SEC Company Response from AMPHENOL (APH) — Oct 12, 2022
AMPHENOL CORP /DE/ (APH) (CIK 0000820313)
Date: Oct. 12, 2022 · CIK: 0000820313 · Accession: 0001341004-22-000264
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-10879
Referenced dates: September 15, 2022
Letter
VIA EDGAR Office of Manufacturing Division of Corporation Finance Securities and Exchange Commission Amphenol Corporation Form 10-K for Fiscal Year Ended December 31, 2021 February 9, 2022 File No. 001-10879
Dear Ms. Angelini:
Amphenol Corporation (the “Company”) submits this letter in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by letter dated September 15, 2022, relating to the above referenced filing (the “Filing”). In this letter, we have recited the Staff’s comments in italicized, bold type, up front and have followed with the Company’s response.
Form 10-K for Fiscal Year Ended December 31, 2021
General
Response:
1. We note that you provided more expansive disclosure in your 2021 Sustainability Report than you provided in your SEC filings. Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your 2021 Sustainability Report.
The Company believes that making sustainable business choices, building strong relationships with our stakeholders and engaging in good corporate governance create long-term value for our Company. To that end, the Company publishes an annual Sustainability Report to highlight our goals and many areas of progress and success in sustainability matters, including climate-related topics. The information included in the 2021 Sustainability Report was prepared with reference to the Global Reporting Initiative (“GRI”) Standards framework and topics identified as material under the Sustainability Accounting Standards Board (“SASB”) standard and is designed to inform and engage the Company’s broad range of environmental, social and governance (“ESG”) stakeholders, such as governments, community members, employees, suppliers, customers and investors. Our 2021 Sustainability Report also outlined board and executive-level oversight of climate-related risks and opportunities identified in the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations. The GRI, SASB and TCFD standards and recommendations in many cases encourage companies to make disclosures about climate-related topics that are important to certain interested stakeholders, even if not material for purposes of the federal securities laws. For that reason, many of our more expansive climate-related disclosures in our 2021 Sustainability Report did not warrant inclusion in the Company’s 2021 Form 10-K.
In preparing the Company’s 2021 Form 10-K, we considered the applicable provisions of Regulation S-K (including Items 101, 103, 105 and 303) and Regulation S-X, as well as Rule 12b-20 of the Securities Exchange Act of 1934 and other guidance available from the Staff, including but not limited to the 2010 Commission Guidance Regarding Disclosure Related to Climate Change. The Company believes its 2021 Form 10-K and all other SEC filings comply with those requirements.
While the initiatives and goals identified in the 2021 Sustainability Report were strategically important to the Company’s overall sustainability program, the Company concluded that these initiatives were not material under the SEC’s rules, regulations and interpretive guidance noted above, either quantitatively or qualitatively. The items discussed in our 2021 Sustainability Report have not required material capital expenditures or operating expenses, nor caused, and are not expected to cause in the foreseeable future, significant operational challenges or risks to the Company’s business or results of operations beyond those items disclosed in “Item 1A. Risk Factors” of the 2021 Form 10-K within the risk factor titled “The Company may be subject to incremental cost and risk associated with efforts to combat the negative effects of climate change” and the risk factor titled “The Company may be negatively impacted by extreme weather conditions and natural catastrophic events, including those caused by climate change and global warming”. As discussed in greater detail below in the Company’s response to Comments #4, #6, #7 and #8, each of the Company’s (1) capital expenditures, (2) weather related damages and insurance cost, (3) compliance cost and (4) purchase or sale of carbon credits or offsets, as they relate to climate change, was immaterial in the periods covered by the 2021 Form 10-K.
For its future filings with the Commission, the Company will continue to consider all relevant facts and circumstances and follow applicable rules and guidance related to climate-related disclosures.
2. Disclose the material effects of transition risks related to climate change that may affect your business, financial condition, and results of operations, such as market trends that may alter business opportunities, credit risks, or technological changes.
Response:
The Company has not identified any material effects of transition risks related to climate change that may affect our business, financial condition and results of operations in the foreseeable future.
In arriving at our conclusion, the Company considered climate-related transition risks such as those driven by the market-based need to transition to a low-carbon economy, including the development of, and investment in, new technologies and services that support such transition. We considered whether the increasing development of new technologies with lower energy consumption and lower greenhouse gas emissions could significantly alter business opportunities for the Company, particularly in the end markets we serve associated with electric vehicles, charging infrastructure and the generation of renewable energy. In this regard, we note that market trends and opportunities are driven by a host of complex factors occurring in a broad and dynamic global context, in which climate change considerations are one of many factors in play. For instance, as discussed in greater detail below in our response to Comment #5, due to the diversity of the end markets we serve and the fact that our products are typically a small component integrated into a larger system, we do not currently expect any material change in the demand for our products based on their carbon intensity or other climate-related impacts.
Another category of risk we considered was a range of legal, regulatory, policy, liability and reputational issues associated with a transition to a low-carbon economy. As discussed in the Company’s 2021 Form 10-K, transition risks likely to be relevant to the Company in the future are associated with the risk that the Company may be subject to additional and/or unforeseen compliance costs and limitations, including increased energy and raw material costs and capital expenditures as a result of compliance with policy-driven responses to climate change such as those that mandate energy and fuel efficiency, regulate greenhouse gas emissions or restrict or mandate specific energy sources. Specifically, we considered whether and how laws, rules and regulations may affect the Company in jurisdictions in which we manufacture our products if, for example, such laws and regulations require use of additional abatement equipment or require changes to our current manufacturing process, which can increase our operating costs or capital expenditures. Further, we also considered whether such laws and regulations could impose additional costs, fees or reporting requirements on the direct or indirect use of energy, natural resources or materials or gases used or emitted into the environment in connection with the manufacture of our products. However, as discussed in greater detail in our response to Comment #5, our production process is generally not carbon intensive as compared to the other aspects of the production of our customers’ end products.
The Company routinely monitors regulations and policies in regions in which we operate to identify proposed revisions and amendments to such regulations and policies. Although the impact of future or pending laws and regulations cannot be predicted with certainty, as discussed in greater detail in our response to Comment #7, climate-related compliance costs have not had a material impact on the Company’s financial condition or results of operations.
The Company will continue to evaluate the actual and potential impact of transition risks associated with climate change and will update disclosures in future filings with the Commission, as necessary.
3. Disclose any material litigation risks related to climate change and explain the potential impact to the company.
Response:
Amphenol defines climate change-related litigation as a proceeding where the primary allegations depend on (a) certain climate change impacts being attributed to the Company’s operations, (b) allegations of a failure by the Company to meet applicable legal or regulatory requirements related to climate change or (c) alleged failure by the Company to mitigate risks to the Company’s business due to the impact of climate change. Based on this definition, we have never had any litigation and, to our knowledge, no litigation is currently threatened, in each case related to climate change.
The Company’s Legal Department monitors legal trends and risks that could impact the Company, tracking lawsuits and claims made against the Company, other similar manufacturers and other large businesses in the U.S. Among the many factors that are considered regarding litigation risks are the likelihood that a claim will be made against us, our views on the merits of the claim and our potential exposures if such a claim were to be successful, including quantitative and qualitative factors. The risks identified as material to the Company were included in the Company’s risk factors in its 2021 Form 10-K. Climate-related litigation has not been a risk identified by our internal risk evaluation process as material. As a result, Amphenol did not identify any litigation risk, current or potential, related to climate change for the 2021 Form 10-K. Should these circumstances change, and the Company becomes aware of material litigation risks related to climate change, future disclosures will be updated accordingly.
4. It appears you have identified climate-related projects in your Sustainability Report. Please tell us about and quantify past and/or future capital expenditures for climate-related projects for each of the periods for which financial statements are presented in your Form 10-K and those planned for future periods.
Response:
Climate-related projects that support incremental improvements in the areas of waste reduction and recycling, renewable energy and energy savings, and water sanitation and use reduction are key elements to meet our clean water, energy and emission reduction goals. Although these goals are important to the Company, none of these efforts have resulted in, or are expected to result in, capital expenditures or other actions that are material to the Company taken as a whole.
More specifically, in fiscal years 2019, 2020 and 2021, the Company’s total capital expenditures were $295.0, $276.8 and $360.4 million, respectively, and in each year the Company’s capital expenditures associated with climate-related projects were approximately 1% of such total expenditures. Therefore, the Company has concluded that the total costs related to its climate-related projects have not been and are not reasonably likely to be material to the Company’s overall financial condition or results of operations taken as a whole. As such, the Company has concluded that disclosure related to specific climate-related capital expenditures in SEC filings is not required at this time.
In addition, we do not expect the nature and amount of capital expenditures for climate-related projects as a percentage of total capital expenditures to be materially different in 2022 and 2023 to reach our sustainability goals.
5. To the extent material, discuss the indirect consequences of climate-related regulation or business trends, such as the following:
• decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources;
• increased demand for goods that result in lower emissions than competing products;
• increased competition to develop innovative new products that result in lower emissions; and
• increased demand for generation and transmission of energy from alternative energy sources.
Response:
The Company has not identified any material indirect consequences of climate-related regulation or business trends. The following is a discussion of why we believe we have not identified any material indirect consequences of climate-related regulation or business trends:
•
decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources
•
increased demand for goods that result in lower emissions than competing products
During the periods covered by the 2021 Form 10-K, the Company did not experience and we do not currently expect to experience any material change in the demand for our products based on any increase or decrease in demand for goods and services based on their carbon intensity or other climate-related impacts. To the extent there is any such impact, given the nature and scope of our products, we would expect such impact to be a net positive for the Company’s revenues and profitability.
Our high-technology products and solutions span the broadest range of connectors, sensors, antennas, flexible and rigid printed circuits, cables and value-added assemblies and our businesses operate in eight diverse end markets. Furthermore, our products are typically a small component integrated into a larger system and as a result generally represent only a small fraction of the energy consumption and overall emissions of the larger system. As an example, the automotive end market makes up approximately 20% of the Company’s consolidated revenues. However, the majority of our automotive revenues are derived from sales of products unrelated to whether the vehicle is an electronic vehicle or is powered by a traditional combustion engine. These products include antennas, infotainment and communications components, lighting, power management, safety and security systems, sensing systems and telematics systems. Generally, the demand for each of these products is driven by the proliferation of electronic content in cars and not by climate-related regulation or business trends.
We further considered whether demand for our products could change based on our reputation and customers’ perception of how the Company is addressing concerns related to climate change. For instance, our customers may demand that the Company reduce our carbon intensity and/or divert purchases to our competitors perceived to have made greater strides in reducing greenhouse gases in their production process. As detailed in our discussion below, we have not identified any
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Amphenol
Amphenol Corporation
World Headquarters
358 Hall Avenue
Wallingford, CT 06492
U.S.A.
Tel: 1-203-265-8900
Fax: 1-203-265-8628
October 12, 2022
VIA EDGAR
Jennifer Angelini
Office of Manufacturing
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
Amphenol Corporation
Form 10-K for Fiscal Year Ended December 31, 2021
February 9, 2022
File No. 001-10879
Dear Ms. Angelini:
Amphenol Corporation (the “Company”) submits this letter in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by
letter dated September 15, 2022, relating to the above referenced filing (the “Filing”). In this letter, we have recited the Staff’s comments in italicized, bold type, up front and have followed with the Company’s response.
Form 10-K for Fiscal Year Ended December 31, 2021
General
Response:
1. We note that you provided more expansive disclosure in your 2021 Sustainability Report than you provided in your SEC filings.
Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your 2021 Sustainability Report.
The Company believes that making sustainable business choices, building strong relationships with our stakeholders and engaging in good corporate governance create
long-term value for our Company. To that end, the Company publishes an annual Sustainability Report to highlight our goals and many areas of progress and success in sustainability matters, including climate-related topics. The information included
in the 2021 Sustainability Report was prepared with reference to the Global Reporting Initiative (“GRI”) Standards framework and topics identified as material under the Sustainability Accounting Standards Board (“SASB”) standard and is designed to
inform and engage the Company’s broad range of environmental, social and governance (“ESG”) stakeholders, such as governments, community members, employees, suppliers, customers and investors. Our 2021
Sustainability Report also outlined board and executive-level oversight of climate-related risks and opportunities identified in the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations. The GRI,
SASB and TCFD standards and recommendations in many cases encourage companies to make disclosures about climate-related topics that are important to certain interested stakeholders, even if not material for purposes of the federal securities laws.
For that reason, many of our more expansive climate-related disclosures in our 2021 Sustainability Report did not warrant inclusion in the Company’s 2021 Form 10-K.
In preparing the Company’s 2021 Form 10-K, we considered the applicable provisions of Regulation S-K (including Items 101, 103, 105 and 303) and Regulation S-X, as
well as Rule 12b-20 of the Securities Exchange Act of 1934 and other guidance available from the Staff, including but not limited to the 2010 Commission Guidance Regarding Disclosure Related to Climate Change. The
Company believes its 2021 Form 10-K and all other SEC filings comply with those requirements.
While the initiatives and goals identified in the 2021 Sustainability Report were strategically important to the Company’s overall sustainability program, the Company concluded that
these initiatives were not material under the SEC’s rules, regulations and interpretive guidance noted above, either quantitatively or qualitatively. The items discussed in our 2021 Sustainability Report have not required material capital
expenditures or operating expenses, nor caused, and are not expected to cause in the foreseeable future, significant operational challenges or risks to the Company’s business or results of operations beyond those items disclosed in “Item 1A. Risk
Factors” of the 2021 Form 10-K within the risk factor titled “The Company may be subject to incremental cost and risk associated with efforts to combat the negative effects of climate change” and the risk factor titled “The Company may be negatively
impacted by extreme weather conditions and natural catastrophic events, including those caused by climate change and global warming”. As discussed in greater detail below in the Company’s response to Comments #4, #6, #7 and #8, each of the Company’s
(1) capital expenditures, (2) weather related damages and insurance cost, (3) compliance cost and (4) purchase or sale of carbon credits or offsets, as they relate to climate change, was immaterial in the periods covered by the 2021 Form 10-K.
For its future filings with the Commission, the Company will continue to consider all relevant facts and circumstances and follow applicable rules and guidance related to
climate-related disclosures.
2. Disclose the material effects of transition risks related to climate change that may affect your business, financial
condition, and results of operations, such as market trends that may alter business opportunities, credit risks, or technological changes.
Response:
The Company has not identified any material effects of transition risks related to climate change that may affect our business, financial condition and results of
operations in the foreseeable future.
In arriving at our conclusion, the Company considered climate-related transition risks such as those driven by the market-based need to transition to a low-carbon economy, including
the development of, and investment in, new technologies and services that support such transition. We considered whether the increasing development of new technologies with lower energy consumption and lower greenhouse gas emissions could
significantly alter business opportunities for the Company, particularly in the end markets we serve associated with electric vehicles, charging infrastructure and the generation of renewable energy. In this regard, we note that market trends and
opportunities are driven by a host of complex factors occurring in a broad and dynamic global context, in which climate change considerations are one of many factors in play. For instance, as discussed in greater detail below in our response to
Comment #5, due to the diversity of the end markets we serve and the fact that our products are typically a small component integrated into a larger system, we do not currently expect any material change in the demand for our products based on their
carbon intensity or other climate-related impacts.
Another category of risk we considered was a range of legal, regulatory, policy, liability and reputational issues associated with a transition to a low-carbon economy. As discussed
in the Company’s 2021 Form 10-K, transition risks likely to be relevant to the Company in the future are associated with the risk that the Company may be subject to additional and/or unforeseen compliance costs and limitations, including increased
energy and raw material costs and capital expenditures as a result of compliance with policy-driven responses to climate change such as those that mandate energy and fuel efficiency, regulate greenhouse gas emissions or restrict or mandate specific
energy sources. Specifically, we considered whether and how laws, rules and regulations may affect the Company in jurisdictions in which we manufacture our products if, for example, such laws and regulations require use of additional abatement
equipment or require changes to our current manufacturing process, which can increase our operating costs or capital expenditures. Further, we also considered whether such laws and regulations could impose additional costs, fees or reporting
requirements on the direct or indirect use of energy, natural resources or materials or gases used or emitted into the environment in connection with the manufacture of our products. However, as discussed in greater detail in our response to Comment
#5, our production process is generally not carbon intensive as compared to the other aspects of the production of our customers’ end products.
The Company routinely monitors regulations and policies in regions in which we operate to identify proposed revisions and amendments to such regulations and policies. Although the
impact of future or pending laws and regulations cannot be predicted with certainty, as discussed in greater detail in our response to Comment #7, climate-related compliance costs have not had a material impact on the Company’s financial condition or
results of operations.
The Company will continue to evaluate the actual and potential impact of transition risks associated with climate change and will update disclosures in future filings with the
Commission, as necessary.
3. Disclose any material litigation risks related to climate change and explain the potential impact to the company.
Response:
Amphenol defines climate change-related litigation as a proceeding where the primary allegations depend on (a) certain climate change impacts being attributed to the
Company’s operations, (b) allegations of a failure by the Company to meet applicable legal or regulatory requirements related to climate change or (c) alleged failure by the Company to mitigate risks to the Company’s business due to the impact of
climate change. Based on this definition, we have never had any litigation and, to our knowledge, no litigation is currently threatened, in each case related to climate change.
The Company’s Legal Department monitors legal trends and risks that could impact the Company, tracking lawsuits and claims
made against the Company, other similar manufacturers and other large businesses in the U.S. Among the many factors that are considered regarding litigation risks are the likelihood that a claim will be made against us, our views on the merits of
the claim and our potential exposures if such a claim were to be successful, including quantitative and qualitative factors. The risks identified as material to the Company were included in the Company’s risk factors in its 2021 Form 10-K.
Climate-related litigation has not been a risk identified by our internal risk evaluation process as material. As a result, Amphenol did not identify any litigation risk, current or potential, related to climate change for the 2021 Form 10-K.
Should these circumstances change, and the Company becomes aware of material litigation risks related to climate change, future disclosures will be updated accordingly.
4. It appears you have identified climate-related projects in your Sustainability Report. Please tell us about and quantify past and/or future
capital expenditures for climate-related projects for each of the periods for which financial statements are presented in your Form 10-K and those planned for future periods.
Response:
Climate-related projects that support incremental improvements in the areas of waste reduction and recycling, renewable energy and energy savings, and water sanitation and use
reduction are key elements to meet our clean water, energy and emission reduction goals. Although these goals are important to the Company, none of these efforts have resulted in, or are expected to result in, capital expenditures or other actions
that are material to the Company taken as a whole.
More specifically, in fiscal years 2019, 2020 and 2021, the Company’s total capital expenditures were $295.0, $276.8 and $360.4 million, respectively, and in each year the Company’s
capital expenditures associated with climate-related projects were approximately 1% of such total expenditures. Therefore, the Company has concluded that the total costs related to its climate-related projects have not been and are not reasonably
likely to be material to the Company’s overall financial condition or results of operations taken as a whole. As such, the Company has concluded that disclosure related to specific climate-related capital expenditures in SEC filings is not required
at this time.
In addition, we do not expect the nature and amount of capital expenditures for climate-related projects as a percentage of total capital expenditures to be materially different in
2022 and 2023 to reach our sustainability goals.
5. To the extent material, discuss the indirect consequences of climate-related regulation or business trends, such as the following:
• decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources;
• increased demand for goods that result in lower emissions than competing products;
• increased competition to develop innovative new products that result in lower emissions; and
• increased demand for generation and transmission of energy from alternative energy sources.
Response:
The Company has not identified any material indirect consequences of climate-related regulation or business trends. The following is a discussion of why we believe
we have not identified any material indirect consequences of climate-related regulation or business trends:
•
decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources
•
increased demand for goods that result in lower emissions than competing products
During the periods covered by the 2021 Form 10-K, the Company did not experience and we do not currently expect to experience any material change in the demand for
our products based on any increase or decrease in demand for goods and services based on their carbon intensity or other climate-related impacts. To the extent there is any such impact, given the nature and scope of our products, we would expect
such impact to be a net positive for the Company’s revenues and profitability.
Our high-technology products and solutions span the broadest range of connectors, sensors, antennas, flexible and rigid printed circuits, cables and value-added
assemblies and our businesses operate in eight diverse end markets. Furthermore, our products are typically a small component integrated into a larger system and as a result generally represent only a small fraction of the energy consumption and
overall emissions of the larger system. As an example, the automotive end market makes up approximately 20% of the Company’s consolidated revenues. However, the majority of our automotive revenues are derived from sales of products unrelated to
whether the vehicle is an electronic vehicle or is powered by a traditional combustion engine. These products include antennas, infotainment and communications components, lighting, power management, safety and security systems, sensing systems and
telematics systems. Generally, the demand for each of these products is driven by the proliferation of electronic content in cars and not by climate-related regulation or business trends.
We further considered whether demand for our products could change based on our reputation and customers’ perception of how the Company is addressing concerns
related to climate change. For instance, our customers may demand that the Company reduce our carbon intensity and/or divert purchases to our competitors perceived to have made greater strides in reducing greenhouse gases in their production process.
As detailed in our discussion below, we have not identified any