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Equity

12 Months Ended

Dec. 31, 2020

Note 7—Equity

Stock-Based Compensation:

For the years ended December 31, 2020, 2019 and 2018, the Company’s income before income taxes was reduced for stock-based compensation expense of $70.5, $63.0 and $55.6, respectively, the expense of which is included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Income. In addition, for the years ended December 31, 2020, 2019 and 2018, the Company recognized aggregate income tax benefits (associated with stock-based compensation) of $50.7, $46.0 and $27.5, respectively, in the provision for income taxes in the accompanying Consolidated Statements of Income. These aggregate income tax benefits during the years ended December 31, 2020, 2019 and 2018 include excess tax benefits of $42.8, $38.1 and $19.8, respectively, from option exercises. The impact associated with recognizing excess tax benefits from option exercises in the provision for income taxes on our consolidated financial statements could result in significant fluctuations in our effective tax rate in the future, since the provision for income taxes will be impacted by the timing and intrinsic value of future stock-based compensation award exercises.

Stock Options

In May 2017, the Company adopted the 2017 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (the “2017 Employee Option Plan”). A committee of the Company’s Board of Directors has been authorized to grant stock options pursuant to the 2017 Employee Option Plan. At the time of its adoption, the number of shares of the Company’s Class A Common Stock (“Common Stock”) reserved for issuance under the 2017 Employee Option Plan is 30,000,000 shares. As of December 31, 2020, there were 5,142,520 shares of Common Stock available for the granting of additional stock options under the 2017 Employee Option Plan. The Company also continues to maintain the 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended (the “2009 Employee Option Plan”). No additional stock options will be granted under the 2009 Employee Option Plan. Options granted under the 2017 Employee Option Plan and the 2009 Employee Option Plan generally vest ratably over a period of five years from the date of grant and are generally exercisable over a period of ten years from the date of grant.

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “2004 Directors Option Plan”). The 2004 Directors Option Plan was administered by the Company’s Board of Directors. The 2004 Directors Option Plan expired in May 2014. Options were last granted under the 2004 Directors Option Plan in May 2011. All options granted under the 2004 Directors Option Plan have been either exercised or forfeited.

Stock option activity for 2018, 2019 and 2020 was as follows:


							Weighted
							Average		Aggregate
				Weighted			Remaining		Intrinsic
				Average			Contractual		Value
		Options		Exercise Price			Term (in years)		(in millions)
Options outstanding at January 1, 2018		33,222,364		$	52.27		7.05
Options granted		6,302,100			87.95
Options exercised		(3,464,876)			37.81
Options forfeited		(508,920)			69.03
Options outstanding at December 31, 2018		35,550,668			59.77		6.81
Options granted		6,181,700			89.52
Options exercised		(5,847,252)			42.14
Options forfeited		(209,910)			78.17
Options outstanding at December 31, 2019		35,675,206			67.70		6.75
Options granted		6,110,200			90.24
Options exercised		(7,484,812)			51.60
Options forfeited		(307,770)			83.11
Options outstanding at December 31, 2020		33,992,824		$	75.16		6.79		$	1,890.4
Vested and non-vested options expected to vest at December 31, 2020		31,791,827		$	74.56		6.71		$	1,787.1
Exercisable options at December 31, 2020		15,498,174		$	63.73		5.32		$	1,039.0

A summary of the status of the Company’s non-vested options as of December 31, 2020 and changes during the year then ended is as follows:


				Weighted Average
				Fair Value
		Options		at Grant Date
Non-vested options at January 1, 2020		19,016,830		$	10.72
Options granted		6,110,200			16.35
Options vested		(6,324,610)			9.87
Options forfeited		(307,770)			12.03
Non-vested options at December 31, 2020		18,494,650		$	12.85

The weighted average fair value at the grant date of options granted during 2019 and 2018 was $12.26 and $12.82, respectively.

During the years ended December 31, 2020, 2019 and 2018, the following activity occurred under the Company’s option plans:



		2020			2019			2018
Total intrinsic value of stock options exercised		$	436.1		$	329.6		$	188.1
Total fair value of stock options vested			62.4			57.3			51.0

As of December 31, 2020, the total compensation cost related to non-vested options not yet recognized was approximately $177.3, with a weighted average expected amortization period of 3.40 years.

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

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


		2020			2019			2018
Risk free interest rate		0.3	%		2.1	%		2.9	%
Expected life		4.7	years		4.7	years		4.7	years
Expected volatility		24.0	%		14.0	%		13.0	%
Expected dividend yield		1.1	%		1.0	%		1.0	%

Restricted Stock

In 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “2012 Directors Restricted Stock Plan”). The 2012 Directors Restricted Stock Plan is administered by the Company’s Board of Directors. As of December 31, 2020, the number of restricted shares available for grant under the 2012 Directors Restricted Stock Plan was 81,671. Restricted shares granted under the 2012 Directors Restricted Stock Plan generally vest on the first anniversary of the grant date. Grants under the 2012 Directors Restricted Stock Plan entitle the holder to receive shares of the Company’s Common Stock without payment.

Restricted share activity for 2018, 2019 and 2020 was as follows:


							Weighted Average
				Fair Value			Remaining
		Restricted		at Grant			Amortization
		Shares		Date			Term (in years)
Restricted shares outstanding at January 1, 2018		12,905		$	73.25		0.37
Restricted shares granted		15,014			87.84
Shares vested and issued		(13,046)			73.35
Restricted shares outstanding at December 31, 2018		14,873			87.89		0.39
Restricted shares granted		14,304			89.49
Shares vested and issued		(16,661)			88.07
Restricted shares outstanding at December 31, 2019		12,516			89.49		0.39
Restricted shares granted		13,175			91.11
Shares vested and issued		(12,516)			89.49
Restricted shares outstanding at December 31, 2020		13,175		$	91.11		0.38

The total fair value of restricted share awards that vested during 2020, 2019, and 2018 was $1.2, $1.5 and $1.0, respectively. As of December 31, 2020, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $0.5 (with a weighted average expected amortization period of 0.38 years).

Stock Repurchase Program:

On April 24, 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.

On January 24, 2017, the Company’s Board of Directors authorized a stock repurchase program under which the Company could purchase up to $1,000.0 of the Company’s Common Stock during the two-year period ending January 24, 2019 (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.

Dividends:

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 quarterly declared 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

Dividends declared and paid for the years ended December 31, 2020, 2019 and 2018 were as follows:


		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

Accumulated Other Comprehensive Income (Loss):

Balances of related after-tax components comprising Accumulated other comprehensive income (loss) included in equity at December 31, 2020, 2019 and 2018 are as follows:


		Foreign			Unrealized			Pension and			Accumulated
		Currency			Gain (Loss)			Postretirement			Other
		Translation			on Hedging			Benefit Plan			Comprehensive
		Adjustments			Activities			Adjustment			(Loss) Income
Balance at January 1, 2018		$	(33.2)		$	(0.2)		$	(167.6)		$	(201.0)
Other comprehensive income (loss) before reclassifications, net of tax of nil, ($0.1) and $6.6, respectively			(164.3)			0.4			(22.0)			(185.9)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($6.4)			—			—			20.2			20.2
Amounts reclassified from Accumulated other comprehensive income (loss) to retained earnings, resulting from income tax effects of the Tax Act (ASU 2018-02)			—			—			(23.5)			(23.5)
Balance at December 31, 2018			(197.5)			0.2			(192.9)			(390.2)
Other comprehensive income (loss) before reclassifications, net of tax of nil, nil and $5.3, respectively			(40.4)			0.1			(15.7)			(56.0)
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($4.9)			—			—			15.3			15.3
Balance at December 31, 2019			(237.9)			0.3			(193.3)			(430.9)
Other comprehensive income (loss) before reclassifications, net of tax of nil, nil and $7.1, respectively			151.3			(0.2)			(18.9)			132.2
Amounts reclassified from Accumulated other comprehensive income (loss) to earnings, net of tax of ($6.7)			—			—			20.6			20.6
Balance at December 31, 2020		$	(86.6)		$	0.1		$	(191.6)		$	(278.1)

For the years ended December 31, 2020, 2019 and 2018, as it relates to the Company’s cash flow hedges, which comprised of foreign exchange forward contracts, the amounts reclassified from Accumulated other comprehensive income (loss) to foreign exchange gain (loss), included in Cost of sales in the accompanying Consolidated Statements of Income, were not material. There were no reclassifications associated with our net investment hedges from Accumulated other comprehensive income (loss) to earnings during the years presented in the table above. The amount included in Accumulated other comprehensive loss as of December 31, 2020 associated with our cash flow hedges is expected to be reclassified into earnings within the next twelve months. The amounts reclassified from Accumulated other comprehensive income (loss) to earnings, related to pension and other postretirement benefit plans in the table above, are reported within Other income, net in the Consolidated Statements of Income, the vast majority of which is related to the amortization of actuarial losses associated with our defined benefit plans. The amortization of actuarial losses are included in the computation of net pension expense discussed in more detail within Note 9 herein.