Amphenol - 10-Q quarterly report FY2013 Q2

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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 COMPREHENSIVE INCOME

(Unaudited)

(dollars in thousands)

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 June 30, 2013 and December 31, 2012, the related condensed consolidated statements of income for the three and six months ended June 30, 2013 and 2012, the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2013 and 2012, and the condensed consolidated statements of cash flow for the six months ended June 30, 2013 and 2012 include the accounts of Amphenol Corporation and its subsidiaries (the “Company”).  All material intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated 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 six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full year.  These condensed consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “2012 Annual Report”).

Note 2—New Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), which clarifies preexisting guidance regarding the treatment of cumulative translation adjustments when a parent sells part or all of its investment in a foreign entity. ASU 2013-05 is effective for fiscal years beginning after December 15, 2013; however, early adoption is permitted.  The Company does not expect that the adoption of this update will have a material effect on its financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present either on the face of the Consolidated Statements of Income or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. ASU 2013-02 was effective prospectively for the Company for the first quarter of 2013. The adoption of this update did not have any effect on the Company’s financial statements.

Note 3—Inventories

Inventories consist of:

Note 4—Reportable Business Segments

The Company has two reportable business segments: (i) Interconnect Products and Assemblies and (ii) Cable Products. The Interconnect Products and Assemblies segment produces antennas, connectors and interconnect assemblies primarily for the communications, defense, commercial aerospace, industrial and automotive markets. The Cable Products segment produces coaxial and flat ribbon cable and related products primarily for communication markets, including cable television. The accounting policies of the segments are the same as those for the Company as a whole. The Company evaluates the performance of business units on, among other things, profit or loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes, amortization related to certain intangible assets and nonrecurring gains and losses.

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Intangible assets are included in other long-term assets in the accompanying Condensed Consolidated Balance Sheets.  The amortization expense for the three months ended June 30, 2013 and 2012 was approximately $4,900 and $4,700, respectively. The amortization expense for the six months ended June 30, 2013 and 2012 was approximately $10,000 and $9,200, respectively.  As of June 30, 2013, amortization expense estimated for each of the next five fiscal years is approximately $19,800 in 2013, $18,300 in 2014, $17,800 in 2015, $17,000 in 2016, and $16,800 in 2017.

Note 12—Debt

Revolving Credit Facility

At June 30, 2013, the Company had a $1,000,000 unsecured credit facility (the “Revolving Credit Facility”) with a maturity date of July 2016. At June 30, 2013, borrowings and availability under the Revolving Credit Facility were $594,100 and $405,900 respectively.  The interest rate on borrowings under the Revolving Credit Facility was at a spread over LIBOR. The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants.  At June 30, 2013, the Company was in compliance with the financial covenants under the Revolving Credit Facility.  On July 1, 2013 the Company amended the Revolving Credit Facility to (1) reduce borrowing costs, (2) to extend the maturity date to July 2018 and (3) increase aggregate commitments under the Revolving Credit Facility by $500,000, thereby increasing the Revolving Credit Facility to $1,500,000.  Availability under the facility at July 1, 2013 was approximately $906,000.

Senior Notes

In November 2009, the Company issued $600,000 principal amount of unsecured 4.75% Senior Notes due November 2014 (the “4.75% Senior Notes”) at 99.813% of their face value. Net proceeds from the sale of the 4.75% Senior Notes were used to repay borrowings under the Company’s Revolving Credit Facility. Interest on the 4.75% 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 4.75% Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase.  The 4.75% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the 4.75% Senior Notes at June 30, 2013 was approximately $630,720 based on recent bid prices in an active market and are therefore classified as Level 1 in the fair value hierarchy.

In January 2012, the Company issued $500,000 principal amount of unsecured 4.00% Senior Notes due February 2022 (the “4.00% Senior Notes”) at 99.746% of their face value.  Net proceeds from the sale of the 4.00% Senior Notes before payment of fees and expenses related to the offering in the amount of $498,730 were used to repay borrowings under the Company’s Revolving Credit Facility.  Interest on the 4.00% Senior Notes is payable semi-annually on February 1 and August 1 of each year, to the holders of record as of the immediately preceding January 15 and July 15.  The Company may, at its option, redeem some or all of the 4.00% Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, plus a make-whole premium (if redeemed prior to November 1, 2021). The 4.00% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness.  The fair value of the 4.00% Senior Notes at June 30, 2013 was approximately $499,750 based on recent bid prices in an active market and are therefore classified as Level 1 in the fair value hierarchy.

Receivables Securitization Facility

A subsidiary of the Company has entered into a Receivables Securitization Facility with a financial institution whereby the subsidiary can sell an undivided interest of up to $100,000 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 and provides for various events of termination.  In January 2013, the Company amended the Receivables Securitization Facility to extend the expiration date to January 2014.  Transfers of receivables 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, 2012 and June 30, 2013 is accounted for as a secured borrowing and is included in the Company’s Condensed Consolidated Balance Sheets as short-term debt.  At June 30, 2013, borrowings under the Receivables Securitization Facility were $82,000.  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 June 30, 2013 due to their relative short-term maturities and market interest rates and are therefore classified as Level 2 in the fair value hierarchy.

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For the six months ended June 30, 2013 and 2012, $(116) and $456 were recognized in accumulated other comprehensive income (loss) associated with foreign exchange rate forward contracts, respectively.  The amount reclassified from accumulated other comprehensive income (loss) to foreign exchange gain (loss) in the accompanying Condensed Consolidated Statements of Income during the six month periods ended June 30, 2013 and 2012 was not material.

Note 15—Income Taxes

The provision for income taxes for the second quarter and the first six months of 2013 was at an effective rate of 26.8% and 24.0%, respectively.  The provision for income taxes for the second quarter and the first six months of 2012 were both at an effective rate of 26.8%.  The effective tax rate in the first six months of 2013 included a first quarter tax benefit of $11,300 resulting from the delay, by the U.S. government in the reinstatement of certain federal income tax provisions for the year 2012 within the American Taxpayer Relief Act relating primarily to research and development credits and certain U.S. taxes on foreign income.  Such tax provisions were reinstated on January 2, 2013 with retroactive effect to 2012.  Excluding the effect of this benefit, the effective tax rate in the first six months of 2013 was 26.8%.

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 2009 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 June 30, 2013, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was approximately $17,753, 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 $5,764.

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Results of Operations

Three and six months ended June 30, 2013 compared to the three and six months ended June 30, 2012

Net sales were $1,136.1 in the second quarter of 2013 compared to $1,061.1 in the prior year quarter, an increase of 7% in both U.S. dollars and in local currencies and 3% organically (excluding the impact of foreign exchange and acquisitions) over the prior year quarter.  Net sales for the first six months of 2013 were $2,215.9 compared to $2,042.7 in the same period in 2012, an increase of 8% in both U.S. dollars and in local currencies and 4% organically over the prior year period.  Sales of interconnect products and assemblies (approximately 92% of sales) increased 6% in both U.S. dollars and in local currencies in the second quarter of 2013 compared to the same period in 2012 ($1,045.7 in 2013 versus $985.5 in 2012) and 8% in both U.S. dollars and in local currencies in the first six months of 2013 compared to the same period in 2012 ($2,041.7 in 2013 versus $1,893.5 in 2012).  The sales growth was driven by increases in nearly all of the served markets and was led by the commercial aerospace, automotive and the mobile network market, with contributions from both organic growth and the Company’s acquisition program.  Sales of cable products (approximately 8% of sales) increased 19% in U.S. dollars and 20% in local currencies in the second quarter of 2013 compared to the same period in 2012 ($90.3 in 2013 versus $75.6 in 2012) and 17% in U.S. dollars and 18% in local currencies in the first six months of 2013 compared to the same period in 2012 ($174.2 in 2013 versus $149.2 in 2012) due to a 2012 acquisition.  Cable product sales are primarily in the broadband market.

Geographically, sales in the United States in the second quarter and first six months of 2013 increased approximately 4%  and 6%, respectively, compared to the same period in 2012 ($359.4 and $708.8, respectively, in 2013 versus $346.2 and $669.1, respectively, in 2012).  International sales for the second quarter and first six months of 2013 increased approximately 9% and 10% in U.S. dollars, respectively, and 8% and 10% in local currencies, respectively, compared to the same period in 2012 ($776.6 and $1,507.1, respectively, in 2013 versus $714.9 and $1,373.6, respectively, in 2012). The comparatively weaker U.S. dollar for the second quarter had the effect of increasing sales approximately $2.1 compared to foreign currency translation rates for the same period in 2012.  Currency translation had no significant effect on sales for the six months of 2013 compared to the 2012 period.

The gross profit margin percentage was approximately 31.7% for the second quarter of 2013 and 31.5% for the first six months of 2013, compared to 31.5% for both the second quarter and first six months of 2012.   The operating margin for the Interconnect Products and Assemblies segment in the second quarter increased approximately 40 basis points compared to the same periods in 2012, primarily reflecting the positive impact of higher volume and cost reduction actions.  The operating margins for the Cable Products segment remained flat for the second quarter and decreased approximately 40 basis points for the first six months of 2013, compared to the same periods in 2012, primarily due to a less favorable pricing environment and product mix.

Selling, general and administrative expenses increased to $135.8 and $266.7, or 12.0% of net sales, for both the second quarter and first six months of 2013, compared to $128.0 and $252.0, or 12.1% and 12.3% of net sales, for the same periods in 2012.  The decrease as a percentage of sales relates primarily to cost control actions and product mix.  Administrative expenses increased approximately $3.1 and $6.2 for the second quarter and first six months of 2013 compared to the same periods in 2012 primarily related to increases in employee related benefits, stock-based compensation expense and amortization of acquisition related identified intangible assets and represented approximately 4.5% of sales for the second quarter and first six months of 2013 and 4.6% of sales for same periods in 2012.  Research and development expenses increased approximately $2.9 and $5.0 for the second quarter and first six months of 2013 compared to the same periods in 2012 reflecting increases in expenses for new product development and represented approximately 2.3% of sales for the second quarter and first six months of 2013 and 2.2% of sales for the same periods in 2012.  Selling and marketing expenses increased approximately $1.8 and $3.6 for the second quarter and first six months of 2013 compared to the same periods in 2012 primarily related to the increase in sales volume and represented approximately 5.1% and 5.3% of sales for the second quarter and first six months of 2013, respectively, and 5.3% and 5.5% for the same periods in 2012, respectively.

Interest expense for the second quarter and first six months of 2013 was $15.6 and $31.1, respectively, compared to $15.1 and $28.8 for the same periods in 2012.  The increases are primarily attributable to higher average debt levels related to the Company’s stock repurchase program.

Other income, net, increased to $3.0 and $5.8 for the second quarter and first six months of 2013, respectively, compared to $2.6 and $4.8 for the same periods in 2012, primarily related to higher interest income on higher levels of cash, cash equivalents and short-term investments.

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The provision for income taxes for the second quarter and the first six months of 2013 was at an effective rate of 26.8% and 24.0%, respectively.  The provision for income taxes for the second quarter and the first six months of 2012 were both at an effective rate of 26.8%.  The effective tax rate in the first six months of 2013 included a first quarter benefit of $11.3 resulting from the delay, by the U.S. government in the reinstatement of certain federal income tax provisions for the year 2012 within the American Taxpayer Relief Act relating primarily to research and development credits and certain U.S. taxes on foreign income.  Such tax provisions were reinstated on January 2, 2013 with retroactive effect to 2012.  Excluding the effect of this benefit, the effective tax rate in the first six months of 2013 was 26.8%.

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 2009 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 June 30, 2013, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was approximately $17.8, 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 $5.8

Liquidity and Capital Resources

Cash flow provided by operating activities was $360.8 in the first six months of 2013 compared to $291.6 in the same 2012 period.  The increase in cash flow provided by operating activities for the first six months of 2013 compared to the same 2012 period is primarily due to an increase in net income, a lower increase in the components of working capital and a net decrease in other long-term assets and liabilities in the 2013 period compared to a net increase in the 2012 period.   The components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $26.7 in the first six months of 2013 due primarily to a decrease in accounts payable of $49.3 which was partially offset by an increase in inventory of $27.7.  The components of working capital as presented on the accompanying Condensed Consolidated Statements of Cash Flow increased $40.6 in the first six months of 2012 due primarily to an increase in accounts receivable, inventory and other current assets of $74.3, $16.5 and $15.3, respectively, which were partially offset by increases in accounts payable and accrued liabilities of $48.0 and $17.5, respectively.

The following describes the significant changes in the amounts as presented on the accompanying Condensed Consolidated Balance Sheets at June 30, 2013. Accounts receivable decreased $4.9 to $905.8 primarily reflecting translation resulting from the comparatively weaker U.S. dollar at June 30, 2013 compared to December 31, 2012 (“Translation”).  Days sales outstanding was approximately 71 days at June 30, 2013 compared to 72 days at December 31, 2012.  Inventories decreased $30.2 to $703.5 as a result of management initiatives to reduce inventory levels and Translation partially offset by the impact of acquisitions.  Inventory days decreased from 83 days at December 31, 2012 to 81 days at June 30, 2013.  Land and depreciable assets, net, increased $7.4 to $424.8 primarily due to capital expenditures of $64.6 offset by depreciation of $55.2 and Translation.  Goodwill increased $19.5 to $1,952.3 primarily as a result of an acquisition offset by Translation.  Accounts payable decreased $49.4 to $447.2, primarily as a result of a decrease in purchasing activity during the period corresponding with the reduced inventory levels and a decrease in payable days. Payable days were 52 at June 30, 2013 compared to 56 at December 31, 2012.  Total accrued expenses decreased $6.9 to $284.8, primarily due to lower accrued wages and income taxes, partially offset by the accrual of dividends declared in June 2013 that were paid in July 2013. Other long-term liabilities increased $8.2 to $42.2 primarily due to an increase in deferred tax liabilities.

For the first six months of 2013, cash flow provided by operating activities of $360.8, proceeds from the exercise of stock options including tax benefits from stock-based payment arrangements of $80.2 and net borrowings under credit facilities of $76.7 were used to fund purchases of treasury stock of $181.1, net purchases of short-term investments of $167.2, capital expenditures (net of disposals) of $64.6, acquisitions (net of cash acquired) of $44.0, dividend payments of $16.8 and payments to shareholders of noncontrolling interests of $1.7, which resulted in an increase in cash and cash equivalents of $32.8.  For the first six months of 2012, cash flow provided by operating activities of $291.6, proceeds from the 4.00% Senior Notes offering of $498.7 and proceeds from the exercise of stock options including tax benefits from stock-based payment arrangements of $45.4 were used to fund net repayments on credit facilities of $331.9, purchases of treasury stock of $201.0, acquisitions (net of cash acquired) of $82.3, capital expenditures (net of disposals) of $61.1, dividend payments of $19.5, fees and expenses in connection with the issuance of the 4.00% Senior Notes of $4.3 and payments to shareholders of noncontrolling interests of $1.7, which resulted in an increase in cash and cash equivalents of $130.9.

At June 30, 2013, the Company had a $1,000.0 unsecured credit facility (the “Revolving Credit Facility”) with a maturity date of July 2016. At June 30, 2013, borrowings and availability under the Revolving Credit Facility were $594.1 and $405.9, respectively.  The interest rate on borrowings under the Revolving Credit Facility was at a spread over LIBOR. The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants.  At June 30,

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2013, the Company was in compliance with the financial covenants under the Revolving Credit Facility.  On July 1, 2013, the Company amended the Revolving Credit Facility to (1) reduce borrowing costs, (2) to extend the maturity date to July 2018 and (3) increase aggregate commitments under the Revolving Credit Facility by $500.0, thereby increasing the Revolving Credit Facility to $1,500.0.  The availability under the facility at July 1, 2013 was approximately $906.0.

In November 2009, the Company issued $600.0 principal amount of unsecured 4.75% Senior Notes due November 2014 (the “4.75% Senior Notes”) at 99.813% of their face value. Net proceeds from the sale of the 4.75% Senior Notes were used to repay borrowings under the Company’s Revolving Credit Facility. Interest on the 4.75% 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 4.75% Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase.  The 4.75% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the 4.75% Senior Notes at June 30, 2013 was approximately $630.7 based on recent bid prices.

In January 2012, the Company issued $500.0 principal amount of unsecured 4.00% Senior Notes due February 2022 (the “4.00% Senior Notes”) at 99.746% of their face value.  Net proceeds from the sale of the 4.00% Senior Notes before payment of fees and expenses related to the offering in the amount of $498.7 were used to repay borrowings under the Company’s Revolving Credit Facility.  Interest on the 4.00% Senior Notes is payable semi-annually on February 1 and August 1 of each year, to the holders of record as of the immediately preceding January 15 and July 15.  The Company may, at its option, redeem some or all of the 4.00% Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, plus a make-whole premium (if redeemed prior to November 1, 2021). The 4.00% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness.  The fair value of the 4.00% Senior Notes at June 30, 2013 was approximately $499.8 based on recent bid prices.

A subsidiary of the Company has entered into a 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 and provides for various events of termination.  In January 2013, the Company amended the Receivables Securitization Facility to extend the expiration date to January 2014.  Transfers of receivables 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, 2012 and June 30, 2013 is accounted for as a secured borrowing and is included in the Company’s Condensed Consolidated Balance Sheets as short-term debt.  At June 30, 2013, borrowings under the Receivables Securitization Facility were $82.0. 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 June 30, 2013.

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 generally pays a quarterly dividend on its common stock.  For the three and six months ended June 30, 2013, the Company paid dividends in the amount of $16.8 and declared dividends in the amount of $16.7 and $33.5, respectively.  In July 2013, the Company’s Board of Directors approved an increase in the quarterly dividend from $0.105 per share to $0.20 per share to be paid on or about October 2, 2013 to holders of record of the Company’s Class A Common stock as of September 11, 2013.  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 2013, the Company’s Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 10 million shares of its common stock during the two year period ending January 31, 2015 (the “2013 Stock Repurchase Program”). The price and timing of any such purchases under the 2013 Stock Repurchase Program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, economic and market conditions and stock price.  During the six months ended June 30, 2013, the Company repurchased 2.5 million shares of its

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common stock for approximately $181.1.  These treasury shares have been or will be retired by the Company and common stock and accumulated earnings were reduced accordingly.  Through July 31, 2013, the Company has repurchased approximately an additional 0.7 million shares of its common stock for $51.9. At July 31, 2013, approximately 6.9 million additional shares of common stock may be repurchased under the 2013 Stock Repurchase Program.

For the three and six months ended June 30, 2013, the Company made a cash contribution to the U.S. defined benefit pension plans of $4.0 and estimates that, based on current actuarial calculations, it will make aggregate cash contributions to its defined benefit pension plans in 2013 of approximately $21.0, the majority of which is to the U.S. defined benefit pension plans.  The timing and amount of cash contributions in subsequent years will depend on a number of factors, including the investment performance of the plan assets.

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 effect on the Company’s financial condition, result of operations or cash flows.

Owners and occupiers of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad liability under various environmental laws and regulations, including expenditures for cleanup and monitoring costs and potential damages arising out of past disposal activities. Such liability in many cases may be imposed regardless of fault or the legality of the original disposal activity. The Company has performed remediation activities and is currently performing operations and maintenance and monitoring activities at three off-site disposal sites previously utilized by the Company’s facility in Sidney, New York, and others - the Richardson Hill Road landfill, the Route 8 landfill and the Sidney landfill.  Actions at the Richardson Hill Road and Sidney landfills were undertaken subsequent to designation as “Superfund” sites on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The Route 8 landfill was designated as a New York State Inactive Hazardous Waste Disposal Site, with remedial actions taken pursuant to Chapter 6, Section 375-1 of the New York Code of Rules and Regulations. In addition, the Company is currently performing monitoring activities at, and in proximity to, its manufacturing site in Sidney, New York. The Company is also engaged in remediating or monitoring environmental conditions at certain of its other manufacturing facilities and has been named as a potentially responsible party for cleanup costs at other off-site disposal sites.

Subsequent to the acquisition of Amphenol from Allied Signal Corporation (“Allied Signal”) in 1987 (Allied Signal merged with Honeywell International Inc. in December 1999 (“Honeywell”)), 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 the Route 8 landfill and the Richardson Hill Road landfill, and they were jointly ordered to perform work at the Sidney landfill, all as referred to above. 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 effect on the Company’s consolidated financial condition, result of operations or cash flows.

Since 1987, the Company has not been identified nor has it been named as a potentially responsible party with respect to any other significant on-site or off-site hazardous waste matters. In addition, the Company believes that its manufacturing activities and disposal practices since 1987 have been in material compliance with applicable environmental laws and regulations. Nonetheless, it is possible that the Company will be named as a potentially responsible party in the future with respect to additional Superfund or other sites. Although the Company is unable to predict with any reasonable certainty the extent of its ultimate liability with respect to any pending or future environmental matters, the Company believes, based upon information currently known by management about the Company’s manufacturing activities, disposal practices and estimates of liability with respect to known environmental matters, that any such liability will not have a material effect on the Company’s consolidated financial condition, result of operations or cash flows.

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 2012 Annual Report, 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 2012

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Annual Report.  As of June 30, 2013, the Company’s average LIBOR rate was 0.20%.  A 10% change in the LIBOR interest rate at June 30, 2013 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 2013, 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 defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 in providing reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act 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 2012 Annual Report.

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

Repurchase of Equity Securities

In January 2013, the Company’s Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 10 million shares of its common stock during the two year period ending January 31, 2015 (the “2013 Stock Repurchase Program”). The price and timing of any such purchases under the 2013 Stock Repurchase Program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, economic and market conditions and stock price.  During the six months ended June 30, 2013, the Company repurchased approximately 2.5 million shares of its common stock for approximately $181.1 million.  These treasury shares have been or will be retired by the Company and common stock and accumulated earnings were reduced accordingly.  Through July 31, 2013, the Company has repurchased approximately an additional 0.7 million shares of its common stock for $51.9. At July 31, 2013, approximately 6.9 million additional shares of common stock may be repurchased under the 2013 Stock Repurchase Program.

Item 3.   Defaults Upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

Not Applicable.

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Item 5.   Other Information

None.

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.

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