businesses, assesses operating performance and makes investing and resource allocation decisions. The Interconnect Products and Assemblies segment primarily designs, manufactures and markets a broad range of connector and connector systems, value-add products and other products, including antennas and sensors, used in a broad range of applications in a diverse set of end markets. The Cable Products and Solutions segment primarily designs, manufactures and markets cable, value-add products and components for use primarily in the broadband communications and information technology markets as well as certain applications in other markets. The accounting policies of the segments are the same as those for the Company as a whole and are described in Note 1 herein. The Company evaluates the performance of business units on, among other things, profit or loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes, amortization related to certain intangible assets and nonrecurring gains and losses.

		Interconnect Products									Cable Products									Total Reportable
		and Assemblies									and Solutions									Business Segments
		2018			2017			2016			2018			2017			2016			2018			2017			2016
Net sales:
External		$	7,781.9		$	6,606.9		$	5,922.3		$	420.1		$	404.4		$	364.1		$	8,202.0		$	7,011.3		$	6,286.4
Intersegment			12.8			9.7			6.9			34.0			40.7			30.0			46.8			50.4			36.9
Depreciation and amortization			287.2			214.7			206.8			6.6			6.3			4.9			293.8			221.0			211.7
Segment operating income			1,752.5			1,475.2			1,280.3			52.6			54.2			52.8			1,805.1			1,529.4			1,333.1
Segment assets (excluding goodwill)			5,678.6			5,732.6			4,587.5			208.1			200.3			197.1			5,886.7			5,932.9			4,784.6
Capital expenditures			305.0			220.4			186.2			5.2			5.6			4.0			310.2			226.0			190.2

Reconciliation of segment operating income to consolidated income before income taxes:

		2018			2017			2016
Segment operating income		$	1,805.1		$	1,529.4		$	1,333.1
Interest expense			(101.7)			(92.3)			(72.6)
Other income, net			3.2			17.1			8.5
Stock-based compensation expense			(55.6)			(49.7)			(47.6)
Acquisition-related expenses			(8.5)			(4.0)			(36.6)
Other operating expenses			(54.1)			(48.1)			(43.7)
Income before income taxes		$	1,588.4		$	1,352.4		$	1,141.1

Reconciliation of segment assets to consolidated total assets:

		2018			2017
Segment assets, excluding goodwill		$	5,886.7		$	5,932.9
Goodwill			4,103.2			4,042.6
Other assets			55.0			28.4
Consolidated total assets		$	10,044.9		$	10,003.9

Net sales by geographic area for the years ended December 31, 2018, 2017 and 2016 and property, plant and equipment, net by geographic area as of December 31 were as follows:

		2018			2017			2016
Net sales
United States		$	2,241.4		$	1,978.4		$	1,740.7
China			2,594.0			2,067.3			1,865.6
Other foreign locations			3,366.6			2,965.6			2,680.1
Total		$	8,202.0		$	7,011.3		$	6,286.4
Property, plant and equipment, net
United States		$	225.1		$	212.7		$	209.2
China			273.8			244.7			200.1
Other foreign locations			376.9			359.4			302.1
Total		$	875.8		$	816.8		$	711.4

Disaggregation of Net Sales

The following table shows our net sales disaggregated into categories the Company considers meaningful to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors for the year ended December 31, 2018:

		Year ended December 31, 2018
		Interconnect			Cable
		Products and			Products and			Total Reportable
		Assemblies			Solutions			Business Segments
Net sales by:
Sales channel:
End customers and contract manufacturers		$	6,667.9		$	322.3		$	6,990.2
Distributors and resellers			1,114.0			97.8			1,211.8
		$	7,781.9		$	420.1		$	8,202.0
Geography:
United States		$	2,038.0		$	203.4		$	2,241.4
China			2,589.9			4.1			2,594.0
Other foreign locations			3,154.0			212.6			3,366.6
		$	7,781.9		$	420.1		$	8,202.0

Net sales by geographic area are based on the customer location to which the product is shipped. During the year ended December 31, 2018, aggregate sales to the Company’s largest customer, including sales of products to EMS companies that the Company believes are manufacturing products on their behalf, represented approximately 12% of the Company’s net sales. No single customer represented 10% or more of the Company’s net sales for the years ended December 31, 2017 and 2016. It is impracticable to disclose net sales by product or group of products.

For further discussion related to the Company’s policies surrounding revenue recognition, refer to Note 1 herein.

Note 12—Commitments and Contingencies

The Company has been named as a defendant in several legal actions arising from normal business activities. The Company records a loss contingency liability when a loss is considered probable and the amount can be reasonably estimated. Although the potential liability with respect to certain of such legal actions cannot be reasonably estimated, none of such matters is expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s legal costs associated with defending itself are recorded to expense as incurred.

The Company has also received a subpoena from the U.S. Department of Defense, Office of the Inspector General, requesting documents pertaining to certain products manufactured by the Company’s Military and Aerospace Group that are purchased or used by the U.S. government. The Company is cooperating with the request. The inquiry is in the early stages and the Company is unable to estimate the timing or outcome of the matter.

Certain operations of the Company are subject to environmental laws and regulations which 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.

The Company also has purchase obligations related to commitments to purchase certain goods and services. At December 31, 2018, the Company had purchase commitments of $384.9 in 2019, $23.6 in 2020 and 2021, combined, and $5.7 beyond 2021.

Note 13—Selected Quarterly Financial Data (Unaudited)

		Three Months Ended
		March 31,			June 30,			September 30,			December 31,
2018
Net sales		$	1,866.9		$	1,981.4		$	2,129.0		$	2,224.7
Gross profit			606.9			644.8			688.2			715.0
Operating income			376.9			408.2			444.2			457.6	(4)
Net income			268.3	(1)		287.8	(2)		319.6	(3)		341.2	(4)
Net income attributable to Amphenol Corporation			265.6	(1)		284.8	(2)		316.6	(3)		338.1	(4)
Net income per common share—Basic			0.87	(1)		0.95	(2)		1.05	(3)		1.13	(4)
Net income per common share—Diluted			0.84	(1)		0.91	(2)		1.01	(3)		1.09	(4)
2017
Net sales		$	1,560.1		$	1,666.5		$	1,840.8		$	1,943.9
Gross profit			515.9			552.6			606.1			635.4
Operating income			314.1			336.2	(6)		377.9			399.4
Net income (loss)			227.3	(5)		253.6	(6)		280.3	(7)		(100.4)	(8)
Net income (loss) attributable to Amphenol Corporation			224.9	(5)		251.5	(6)		277.5	(7)		(103.4)	(8)
Net income (loss) per common share—Basic			0.73	(5)		0.82	(6)		0.91	(7)		(0.34)	(8)
Net income (loss) per common share—Diluted			0.71	(5)		0.80	(6)		0.88	(7)		(0.34)	(8)

	(1)		Net income and net income per common share includes excess tax benefits related to stock-based compensation of $4.1. The excess tax benefits had the effect of increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $4.1, $4.1 and $0.01 per share, respectively, for the three months ended March 31, 2018.

	(2)		Net income and net income per common share includes excess tax benefits related to stock-based compensation of $3.0. The excess tax benefits had the effect of increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $3.0, $3.0 and $0.01 per share, respectively, for the three months ended June 30, 2018.

	(3)		Net income and net income per common share includes excess tax benefits related to stock-based compensation of $7.0. The excess tax benefits had the effect of increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $7.0, $7.0 and $0.02 per share, respectively, for the three months ended September 30, 2018.

	(4)		Operating income, net income and net income per common share includes acquisition-related expenses of $8.5 ($7.2 after-tax, or $0.02 per share) primarily related to external transaction costs. Net income and net income per common share also includes an income tax benefit of $14.5 ($0.04 per share) recorded in 2018 related to the completion of its accounting for the provisional Tax Act Charge from 2017 resulting from the enactment of the Tax Cuts and Jobs Act (“Tax Act”), and the excess tax benefits related to stock-based compensation of $5.7 ($0.02 per share). These items had the aggregate effect of decreasing Operating income by $8.5, while increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $13.0, $13.0 and $0.04 per share, respectively, for the three months ended December 31, 2018.

	(5)		Net income and net income per common share includes excess tax benefits related to stock-based compensation of $8.0. The excess tax benefits had the effect of increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $8.0, $8.0 and $0.02 per share, respectively, for the three months ended March 31, 2017.

	(6)		Operating income, net income and net income per common share includes acquisition-related expenses of $4.0 ($3.7 after-tax, or $0.01 per share) primarily related to 2017 acquisitions and excess tax benefits related to stock-based compensation of $21.2 ($0.07 per share). These items had the aggregate effect of decreasing Operating income by $4.0, while increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $17.5, $17.5 and $0.06 per share, respectively, for the three months ended June 30, 2017.

	(7)		Net income and net income per common share includes excess tax benefits related to stock-based compensation of $16.6. The excess tax benefits had the effect of increasing Net income, Net income attributable to Amphenol Corporation, and Net income per common share-Diluted by $16.6, $16.6 and $0.05 per share, respectively, for the three months ended September 30, 2017.

	(8)		Net loss and net loss per common share includes the provisional Tax Act Charge of $398.5 ($1.26 per share) related to the enactment of the Tax Act, partially offset by the excess tax benefits related to stock-based compensation of $20.8 ($0.07 per share). In addition, diluted weighted average shares used to calculate the GAAP diluted net loss per common share for the fourth quarter of 2017 excluded the anti-dilutive effect of 12.4 million common share equivalents due to the GAAP net loss position during the period; this net loss per common share-diluted in this period would have been $0.01 less if the dilutive impact of common share equivalents was included in the diluted weighted average common shares outstanding. These items had the aggregate effect of decreasing Net income, Net income attributable to Amphenol Corporation, and Net income (loss) per common share-Diluted by $377.7, $377.7 and $1.20 per share, respectively, for the three months ended December 31, 2017.

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