Amphenol - 10-Q quarterly report FY2011 Q3

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Amphenol Corporation

Index to Quarterly Report

on Form 10-Q

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AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(dollars in thousands, except per share data)

See accompanying notes to condensed consolidated financial statements.

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AMPHENOL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

(dollars in thousands)

See accompanying notes to condensed consolidated financial statements.

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AMPHENOL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(dollars in thousands, except per share data)

Note 1—Basis of Presentation and Principles of Consolidation

The condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010, the related condensed consolidated statements of income for the three and nine months ended September 30, 2011 and 2010 and the condensed consolidated statements of cash flow for the nine months ended September 30, 2011 and 2010 include the accounts of Amphenol Corporation and its subsidiaries (the “Company”).  All material intercompany balances and transactions have been eliminated in consolidation. The financial statements included herein are unaudited. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation in conformity with accounting principles generally accepted in the United States of America have been included.  The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year.  These financial statements and the related notes should be read in conjunction with the financial statements and notes included in the Company’s 2010 Annual Report on Form 10-K.

Note 2—New Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, Intangibles - Goodwill and Other (“ASU 2011-08”), which allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this amendment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment of events and circumstances, that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company will consider this update when performing its annual impairment assessment in the second quarter of 2012.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011 and will be applied retrospectively.  The Company has not yet determined which presentation will be adopted.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 improves comparability of fair value measurements presented and disclosed in financial statements prepared with U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements including (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (3) quantitative information required for fair value measurements categorized within Level 3 of the fair value hierarchy. ASU 2011-04 also provides guidance on measuring the fair value of financial instruments managed within a portfolio, and application of premiums and discounts in a fair value measurement. In addition, ASU 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The amendments in this guidance are to be applied prospectively, and are effective for interim and annual periods beginning after December 15, 2011. The Company does not expect that the adoption of this update will have a material effect on its financial statements.

Note 3—Reclassifications

In 2011, the Company changed the presentation of the Condensed Consolidated Statements of Cash Flow to present purchases and sales/maturities of short-term investments on a gross basis, which had been presented on a net basis for the nine months ended September 30, 2010 and to present excess tax benefits on a gross basis, which had been presented in the net change in components of working capital for the nine months ended September 30, 2010.  As a result, amounts in the accompanying Condensed Consolidated Statements of Cash Flow for the nine months ended September 30, 2010 have been reclassified to conform to the current year presentation.

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and the first nine months of 2010 was at an effective rate of 22.8% and 23.2%, respectively.  The lower rate in the third quarter and the first nine months of 2010 included $8,400 and $20,700, respectively, of one-time net benefits relating to reductions in international tax expense due primarily to reserve adjustments from favorable settlements of certain tax positions and the completion of prior year audits.

The Company is present in over sixty tax jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2008 and after.  The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of September 30, 2011, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was approximately $21,598, the majority of which is included in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.  Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and the closing of statutes of limitation. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitation may close relating to existing unrecognized tax benefits of approximately $4,000.

Results of Operations

Three months and nine months ended September 30, 2011 compared to the three months and nine months ended September 30, 2010

Net sales were $1,032.8 in the third quarter of 2011 compared to $948.5 in the prior year quarter, an increase of 9% in U.S. dollars, 7% in local currencies and 5% organically (excluding the impact of foreign exchange and acquisitions) over the prior year quarter.  Net sales for the first nine months of 2011 were $2,991.1 compared to $2,604.2 for the same period in 2010, an increase of 15% in U.S. dollars, 13% in local currencies, and 9% organically over the prior year period.   Sales growth resulted from the continuing development of new application-specific solutions and value added products, and increased worldwide presence with leading companies in target markets.

Sales of interconnect products and assemblies (approximately 93% of sales) increased 9% in U.S. dollars and 6% in local currencies in the third quarter of 2011 compared to the same period in 2010 ($957.2 in 2011 versus $881.3 in 2010) primarily due to significant strength in the wireless devices market resulting from strong growth in products for new mobile devices.  In addition, demand previously planned for the fourth quarter was pulled forward by certain customers.  Sales also grew in the automotive and commercial air markets, partially offset by a decline in the military aerospace market related to softening in demand in the defense market including the related deferral of certain defense related programs and approximately $11.0 of lost sales due to the business interruption impact from the flood at the Company’s Sidney, New York facility in early September 2011 as further described below (the “Flood Impact”). Sales of interconnect products and assemblies increased 16% in U.S. dollars and 14% in local currencies in the first nine months of 2011 compared to the same period in 2010 ($2,778.4 in 2011 versus $2,402.1 in 2010) driven by strength in the wireless devices, industrial, automotive and commercial aerospace markets and to a lesser extent by growth in the wireless infrastructure market and by acquisition growth in the military aerospace market, partially offset by the Flood Impact.  Sales of cable products (approximately 7% of sales) increased 13% in U.S dollars and 9% in local currencies in the third quarter of 2011 compared to the same period in 2010 ($75.6 in 2011 versus $67.1 in 2010), primarily due to stronger demand in South American communication and North American broadband markets in 2011. During the first nine months of 2011 compared to the same period in 2010 sales of cable products increased 5% in U.S. dollars and 2% in local currencies ($212.7 in 2011 versus $202.1 in 2010), primarily due to increased spending in South American communication markets during the year offset by lower spending in some broadband markets, particularly in the first quarter.

Geographically, sales in the United States in the third quarter of 2011 decreased approximately 9% due primarily to weakness in the defense market as well as the Flood Impact.   In the first nine months of 2011, sales in the United States increased approximately 5% compared to the same periods in 2010 ($318.7 and $976.2 in 2011, respectively, versus $350.6 and $932.3 in 2010, respectively) primarily due to acquisition impacts partially offset by the Flood Impact.  International sales for the third quarter and the first nine months of 2011 increased approximately 19% and 21% in U.S. dollars, respectively, and 16% and 17% in local currencies, respectively, compared to the same periods in 2010 ($714.1 and $2,014.9 in 2011 versus $597.9 and $1,672.0 in 2010) with particular strength in Asia. The comparatively weaker U.S. dollar for the third quarter and first nine months of 2011 had the effect of increasing sales by approximately $22.6 and $57.6, respectively, compared to foreign currency translation rates for the same periods in 2010.

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The gross profit margin as a percentage of net sales was approximately 31.3% for the third quarter and 31.7% for the first nine months of 2011, compared to 32.7% for the third quarter and 32.6% for the first nine months of 2010.  The operating margins in the Interconnect Products and Assemblies segment decreased approximately 0.8% and 0.2% in the third quarter and the first nine months of 2011, respectively, compared to the same periods in 2010. The decrease in operating margins from the 2010 period was primarily a result of the impacts of increases in material input costs and to a lesser extent severance costs in the quarter relating to workforce reductions and the impact of the loss of sales and margin due to the Flood Impact.  These impacts were partially offset by the positive impacts of higher volume, cost reduction actions and price increases.  The operating margins in the Cable Products segment decreased by approximately 0.4% and 1.4% in the third quarter and first nine months of 2011, respectively, compared to the same periods in 2010, primarily as a result of higher relative material costs.

The Company incurred damage at its Sidney, New York manufacturing facility as a result of severe and sudden flooding in New York State in early September 2011. As a result, in the third quarter the Company recorded a charge of $12.8 ($8.1 after taxes) or $.05 per share, for property-related damage, as well as cleanup and repair efforts incurred through September 30, 2011, net of expected insurance recoveries. This charge includes the Company’s estimated loss for damaged inventory and machinery and equipment. In the fourth quarter, the Company expects to record additional charges of approximately $7.0 ($4.3 after taxes), or $.03 per share, for one-time expenses related to remaining cleanup and repair efforts.  The Sidney facility had limited manufacturing and sales activity in September which reduced sales by approximately $11.0 in the third quarter.  The facility is ramping up to full production levels during October although sales are expected to be negatively impacted by approximately $7.0 in the fourth quarter.

During the nine months ended September 30, 2011, the Company reassessed, based on current 2011 performance expectations, a contingent acquisition related obligation which would have been payable in 2012 related to a 2010 acquisition (Note 16).  Performance expectations were reduced as a result of a softening in demand in the defense market and the related deferral of certain defense related programs to periods beyond 2011 and therefore outside the contractual earn-out period.  Therefore, it was determined that the payment related to 2011 profitability levels was no longer probable and the Company adjusted the remaining contingent consideration liability of $17.8 as a gain in operating income in the second quarter in accordance with applicable accounting rules. This adjustment had an impact of $11.2 on net income and $0.06 on EPS for the second quarter and nine months ended September 30, 2011.

Selling, general and administrative expenses increased to $124.6 and $366.8, or 12.1% and 12.3% of net sales, for the third quarter and first nine months of 2011, respectively, compared to $120.6 and $338.4, or 12.7% and 13.0% of net sales for the same periods in 2010. The increase in expense in the third quarter and first nine months of 2011 is primarily attributable to increases in selling expense resulting from higher sales volume and increased research and development spending relating to new product development. Selling, general and administrative expenses include stock-based compensation expense of $7.6 and $21.0 for the third quarter and first nine months of 2011, respectively, compared to $7.0 and $18.6 for the same periods in 2010.

Interest expense for the third quarter and first nine months of 2011 was $10.5 and $31.9, respectively, compared to $10.6 and $30.5, respectively, for the same periods in 2010.  The increase for the nine month period is primarily attributed to higher average debt levels related to the Company’s stock repurchase program (Note 11), partially offset by lower average borrowing costs resulting from the June 2011 amendment of the Company’s credit facility discussed below.

Other income, net, increased to $2.3 and $6.1 for the third quarter and first nine months of 2011, respectively, compared to $1.3 and $2.5, respectively, for the same periods in 2010, primarily related to interest income on higher levels of cash, cash equivalents and short-term investments.

The provision for income taxes for the third quarter and the first nine months of 2011 was at an effective rate of 23.5% and 26.3%, respectively.  The 2011 third quarter provision for taxes includes a one-time tax benefit of approximately $4.7 relating to the $12.8 charge for the previously announced flood damage at the Company’s Sidney, New York facility (Note 15) and a one-time tax benefit of $4,500 relating to a reduction in tax expense due primarily to the completion of prior year audits.  The provision for income taxes for the first nine months of 2011 included a one-time tax cost of approximately $6.6 related to a gain of $17.8 for the adjustment of a contingent acquisition related purchase price obligation (Note 16). The provision for income taxes for the third quarter and the first nine months of 2010 was at an effective rate of 22.8% and 23.2%, respectively.  The lower rate in the third quarter and the first nine months of 2010 included $8.4 and $20.7, respectively, of one-time net benefits relating to reductions in international tax expense due primarily to reserve adjustments from a favorable settlement of certain tax positions and the completion of prior year audits.

The Company is present in over sixty tax jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2008 and after.  The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit.  The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local

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authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of September 30, 2011, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was approximately $21.6, the majority of which is included in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.  Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and the closing of statutes of limitation. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitation may close relating to existing unrecognized tax benefits of approximately $4.0.

Liquidity and Capital Resources

Cash flow provided by operating activities was $396.6 in the first nine months of 2011 compared to $264.2 in the same 2010 period.  Cash flow provided by operating activities for the 2010 period includes the effect of adoption of the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”), which became effective January 1, 2010 and resulted in a decrease to cash flow provided by operating activities of $82.0 in 2010.  The increase in cash flow provided by operating activities for the first nine months of 2011 compared to the same 2010 period (excluding the effect of adoption of ASU 2009-16 in 2010) is primarily due to increases in net income and non-cash expenses, including depreciation and amortization and stock-based compensation, as well as an increase in other long-term assets primarily related to deferred income taxes, partially offset by an increase in components of working capital. The components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $125.6 in the first nine months of 2011 due primarily to an increase of $82.4 in inventory and $69.8 in accounts receivable, which were partially offset by increases in accounts payable and accrued liabilities of $19.0 and $10.9, respectively.  The components of working capital increased $109.9 in the first nine months of 2010 due primarily to an increase of $172.4 in accounts receivable and increases of $56.5 and $7.6 in inventory and other current assets, respectively, which were partially offset by increases in accounts payable and accrued liabilities of $90.9 and $35.8, respectively.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at September 30, 2011. Accounts receivable increased $84.9 to $803.5 reflecting higher sales levels, the impact of an acquisition made during the period and translation resulting from the comparatively weaker U.S. dollar at September 30, 2011 compared to December 31, 2010 (“Translation”). Days sales outstanding was approximately 70 days at September 30, 2011 compared to 68 days at December 31, 2010.  Inventories increased $85.6 to $634.8 to support higher sales levels and were also impacted by an acquisition during the period and Translation.  Inventory days increased from 77 at December 31, 2010 to 79 at September 30, 2011. Other current assets increased $8.4 to $108.6 primarily due to a receivable related to insurance recoveries as a result of the aforementioned flood at one of the Company’s manufacturing facilities and Translation. Land and depreciable assets, net, decreased $7.5 to $359.5 primarily due to depreciation of $75.1 and disposals of $14.1 which included a write-off of certain flood damaged assets, partially offset by capital expenditures of $72.0, the impact of an acquisition and Translation. Goodwill increased $26.7 to $1,560.0 primarily due an acquisition in the Interconnect Products and Assemblies segment made during the period. Accounts payable increased $33.2 to $418.2, primarily as a result of an increase in purchasing activity during the period, the impact of an acquisition and Translation. Total accrued expenses decreased $26.0 to $243.7 primarily due to the payment of acquisition related contingent consideration of $40.0 partially offset by an increase in accrued income taxes of $12.4 and Translation.  Accrued pension and post-employment benefit obligations decreased $9.1 to $167.6, primarily due to contributions of $20.0 mainly to the Company’s U.S. defined benefit pension plan, partially offset by pension expense.  Other long-term liabilities decreased $4.4 to $37.4 primarily due to the reduction in an acquisition related contingent payment obligation of $17.8 in the second quarter, partially offset by an increase in deferred tax liabilities and Translation.

For the first nine months of 2011, cash flow provided by operating activities of $396.6, net borrowings of $459.5, proceeds from the exercise of stock options including tax benefits from stock-based payment arrangements of $29.9, net proceeds from sales of short-term investments of $7.6 and proceeds from disposals of fixed assets of $7.1 were used to fund purchases of treasury stock of $534.0, capital expenditures of $72.0, acquisitions (net of cash acquired) of $53.0, contingent acquisition-related obligation payments of $40.0, payments to shareholders of noncontrolling interests of $28.7 and dividend payments of $7.8, which resulted in an increase in cash and cash equivalents of $164.3. For the first nine months of 2010, cash flow provided by operating activities of $264.2, net borrowings of $149.8 and proceeds from the exercise of stock options including tax benefits from stock-based payment arrangements of $24.9 were used to fund acquisition-related payments of $164.9, capital expenditures of $73.4, net purchases of short-term investments of $69.1 and payments to shareholders of noncontrolling interests and dividend payments of $22.6 and $7.8, respectively, which resulted in an increase in cash and cash equivalents of $95.9.

In June 2011, the Company amended its $1,000.0 unsecured credit facility (the “Revolving Credit Facility”) to reduce borrowing costs and to extend the maturity date from August 2014 to July 2016. At September 30, 2011, borrowings and availability under the Revolving Credit Facility were $575.5 and $424.5, respectively.  As of September 30, 2011, interest on borrowings under the Revolving Credit Facility was at a spread over LIBOR. The Revolving Credit Facility requires payment of certain annual agency and

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commitment fees and requires that the Company satisfy certain financial covenants.  At September 30, 2011, the Company was in compliance with the financial covenants under the Revolving Credit Facility.  The Company paid fees and expenses of approximately $2.1 related to the amendment which were deferred and are being amortized as interest expense through the amended maturity date of the Revolving Credit Facility.

In November 2009, the Company issued $600.0 principal amount of unsecured 4.75% Senior Notes due November 2014 (the “Senior Notes”) at 99.813% of their face value.  Interest on the Senior Notes is payable semi-annually on May 15 and November 15 of each year to the holders of record as of the immediately preceding May 1 and November 1. The Company may, at its option, redeem some or all of the Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase.  The Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the Senior Notes at September 30, 2011 was approximately $635.0 based on recent bid prices.

A subsidiary of the Company has entered into the Receivables Securitization Facility with a financial institution whereby the subsidiary can sell an undivided interest of up to $100.0 in a designated pool of qualified accounts receivable (the “Receivables Securitization Facility”). The Company services, administers and collects the receivables on behalf of the purchaser. The Receivables Securitization Facility includes certain covenants, provides for various events of termination and expires in May 2013.  In accordance with previous accounting guidance, the receivables sold under the Receivables Securitization Facility were accounted for off-balance sheet as sales of receivables.  The Company adopted FASB ASU No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”) on January 1, 2010. As a result, the Company no longer accounts for the value of the outstanding undivided interest held by investors under the Receivables Securitization Facility as a sale. In addition, transfers of receivables occurring on or after January 1, 2010 are reflected as debt issued in the Company’s Condensed Consolidated Statements of Cash Flow, and the value of the outstanding undivided interest held by investors at December 31, 2010 and September 30, 2011 is accounted for as a secured borrowing and is included in the Company’s Condensed Consolidated Balance Sheets as long-term debt.  At September 30, 2011, borrowings under the Receivables Securitization Facility were $87.7.   Additionally, in accordance with ASU 2009-16, fees incurred in connection with the Receivables Securitization Facility are included in interest expense.

The carrying value of borrowings under the Company’s Revolving Credit Facility and Receivables Securitization Facility approximated their fair value at September 30, 2011.

The Company’s primary ongoing cash requirements will be for operating and capital expenditures, product development activities, repurchases of its common stock, funding of pension obligations, dividends and debt service.  The Company may also use cash to fund all or part of the cost of acquisitions.  The Company currently pays a quarterly dividend on its common stock of $.015 per share.  On October 27, 2011, the Company’s Board of Directors announced its intention to increase the quarterly dividend to $.105 per share effective with the first quarter dividend, which will be paid in April 2012.  For the three and nine months ended September 30, 2011, the Company paid dividends in the amount of $2.5 and $7.8, respectively, and declared dividends in the amount of $2.5 and $7.7, respectively.  For the three and nine months ended September 30, 2010, the Company paid dividends in the amount of $2.6 and $7.8, respectively, and declared dividends in the amount of $2.6 and $7.8, respectively. The Company’s debt service requirements consist primarily of principal and interest on the Senior Notes, the Revolving Credit Facility and the Receivables Securitization Facility.

The Company’s primary sources of liquidity are internally generated cash flow, the Revolving Credit Facility, the Receivables Securitization Facility and cash, cash equivalents and short-term investments.  The Company expects that ongoing cash requirements will be funded from these sources; however, the Company’s sources of liquidity could be adversely affected by, among other things, a decrease in demand for the Company’s products, a deterioration in certain of the Company’s financial ratios or a deterioration in the quality of the Company’s accounts receivables.  However, management believes that the Company’s cash, cash equivalents and short-term investment position, ability to generate strong cash flow from operations, and availability under its Revolving Credit Facility and its Receivables Securitization Facility will allow it to meet its obligations for the next twelve months.

In January 2011, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 20 million shares of its common stock during the three year period ending January 31, 2014 (the “Program”). During the nine months ended September 30, 2011, the Company repurchased approximately 10.4 million shares of its common stock for approximately $534.0.  These treasury shares have been or will be retired by the Company and common stock accumulated earnings were reduced accordingly.  Through October 31, 2011, the Company has repurchased an additional .4 million shares of its common stock for $15.9.  At October 31, 2011, approximately 9.2 million additional shares of common stock may be repurchased under the Program.

For the three and nine months ended September 30, 2011, the Company made cash contributions to the Plans of $2.3 and $20.0, respectively, the majority of which is to the U.S. Plans.  Cash contributions in subsequent years will depend on a number of factors, including the investment performance of the Plans’ assets.

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Environmental Matters

Subsequent to the acquisition of Amphenol Corporation from Allied Signal Corporation (“Allied Signal”) in 1987 (Allied Signal merged with and into Honeywell International Inc. (“Honeywell”) in December 1999), the Company and Honeywell were named jointly and severally liable as potentially responsible parties in connection with several environmental cleanup sites. The Company and Honeywell jointly consented to perform certain investigations and remediation and monitoring activities at two sites, the “Route 8” landfill and the “Richardson Hill Road” landfill, and they were jointly ordered to perform work at another site, the “Sidney” landfill. All of the costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement (the “Honeywell Agreement”) entered into in connection with the acquisition in 1987. The environmental investigation, remediation and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company’s consolidated financial condition or results of operations.

Safe Harbor Statement

Statements in this Form 10-Q, which are other than historical facts, are intended to be “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, the Private Securities Litigation Reform Act of 1995 and other related laws. While the Company believes such statements are reasonable, the actual results and effects could differ materially from those currently anticipated. Please refer to Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2010, for some factors that could cause the actual results to differ from estimates. In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company, in the normal course of doing business, is exposed to the risks associated with foreign currency exchange rates and changes in interest rates.  There has been no material change in the Company’s assessment of its sensitivity to foreign currency exchange rate risk since its presentation set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in its 2010 Annual Report on Form 10-K.  As of September 30, 2011, the Company’s average LIBOR rate was 0.23%.  A 10% change in the LIBOR interest rate at September 30, 2011 would have no material effect on interest expense. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2011, although there can be no assurances that interest rates will not significantly change.

Item 4.    Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the period covered by this report. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management, including the Company’s principal executive and financial officers, to allow timely decisions regarding required disclosure. There has been no change in the Company’s internal controls over financial reporting during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

The Company and its subsidiaries have been named as defendants in several legal actions in which various amounts are claimed arising from normal business activities. Although the amount of any ultimate liability with respect to such matters cannot be precisely determined, in the opinion of management, such matters are not expected to have a material adverse effect on the Company’s financial condition or results of operations.

Item 1A.  Risk Factors

There have been no material changes to the Company’s risk factors as disclosed in Part I, Item 1A of the Company’s 2010 Annual Report on Form 10-K.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Equity Securities

In January 2011, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 20 million shares of its common stock during the three year period ending January 31, 2014 (the “Program”). During the nine months ended September 30, 2011, the Company repurchased approximately 10.4 million shares of its common stock for approximately $534.0.  These treasury shares have been or will be retired by the Company and common stock and accumulated earnings were reduced accordingly.  Through October 31, 2011, the Company has repurchased an additional .4 million shares of its common stock for $15.9.  At October 31, 2011, approximately 9.2 million additional shares of common stock may be repurchased under the Program.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Removed and Reserved

Item 5.    Other Information

None.

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Item 6.    Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  November 4, 2011

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