Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(amounts in millions, except share and per share data, unless otherwise noted)

The following discussion and analysis of the results of operations and financial condition for the three years ended December 31, 2020, 2019 and 2018 has been derived from and should be read in conjunction with the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, herein. The Consolidated Financial Statements have been prepared in U.S. dollars, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The following discussion and analysis also includes references to certain non-GAAP financial measures, which are defined in the “Non-GAAP Financial Measures” section below, including “Constant Currency Net Sales Growth” and “Organic Net Sales Growth”. For purposes of the following discussion, the terms “constant currencies” and “organically” have the same meanings, respectively, as these aforementioned non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” within this Item 7 for more information, including our reasons for including non-GAAP financial measures and material limitations with respect to the usefulness of the measures.

In addition to historical information, the following discussion and analysis also contains certain forward-looking statements that are subject to risks and uncertainties, including but not limited to the risk factors described in Part I, Item 1A herein, as well as the risks and uncertainties that exist with the use of forward-looking statements as described in the “Cautionary Note Regarding Forward-Looking Statements” section included herein at the beginning of this Annual Report on Form 10-K.

Overview

General

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 and interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. The Company operates through two reporting segments: (i) Interconnect Products and Assemblies and (ii) Cable Products and Solutions. In 2020, approximately 71% of the Company’s sales were outside the United States. The primary end markets for our products are:

	●	information technology and communication devices and systems for the converging technologies of voice, video and data communications;

	●	a broad range of industrial applications and traditional, hybrid and electric automotive applications; and

	●	military and commercial aerospace applications.

The Company’s products are used in a wide variety of applications by numerous customers around the world. The Company competes primarily on the basis of technology innovation, product quality and performance, price, customer service and delivery time. There has been a trend on the part of customers to consolidate their lists of qualified suppliers to companies that have the ability to meet certain technical, quality, delivery and other standards while maintaining competitive prices. The Company has focused its global resources to position itself to compete effectively in this environment. The Company believes that its global presence is an important competitive advantage as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers.

Strategy

The Company’s strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a worldwide basis while maintaining continuing programs of productivity improvement and cost control. The Company focuses its research and development efforts through close collaboration with its customers to develop highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales within a one- to three-year period. The Company is also focused on controlling costs. The Company does this by investing in modern manufacturing technologies, controlling purchasing processes and expanding into lower cost areas.

The Company’s strategic objective is to further enhance its position in its served markets by pursuing the following success factors:

	●	Pursue broad diversification;

	●	Develop high technology performance-enhancing interconnect solutions;

	●	Expand global presence;

	●	Control costs;

	●	Pursue strategic acquisitions and investments; and

	●	Foster collaborative, entrepreneurial management.

In 2020, the Company reported net sales, operating income and net income attributable to Amphenol Corporation of $8,598.9, $1,638.4 and $1,203.4, respectively, representing an increase of 5%, 1% and 4%, respectively, from 2019. In 2020, the Company’s net income attributable to Amphenol Corporation was impacted by (a) excess tax benefits related to stock-based compensation of $42.8 resulting from stock option exercises and (b) a discrete tax benefit of $19.9 related to the settlements of refund claims in certain non-U.S. jurisdictions and the resulting adjustments to deferred taxes, partially offset by (c) acquisition-related expenses of $11.5 ($10.7 after-tax) primarily comprised of external transaction costs related to acquisitions that were announced or closed. In 2019, the Company’s net income attributable to Amphenol Corporation was impacted by (a) excess tax benefits related to stock-based compensation of $38.1 resulting from stock option exercises, partially offset by (b) acquisition-related expenses of $25.4 ($21.0 after-tax) primarily from the amortization related to the value associated with acquired backlog as well as external transaction costs and (c) refinancing-related costs associated with the early extinguishment of debt of $14.3 ($12.5 after-tax), comprised primarily of the premiums and other fees incurred from the early extinguishment of redeemed amounts of our 3.125% Senior Notes and 4.00% Senior Notes resulting from the tender offers in September 2019 described herein under “Liquidity and Capital Resources – Financing Activities”. Excluding the effects of these items, Adjusted Operating Income and Adjusted Net Income attributable to Amphenol Corporation, as defined in the “Non-GAAP Financial Measures” section below and reconciled in Part II, Item 7 herein, was unchanged in 2020 compared to 2019. Sales and profitability trends are discussed in detail in “Results of Operations” below. In addition, a strength of the Company has been its ability to consistently generate cash from operations (“Operating Cash Flow”). The Company uses Operating Cash Flow to fund capital expenditures and acquisitions, repurchase shares of its common stock, pay dividends and reduce indebtedness. In 2020, the Company generated Operating Cash Flow of $1,592.0 and Free Cash Flow of $1,327.9. Free Cash Flow, a non-GAAP financial measure, is defined in the “Non-GAAP Financial Measures” section below and reconciled within this Part II, Item 7 herein.

Impact of Coronavirus (“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations

The COVID-19 pandemic has caused widespread disruptions to our Company during 2020, particularly during the first half of the year. During the first quarter, these disruptions were primarily limited to our operations in China, which were closed for three weeks during January and February due to government mandates. As the virus spread to the rest of the world beginning in March and continuing throughout the remainder of 2020, most of our other operations outside of China were also impacted. As of December 31, 2020, we continue to experience some disruptions, and at a minimum, we expect those disruptions to continue through the first half of 2021 and they could, potentially, extend for the full year and beyond. These disruptions have included and may continue to include, depending on the specific location, government regulations that limit our ability to operate certain of our facilities at full capacity and to adjust certain costs, travel restrictions, “work-from-home” orders, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers. During the fourth quarter of 2020 and into 2021, in several regions around the world, including the United States and Europe, there has been a resurgence in COVID-19 cases. The extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, future government regulations and actions in response to the crisis, the timing, availability and effectiveness of vaccines, some of which have recently been approved and distributed for use, and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. In addition, the COVID-19 pandemic could impact the health of our management team and other employees. The Company continues taking actions to mitigate, as best we can, the impact of the COVID-19 pandemic on the health and well-being of our employees, the communities in which we operate and our partners, as well as the impact on our operations and business as a whole. However, there can be no assurance that the COVID-19 pandemic will not have a material and adverse impact on our operations, financial condition, liquidity and results of operations. For further discussion on the risks and uncertainties associated with the COVID-19 pandemic, refer to Part I, Item 1A. Risk Factors.

Results of Operations

The following table sets forth the components of net income attributable to Amphenol Corporation as a percentage of net sales for the years indicated.


	Year Ended December 31,
	2020		2019		2018
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	69.0		68.2		67.6
Acquisition-related expenses	0.1		0.3		0.1
Selling, general and administrative expenses	11.8		11.8		11.7
Operating income	19.1		19.7		20.6
Interest expense	(1.3)		(1.4)		(1.2)
Loss on early extinguishment of debt	—		(0.2)		—
Other income, net	—		0.1		—
Income before income taxes	17.8		18.2		19.4
Provision for income taxes	(3.7)		(4.1)		(4.5)
Net income	14.1		14.1		14.9
Net income attributable to noncontrolling interests	(0.1)		(0.1)		(0.2)
Net income attributable to Amphenol Corporation	14.0	%	14.0	%	14.7	%

2020 Compared to 2019

Net sales were $8,598.9 for the year ended December 31, 2020 compared to $8,225.4 for the year ended December 31, 2019, which was an increase of 5% in U.S. dollars, 4% in constant currencies, and 2% organically (excluding both currency and acquisition impacts), over the prior year. The increase in net sales in 2020 was driven by strong growth in several markets, which was partially offset by the sudden and severe slowdown in certain of our markets resulting from the global outbreak of the COVID-19 pandemic, which also caused production disruptions in many parts of the world during much of the first half of 2020.

Net sales in the Interconnect Products and Assemblies segment (approximately 96% of net sales) increased 5% in U.S. dollars, 4% in constant currencies, and 2% organically, in 2020 compared to 2019. The sales growth was driven by strong growth in the industrial, information technology and data communications, and mobile devices markets, along with moderate growth in the military market, and contributions from the Company’s acquisition program. This sales growth was partially offset by declines in the commercial aerospace, mobile networks and automotive markets, all of which were negatively impacted by the COVID-19 pandemic. Net sales to the industrial market increased (approximately $246.4), primarily driven by strength in battery and electric vehicle, industrial instrumentation, heavy equipment, alternative energy and medical applications, along with contributions from acquisitions. Net sales to the information technology and data communications market increased (approximately $234.0), driven primarily by strong sales growth to data center customers and market demand for storage and networking related products as customers worked to support higher demand for increased bandwidth to support work, school and entertainment activities during the pandemic, along with contributions from acquisitions. Net sales to the mobile devices market increased (approximately $179.9), driven by strength in products incorporated into laptops, tablets, wearable devices, and accessories along with production-related products, which was partially offset by a slight moderation of sales into smartphones. Net sales to the military market increased (approximately $32.2), driven by strength across multiple segments of the military market, offset in part by the impact of pandemic-related production disruptions experienced during the first half of the year. Net sales to the commercial aerospace market decreased significantly (approximately $135.3) primarily due to the significant impact of the COVID-19 pandemic on travel and aircraft production. Net sales to the mobile networks market decreased (approximately $98.5), which reflected the impact of the 2019 U.S. Government restrictions on certain Chinese customers as well as reduced demand from both mobile networks equipment manufacturers and mobile operators, partially as a result of the negative impact of the COVID-19 pandemic, offset in part by contributions from acquisitions. Net sales to the automotive market decreased (approximately $86.0), due to a significant reduction in demand resulting from customer factory shutdowns together with production disruptions in the first half of 2020 resulting from the COVID-19 pandemic, which was partially offset by a strong recovery of demand during the second half of the year.

Net sales in the Cable Products and Solutions segment (approximately 4% of net sales), which primarily serves the broadband communications market, decreased 4% in U.S. dollars, 1% in constant currencies and 1% organically in 2020, compared to 2019. The decrease in net sales in the Cable Products and Solutions segment was largely driven by the

negative impact of the COVID-19 pandemic primarily during the first half of 2020, as well as an overall weakness in market demand.

The table below reconciles Constant Currency Net Sales Growth and Organic Net Sales Growth to the most directly comparable U.S. GAAP financial measures, by segment and consolidated, for the year ended December 31, 2020 compared to the year ended December 31, 2019:


					Percentage Growth (relative to prior year)


					Net sales		Foreign		Constant				Organic
					growth in		currency		Currency Net		Acquisition		Net Sales
					U.S. Dollars (1)		impact (2)		Sales Growth (3)		impact (4)		Growth (3)
	2020		2019		(GAAP)		(non-GAAP)		(non-GAAP)		(non-GAAP)		(non-GAAP)
Net sales:
Interconnect Products and Assemblies	$	8,229.9	$	7,840.3	5	%	1	%	4	%	2	%	2	%
Cable Products and Solutions		369.0		385.1	(4)	%	(3)	%	(1)	%	—	%	(1)	%
Consolidated	$	8,598.9	$	8,225.4	5	%	1	%	4	%	2	%	2	%

(1)

Net sales growth in U.S. dollars is calculated based on Net sales as reported in the Consolidated Statements of Income and Note 13 of the accompanying financial statements. While the term “net sales growth in U.S. dollars” is not considered a U.S. GAAP financial measure, for purposes of this table, we derive the reported (GAAP) measure based on GAAP results, which serves as the basis for the reconciliation to its comparable non-GAAP financial measures.

(2)

Foreign currency translation impact, a non-GAAP measure, represents the impact on net sales resulting from foreign currency exchange rate changes in the current year compared to the prior year. Such amount is calculated by subtracting current year net sales translated at average foreign currency exchange rates for the respective prior year from current year reported net sales, taken as a percentage of the respective prior year’s net sales.

(3)	Constant Currency Net Sales Growth and Organic Net Sales Growth are non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section.

(4)	Acquisition impact, a non-GAAP measure, represents the impact on net sales resulting from acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year and which do not reflect the underlying growth of the Company on a comparative basis.

Geographically, net sales in the United States in 2020 decreased approximately 1% in U.S. dollars ($2,494.0 in 2020 versus $2,524.7 in 2019) and 5% organically, compared to 2019. Foreign sales in 2020 increased approximately 7% in U.S. dollars ($6,104.9 in 2020 versus $5,700.7 in 2019), 7% in constant currencies and 5% organically, compared to 2019, driven by strong growth in Asia. The comparatively weaker U.S. dollar in 2020 had an insignificant effect on net sales compared to 2019.

Selling, general and administrative expenses were $1,014.2 or 11.8% of net sales for 2020, compared to $971.4 or 11.8% of net sales for 2019. Administrative expenses increased approximately $27.5 in 2020, and represented approximately 4.8% of net sales in 2020 and 4.7% of net sales in 2019. Research and development expenses increased approximately $26.5 in 2020 primarily related to increases in expenses for new product development, and represented approximately 3.0% of net sales in 2020 and 2.8% of net sales in 2019. Selling and marketing expenses decreased approximately $11.2 in 2020 compared to 2019, and represented approximately 4.0% of net sales in 2020 and 4.3% of net sales in 2019.

Operating income was $1,638.4 or 19.1% of net sales in 2020, compared to $1,619.2 or 19.7% of net sales in 2019. Operating income for 2020 included acquisition-related expenses of $11.5, primarily comprised of external transaction costs related to acquisitions that were announced or closed. Operating income for 2019 included acquisition-related expenses of $25.4, comprised of the amortization of $15.7 related to the value associated with the acquired backlog resulting from two of our 2019 acquisitions, with the remainder representing external transaction costs. These acquisition-related expenses in 2020 and 2019 had the effect of decreasing net income by $10.7 or $0.03 per share, and $21.0 or $0.07 per share, respectively. Acquisition-related expenses are separately presented in the Consolidated Statements of Income. Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, was $1,649.9 or 19.2% of net sales, respectively, in 2020 and $1,644.6 or 20.0% of net sales, respectively, in 2019.

Operating income for the Interconnect Products and Assemblies segment in 2020 was $1,741.2 or 21.2% of net sales, compared to $1,722.7 or 22.0% of net sales in 2019. The decrease in operating margin for the Interconnect Products and Assemblies segment for 2020 compared to 2019 was primarily driven by the significant incremental costs incurred, primarily during the first half of 2020, related to the COVID-19 pandemic. This decrease in the operating margin during the first half of 2020 was partly offset by strong operating leverage on higher sales volumes during the second half of 2020.

Operating income for the Cable Products and Solutions segment in 2020 was $35.4 or 9.6% of net sales, compared to $39.5 or 10.2% of net sales in 2019. The decrease in operating margin for the Cable Products and Solutions segment in 2020 compared to 2019 was primarily driven by lower volumes as well as the negative impact of the COVID-19 pandemic, primarily during the first half of 2020.

Interest expense was $115.4 in 2020 compared to $117.6 in 2019. Refer to Note 4 of the Consolidated Financial Statements for further information related to the Company’s debt.

Loss on early extinguishment of debt was $14.3 in 2019, which related to refinancing-related costs, specifically premiums and fees incurred associated with the early extinguishment of certain redeemed principal amounts of the 3.125% Senior Notes and 4.00% Senior Notes (collectively, the “Tendered Notes”) as a result of the tender offers in September 2019. Refer to Note 4 of the accompanying Consolidated Financial Statements and the “Liquidity and Capital Resources” section within this Item 7 for further information related to the Tendered Notes.

Provision for income taxes was at an effective rate of 20.5% in 2020 and 22.2% in 2019. Provision for income taxes in 2020 included (i) excess tax benefits of $42.8 from stock option exercises and (ii) a discrete tax benefit of $19.9 related to the settlements of refund claims in certain non-U.S. jurisdictions and the resulting adjustments to deferred taxes, which was partially offset by the tax effect related to acquisition-related expenses during the year, each of which had an impact on the effective tax rate and earnings per share by the amounts noted in the table below. Provision for income taxes in 2019 included excess tax benefits of $38.1 from stock option exercises, which was partially offset by the tax effects related to (i) acquisition-related expenses during the year and (ii) refinancing-related costs associated with the early extinguishment of debt, each of which had an impact on the effective tax rate and earnings per share by the amounts noted in the table below. Excluding the effect of these items, the Adjusted Effective Tax Rate, a non-GAAP financial measure as defined in the “Non-GAAP Financial Measures” section below within this Item 7, was 24.5% for both 2020 and 2019, as reconciled in the table below to the comparable effective tax rate based on GAAP results. For additional details related to the reconciliation between the U.S. statutory federal tax rate and the Company’s effective tax rate for these years, refer to Note 6 of the Notes to Consolidated Financial Statements.

Net income attributable to Amphenol Corporation and Net income per common share-Diluted (“Diluted EPS”) were $1,203.4 and $3.91, respectively, for 2020, compared to $1,155.0 and $3.75, respectively, for 2019. Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS, non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section below within this Item 7, were $1,151.4 and $3.74, respectively, for 2020, compared to $1,150.4 and $3.74, respectively, for 2019.

The following table reconciles Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income attributable to Amphenol Corporation, Adjusted Effective Tax Rate and Adjusted Diluted EPS (all defined in the “Non-GAAP Financial Measures” section below) to the most directly comparable U.S. GAAP financial measures for the years ended December 31, 2020 and 2019:


	2020										2019
					Net Income										Net Income
					attributable		Effective								attributable		Effective
	Operating		Operating		to Amphenol		Tax		Diluted		Operating		Operating		to Amphenol		Tax		Diluted
	Income		Margin (1)		Corporation		Rate (1)		EPS		Income		Margin (1)		Corporation		Rate (1)		EPS
Reported (GAAP)	$	1,638.4	19.1	%	$	1,203.4	20.5	%	$	3.91	$	1,619.2	19.7	%	$	1,155.0	22.2	%	$	3.75
Acquisition-related expenses		11.5	0.1			10.7	(0.1)			0.03		25.4	0.3			21.0	(0.1)			0.07
Loss on early extinguishment of debt		-	-			-	-			-		-	-			12.5	(0.1)			0.04
Excess tax benefits related to stock-based compensation		-	-			(42.8)	2.8			(0.14)		-	-			(38.1)	2.5			(0.12)
Discrete tax item		-	-			(19.9)	1.3			(0.06)		-	-			-	-			-
Adjusted (non-GAAP)	$	1,649.9	19.2	%	$	1,151.4	24.5	%	$	3.74	$	1,644.6	20.0	%	$	1,150.4	24.5	%	$	3.74

(1)	While the terms “operating margin” and “effective tax rate” are not considered U.S. GAAP financial measures, for purposes of this table, we derive the reported (GAAP) measures based on GAAP results, which serve as the basis for the reconciliation to their comparable non-GAAP financial measure.

2019 Compared to 2018

Net sales were $8,225.4 for the year ended December 31, 2019 compared to $8,202.0 for the year ended December 31, 2018, which was flat in U.S. dollars, an increase of 2% in constant currencies and a decrease of 3% organically (excluding both currency and acquisition impacts), over the prior year.

Net sales in the Interconnect Products and Assemblies segment (approximately 95% of net sales) increased 1% in U.S. dollars and 2% in constant currencies, while decreasing 3% organically, in 2019 compared to 2018. The sales growth was driven by strong growth in the military and commercial aerospace markets as well as contributions from the Company’s acquisition program. This sales growth was largely offset by reductions in the communications-related markets, in particular the mobile devices market, along with the negative effect of currency translation. Net sales to the military market increased (approximately $181.0), driven by broad-based strength across essentially all segments including military vehicle, rotorcraft, and military airframe applications. Net sales to the commercial aerospace market increased (approximately $48.7) primarily due to strength in large passenger planes. Net sales to the industrial market increased (approximately $66.1), primarily driven by contributions from acquisitions, as well as strength in medical and factory automation applications, which were partially offset by moderations in industrial instrumentation, heavy equipment and transportation, as well as other applications. Net sales to the automotive market increased (approximately $38.0), driven primarily by contributions from acquisitions, which were partially offset by moderations in demand due to the slowing of the worldwide automotive market. Net sales to the information technology and data communications market slightly increased (approximately $5.6), driven primarily by contributions from acquisitions and organic growth of sales to data center customers, offset by moderations in market demand for storage and networking related products. Net sales to the mobile devices market decreased (approximately $277.5), driven by moderations in sales of products incorporated into smartphones. Net sales to the mobile networks market decreased (approximately $10.2), due to reduced demand from both mobile networks equipment manufacturers and mobile operators, offset in part by contributions from acquisitions.

Net sales in the Cable Products and Solutions segment (approximately 5% of net sales), which primarily serves the broadband communications market, decreased 8% in U.S. dollars, 6% in constant currencies and 7% organically in 2019, compared to 2018. The decrease in net sales in the Cable Products and Solutions segment was primarily due to a reduction in demand from broadband service providers.


					Percentage Growth (relative to prior year)


					Net sales		Foreign		Constant				Organic
					growth in		currency		Currency Net		Acquisition		Net Sales
					U.S. Dollars (1)		impact (2)		Sales Growth (3)		impact (4)		Growth (3)
	2019		2018		(GAAP)		(non-GAAP)		(non-GAAP)		(non-GAAP)		(non-GAAP)
Net sales:
Interconnect Products and Assemblies	$	7,840.3	$	7,781.9	1	%	(1)	%	2	%	5	%	(3)	%
Cable Products and Solutions		385.1		420.1	(8)	%	(2)	%	(6)	%	1	%	(7)	%
Consolidated	$	8,225.4	$	8,202.0	—	%	(2)	%	2	%	5	%	(3)	%

(1)

(2)

(3)	Constant Currency Net Sales Growth and Organic Net Sales Growth are non-GAAP financial measures as defined in the “Non-GAAP Financial Measures” section.

(4)	Acquisition impact, a non-GAAP measure, represents the impact on net sales resulting from acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year and which do not reflect the underlying growth of the Company on a comparative basis.

Geographically, net sales in the United States in 2019 increased approximately 13% in U.S. dollars ($2,524.7 in 2019 versus $2,241.4 in 2018) and 4% organically, compared to 2018. Foreign sales in 2019 decreased approximately 4% in U.S. dollars ($5,700.7 in 2019 versus $5,960.6 in 2018), 2% in constant currencies and 6% organically, compared to 2018, driven by moderations in Asia. The comparatively stronger U.S. dollar in 2019 had the effect of decreasing net sales by approximately $125.8, compared to foreign currency translation rates in 2018.

Selling, general and administrative expenses were $971.4 or 11.8% of net sales for 2019, compared to $959.5 or 11.7% of net sales for 2018. Administrative expenses were flat in 2019 compared to 2018, and represented approximately 4.7% of net sales in both years. Research and development expenses increased approximately $13.3 in 2019 primarily related to increases in expenses for new product development, and represented approximately 2.8% of net sales in 2019 and 2.7% of net sales in 2018. Selling and marketing expenses were flat in 2019 compared to 2018, and represented approximately 4.3% of net sales in both years.

Operating income was $1,619.2 or 19.7% of net sales in 2019, compared to $1,686.9 or 20.6% of net sales in 2018. Operating income for 2019 included acquisition-related expenses of $25.4, comprised of the amortization of $15.7 related to the value associated with the acquired backlog resulting from two of our 2019 acquisitions, with the remainder representing external transaction costs. Operating income for 2018 included acquisition-related expenses of $8.5, related to external transaction costs. These acquisition-related expenses are separately presented in the Consolidated Statements of Income. Excluding the effect of these acquisition-related expenses, Adjusted Operating Income and Adjusted Operating Margin, as defined in the “Non-GAAP Financial Measures” section below, were $1,644.6 or 20.0% of net sales, respectively, in 2019 and $1,695.4 or 20.7% of net sales, respectively, in 2018.

Operating income for the Interconnect Products and Assemblies segment in 2019 was $1,722.7 or 22.0% of net sales, compared to $1,752.5 or 22.5% of net sales in 2018. The slight decrease in operating margin for the Interconnect Products and Assemblies segment for 2019 compared to 2018 was primarily driven by normal downside conversion related to the organic decline in sales as well as the impact of recent acquisitions which currently have, on average, a lower operating margin than the average of the Interconnect Products and Assemblies segment.

Operating income for the Cable Products and Solutions segment in 2019 was $39.5 or 10.2% of net sales, compared to $52.6 or 12.5% of net sales in 2018. The decrease in operating margin for the Cable Products and Solutions segment in 2019 compared to 2018 was primarily driven by lower volumes and product mix.

Interest expense was $117.6 in 2019 compared to $101.7 in 2018. The increase is primarily due to higher average debt levels and the higher average interest rate associated with the 4.350% U.S. Senior Notes issuance in January 2019 (the net proceeds of which, along with commercial paper borrowings, were used to repay the Company’s 2.55% U.S. Senior Notes also in January 2019).

Loss on early extinguishment of debt was $14.3 in 2019, which related to refinancing-related costs, specifically premiums and fees incurred associated with the early extinguishment of the Tendered Notes as a result of the tender offers in September 2019. Refer to Note 4 of the accompanying Consolidated Financial Statements and the Liquidity and Capital Resources section within this Item 7 for further information related to the Tendered Notes.

Provision for income taxes was at an effective rate of 22.2% in 2019 and 23.4% in 2018. Provision for income taxes in 2019 included excess tax benefits of $38.1 from stock option exercises, which was partially offset by the tax effects related to (i) acquisition-related expenses during the year and (ii) refinancing-related costs associated with the early extinguishment of debt, each of which had an impact on the effective tax rate and earnings per share by the amounts noted in the table below. Provision for income taxes in 2018 included (i) excess tax benefits of $19.8 from stock option exercises and (ii) an income tax benefit of $14.5 related to the completion of the accounting of the income tax charge (“Tax Act Charge”) associated with the Tax Cuts and Jobs Act (“Tax Act”), which were partially offset by the tax effect related to acquisition-related expenses during the year, each of which had an impact on the effective tax rate and earnings per share by the amounts noted in the table below. These items had the aggregate effect of lowering the effective tax rate and increasing earnings per share by the amounts noted in the tables below. Excluding the effect of these items, the Adjusted Effective Tax Rate, a non-GAAP financial measure as defined in the “Non-GAAP Financial Measures” section below within this Item 7, was 24.5% and 25.5% for 2019 and 2018, respectively, as reconciled in the table below to the comparable effective tax rate based on GAAP results. For additional details related to the reconciliation between the U.S. statutory federal tax rate and the Company’s effective tax rate for these years, refer to Note 6 of the Notes to Consolidated Financial Statements.

Net income attributable to Amphenol Corporation and Net income per common share-Diluted (“Diluted EPS”) were $1,155.0 and $3.75, respectively, for 2019, compared to $1,205.0 and $3.85, respectively, for 2018. Excluding the effect of the aforementioned items discussed above, Adjusted Net Income attributable to Amphenol Corporation and Adjusted Diluted EPS, as defined in the “Non-GAAP Financial Measures” section below within this Item 7, were $1,150.4 and $3.74, respectively, for 2019, compared to $1,177.9 and $3.77, respectively, for 2018.


	2019										2018
					Net Income										Net Income
					attributable		Effective								attributable		Effective
	Operating		Operating		to Amphenol		Tax		Diluted		Operating		Operating		to Amphenol		Tax		Diluted
	Income		Margin (1)		Corporation		Rate (1)		EPS		Income		Margin (1)		Corporation		Rate (1)		EPS
Reported (GAAP)	$	1,619.2	19.7	%	$	1,155.0	22.2	%	$	3.75	$	1,686.9	20.6	%	$	1,205.0	23.4	%	$	3.85
Acquisition-related expenses		25.4	0.3			21.0	(0.1)			0.07		8.5	0.1			7.2	-			0.02
Loss on early extinguishment of debt		-	-			12.5	(0.1)			0.04		-	-			-	-			-
Excess tax benefits related to stock-based compensation		-	-			(38.1)	2.5			(0.12)		-	-			(19.8)	1.2			(0.06)
Tax Act Charge (benefit)		-	-			-	-			-		-	-			(14.5)	0.9			(0.04)
Adjusted (non-GAAP)	$	1,644.6	20.0	%	$	1,150.4	24.5	%	$	3.74	$	1,695.4	20.7	%	$	1,177.9	25.5	%	$	3.77

(1)	While the terms “operating margin” and “effective tax rate” are not considered U.S. GAAP financial measures, for purposes of this table, we derive the reported (GAAP) measures based on GAAP results, which serve as the basis for the reconciliation to their comparable non-GAAP financial measure.

Liquidity and Capital Resources

Liquidity and Cash Requirements

At December 31, 2020 and 2019, the Company had cash, cash equivalents and short-term investments of $1,738.1 and $908.6, respectively. The majority of the Company’s cash, cash equivalents and short-term investments on hand as of December 31, 2020 and 2019 was located outside of the United States. The Company used approximately $145, net of cash acquired, of its cash and cash equivalents as of December 31, 2020 to fund two acquisitions in January 2021. The Company also expects to fund the anticipated acquisition of MTS (as defined below) by the middle of 2021, through a combination of cash and cash equivalents on hand, along with borrowings under our existing revolving credit or commercial paper facilities, as discussed in more detail later within this Item 7. As of December 31, 2020, there were no outstanding borrowings under the Company’s Commercial Paper Programs and the Revolving Credit Facility (each defined below).

Prior to the Tax Act, the Company asserted its intention to indefinitely reinvest outside of the United States all of its foreign earnings not otherwise distributed currently. For earnings occurring on or after January 1, 2018, the Tax Act’s change to a modified territorial tax system in the United States has significantly reduced the U.S. tax expense associated with the remittance of foreign earnings, among other changes. The Tax Act also imposed a one-time transition tax (“Transition Tax”) on all of the Company’s pre-2018 accumulated unremitted foreign earnings. As a result, on December 31, 2017, the Company recorded a provisional U.S. tax expense for the Transition Tax, which was adjusted and finalized in 2018. This Transition Tax on the deemed repatriation of the accumulated unremitted earnings and profits of foreign subsidiaries will be paid, net of applicable tax credits and deductions, in annual installments until 2025, as permitted under the Tax Act.

As a result of the Tax Act, on December 31, 2017, the Company indicated an intention to repatriate most of its pre-2018 accumulated earnings and recorded the foreign and U.S. state and local tax costs related to the repatriation. The associated tax payments are due as the repatriations are made. On December 31, 2019 and 2018, the Company indicated its intention to distribute certain 2019 and 2018 foreign earnings, respectively, and accrued foreign and U.S. state and local taxes, if applicable, on those earnings as appropriate and indefinitely reinvest all remaining 2019 and 2018 foreign earnings, respectively. The Company intends to distribute certain 2020 foreign earnings and has accrued foreign and U.S. state and local taxes, if applicable, on those earnings as appropriate as of December 31, 2020, and intends to indefinitely reinvest all remaining 2020 foreign earnings. The Company intends to evaluate certain post-2020 earnings for distribution, and accrue for those distributions where appropriate, and to indefinitely reinvest all other foreign earnings. As of December 31, 2020, the Company has not provided for deferred income taxes on undistributed foreign

earnings of approximately $900 related to certain geographies, as it is the Company’s intention to permanently reinvest such earnings outside the United States. It is impracticable to calculate the amount of taxes that would be payable if these undistributed foreign earnings were to be repatriated.

The Company’s primary sources of liquidity are internally generated cash flow, our cash, cash equivalents and short-term investments on hand, the U.S. Commercial Paper Program, the Euro Commercial Paper Program, and the Revolving Credit Facility (each as defined below in this Item 7). The Company believes that its cash, cash equivalents and short-term investment position on hand, ability to generate future cash flow from operations, availability under its credit facilities, and access to capital markets (including the issuances of the 2025 Senior Notes in February 2020 and the 2026 Euro Notes in May 2020, each as defined and discussed further within this Item 7), provide adequate liquidity to meet its obligations for at least the next twelve months.

The Company’s primary ongoing cash requirements will be for operating and capital expenditures, the MTS acquisition, product development activities, repurchases of its Common Stock, dividends, debt service, payments associated with the Transition Tax (which is payable in annual installments until 2025), taxes due upon the repatriation of foreign earnings (which will be payable upon the repatriation of such earnings), and funding of pension obligations. The Company’s debt service requirements consist primarily of principal and interest on the Company’s Senior Notes (including the 3.125% Senior Notes due in September 2021), and to the extent of any amounts outstanding, the Revolving Credit Facility and the Commercial Paper Programs (all as defined below). The Company may also use cash to fund all or part of the cost of future acquisitions. The Company expects that capital expenditures in 2021 will be in a range of 3% to 4% of net sales.

Cash Flow Summary

The following table summarizes the Company’s cash flows from operating, investing and financing activities for the years ended December 31, 2020, 2019 and 2018, as reflected in the Consolidated Statements of Cash Flow:


	Year Ended December 31,
	2020		2019		2018
Net cash provided by operating activities	$	1,592.0	$	1,502.3	$	1,112.7
Net cash used in investing activities		(333.5)		(1,228.8)		(441.8)
Net cash used in financing activities		(516.6)		(648.4)		(1,070.1)
Effect of exchange rate changes on cash and cash equivalents		68.9		(13.2)		(40.6)
Net change in cash and cash equivalents	$	810.8	$	(388.1)	$	(439.8)

Operating Activities

The ability to generate cash from operating activities is one of the Company’s fundamental financial strengths. Net cash provided by operating activities (“Operating Cash Flow”) was $1,592.0 for 2020, compared to $1,502.3 for 2019 and $1,112.7 for 2018. The increase in Operating Cash Flow for 2020 compared to 2019 is primarily due to the increase in net income, along with a lower usage of cash related to the change in working capital as discussed below. The increase in Operating Cash Flow for 2019 compared to 2018 was primarily related to a lower usage of cash related to the change in working capital. Operating Cash Flow in 2018 also reflected the Company’s voluntary cash contribution of approximately $81.0 in the first quarter of 2018 to fund our U.S. defined benefit pension plans (“U.S. Plans”, and together with its foreign plans, the “Plans”), while no such voluntary cash contribution to the U.S. Plans was made in 2019.

In 2020, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $38.9, excluding the impact of acquisitions and foreign currency translation, due to increases in accounts receivable, inventories, and prepaid expenses and other current assets of $146.3, $102.0 and $88.6, respectively, partially offset by increases in accounts payable of $204.3 and accrued liabilities, including income taxes, of $93.7. In 2019, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $81.6, excluding the impact of acquisitions and foreign currency translation, primarily due to decreases in accrued liabilities, including income taxes, of $129.3 and accounts payable of $60.2, partially offset by a decrease in accounts receivable of $117.3. In 2018, the components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $362.4, excluding the impact of acquisitions and foreign currency translation, primarily due to increases in accounts receivable, inventories, and prepaid expenses and other current assets of $237.9,

$173.3 and $47.7, respectively, partially offset by increases in accounts payable and accrued liabilities, including income taxes, of $48.8 and $47.7, respectively.

The following describes the significant changes in the amounts as presented on the accompanying Consolidated Balance Sheets at December 31, 2020 compared to December 31, 2019. Accounts receivable increased $215.2 to $1,951.6 primarily due to higher sales in the fourth quarter of 2020 relative to the fourth quarter of 2019, along with the effect of translation from exchange rate changes at December 31, 2020 compared to December 31, 2019 (“Translation”). Days sales outstanding at December 31, 2020 and 2019 were 72 days and 73 days, respectively. Inventories increased $152.1 to $1,462.2, primarily to support higher sales levels, along with the effect of Translation. Inventory days at December 31, 2020 and 2019 were 79 days and 80 days, respectively. Prepaid expenses and other current assets increased $82.8 to $338.9, primarily due to increases in certain prepaid expenses and other current receivables. Property, plant and equipment, net, increased $55.6 to $1,054.6, primarily due to capital expenditures of $276.8 and Translation, partially offset by depreciation of $252.7 and disposals. Goodwill increased $165.0 to $5,032.1, primarily as a result of Translation, as well as goodwill recognized related to two acquisitions that closed in 2020. Other intangible assets, net, decreased $44.5 to $397.5 primarily due to the amortization of $49.6 related to the Company’s intangible assets. Other long-term assets increased $56.1 to $352.3, primarily due to an increase in operating lease right-of-use assets, along with an increase in deferred tax assets. Accounts payable increased $253.9 to $1,120.7, primarily as a result of increased purchasing activity related to higher sales levels, along with Translation. Payable days at December 31, 2020 and 2019 were 61 days and 53 days, respectively. Total accrued expenses, including accrued income taxes, increased $90.7 to $953.3, primarily as a result of an increase in accrued salaries and wages and other accrued expenses, partly offset by the contingent consideration payment (related to the SSI acquisition) of $75.0 in June 2020, a deferred purchase price payment in the third quarter of $16.2, and a decrease in accrued income taxes, primarily resulting from U.S. federal tax payments. Accrued pension and postretirement benefit obligations increased $29.8 to $228.6, primarily due to a decrease in the discount rate used to calculate the pension liabilities, partially offset by benefit payments. Other long-term liabilities, including deferred tax liabilities, increased $21.9 to $706.3, primarily as a result of an increase in deferred tax liabilities.

In 2020, 2019 and 2018, the Company made aggregate cash contributions to its defined benefit pension plans of approximately $6.5, $6.6 and $88.3, respectively. In 2018, approximately $81.0 of the contributions in that year related to the January 2018 voluntary cash contribution to fund our U.S. Plans. There is no current requirement for cash contributions to any of the Company’s 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, as discussed in more detail in Note 9 of the Notes to Consolidated Financial Statements.

In addition to Operating Cash Flow, the Company also considers Free Cash Flow, a non-GAAP financial measure defined in the “Non-GAAP Financial Measures” section below, as a key metric in measuring the Company’s ability to generate cash. The following table reconciles Free Cash Flow to its most directly comparable U.S. GAAP financial measure for the years ended December 31, 2020, 2019 and 2018. The increase in Free Cash Flow in 2020 compared to 2019 was driven by the increase in Operating Cash Flow, as described above, and to a lesser extent, a decrease in capital expenditures. The increase in Free Cash Flow in 2019 compared to 2018 was driven by the increase in Operating Cash Flow, as described above.


	2020		2019		2018
Operating Cash Flow (GAAP)	$	1,592.0	$	1,502.3	$	1,112.7
Capital expenditures (GAAP)		(276.8)		(295.0)		(310.6)
Proceeds from disposals of property, plant and equipment (GAAP)		12.7		7.4		5.0
Free Cash Flow (non-GAAP)	$	1,327.9	$	1,214.7	$	807.1

Investing Activities

Cash flows from investing activities consist primarily of cash flows associated with capital expenditures, proceeds from disposals of property, plant and equipment, sales and maturities (purchases) of short-term investments, net, and acquisitions.

Net cash used in investing activities was $333.5 in 2020, compared to $1,228.8 in 2019 and $441.8 in 2018. In 2020, net cash used in investing activities was driven primarily by capital expenditures (net of disposals) of $264.1, the use of $50.4 to fund acquisitions, and net purchases of short-term investments of $18.4. In 2019, net cash used in

investing activities was driven primarily by the use of $937.4 to fund acquisitions, capital expenditures (net of disposals) of $287.6, and net purchases of short-term investments of $3.8. In 2018, net cash used in investing activities was driven primarily by capital expenditures (net of disposals) of $305.6 and the use of $158.9 to fund acquisitions, partially offset by net sales and maturities of short-term investments of $22.7.

Financing Activities

Cash flows from financing activities consist primarily of cash flows associated with borrowings and repayments of the Company’s credit facilities and other long-term debt, repurchases of common stock, proceeds from stock option exercises, dividend payments, and distributions to and purchases of noncontrolling interests.

Net cash used in financing activities was $516.6 in 2020, compared to $648.4 in 2019 and $1,070.1 in 2018. In 2020, net cash used in financing activities was driven primarily by (i) repurchases of the Company’s common stock of $641.3, (ii) the repayments of $404.4 associated with the Company’s 2.20% U.S. Senior Notes due April 2020 and other debt, (iii) net repayments of $385.8 related to the Company’s commercial paper programs, (iv) dividend payments of $297.6, (v) payment of $75.0 related to acquisition-related contingent consideration, (vi) payment of $16.2 associated with the deferred purchase price related to an acquisition, (vii) distributions to and purchases of noncontrolling interests of $14.9, (vii) payments of costs of $8.7 related to debt financing primarily associated with the 2025 Senior Notes and 2026 Euro Notes (each as defined below), and (viii) net repayments under the Company’s credit facilities of $0.7, partially offset by (i) net cash proceeds from both the February 2020 issuance of the 2025 Senior Notes and the May 2020 issuance of the 2026 Euro Notes of $942.3 and (ii) cash proceeds of $385.7 from the exercise of stock options. In 2019, net cash used in financing activities was driven primarily by (i) the aggregate repayments of $1,111.5 associated with certain of the Company’s senior notes (the 2.55% U.S. Senior Notes due January 2019 and the early extinguishment of the Tendered Notes in September 2019) and other long-term debt, (ii) repurchases of the Company’s common stock of $601.7, (iii) dividend payments of $279.5, (iv) net repayments of $229.0 associated with the Company’s commercial paper programs, (v) distributions to and purchases of noncontrolling interests of $43.3, (vi) payments of costs of $14.9 related to debt financing primarily associated with the 2029 Senior Notes, the Revolving Credit Facility, and the 2030 Senior Notes (each as defined below), and (vii) premiums and fees paid of $13.4 related to the early extinguishment of the Tendered Notes, partially offset by (i) aggregate net cash proceeds from the issuances of the 2029 Senior Notes and the 2030 Senior Notes of $1,398.8 and (ii) cash proceeds of $246.1 from the exercise of stock options. In 2018, net cash used in financing activities was driven primarily by (i) repurchases of the Company’s common stock of $935.2, (ii) net repayments of $559.8 associated with commercial paper and other debt, (iii) dividend payments of $253.7, (iv) distributions to and purchases of noncontrolling interests of $18.2 and (v) payments of costs of $5.6 related to debt financing associated with the issuances of the 2028 Euro Notes and Euro Commercial Paper Program (each defined below), partially offset by (i) net cash proceeds of $571.7 from the October 2018 issuance of the 2028 Euro Notes and (ii) cash proceeds of $130.7 from the exercise of stock options.

The Company has significant flexibility to meet its financial commitments. The Company uses debt financing to lower the overall cost of capital and increase return on stockholders’ equity. The Company’s debt financing includes the use of the commercial paper programs, the Revolving Credit Facility and senior notes as part of its overall cash management strategy.

On January 15, 2019, the Company amended its existing $2,000.0 unsecured credit facility with a $2,500.0 unsecured credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility, which matures January 2024, gives the Company the ability to borrow, in various currencies, at a spread over LIBOR. The Company may utilize the Revolving Credit Facility for general corporate purposes. At December 31, 2020, there were no outstanding borrowings under the Revolving Credit Facility. The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants. At December 31, 2020, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

The Company has a commercial paper program pursuant to which the Company may issue short-term unsecured commercial paper notes (the “USCP Notes”) in one or more private placements in the United States (the “U.S. Commercial Paper Program”). As of December 31, 2020, there were no USCP Notes outstanding.

In July 2018, the Company and one of its wholly owned European subsidiaries (collectively, 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, the “Commercial Paper”),

which are guaranteed by the Company and are to be issued outside of the United States. The ECP Notes may be issued in Euros, Sterling, U.S. dollars or other currencies. In addition, effective April 14, 2020, a subsidiary of the Company is able to issue ECP Notes through the Bank of England’s COVID Corporate Financing Facility (the “BOE Facility”). The BOE Facility will be available until March 22, 2021, although the Company has no current intentions to borrow under the BOE Facility. As of December 31, 2020, there were no ECP Notes outstanding, including under the BOE Facility.

Amounts available under the Commercial Paper Programs may be borrowed, repaid and re-borrowed from time to time. As of December 31, 2020, the authorization from the Company’s Board of Directors 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 $2,500.0, consistent with the Revolving Credit Facility. In addition, the maximum aggregate principal amount outstanding of USCP Notes at any time is $2,500.0, while the maximum aggregate principal amount outstanding of ECP Notes at any time is $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 Revolving Credit Facility are available to repay Commercial Paper, if necessary. Net proceeds of the issuances of Commercial Paper are expected to be used for general corporate purposes. The Company reviews its optimal mix of short-term and long-term debt regularly and may replace certain amounts of Commercial Paper, short-term debt and current maturities of long-term debt with new issuances of long-term debt in the future.

On March 20, 2020, the Company, through one of its wholly owned foreign subsidiaries, borrowed $100.0 (the maximum borrowing capacity) on an uncommitted line of credit, at a variable LIBOR-based interest rate, initially set at 1.92%. This line of credit, which was guaranteed by the Company and carried an interest rate of LIBOR plus 80 basis points, expired on December 19, 2020. Borrowings under this line of credit arrangement were used for general corporate purposes. Prior to maturity, on May 5, 2020, the Company repaid, in full, the outstanding borrowing on this uncommitted line of credit, using cash and cash equivalents on hand.

As of December 31, 2020, the Company has outstanding senior notes (the “Senior Notes”) as follows:


Principal		Interest
Amount		Rate		Maturity
$	227.7	3.125	%	September 2021
	295.0	4.00	%	February 2022
	350.0	3.20	%	April 2024
	400.0	2.050	%	March 2025
	500.0	4.350	%	June 2029
	900.0	2.80	%	February 2030

€	500.0	0.750	%	May 2026 (Euro Notes)
	500.0	2.00	%	October 2028 (Euro Notes)

On February 20, 2020, the Company issued $400.0 principal amount of unsecured 2.050% Senior Notes due March 1, 2025 at 99.829% of face value (the “2025 Senior Notes”). On April 1, 2020, the Company used the net proceeds from the 2025 Senior Notes to repay the $400.0 principal amount of unsecured 2.20% Senior Notes due April 1, 2020 upon maturity.

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 net proceeds of which were used, along with proceeds from borrowings under the U.S. Commercial Paper Program, to repay the $750.0 principal amount of unsecured 2.55% Senior Notes due in January 2019.

On September 4, 2019, the Company commenced tender offers (the “Tender Offers”) to purchase for cash any and all of the Company’s outstanding (i) $375.0 principal amount of 3.125% Senior Notes due September 2021 (the “2021 Senior Notes”) and (ii) $500.0 principal amount of 4.00% Senior Notes due February 2022 (the “2022 Senior Notes”). On September 11, 2019, as a result of the Tender Offers, the Company accepted for payment $147.3 aggregate principal amount of the 2021 Senior Notes and $205.0 aggregate principal amount of the 2022 Senior Notes for 101.9% and 104.5% of par value, respectively (collectively, the “Tendered Notes”), plus accrued and unpaid interest to, but not including, the settlement date of the Tender Offers. The total consideration for the Tendered Notes was $368.8, which in addition to the Tendered Notes, included $13.4 of premiums and fees paid related to the early extinguishment of debt

and $3.1 of accrued interest. The remaining principal amounts associated with the 2021 Senior Notes and 2022 Senior Notes, which were not redeemed as a result of the Tender Offers, remain outstanding as of December 31, 2020.

On September 10, 2019, the Company issued $900.0 principal amount of unsecured 2.800% Senior Notes due February 15, 2030 at 99.920% of face value (the “2030 Senior Notes”). In September 2019, the Company used the net proceeds from the 2030 Senior Notes to fund the cash consideration payable in the Tender Offers, with the remaining net proceeds being used for general corporate purposes, including to partially reduce outstanding borrowings related to the U.S. Commercial Paper Program.

All of the Company’s outstanding senior notes in the United States (the “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, subject to certain terms and conditions. The 2021 Senior Notes are due in September 2021 and are therefore recorded, net of the related unamortized discount and debt issuance costs, within Current portion of long-term debt in the accompanying Consolidated Balance Sheets as of December 31, 2020.

On May 4, 2020, the Euro Issuer issued €500.0 (approximately $545.4 at date of issuance) principal amount of unsecured 0.750% Senior Notes due May 4, 2026 at 99.563% of face value (the “2026 Euro Notes” or “0.750% Euro Senior Notes”). The Company used the net proceeds from the 2026 Euro Notes to repay amounts outstanding under its Revolving Credit Facility.

On October 8, 2018, the Euro Issuer issued €500.0 (approximately $574.6 at date of issuance) principal amount of unsecured 2.000% Senior Notes due October 8, 2028 at 99.498% of face value (the “2028 Euro Notes”, collectively with the 2026 Euro Notes, “Euro Notes”, and collectively with the 2026 Euro Notes and the U.S. Senior Notes, the “Senior Notes”). 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 Euro Notes are unsecured and rank equally in right of payment with the Euro Issuer’s other unsecured senior indebtedness, and are fully and unconditionally guaranteed on a senior unsecured basis by the Company. Interest on each series of Euro Notes is payable annually. The Company may, at its option, redeem some or all of any series of Euro Notes, subject to certain terms and conditions.

The Company’s Senior Notes contain certain financial and non-financial covenants. At December 31, 2020, the Company was in compliance with the financial covenants under its Senior Notes. Refer to Note 4 of the Notes to Consolidated Financial Statements for further information related to the Company’s debt.

In April 2018, the Company’s Board of Directors authorized a 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 (the “2018 Stock Repurchase Program”) in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). During the years ended December 31, 2020, 2019 and 2018, the Company repurchased 6.0 million, 6.5 million and 6.4 million shares of its Common Stock for $641.3, $601.7 and $553.2, respectively, under the 2018 Stock Repurchase Program. Of the total repurchases in 2020, 1.4 million shares, or $153.9, have been retained in Treasury stock at time of repurchase; the remaining 4.6 million shares, or $487.4, have been retired by the Company. Of the total repurchases in 2019, 1.0 million shares, or $87.6, were retained in Treasury stock at time of repurchase; the remaining 5.5 million shares, or $514.1, were retired by the Company. Of the total repurchases in 2018, 0.7 million shares, or $55.0, were retained in Treasury stock at time of repurchase; the remaining 5.7 million shares, or $498.2, were retired by the Company. From January 1, 2021 through January 31, 2021, the Company repurchased $4.0 of its Common Stock, and has remaining authorization to purchase up to $199.8 of its Common Stock under the 2018 Stock Repurchase Program. The price and timing of any future purchases under the 2018 Stock Repurchase Program will depend on a number of factors such as levels of cash generation from operations, the level of uncertainty relating to the COVID-19 pandemic, the volume of stock option exercises by employees, cash requirements for acquisitions, dividends, economic and market conditions and stock price.

In January 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 (the “2017 Stock Repurchase Program”) in accordance with the requirements of Rule 10b-18 of the Exchange Act. During the three months ended March 31, 2018, the Company repurchased 4.2 million shares of its Common Stock for $382.0, all of which were retired by the Company; these repurchases completed the $1,000.0 2017 Stock Repurchase Program. The repurchases in the first quarter of 2018, coupled with the Company’s repurchase of 6.4 million shares of its Common Stock for $553.2 under the 2018 Stock Repurchase Program during the nine months ended December 31, 2018, resulted in total repurchases of 10.6 million shares for $935.2 during the year ended December 31, 2018.

Contingent upon declaration by the Board of Directors, the Company generally pays a quarterly dividend on shares of its Common Stock. On October 20, 2020, the Company’s Board of Directors approved an increase to its quarterly dividend rate from $0.25 per share to $0.29 per share effective with dividends declared in the fourth quarter of 2020. The following table summarizes the declared quarterly dividends per share for each of the three years ended December 31, 2020, 2019 and 2018:


	2020		2019		2018
First Quarter	$	0.25	$	0.23	$	0.19
Second Quarter		0.25		0.23		0.23
Third Quarter		0.25		0.25		0.23
Fourth Quarter		0.29		0.25		0.23
Total	$	1.04	$	0.96	$	0.88

The following table summarizes the dividends declared and paid for the years ended December 31, 2020, 2019 and 2018:


	2020		2019		2018
Dividends declared	$	310.0	$	285.3	$	264.3
Dividends paid (including those declared in the prior year)		297.6		279.5		253.7

LIBOR Transition

In July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced its intent to phase out the use of LIBOR by the end of 2021. On December 4, 2020, the ICE Benchmark Administration published a consultation on its intention to extend the publication of certain U.S. dollar LIBOR (“USD LIBOR”) rates until June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, identified the Secured Overnight Financing Rate (the “SOFR”) as its preferred benchmark alternative to USD LIBOR. The SOFR represents a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is calculated based on directly observable U.S. Treasury-backed repurchase transactions. In March 2020, in response to this transition, the Financial Accounting Standards Board (“FASB”) issued accounting guidance providing certain optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued by reference rate reform, and addresses operational issues likely to arise in modifying contracts to replace discontinued reference rates with new rates. In January 2021, the FASB issued further clarifying guidance surrounding derivatives, as it relates to this transition. The Company is evaluating the potential impact of the replacement of LIBOR from both a risk management and financial reporting perspective. Our current portfolio of debt and financial instruments currently tied to LIBOR consists primarily of our Revolving Credit Facility, which had no outstanding borrowings as of December 31, 2020. Due to our current limited reliance on borrowings tied to LIBOR, the Company does not currently believe that this transition will have a material impact on our financial condition, results of operations or cash flows.

Pensions

The Company and certain of its subsidiaries in the United States have defined benefit pension plans (“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. The majority of U.S. employees are not covered by the U.S. Plans and are covered by defined contribution plans. Certain foreign subsidiaries also have defined benefit plans covering their employees (the “Foreign Plans” and, together with the U.S. Plans, the “Plans”). The total liability for accrued pension and postretirement benefit obligations associated with the Company’s underfunded pension and postretirement benefit plans increased in 2020 to $211.0 from $184.8 in 2019 primarily due to the impact of lower discount rates on our projected benefit obligation, which was partially offset by actual returns on plan assets. In 2018, the Company also

made a voluntary cash contribution of $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.

Refer to Note 9 of the Notes to Consolidated Financial Statements for further discussion of the Company’s benefit plans and other postretirement benefit plans.

Acquisitions

During 2020, the Company completed two acquisitions for $50.4, net of cash acquired. The 2020 acquisitions were included in the Interconnect Products and Assemblies segment and were not material, either individually or in the aggregate, to the Company. During 2019, the Company completed nine acquisitions (including the January 2019 acquisition of SSI Controls Technologies) for $937.4, net of cash acquired. All but one of the acquisitions in 2019 were included in the Interconnect Products and Assemblies segment. These 2019 acquisitions were not material, either individually or in the aggregate, to the Company.

On December 9, 2020, Amphenol announced that the Company entered into a definitive agreement under which Amphenol will acquire MTS Systems Corporation (Nasdaq: MTSC) (“MTS”) for $58.50 per share in cash, or approximately $1,700, net of cash acquired and including the assumption of outstanding debt and liabilities. MTS, which is headquartered in the state of Minnesota in the United States, is a leading global supplier of precision sensors, advanced test systems and motion simulators. MTS is organized into two business segments: Sensors and Test & Simulation. The Sensors segment represents a highly complementary offering of high-technology, harsh environment sensors sold into diverse end markets and applications. The Company expects the MTS acquisition to further expand our range of sensor and sensor-based products across a wide array of industries. The definitive agreement to acquire MTS has been unanimously approved by the boards of both companies and is expected to close by the middle of 2021, subject to certain regulatory approvals, approval from MTS’s shareholders and other customary closing conditions. Amphenol expects to fund the MTS acquisition through a combination of cash and cash equivalents on hand, along with borrowings under our existing revolving credit or commercial paper facilities.

On January 19, 2021, the Company announced that it has entered into an agreement to sell the MTS Test & Simulation business to Illinois Tool Works Inc. (NYSE: ITW). The sale of this business is expected to close following the anticipated closing of our acquisition of MTS, subject to certain regulatory approvals and other customary closing conditions.

In January 2021, the Company also completed two acquisitions, each in the Interconnect Products and Assemblies segment, for approximately $145, net of cash acquired. These acquisitions, which were funded using cash and cash equivalents on hand, are not material, either individually or in the aggregate, to the Company’s financial results.

For further discussion of the Company’s acquisitions, refer to Note 11 of the Notes to Consolidated Financial Statements.

Stock Split

On January 27, 2021, the Company announced that its Board of Directors approved a two-for-one split of the Company’s common stock. The stock split will be effected in the form of a stock dividend paid to shareholders of record as of the close of business on February 16, 2021. The Company expects the additional shares will be distributed on March 4, 2021. Refer to Note 8 of the Notes to Consolidated Financial Statements for the pro forma effect of this stock split as if it had been effective for all years presented.

Environmental Matters

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. For more information on certain environmental matters, refer to Note 14 of the Notes to Consolidated Financial Statements.

Inflation and Costs

The cost of the Company’s products is influenced by the cost of a wide variety of raw materials. The Company strives to offset the impact of increases in the cost of raw materials, labor and services through price increases, productivity improvements and cost saving programs. However, in certain markets, particularly in communications related markets, implementing price increases can be difficult and there is no guarantee that the Company will be successful. For a discussion of certain risks related to inflation and costs, refer to the risk factor titled “The Company has at times experienced difficulties in obtaining a consistent supply of materials at stable pricing levels” in Part I, Item 1A herein.

Foreign Exchange

The Company conducts business in many foreign currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies including possible currency devaluations. Changes in exchange rates can positively or negatively affect the Company’s sales, operating margins and equity. The Company attempts to minimize currency exposure risk in a number of ways including producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency, cost reduction and pricing actions, working capital management and hedging contracts. However, there can be no assurance that these actions will be fully effective in managing currency risk, including in the event of a significant and sudden decline in the value of any of the foreign currencies of the Company’s worldwide operations. For further discussion of foreign exchange exposures, risks and uncertainties, refer to the risk factor titled “The Company’s results have at times been negatively affected by foreign currency exchange rates” in Part I, Item 1A herein.

Non-GAAP Financial Measures

In addition to assessing the Company’s financial condition, results of operations, liquidity and cash flows in accordance with U.S. GAAP, management utilizes certain non-GAAP financial measures defined below as part of its internal reviews for purposes of monitoring, evaluating and forecasting the Company’s financial performance, communicating operating results to the Company’s Board of Directors and assessing related employee compensation measures. Management believes that these non-GAAP financial measures may be helpful to investors in assessing the Company’s overall financial performance, trends and year-over-year comparative results, in addition to the reasons noted below. Non-GAAP financial measures related to operating income, operating margin, net income attributable to Amphenol Corporation, effective tax rate and diluted EPS exclude income and expenses that are not directly related to the Company’s operating performance during the years presented. Items excluded in the presentation of such non-GAAP financial measures in any period may consist of, without limitation, acquisition-related expenses, refinancing-related costs, and certain discrete tax items including but not limited to (i) the excess tax benefits related to stock-based compensation and (ii) the impact of significant changes in tax law. Non-GAAP financial measures related to net sales exclude the impact related to foreign currency exchange and acquisitions. The non-GAAP financial information contained herein is included for supplemental purposes only and should not be considered in isolation, as a substitute for or superior to the related U.S. GAAP financial measures. In addition, these non-GAAP financial measures are not necessarily the same or comparable to similar measures presented by other companies, as such measures may be calculated differently or may exclude different items.

The non-GAAP financial measures defined below should be read in conjunction with the Company’s financial statements presented in accordance with U.S. GAAP. The reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures for the years ended December 31, 2020, 2019 and 2018 are included in “Results of Operations” and “Liquidity and Capital Resources” within this Item 7:

	●	Adjusted Diluted EPS is defined as diluted earnings per share (as reported in accordance with U.S. GAAP), excluding income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the years presented. Adjusted Diluted EPS is calculated as Adjusted Net Income attributable to Amphenol Corporation, as defined below, divided by the weighted average outstanding diluted shares as reported in the Consolidated Statements of Income.

	●	Adjusted Effective Tax Rate is defined as Provision for income taxes, as reported in the Consolidated Statements of Income, expressed as a percentage of Income before income taxes, as reported in the Consolidated Statements of Income, each excluding the income and expenses and their specific tax effects that are not directly related to the Company’s operating performance during the years presented.

	●	Adjusted Net Income attributable to Amphenol Corporation is defined as Net income attributable to Amphenol Corporation, as reported in the Consolidated Statements of Income, excluding income and expenses and their specific tax effects that are not directly related to the Company's operating performance during the years presented.

	●	Adjusted Operating Income is defined as Operating income, as reported in the Consolidated Statements of Income, excluding income and expenses that are not directly related to the Company's operating performance during the years presented.

	●	Adjusted Operating Margin is defined as Adjusted Operating Income (as defined above) expressed as a percentage of Net sales (as reported in the Consolidated Statements of Income).

	●	Constant Currency Net Sales Growth is defined as the year-over-year percentage change in net sales growth, excluding the impact of changes in foreign currency exchange rates. Amphenol’s results are subject to volatility related to foreign currency translation fluctuations. As such, management evaluates the Company’s sales performance based on actual sales growth in U.S. dollars, as well as Organic Net Sales Growth (defined below) and Constant Currency Net Sales Growth, and believes that such information is useful to investors to assess the underlying sales trends.

	●	Free Cash Flow is defined as (i) Net cash provided by operating activities (“Operating Cash Flow” - as reported in accordance with U.S. GAAP) less (ii) capital expenditures (as reported in accordance with U.S. GAAP), net of proceeds from disposals of property, plant and equipment (as reported in accordance with U.S. GAAP), all of which are derived from the Consolidated Statements of Cash Flow. Free Cash Flow is an important liquidity measure for the Company, as we believe it is useful for management and investors to assess our ability to generate cash, as well as to assess how much cash can be used to reinvest in the growth of the Company or to return to shareholders through either stock repurchases or dividends.

	●	Organic Net Sales Growth is defined as the year-over-year percentage change in net sales growth resulting from operating volume and pricing changes, and excludes the impact of (i) changes in foreign currency exchange rates, which directly impact the Company’s operating results and are outside the control of the Company and (ii) acquisitions closed since the beginning of the prior calendar year, which were not included in the Company’s results as of the comparable prior year periods and which do not reflect the underlying growth of the Company on a comparative basis. Management evaluates the Company’s sales performance based on actual sales growth in U.S. dollars, as well as Constant Currency Net Sales Growth (defined above) and Organic Net Sales Growth, and believes that such information is useful to investors to assess the underlying sales trends.

Recent Accounting Pronouncements

Refer to Note 1 of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements, including those adopted by the Company.

Critical Accounting Policies and 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. Management bases its estimates on historical experience along with other assumptions that we believe are reasonable in formulating our bases for making judgements regarding the carrying amounts of assets and liabilities that are not readily apparent elsewhere. Estimates are adjusted as new information becomes available. Actual results could differ from those estimates. The Company believes that the most significant areas involving critical accounting policies are set forth below. The significant accounting policies are more fully described in Note 1 of the Notes to Consolidated Financial Statements.

Revenue Recognition

Topic 606

The Company’s net sales in the Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 are presented under Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with

Customers (Topic 606) (collectively with its related subsequent amendments, “Topic 606”), resulting from the modified retrospective adoption of Topic 606 applied to those contracts which were not completed as of January 1, 2018.

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. Our 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, which generally occurs when we ship or deliver the product from our manufacturing facility to our customers, when our customer accepts and has legal title of the goods, and where 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 products are pulled from consignment inventory. For the years ended December 31, 2020, 2019 and 2018, less than 5% of our net sales were recognized over time, where 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, contract assets and contract liabilities related to our contracts with customers recorded in the Consolidated Balance Sheets were not material as of December 31, 2020 and 2019.

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, 2020, the Company has not provided for deferred income taxes on undistributed foreign earnings of approximately $900 related to certain geographies, as it is the Company’s intention to permanently reinvest such earnings outside the United States. It is impracticable to calculate the amount of taxes that would be payable if these undistributed foreign earnings were to be repatriated. 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.

As a result of the Tax Act, in 2017, 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 for the year ended December 31, 2017. The accounting associated with each of the provisional amounts was completed in 2018. Beginning in 2018, the global intangible low-taxed income (“GILTI”) provision imposed a tax on certain earnings of foreign subsidiaries. The Company elected an accounting policy to account for GILTI as a period cost. The U.S. Treasury Department has issued final interpretive guidance relating to certain provisions of the Tax Act and proposed additional guidance related to the same provisions. The Company will account for the impact of additional guidance in the period in which any new guidance is released, if appropriate.

Disclosures about contractual obligations and commitments

The following table summarizes the Company’s known obligations to make future payments pursuant to certain contracts as of December 31, 2020, as well as an estimate of the timing in which such obligations are expected to be satisfied.


	Payment Due By Period
Contractual Obligations			Less than		1-3		3-5		More than
(dollars in millions)	Total		1 year		years		years		5 years
Debt (1)	$	3,894.3	$	230.5	$	296.3	$	750.5	$	2,617.0
Interest related to senior notes (1)		650.4		102.1		172.2		145.4		230.7
Operating leases (2)		246.8		72.7		85.8		45.2		43.1
Purchase obligations (3)		462.6		424.1		34.6		2.1		1.8
Accrued pension and postretirement benefit obligations (4)		60.4		7.2		11.3		12.5		29.4
Transition tax (5)		97.6		15.8		45.4		36.4		—
Total (6)	$	5,412.1	$	852.4	$	645.6	$	992.1	$	2,922.0

(1)

The Company has excluded expected interest payments on the Revolving Credit Facility, U.S. Commercial Paper Program and Euro Commercial Paper Program from the above table, as this calculation is largely dependent on average debt levels the Company expects to have during each of the years presented. The actual interest payments made related to the Company’s Revolving Credit Facility and both Commercial Paper Programs combined, in 2020, were approximately $4.6. Expected debt levels, and therefore expected interest payments, are difficult to predict, as they are significantly impacted by such items as future acquisitions, repurchases of common stock, dividend payments as well as payments or additional borrowings made to reduce or increase the underlying revolver balance.

(2)

The Company’s operating lease payments included in this table reflect the future minimum undiscounted fixed lease payments, which serve as the basis for calculating the Company’s operating lease liabilities as of December 31, 2020. The table above excludes any variable lease payments not included in the measurement of the Company’s right-of-use assets and operating lease liabilities in accordance with ASC Topic 842, due to their uncertainty. Finance leases are not material to the Company individually or in the aggregate and as such, have been excluded from the table above.

(3)	Purchase obligations relate primarily to open purchase orders for goods and services, including but not limited to, raw materials and components to be used in production.

(4)

Included in this table are estimated benefit payments expected to be made under the Company’s unfunded pension and postretirement benefit plans, as well as the anticipated minimum required contributions under the Company’s funded pension plans, the most significant funded plan of which covers certain of its U.S. employees. Over the past several years, there has been no minimum requirement for Company contributions to the U.S. Plans due to prior contributions made in excess of minimum requirements and as a result, there was no anticipated minimum required contribution included in the table above related to the U.S. Plans for 2021. However, the Company did make a voluntary contribution of approximately $81.0 in 2018 to fund the U.S. Plans, while no such voluntary contribution was made in 2020 and 2019. It is not possible to reasonably estimate expected required contributions in the above table after 2021 since several assumptions are required to calculate minimum required contributions, such as the discount rate and expected returns on pension assets.

(5)

As a result of the enactment of the Tax Act in December 2017, the Company recorded a provisional tax charge on the deemed repatriation of the accumulated unremitted earnings and profits of foreign subsidiaries (“Transition Tax”) for the year ended December 31, 2017, based on certain assumptions made upon the Company’s then current interpretation of the Tax Act. 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 provisional amount, and consequently completed its accounting and recorded an adjustment related to the Transition Tax. The amounts noted in the table above reflect the final Transition Tax, which is net of applicable tax credits and deductions, and in accordance with the Tax Act, is to be paid over the eight year period starting in 2018. The third installment of the Transition Tax was paid in the third quarter of 2020.

(6)

As of December 31, 2020, the Company has recorded net liabilities of approximately $168.2 related to unrecognized tax benefits. These liabilities have been excluded from the above table due to the high degree of uncertainty regarding the timing of potential future cash flows; it is difficult to make a reasonably reliable estimate of the amount and period in which all of these liabilities might be paid.

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