UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
|
|
For the Fiscal Year Ended December 31, 2008 |
|
|
|
or |
||
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
|
|
For the transition period from to |
Commission file number 1-10879
AMPHENOL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
22-2785165 |
(State or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
358 Hall Avenue, Wallingford, Connecticut 06492 |
||
203-265-8900 |
||
(Address of Principal Executive Offices, Zip Code, Registrants Telephone |
||
Number, including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $.001 par value |
|
New York Stock Exchange, Inc. |
(Title Of Each Class) |
|
(Name Of Each Exchange On Which Registered) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act).
Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer x , |
|
Accelerated filer o , |
|
Non-accelerated filer o , |
|
a Smaller reporting company o . |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act).
Yes o No x
The aggregate market value of Amphenol Corporation Class A Common Stock, $.001 par value, held by non-affiliates was approximately $7,874 million based on the reported last sale price of such stock on the New York Stock Exchange on June 30, 2008.
As of January 31, 2009, the total number of shares outstanding of Registrants Class A Common Stock was 171,187,318.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants definitive proxy statement, which is expected to be filed within 120 days following the end of the fiscal year covered by this report, are incorporated by reference into Part III hereof.
|
Page |
|||
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
||
|
|
|
3 |
|
|
|
|
5 |
|
|
|
|
6 |
|
|
|
|
6 |
|
|
|
|
6 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
8 |
|
|
|
|
8 |
|
|
|
Cautionary Statements for Purposes of Forward Looking Information |
|
8 |
|
|
9 |
||
|
|
12 |
||
|
|
12 |
||
|
|
12 |
||
|
|
12 |
||
|
|
|
13 |
|
|
|
13 |
||
|
|
15 |
||
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
|
16 |
|
|
|
25 |
||
|
|
26 |
||
|
|
|
26 |
|
|
|
|
27 |
|
|
|
|
28 |
|
|
|
Consolidated Statements of Changes in Shareholders Equity and Other Comprehensive Income |
|
29 |
|
|
|
30 |
|
|
|
|
31 |
|
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
|
46 |
|
|
|
46 |
||
|
|
47 |
||
|
|
|
48 |
|
|
|
48 |
||
|
|
48 |
||
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
|
48 |
|
|
Certain Relationships and Related Transactions, and Director Independence |
|
48 |
|
|
|
48 |
||
|
|
|
49 |
|
|
|
49 |
||
|
|
|
52 |
|
|
|
|
52 |
2
Amphenol Corporation (Amphenol or the Company) is one of the worlds largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems and coaxial and flat-ribbon cable. The Company was incorporated in 1987. Certain predecessor businesses, which now constitute part of the Company, have been in business since 1932. The primary end markets for the Companys products are:
· communication systems for the converging technologies of voice, video and data communications;
· a broad range of industrial applications including factory automation and motion control systems, medical and industrial instrumentation, mass transportation, alternative energy, natural resource exploration and traditional and hybrid- electrical automotive applications; and
· commercial aerospace and military applications.
The Companys strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a worldwide basis while maintaining continuing programs of productivity improvement and cost control. For 2008, the Company reported net sales, operating income and net income of $3,236.5 million, $632.2 million and $419.2 million, respectively. The table below summarizes information regarding the Companys primary markets and end applications for the Companys products:
|
|
Information Technology & Communications |
|
Industrial/Automotive |
|
Commercial Aerospace
|
|
|
|
|
|
|
|
Percentage of Sales |
|
62% |
|
19% |
|
19% |
|
|
|
|
|
|
|
Primary End Applications |
|
Wireless Communication Systems · wireless handsets and personal communication devices · wireless infrastructure equipment · base stations · cell sites
Broadband Networks · cable television networks · set top converters · high-speed data kits · cable modems · network switching equipment |
|
Factory automation Instrumentation Automobile safety systems and on-board electronics Hybrid-electrical vehicles Mass transportation Oil exploration Off-road construction Medical equipment Satellite radio systems Geophysical Alternative energy |
|
Military and Commercial Aircraft · avionics · engine controls · flight controls · passenger related systems Missile systems Military communications systems Satellite and space programs Radar systems Military vehicles Ordnance |
|
|
Telecommunications and Data Communications · servers and storage systems · computers, personal computers and related peripherals · data networking equipment · routers, and switches |
|
|
|
|
3
The Company designs and manufactures connectors and interconnect systems, which are used primarily to conduct electrical and optical signals for a wide range of sophisticated electronic applications. The Company believes, based primarily on published market research, that it is the second largest connector and interconnect product manufacturer in the world. The Company has developed a broad range of connector and interconnect products for the information technology and communications equipment applications including the converging voice, video and data communications markets. The Company offers a broad range of interconnect products for factory automation and motion control systems, machine tools, instrumentation and medical systems, mass transportation applications and automotive applications, including airbags, pretensioner seatbelts and other on-board automotive electronics. In addition, the Company is the leading supplier of high performance, military-specification, circular environmental connectors that require superior reliability and performance under conditions of stress and in hostile environments. These conditions are frequently encountered in commercial and military aerospace applications and other demanding industrial applications such as solar and wind power generation, oil exploration, medical equipment, hybrid-electrical vehicles and off-road construction.
The Company is a global manufacturer employing advanced manufacturing processes. The Company designs, manufactures and assembles its products at facilities in the Americas, Europe, Africa and Asia. The Company sells its products through its own global sales force, independent manufacturers representatives and a global network of electronics distributors to thousands of OEMs in approximately 60 countries throughout the world. The Company also sells certain products to electronic manufacturing services (EMS), to original design manufacturing (ODM) companies and to communication network operators. For 2008, approximately 40% of the Companys net sales were in North America, 21% were in Europe and 39% were in Asia and other countries.
The Company generally implements its product development strategy through product design teams and collaboration arrangements with customers which result in the Company obtaining approved vendor status for its customers new products and programs. The Company seeks to have its products become widely accepted within the industry for similar applications and products manufactured by other potential customers, which the Company believes will provide additional sources of future revenue. By developing application specific products, the Company has decreased its exposure to standard products which generally experience greater pricing pressure. In addition to product design teams and customer collaboration arrangements, the Company uses key account managers to manage customer relationships on a global basis such that it can bring to bear its total resources to meet the worldwide needs of its multinational customers.
The Company and industry analysts estimate that the worldwide sales of interconnect products were approximately $45 billion in 2008. The Company believes that the worldwide industry for interconnect products and systems is highly fragmented with over 2,000 producers of connectors and interconnect systems worldwide, of which the 10 largest, including Amphenol, accounted for a combined market share of approximately 44% in 2008.
The Companys acquisition strategy is focused on the consolidation of this highly fragmented industry. The Company targets acquisitions on a global basis in high growth segments that have complementary capabilities to the Company from a product, customer or geographic standpoint. The Company looks to add value to smaller companies through its global capabilities and generally expects acquisitions to be accretive to performance in the first year. In 2008, the Company spent approximately $136 million on acquisitions, including payments for performance-based additional cash consideration. A significant portion of this spending was made on three acquisitions in target markets, including the wireless infrastructure, military/aerospace and internet markets, which broadened and enhanced its product offering in these areas.
4
The following table sets forth the dollar amounts of the Companys net trade sales for its business segments. For a discussion of factors affecting changes in sales by business segment and additional segment financial data, see Managements Discussion and Analysis of Financial Condition and Results of Operations.
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
(dollars in thousands) |
|
|||||||
Net trade sales by business segment: |
|
|
|
|
|
|
|
|||
Interconnect products and assemblies |
|
$ |
2,950,570 |
|
$ |
2,569,281 |
|
$ |
2,207,508 |
|
Cable products |
|
285,901 |
|
281,760 |
|
263,922 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
|
|
|
|
|
|
|
|
|||
Net trade sales by geographic area (1): |
|
|
|
|
|
|
|
|||
United States |
|
$ |
1,159,349 |
|
$ |
1,155,846 |
|
$ |
1,059,974 |
|
China |
|
557,243 |
|
382,489 |
|
264,972 |
|
|||
Other International locations |
|
1,519,879 |
|
1,312,706 |
|
1,146,484 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
(1) Based on customer location to which product is shipped.
Interconnect Products and Assemblies. The Company produces a broad range of interconnect products and assemblies primarily for voice, video and data communication systems, commercial aerospace and military systems, automotive and mass transportation applications, and industrial and factory automation equipment. Interconnect products include connectors, which when attached to an electronic or fiber optic cable, a printed circuit board or other device, facilitate electronic or fiber optic transmission. Interconnect assemblies generally consist of a system of cable and connectors for linking electronic and fiber optic equipment. The Company designs and produces a broad range of connector and cable assembly products used in communication applications, such as: engineered cable assemblies used in base stations for wireless communication systems and internet networking equipment; smart card acceptor and other interconnect devices used in mobile telephones; set top boxes and other applications to facilitate reading data from smart cards; fiber optic connectors used in fiber optic signal transmission; backplane and input/output connectors and assemblies used for servers and data storage devices and linking personal computers and peripheral equipment; sculptured flexible circuits used for integrating printed circuit boards in communication applications and hinge products used in mobile phone and other mobile communication devices. The Company also designs and produces a broad range of radio frequency connector products and antennas used in telecommunications, computer and office equipment, instrumentation equipment, local area networks and automotive electronics. The Companys radio frequency interconnect products and assemblies are also used in base stations, mobile communication devices and other components of cellular and personal communications networks.
The Company believes that it is the largest supplier of high performance, military-specification, circular environmental connectors. Such connectors require superior performance and reliability under conditions of stress and in hostile environments. High performance environmental connectors and interconnect systems are generally used to interconnect electronic and fiber optic systems in sophisticated aerospace, military, commercial and industrial equipment. These applications present demanding technological requirements in that the connectors are subject to rapid and severe temperature changes, vibration, humidity and nuclear radiation. Frequent applications of these connectors and interconnect systems include aircraft, guided missiles, radar, military vehicles, equipment for spacecraft, energy, medical instrumentation, geophysical applications and off-road construction equipment. The Company also designs and produces industrial interconnect products used in a variety of applications such as factory automation equipment, mass transportation applications including railroads and marine transportation; and automotive safety products including interconnect devices and systems used in automotive airbags, pretensioner seatbelts, antilock braking systems and other on-board automotive electronic systems. The Company also designs and produces highly-engineered cable and backplane assemblies. Such assemblies are specially designed by the Company in conjunction with OEM customers for specific applications, primarily for computer, wired and wireless communication systems, office equipment, industrial and aerospace applications. The cable assemblies utilize the Companys connector and cable products as well as components purchased from others.
5
Cable Products. The Company designs, manufactures and markets coaxial cable primarily for use in the cable television industry. The Companys Times Fiber Communications subsidiary is the worlds second largest producer of coaxial cable for the cable television market. The Company believes that its Times Fiber Communications unit is one of the lowest cost producers of coaxial cable for cable television. The Companys coaxial cable and connector products are used in cable television systems including full service cable television/telecommunication systems being installed by cable operators and telecommunication companies offering video, voice and data services. The Company is also a major supplier of coaxial cable to the international cable television market. The Company manufactures two primary types of coaxial cable: semi-flexible, which has an aluminum tubular shield, and flexible, which has one or more braided metallic shields. Semi-flexible coaxial cable is used in the trunk and feeder distribution portion of cable television systems, and flexible cable (also known as drop cable) is used primarily for hookups from the feeder cable to the cable television subscribers residence. Flexible cable is also used in other communication applications. The Company has also developed a broad line of radio frequency and fiber optic interconnect components for full service cable television/ telecommunication networks.
The Company is also a leading producer of high speed data cables and specialty cables, which are used to connect internal components in systems with space and component configuration limitations. Such products are used in computer and office equipment applications as well as in a variety of telecommunication applications.
The Company believes that its global presence is an important competitive advantage, as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers. Approximately 64% of the Companys sales for the year ended December 31, 2008 were outside the United States. Approximately 17% of the Companys sales were sold to customers in China, and the Company has international manufacturing and assembly facilities in China, Taiwan, Korea, India, Japan, Malaysia, Europe, Canada, Latin America, Africa and Australia. European operations include manufacturing and assembly facilities in the United Kingdom, Germany, France, the Czech Republic, Slovakia and Estonia and sales offices in most European markets. The Companys international manufacturing and assembly facilities generally serve the respective local markets and coordinate product design and manufacturing responsibility with the Companys other operations around the world. The Company has low cost manufacturing and assembly facilities in China, Mexico, India, Eastern Europe and Africa to serve regional and world markets.
The Companys products are used in a wide variety of applications by numerous customers, the largest of which accounted for approximately 7% of net sales for the year ended December 31, 2008. The Company sells its products to over 10,000 customer locations worldwide. The Companys products are sold directly to OEMs, contract manufacturers, cable system operators, telecommunication companies and through manufacturers representatives and distributors. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a global presence, can meet quality and delivery standards, have a broad product portfolio and design capability and have competitive prices.
The Company has focused its global resources to position itself to compete effectively in this environment. The Company has concentrated its efforts on service and productivity improvements including advanced computer aided design and manufacturing systems, statistical process controls and just-in-time inventory programs to increase product quality and shorten product delivery schedules. The Companys strategy is to provide comprehensive design capabilities, a broad selection of products and a high level of service in the areas in which it competes. The Company has achieved a preferred supplier designation from many of its customers.
The Companys sales to distributors represented approximately 15% of the Companys 2008 sales. The Companys recognized brand names, including Amphenol, Times Fiber, Tuchel, Socapex, Sine, Spectra-Strip, Pyle-National, Matrix, Kai Jack and others, together with the Companys strong connector design-in position (products that are specified in customer drawings), enhance its ability to reach the secondary market through its network of distributors.
The Company employs advanced manufacturing processes including molding, stamping, plating, turning, extruding, die casting and assembly operations as well as proprietary process technology for specialty and coaxial cable production. The Companys manufacturing facilities are generally vertically integrated operations from the initial design stage through final design and manufacturing. Outsourcing of certain fabrication processes is used when cost-effective. Substantially all of the Companys manufacturing facilities are certified to the ISO9000 series of quality standards, and many of the Companys manufacturing facilities are certified
6
to other quality standards, including QS9000, ISO14000 and TS16469.
The Company employs a global manufacturing strategy to lower its production costs and to improve service to customers. The Company sources its products on a worldwide basis with manufacturing and assembly operations in the Americas, Europe, Asia, Africa and Australia. To better serve certain high volume customers, the Company has established just-in-time facilities near these major customers.
The Companys policy is to maintain strong cost controls in its manufacturing and assembly operations. The Company is continually evaluating and adjusting its expense levels and workforce to reflect current business conditions and maximize the return on capital investments.
The Company purchases a wide variety of raw materials for the manufacture of its products, including precious metals such as gold and silver used in plating; aluminum, brass, steel, copper and bimetallic products used for cable, contacts and connector shells, and plastic materials used for cable and connector bodies and inserts. Such raw materials are generally available throughout the world and are purchased locally from a variety of suppliers. The Company is generally not dependent upon any one source for raw materials, or if one source is used the Company attempts to protect itself through long-term supply agreements.
The Companys research and development expense for the creation of new and improved products and processes was $68.1 million, $62.4 million and $53.7 million for 2008, 2007 and 2006, respectively. The Companys research and development activities focus on selected product areas and are performed by individual operating divisions. Generally, the operating divisions work closely with OEM customers to develop highly-engineered products and systems that meet specific customer needs. The Company focuses its research and development efforts primarily on those product areas that it believes have the potential for broad market applications and significant sales within a one-to-three year period.
The Company owns a number of active patents worldwide. The Company also regards its trademarks Amphenol, Times Fiber, Tuchel, Socapex and Spectra-Strip to be of material value in its businesses. The Company has exclusive rights in all its major markets to use these registered trademarks. The Company has rights to other registered and unregistered trademarks which it believes to be of value to its businesses. While the Company considers its patents and trademarks to be valuable assets, the Company does not believe that its competitive position is dependent on patent or trademark protection or that its operations are dependent on any individual patent or trademark.
The Company encounters competition in substantially all areas of its business. The Company competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. Competitors include large, diversified companies, some of which have substantially greater assets and financial resources than the Company, as well as medium to small companies. In the area of coaxial cable for cable television, the Company believes that it and CommScope are the primary world providers of such cable; however, CommScope is larger than the Company in this market. In addition, the Company faces competition from other companies that have concentrated their efforts in one or more areas of the coaxial cable market.
The Company estimates that its backlog of unfilled orders was $505 million and $523 million at December 31, 2008 and 2007, respectively. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions. Unfilled orders may be cancelled prior to shipment of goods. It is expected that all or a substantial portion of the backlog will be filled within the next 12 months. Significant elements of the Companys business, such as sales to the communications related markets (including wireless communications, telecom & data communications and broadband communications) and sales to distributors, generally have short lead times. Therefore, backlog may not be indicative of future demand.
As of December 31, 2008, the Company had approximately 30,000 full-time employees worldwide of which approximately 21,100 were located in low cost regions. Of these employees, approximately 24,200 were hourly employees and the remainder were
7
salaried. The Company believes that it has a good relationship with its unionized and non-unionized employees.
Certain operations of the Company are subject to federal, state and local 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 Companys financial condition or results of operations.
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)), Amphenol and Honeywell were named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Honeywell jointly consented to perform certain investigations and remedial 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. 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. For sites covered by the Honeywell Agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, Honeywell is obligated to reimburse Amphenol 100% of such costs. Honeywell representatives continue to work closely with the Company in addressing the most significant environmental liabilities covered by 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 Companys financial condition or results of operations. The environmental investigation, remedial and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
Owners and occupiers of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad liability under various federal and state 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 Companys Sidney facility and others, to wit 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. All such environmental matters referred to in this paragraph are covered by the Honeywell Agreement.
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 Companys manufacturing activities, disposal practices and estimates of liability with respect to known environmental matters, that any such liability will not be material to its financial condition or results of operations.
The Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available, without charge, on its web site, www.amphenol.com, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available without charge, from Amphenol Corporation, Investor Relations, 358 Hall Avenue, Wallingford, CT 06492.
Cautionary Information for Purposes of Forward Looking Statements
Statements made by the Company in written or oral form to various persons, including statements made in this annual report on Form 10-K and other filings with the SEC, that are not strictly historical facts are forward looking statements. Such statements
8
should be considered as subject to uncertainties that exist in the Companys operations and business environment. Certain of the risk factors, assumptions or uncertainties that could cause the Company to fail to conform with expectations and predictions are described below under the caption Risk Factors in Part I, Item IA and elsewhere in this Form 10-K. Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may vary materially from those described in this Form 10-K as anticipated, believed, estimated or expected. We do not intend to update these forward looking statements.
Investors should carefully consider the risks described below and all other information in this Form 10-K. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that it currently deems immaterial may also impair the Companys business and operations.
If any of the following risks actually occur, the Companys business and consolidated financial statements could be materially adversely affected. In such case, the trading price of the Companys common stock could decline and investors may lose all or part of their investment.
The Company is dependent on the communications industry, including telecommunication and data communication, wireless communications and broadband communications.
Approximately 62% of the Companys revenues for the year ended December 31, 2008 came from sales to the communications industry, including telecommunication and data communication, wireless communications and broadband communications. Demand for these products is subject to rapid technological change (see belowThe Company is dependent on the acceptance of new product introductions for continued revenue growth). These markets are dominated by several large manufacturers and operators who regularly exert significant price pressure on their suppliers, including the Company. The loss of one or more of the large communications customers could have a material adverse effect on the Companys business. There can be no assurance that the Company will be able to continue to compete successfully in the communications industry, and the Companys failure to do so could have an adverse effect on the Companys results of operations.
Approximately 10% of the Companys 2008 revenues came from sales to the broadband communications industry. Demand for the Companys broadband communications products depends primarily on capital spending by cable television operators for constructing, rebuilding or upgrading their systems. The amount of this capital spending, and, therefore, the Companys sales and profitability will be affected by a variety of factors, including general economic conditions, acquisitions of cable television operators by non-cable television operators, cable system consolidation within the industry, the financial condition of domestic cable television operators and their access to financing, competition from satellite, telephone and television providers and telephone companies, technological developments and new legislation and regulation of cable television operators. There can be no assurance that existing levels of cable television capital spending will continue or that cable television spending will not decrease.
Changes in defense expenditures may reduce the Companys sales.
Approximately 15% of the Companys 2008 revenues came from sales to the military market. The Company participates in a broad spectrum of defense programs and believes that no one program accounted for more than 1% of its 2008 revenues. The substantial majority of these sales are related to both U.S. and foreign military and defense programs. However, the Companys sales are generally to contractors and subcontractors of the U.S. or foreign governments or to distributors that in turn sell to the contractors and subcontractors. Nevertheless, the Companys sales are affected by changes in the defense budgets of the U.S. and foreign governments. A decline in U.S. defense expenditures and defense expenditures generally could adversely affect the Companys business.
The Company encounters competition in substantially all areas of its business.
The Company competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. Competitors include large, diversified companies, some of which have substantially greater assets and financial resources than the Company, as well as medium to small companies. There can be no assurance that additional competitors will not enter the Companys existing markets, nor can there be any assurance that the Company will be able to compete successfully against existing or new competition, and the inability to do so could have an adverse effect on the Companys business and operations.
9
The Company is dependent on the acceptance of new product introductions for continued revenue growth.
The Company estimates that products introduced in the last two years accounted for approximately 29% of 2008 net sales. The Companys long-term results of operations depend substantially upon its ability to continue to conceive, design, source and market new products and upon continuing market acceptance of its existing and future product lines. In the ordinary course of business, the Company continually develops or creates new product line concepts. If the Company fails to or is significantly delayed in introducing new product line concepts or if the Companys new products do not meet with market acceptance, our results of operations may be adversely affected.
Covenants in the Companys credit agreements may adversely affect the Company.
The Companys bank credit agreements contain financial and other covenants, such as a limit on the ratio of debt to earnings before interest, taxes, depreciation and amortization, minimum levels of net worth and limits on incurrence of liens. Although the Company believes none of these covenants are presently restrictive to the Companys operations, the ability to meet the financial covenants can be affected by events beyond the Companys control, and the Company cannot provide assurance that the Company will meet those tests. A breach of any of these covenants could result in a default under the Companys credit agreements. Upon the occurrence of an event of default under any of the Companys credit facilities, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and terminate all commitments to extend further credit. If the lenders accelerate the repayment of borrowings, the Company may not have sufficient assets to repay the Companys credit facilities and other indebtedness. See Liquidity and Capital Resources.
Downgrades of the Companys debt rating could adversely affect the Companys results of operations and financial position.
If the credit rating agencies that rate the Companys debt were to downgrade the Companys credit rating in conjunction with a deterioration of the Companys performance, it may increase the Companys cost of capital and make it more difficult for the Company to obtain new financing, which could adversely affect the Companys business.
The Companys results may be negatively affected by changing interest rates .
The Company is subject to market risk from exposure to changes in interest rates based on the Companys financing activities. The Company utilizes interest rate swap agreements to manage and mitigate its exposure to changes in interest rates. As of December 31, 2008, the Company had interest rate protection in the form of swaps that effectively fixed the Companys LIBOR interest rate on $150.0 million, $250.0 million and $250.0 million of floating rate bank debt at 4.40%, 4.65% and 4.73%, expiring in December 2009, December 2009 and July 2010, respectively.
A 10% change in the LIBOR interest rate at December 31, 2008 would have the effect of increasing or decreasing interest expense by approximately $0.2 million. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2009, although there can be no assurances that interest rates will not significantly change.
The Companys results may be negatively affected by foreign currency exchange rates.
The Company conducts business in several international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Companys sales, gross margins and retained earnings. The Company attempts to minimize currency exposure risk by producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency and by managing its working capital. There can be no assurance that this approach will be successful, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Companys worldwide operations, which could have an adverse effect on the results of the Companys operations.
The Company is subject to the risks of political, economic and military instability in countries outside the United States.
Non-U.S. markets account for a substantial portion of the Companys business. During 2008, non-U.S. markets constituted approximately 64% of the Companys net sales. The Company employs more than 85% of its workforce outside the United States. The Companys customers are located throughout the world and it has many manufacturing, administrative and sales facilities outside the United States. Because of the Companys extensive non-U.S. operations, it is exposed to risks that could negatively affect sales or profitability, including:
· tariffs, trade barriers and trade disputes;
· regulations related to customs and import/export matters;
10
· longer payment cycles;
· tax issues, such as tax law changes, examinations by taxing authorities, variations in tax laws from country to country as compared to the United States, and difficulties in repatriating in a tax-efficient manner cash generated or held abroad;
· challenges in collecting accounts receivable;
· employment regulations and local labor conditions;
· difficulties protecting intellectual property;
· instability in economic or political conditions, including inflation, recession and actual or anticipated military or political conflicts; and
· the impact of each of the foregoing on our outsourcing and procurement arrangements.
The Company may experience difficulties and unanticipated expense of assimilating newly acquired businesses, including the potential for the impairment of goodwill.
The Company has completed a number of acquisitions in the past few years. It is possible the Company may experience difficulty integrating such acquisitions and further that the acquisitions may not perform as expected. At December 31, 2008, the total assets of the Company were $2,994.2 million, which included $1,232.3 million of goodwill. The goodwill arose as the excess of the purchase price, inclusive of performance-based cash consideration, over the fair value of net assets of businesses acquired. The Company performs annual evaluations for the potential impairment of the carrying value of goodwill in accordance with Statement of Financial Accounting Standards No. 142. Such evaluations have not resulted in the need to recognize an impairment. However, if the financial performance of the Companys businesses were to decline significantly, the Company could incur a non-cash charge to its income statement for the impairment of goodwill.
The Company may experience difficulties in obtaining a consistent supply of materials at stable pricing levels, which could adversely affect its results of operations.
The Company uses basic materials like steel, aluminum, copper, bi-metallic products, gold and plastic resins in its manufacturing process. Volatility in the prices of such material and availability of supply may have a substantial impact on the price the Company pays for such products. In addition, to the extent such cost increases cannot be recovered through sales price increases or productivity improvements, the Companys margin may decline.
The Company may not be able to attract and retain key employees.
The Companys continued success depends upon its continued ability to hire and retain key employees at its operations around the world. Any difficulties in obtaining or retaining the management and other human resource competencies that the Company needs to achieve its business objectives may have adverse effects on the Companys performance.
Changes in general economic conditions and other factors beyond the Companys control may adversely impact its business.
The following factors could adversely impact the Companys business:
· A global economic slowdown in any one, or all, of the Companys market segments.
· The effects of significant changes in monetary and fiscal policies in the U.S. and abroad including significant income tax changes, currency fluctuations and unforeseen inflationary pressures.
· Rapid material escalation of the cost of regulatory compliance and litigation.
· Unexpected government policies and regulations affecting the Company or its significant customers.
· Unforeseen intergovernmental conflicts or actions, including but not limited to armed conflict and trade wars.
· Unforeseen interruptions to the Companys business with its largest customers, distributors and suppliers resulting from but not limited to, strikes, financial instabilities, computer malfunctions, inventory excesses or natural disasters.
11
Item 1B. Unresolved Staff Comments
Not applicable.
The Companys fixed assets include certain plants and warehouses and a substantial quantity of machinery and equipment, most of which is general purpose machinery and equipment using tools and fixtures and in many instances having automatic control features and special adaptations. The Companys plants, warehouses, machinery and equipment are in good operating condition, are well maintained, and substantially all of its facilities are in regular use. The Company considers the present level of fixed assets along with planned capital expenditures as suitable and adequate for operations in the current business environment. At December 31, 2008, the Company operated a total of 208 plants and warehouses of which (a) the locations in the U.S. had approximately 2.6 million square feet, of which 1.2 million square feet were leased; (b) the locations outside the U.S. had approximately 5.2 million square feet, of which 3.9 million square feet were leased; and (c) the square footage by segment was approximately 6.8 million square feet and 1.0 million square feet for the interconnect products segment and the cable products segment, respectively.
The Company believes that its facilities are suitable and adequate for the business conducted therein and are being appropriately utilized for their intended purposes. Utilization of the facilities varies based on demand for the products. The Company continuously reviews its anticipated requirements for facilities and, based on that review, may from time to time acquire or lease additional facilities and/or dispose of existing facilities.
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 effect on the Companys financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our shareholders during the last quarter of the year ended December 31, 2008.
12
Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
On January 17, 2007, the Company announced a 2-for-1 stock split that was effective for stockholders of record as of March 16, 2007 and these additional shares were distributed on March 30, 2007. The share information included herein reflects the effect of such stock split.
The Company affected the initial public offering of its Class A Common Stock in November 1991. The Companys common stock has been listed on the New York Stock Exchange since that time under the symbol APH. The following table sets forth on a per share basis the high and low sales prices for the common stock for both 2008 and 2007 as reported on the New York Stock Exchange.
|
|
2008 |
|
2007 |
|
||||||||
|
|
High |
|
Low |
|
High |
|
Low |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
First Quarter |
|
$ |
45.48 |
|
$ |
34.19 |
|
$ |
34.06 |
|
$ |
30.75 |
|
Second Quarter |
|
50.00 |
|
37.66 |
|
36.63 |
|
32.80 |
|
||||
Third Quarter |
|
52.28 |
|
39.10 |
|
40.11 |
|
33.28 |
|
||||
Fourth Quarter |
|
40.50 |
|
18.38 |
|
47.16 |
|
39.49 |
|
||||
As of January 31, 2009, there were 48 holders of record of the Companys common stock. A significant number of outstanding shares of common stock are registered in the name of only one holder, which is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. The Company believes that there are a significant number of beneficial owners of its common stock.
The Company pays a quarterly dividend on its common stock of $.015 per share. Cumulative dividends declared during 2008 were $10.5 million. Total dividends paid in 2008 were $10.6 million including those declared in 2007 and paid in 2008. The Company intends to retain the remainder of its earnings not used for dividend payments to provide funds for the operation and expansion of the Companys business, to repurchase shares of its common stock and to repay outstanding indebtedness.
The following table summarizes the Companys equity compensation plan information as of December 31, 2008:
|
|
Equity Compensation Plan Information |
|
|||||
Plan category |
|
Number of securities to
|
|
Weighted average
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders |
|
11,229,837 |
|
$ |
25.82 |
|
4,089,560 |
|
Equity compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
Total |
|
11,229,837 |
|
$ |
25.82 |
|
4,089,560 |
|
13
Purchases of Equity Securities
The Company maintains an open-market stock repurchase program (the Program) to repurchase shares of its Common Stock. In January 2008, the Company announced that its Board of Directors authorized an increase to the number of shares which may be purchased under the program from 10.0 to 20.0 million shares in addition to extending the Programs maturity date from December 31, 2008 to January 31, 2010. Through December 31, 2007, the Company retired 6.1 million shares of its Common Stock purchased for $141.0 million under the Program. During 2008, an additional 12.1 million shares of its Common Stock purchased for $293.6 million and $79.6 million in 2008 and 2007, respectively, were retired by the Company. In both cases, accumulated earnings were reduced by the respective purchase amounts. At December 31, 2008, approximately 1.8 million shares of Common Stock remained available for repurchase under the Program.
Period |
|
(a) Total
|
|
(b) Average Price
|
|
(c) Total Number
|
|
(d) Maximum
|
|
|
January 1 to January 31, 2008 |
|
1,797,881 |
|
$ |
39.68 |
|
1,797,881 |
|
9,775,525 |
|
February 1 to February 29, 2008 |
|
1,123,985 |
|
37.97 |
|
1,123,985 |
|
8,651,540 |
|
|
March 1 to March 31, 2008 |
|
835,337 |
|
35.16 |
|
835,337 |
|
7,816,203 |
|
|
April 1 to April 30, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
May 1 to May 31, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
June 1 to June 30, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
July 1 to July 31, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
August 1 to August 31, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
September 1 to September 30, 2008 |
|
|
|
|
|
|
|
7,816,203 |
|
|
October 1 to October 31, 2008 |
|
1,355,910 |
|
24.00 |
|
1,355,910 |
|
6,460,293 |
|
|
November 1 to November 30, 2008 |
|
4,609,804 |
|
25.47 |
|
4,609,804 |
|
1,850,489 |
|
|
December 1 to December 31, 2008 |
|
|
|
|
|
|
|
1,850,489 |
|
|
Total |
|
9,722,917 |
|
$ |
30.20 |
|
9,722,917 |
|
1,850,489 |
|
14
Item 6. Selected Financial Data
(dollars in thousands, except per share data)
|
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operations |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
$ |
1,808,147 |
|
$ |
1,530,446 |
|
Net income |
|
419,151 |
|
353,194 |
|
255,691 |
(1) |
206,339 |
|
163,311 |
|
|||||
Net income per common shareDiluted |
|
2.34 |
|
1.94 |
|
1.39 |
(1) |
1.14 |
|
0.91 |
|
|||||
Financial Position |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
214,987 |
|
$ |
183,641 |
|
$ |
74,135 |
|
$ |
38,669 |
|
$ |
30,172 |
|
Working capital |
|
701,032 |
|
703,327 |
|
486,946 |
|
373,884 |
|
253,443 |
|
|||||
Total assets |
|
2,994,159 |
|
2,675,733 |
|
2,195,397 |
|
1,932,540 |
|
1,306,711 |
|
|||||
Long-term debt, including current portion |
|
786,459 |
|
722,636 |
|
680,414 |
|
781,000 |
|
449,053 |
|
|||||
Shareholders equity |
|
1,349,425 |
|
1,264,914 |
|
902,994 |
|
689,235 |
|
481,604 |
|
|||||
Weighted average shares outstanding Diluted |
|
178,813,013 |
|
182,503,969 |
|
183,347,326 |
|
180,943,474 |
|
179,473,312 |
|
|||||
Cash dividends declared per share |
|
$ |
0.06 |
|
$ |
0.06 |
|
$ |
0.06 |
|
$ |
0.06 |
|
|
|
(1) Includes a one-time charge for expenses incurred in connection with a flood at the Companys Sidney, NY facility of $20,747, less tax benefit of $6,535, or $0.08 per share after taxes.
15
Item 7. |
|
|
|
|
Condition and Results of Operations |
The following discussion and analysis of the results of operations for the three fiscal years ended December 31, 2008, 2007 and 2006 has been derived from and should be read in conjunction with the consolidated financial statements included elsewhere in this document.
Executive Overview
The Company is a global designer, manufacturer and marketer of interconnect and cable products. In 2008, approximately 64% of the Companys sales were outside the U.S. The primary end markets for our products are:
· communication systems for the converging technologies of voice, video and data communications;
· a broad range of industrial applications including factory automation and motion control systems, medical and industrial instrumentation, mass transportation, alternative energy, natural resource exploration, and traditional and hybrid-electrical automotive applications; and
· commercial aerospace and military applications.
The Companys products are used in a wide variety of applications by numerous customers, the largest of which accounted for approximately 7% of net sales in 2008. The Company encounters competition in all of its markets and competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a global presence, can meet quality and delivery standards, have a broad product portfolio and design capability and have competitive prices. The Company has focused its global resources to position itself to compete effectively in this environment. The Company believes that its global presence is an important competitive advantage as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers.
The Companys strategy is to provide comprehensive design capabilities, a broad selection of products and a high level of service in the areas in which it competes. The Company focuses its research and development efforts through close collaboration with its OEM customers to develop highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales within a one-to-three year period. The Company is also focused on controlling costs. The Company does this by investing in modern manufacturing technologies, controlling purchasing processes and expanding into low cost areas.
The Companys strategic objective is to further enhance its position in its served markets by pursuing the following success factors:
· Focus on customer needs
· Design and develop performance-enhancing interconnect solutions
· Establish a strong global presence in resources and capabilities
· Preserve and foster a collaborative, entrepreneurial management structure
· Maintain a culture of controlling costs
· Pursue strategic acquisitions
For the year ended December 31, 2008, the Company reported net sales, operating income and net income of $3,236.5 million, $632.2 million and $419.2 million, respectively; up 14%, 14% and 19%, respectively, from 2007. Sales of interconnect products and assemblies and sales of cable products increased in predominantly all of the Companys related major markets and geographic regions. Sales and profitability trends are discussed in detail in Results of Operations below. In addition, a strength of the Company is its ability to consistently generate cash. The Company uses cash generated from operations to fund capital expenditures and acquisitions, repurchase shares of its common stock, pay dividends and reduce indebtedness. In 2008, the Company generated operating cash flow of $481.5 million.
16
Results of Operations
The following table sets forth the components of net income as a percentage of net sales for the periods indicated.
|
|
Year Ended December 31, |
|
||||
|
|
2008 |
|
2007 |
|
2006 |
|
Net sales |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
Cost of sales |
|
67.6 |
|
67.4 |
|
68.1 |
|
Selling, general and administrative expense |
|
12.9 |
|
13.2 |
|
13.9 |
|
Casualty loss related to flood |
|
|
|
|
|
.8 |
|
Operating income |
|
19.5 |
|
19.4 |
|
17.2 |
|
Interest expense |
|
(1.2 |
) |
(1.3 |
) |
(1.6 |
) |
Other expenses, net |
|
(.3 |
) |
(.5 |
) |
(.5 |
) |
Income before income taxes |
|
18.0 |
|
17.6 |
|
15.1 |
|
Provision for income taxes |
|
(5.0 |
) |
(5.2 |
) |
(4.8 |
) |
Net income |
|
13.0 |
% |
12.4 |
% |
10.3 |
% |
17
2008 Compared to 2007
Net sales were $3,236.5 million for the year ended December 31, 2008 compared to $2,851.0 million for 2007, an increase of 14% in U.S. dollars and 12% in local currencies. The increase in sales in 2008 over 2007 excluding acquisitions was 10% in U.S. dollars and 9% in local currencies. Sales of interconnect products and assemblies in 2008 (approximately 91% of net sales) increased 15% in U.S. dollars and 13% in local currencies compared to 2007 ($2,950.6 million in 2008 versus $2,569.3 million in 2007). Sales increased in all of the Companys major end markets, except automotive, including the wireless communications, military/aerospace, telecommunications and data communications and industrial markets. The increase in sales in the wireless communications markets (approximately $205.2 million) is attributable to increased sales to the mobile device market primarily relating to new products for mobile phones, increased demand in the wireless infrastructure market from base station/equipment manufacturers and to a lesser extent increased sales to cell site installation customers. Sales to the military/aerospace markets increased approximately $90.8 million, primarily due to increased sales to military customers for various defense related programs, including war related spending, an increase in sales to commercial aerospace customers and the impact of acquisitions. The increase in sales to the telecommunications and data communications related markets (approximately $53.9 million) reflects increased sales of high speed interconnect products for servers and switching and network equipment for data centers as well as the impact of acquisitions. The increase in sales in the industrial market (approximately $20.1 million) primarily reflects the impact of acquisitions as well as increased sales to the natural resource exploration and railway/mass transit markets. The automotive market was slightly down in 2008 (approximately $3.0 million) versus 2007 reflecting the general softness in the domestic and European automotive markets. Sales of cable products in 2008 (approximately 9% of net sales) increased 1% in U.S. dollars and 3% in local currencies compared to 2007 ($285.9 million in 2008 versus $281.8 million in 2007). Such increase is primarily due to the impact of price increases.
Geographically, sales in the U.S. in 2008 and 2007 were relatively flat ($1,159.3 million in 2008 versus $1,155.8 million in 2007); international sales for 2008 increased approximately 23% in U.S. dollars ($2,077.2 million in 2008 versus $1,695.2 million in 2007) and increased approximately 21% in local currency compared to 2007. The comparatively weak U.S. dollar in 2008 had the effect of increasing net sales by approximately $34.3 million when compared to foreign currency translation rates in 2007.
The gross profit margin as a percentage of net sales was relatively flat at 32.4% in 2008 compared to 32.6% in 2007. The operating margin for interconnect products and assemblies increased approximately 0.3% compared to the prior year, mainly as a result of the continuing development of new higher margin application specific products, excellent operating leverage on incremental volume and aggressive programs of cost control. Cable operating margins decreased 1.0% due primarily to the impact of higher material costs for the majority of 2008 partially offset by the impact of price increases.
Selling, general and administrative expenses were $416.9 million and $377.3 million in 2008 and 2007, respectively, or approximately 13% of net sales in both 2008 and 2007. The increase in expense in 2008 is attributable to increases in the major components of selling, general and administrative expenses. Research and development expenditures increased approximately $5.7 million, reflecting increases in expenditures for new product development and represented approximately 2% of sales for both 2008 and 2007. Selling and marketing expense remained approximately 6.5% of sales for both 2008 and 2007. Administrative expense, which represented approximately 4% of sales for both 2008 and 2007, increased by approximately $16.1 million, due primarily to increases in stock-based compensation expense of $3.9 million as well as cost increases relating to salaries and employee-related benefits.
Interest expense was $39.6 million for 2008 compared to $36.9 million for 2007. The increase is primarily attributable to the higher average debt levels in 2008.
Other expenses, net for 2008 and 2007 were $10.5 million and $15.0 million, respectively. Other expenses, net, are comprised primarily of minority interests ($10.4 million in 2008 and $10.5 million in 2007), program fees on the sale of accounts receivable ($3.1 million in 2008 and $5.2 million in 2007), and agency and commitment fees on the Companys credit facilities ($1.8 million in both 2008 and 2007) offset by interest income ($4.7 million in 2008 and $2.7 million in 2007).
The provision for income taxes was at an effective rate of 28.0% in 2008 and 29.5% in 2007. The lower effective tax rate results primarily from an increase in income in lower tax jurisdictions and changes in the Companys income repatriation plans. The total effective rate reduction lowered tax expense in 2008 by approximately $8.7 million or $.04 per share.
18
2007 Compared to 2006
Net sales were $2,851.0 million for the year ended December 31, 2007 compared to $2,471.4 million for 2006, an increase of 15% in U.S. dollars and 13% in local currencies. The increase in sales in 2007 over 2006 excluding acquisitions was 15% in U.S. dollars and 12% in local currencies. Sales of interconnect products and assemblies in 2007 (approximately 90% of net sales) increased 16% in U.S. dollars and 13% in local currencies compared to 2006 ($2,569.3 million in 2007 versus $2,207.5 million in 2006). Sales increased in all of the Companys major end markets including the military/aerospace, wireless communications, industrial/automotive, and telecommunications and data communications markets. Sales to the military/aerospace markets increased approximately $117.5 million primarily due to increased sales to military customers for various defense related programs including war related spending, as well as an increase in sales to commercial aerospace customers. The increase in sales in the wireless communications markets (approximately $104.6 million) is attributable to increased sales to the mobile device market relating to new products for both mobile phones and laptop computers, and to a lesser extent, to increased demand in the wireless infrastructure market from base station/equipment manufacturers and cell site installation customers. The increase in sales in the industrial/automotive market (approximately $77.0 million) primarily reflects increased new product sales to the European automotive market, increased sales to the natural resource exploration and factory automation markets as well as the impact of acquisitions. The increase in sales to the telecommunications and data communications related markets (approximately $54.1 million) reflects increased sales of high speed interconnect products for servers and switching and transmission equipment for data centers. Sales of cable products in 2007 (approximately 10% of net sales) increased 7% compared to 2006 ($281.8 million in 2007 versus $263.9 million in 2006). Such increase is primarily due to increased sales in broadband cable television markets and the impact of price increases.
Geographically, sales in the U.S. in 2007 increased approximately 9% compared to 2006 ($1,155.8 million in 2007 versus $1,060.0 million in 2006); international sales for 2007 increased approximately 20% in U.S. dollars ($1,695.2 million in 2007 versus $1,411.5 million in 2006) and increased approximately 16% in local currency compared to 2006. The comparatively weak U.S. dollar in 2007 had the effect of increasing net sales by approximately $66.3 million when compared to foreign currency translation rates in 2006.
The gross profit margin as a percentage of net sales increased to 33% in 2007 compared to 32% in 2006. The operating margin for interconnect products and assemblies increased approximately 1.3% compared to the prior year, mainly as a result of the continuing development of new higher margin application specific products, excellent operating leverage on incremental volume and aggressive programs of cost control. In addition, cable operating margins increased 0.7% due primarily to the impact of a higher mix of specialty products, increased production levels in low cost facilities and price increases partially offset by higher material costs.
Selling, general and administrative expenses were $377.3 million and $342.8 million in 2007 and 2006, respectively, or approximately 13% and 14% of sales in 2007 and 2006, respectively. The increase in expense in 2007 is attributable to increases in the major components of selling, general and administrative expenses as follows. Research and development expenditures increased approximately $8.7 million, reflecting increases in expenditures for new product development and represented approximately 2% of sales for both 2007 and 2006. Selling and marketing expenses remained approximately 7% of sales for both 2007 and 2006. Administrative expense, which represented approximately 4% and 5% of sales in 2007 and 2006, respectively, increased by approximately $8.4 million, due primarily to increases in stock-based compensation expense of $2.7 million, and cost increases relating to professional fees as well as salaries and employee-related benefits.
The Company incurred damage at its Sidney, New York manufacturing facility as a result of severe and sudden flooding during the second quarter of 2006. In 2006, the Company recorded charges of $20.7 million, or $.08 per share, for recovery and clean up expenses and property related damage, net of insurance and grant recoveries. The Sidney facility had limited manufacturing and sales activity for the period from June 28 to July 14, 2006. Production activity was substantially back to full production at the end of the third quarter of 2006. As a result, sales in 2006 were reduced by approximately $25.0 million.
Interest expense was $36.9 million for 2007 compared to $38.8 million for 2006. The decrease is primarily attributable to the lower average debt levels in 2007.
Other expenses, net, for 2007 and 2006 were $15.0 million and $12.5 million, respectively. Other expenses, net, are comprised primarily of minority interests ($10.5 million in 2007 and $6.0 million in 2006), program fees on the sale of accounts receivable ($5.2 million in 2007 and $5.0 million in 2006), and agency and commitment fees on the Companys credit facilities ($1.8 million in 2007 and $2.0 million in 2006) offset by interest income ($2.7 million in 2007 and $0.7 million in 2006).
19
The provision for income taxes was at an effective rate of 29.5% in 2007 and 31.5% in 2006. The lower effective tax rate results primarily from an increase in income in lower tax jurisdictions and changes in the Companys income repatriation plans. The total effective rate reduction lowered tax expense in 2007 by approximately $10.0 million or $.05 per share.
Liquidity and Capital Resources
Cash provided by operating activities totaled $481.5 million, $387.9 million and $289.6 million for 2008, 2007 and 2006, respectively. The increase in cash from operating activities in 2008 compared to 2007 is primarily attributable to an increase in net income, an increase in depreciation and amortization and a lower increase in the components of working capital compared to the increase in 2007. The increase in cash from operating activities in 2007 compared to 2006 is primarily attributable to an increase in net income, an increase in depreciation and amortization and a lower increase in the components of working capital compared to the increase in 2006.
The components of working capital increased $40.0 million in 2008 due primarily to increases in inventory of $47.6 million, $21.3 million in excess tax benefits from stock-based payment arrangements and $7.5 million of other current assets partially offset by a $32.2 million increase in accrued liabilities, a $2.7 million increase in accounts payable and a $1.5 million decrease in accounts receivable.
The components of working capital increased $63.0 million in 2007 due primarily to increases in accounts receivable of $87.0 million, $23.7 million in excess tax benefits from stock-based payment arrangements, $22.7 million in inventory and $7.2 million of prepaid expenses and other assets partially offset by a $43.7 million increase in accounts payable and an increase of $33.9 million in accrued liabilities.
The components of working capital increased $69.4 million in 2006 due primarily to increases in accounts receivable of $60.6 million, $81.9 million in inventory, $10.0 million in excess tax benefits from stock-based payment arrangements, $9.0 million in prepaid expenses and other assets and a decrease in accrued interest of $1.1 million partially offset by a $46.4 million increase in accounts payable and an increase of $46.8 million in accrued liabilities.
In 2008, accounts receivable increased $5.6 million to $516.0 million, due primarily to acquisitions during the period, partially offset by translation resulting from the comparatively stronger U.S. dollar at December 31, 2008 compared to December 31, 2007 (Translation). Days sales outstanding increased to approximately 72 days from 69 days in 2007. Inventory increased $55.6 million to $512.5 million, resulting from higher activity levels in 2008, an increase in inventory days, and inventory from acquired companies of $19.3 million, partially offset by $9.7 million of Translation. Inventory days at December 31, 2008 and 2007 were 88 and 80, respectively. The increase in inventory days resulted primarily from a slowdown in sales activity in the fourth quarter of 2008 as a result of the well publicized global economic slowdown. The Company will continue to focus on inventory reduction as adjustments to production activity continue in response to lower demand levels. Other current assets increased $19.5 million to $92.4 million primarily due to an increase in deferred taxes. Land and depreciable assets, net, increased $28.3 million to $344.5 million reflecting capital expenditures of $108.5 million, as well as assets from acquisitions of approximately $9.5 million offset by depreciation of $80.7 million, $7.5 million due to Translation and disposals of $1.5 million. Goodwill increased $140.5 million to $1,232.3 million primarily as a result of three acquisitions completed during the year, the payment of and recording of liabilities for performance-based additional cash consideration of $131.7 million offset by adjustments made related to prior year acquisitions, and by Translation of $25.2 million and $14.1 million in intangible assets reclassified to other long-term assets representing the fair value assigned to identifiable assets associated with the Companys acquisitions in 2007. Other long-term assets increased $37.5 million to $81.4 million primarily due to an increase in identifiable intangible assets resulting from 2008 acquisitions as well as the reclassification from goodwill discussed above related to 2007 acquisitions and an increase in long-term deferred tax assets primarily associated with the increase in the accrued pension and post-employment obligation, offset by amortization of the intangible asset balances. Accounts payable and accrued salaries, wages and employee benefits increased $10.6 million and $4.7 million to $306.0 million and $59.6 million, respectively, due primarily to liabilities assumed from acquired companies offset by Translation. The other accrued liabilities including acquisition-related obligations and accrued income taxes increased $99.7 million to $268.8 million relating primarily to an increase of $65.1 million in liabilities associated with performance-based additional cash consideration on acquisitions and an increase in accrued income taxes of $26.2 million due primarily to an increase in liabilities related to foreign income taxes. Accrued pension and post employment benefit obligations increased $59.9 million to $161.7 million primarily due to a decrease in plan assets during the year resulting from equity market losses in 2008. Other long-term liabilities decreased $4.8 million to $62.2 million due primarily to lower long-term deferred tax liabilities offset by a higher minority interest liability at December 31, 2008.
20
In 2008, cash from operating activities of $481.5 million, net borrowings of $61.9 million, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $48.4 million and proceeds from disposal of fixed assets of $0.9 million were used to fund purchases of treasury stock of $293.6 million, $135.8 million of acquisitions, including payments for performance-based additional cash consideration, capital expenditures of $108.3 million, dividend payments of $10.6 million, purchases of short-term investments of $2.9 million and resulted in an increase in cash and cash equivalents on hand of $31.3 million. For 2007, cash from operating activities of $387.9 million, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $58.2 million, net borrowings of $41.6 million and proceeds from disposal of fixed assets of $5.3 million were used to fund $179.3 million of acquisitions including payments for performance-based additional cash consideration, capital expenditures of $103.8 million, purchases of treasury stock of $93.6 million, dividend payments of $10.7 million, purchases of short-term investments of $1.4 million and resulted in an increase in cash and cash equivalents on hand of $109.5 million.
The Companys senior unsecured Revolving Credit Facility is comprised of a five-year $1,000.0 million unsecured revolving credit facility that is scheduled to expire in August 2011, of which $778.0 million was drawn at December 31, 2008. At December 31, 2008, availability under the Revolving Credit Facility was $207.2 million, after a reduction of $14.8 million for outstanding letters of credit. The Companys interest rate on borrowings under the Revolving Credit Facility is LIBOR plus 40 basis points. The Company also pays certain annual agency and facility fees. The Revolving Credit Facility requires that the Company satisfy certain financial covenants. At December 31, 2008, the Company was in compliance with all financial covenants under the Revolving Credit Facility, and the Companys credit rating from Standard & Poors was BBB- and from Moodys was Baa3.
As of December 31, 2008, the Company had interest rate swap agreements of $150.0 million, $250.0 million and $250.0 million that fix the Companys LIBOR interest rate at 4.40%, 4.65% and 4.73%, expiring in December 2009, December 2009 and July 2010, respectively. The fair value of such agreements represents the amounts that the Company would receive or pay if the agreements were terminated. The fair value of swaps indicated that termination of the agreements at December 31, 2008 would have resulted in a pre-tax loss of $25.0 million; such loss, net of tax of $9.2 million, was recorded in accumulated other comprehensive loss.
The Companys primary ongoing cash requirements will be for operating and capital expenditures, product development activities, repurchase 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 Companys debt service requirements consist primarily of principal and interest on bank borrowings. The Companys primary sources of liquidity are internally generated cash flow, the Companys Revolving Credit Facility and the sale of receivables under the Companys accounts receivable agreement described below. In addition, the Company had cash and cash equivalents of $215.0 million and $183.6 million at December 31, 2008 and 2007, respectively, the majority of which was in non-U.S. accounts as of December 31, 2008. The Company expects that ongoing requirements for operating and capital expenditures, product development activities, repurchases of its common stock, dividends and debt service requirements will be funded from these sources; however, the Companys sources of liquidity could be adversely affected by, among other things, a decrease in demand for the Companys products, a deterioration in certain of the Companys financial ratios or a deterioration in the quality of the Companys accounts receivable.
The Company expects that capital expenditures in 2009 will be approximately $85 million. The Company may also use cash to fund part or all of the cost of future acquisitions. The Company pays a quarterly dividend on its common stock of $.015 per share. Cumulative dividends declared during 2008 were $10.5 million. Total dividends paid in 2008 were $10.6 million, including those declared in 2007 and paid in 2008. The Company intends to retain the remainder of its earnings not used for dividend payments to provide funds for the operation and expansion of the Companys business, to repurchase shares of its common stock and to repay outstanding indebtedness. Management believes that the Companys working capital position, ability to generate strong cash flow from operations, availability under its Revolving Credit Agreement and access to credit markets will allow it to meet its obligations for the next twelve months and the foreseeable future.
Off-Balance Sheet Arrangement - Accounts Receivable Securitization
A subsidiary of the Company has an agreement with a financial institution whereby the subsidiary can sell an undivided interest of up to $100.0 million in a designated pool of qualified accounts receivable (the Agreement). The Company services, administers and collects the receivables on behalf of the purchaser. The Agreement includes certain covenants and provides for various events of termination and expires in July 2009. Upon expiration, the Company intends to replace the Agreement with a similar program. Due to the short-term nature of the accounts receivable, the fair value approximates carrying value. At December 31, 2008 and 2007, approximately $85.0 million of receivables were sold and are therefore not reflected in the accounts receivable balance in the accompanying Consolidated Balance Sheets.
21
Environmental Matters
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)), Amphenol and Honeywell were named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Honeywell jointly consented to perform certain investigations and remedial 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. 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. For sites covered by the Honeywell Agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, Honeywell is obligated to reimburse Amphenol 100% of such costs. Honeywell representatives continue to work closely with the Company in addressing the most significant environmental liabilities covered by 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 Companys financial condition or results of operations. The environmental investigations, remedial and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
Inflation and Costs
The cost of the Companys products is influenced by the cost of a wide variety of raw materials, including precious metals such as gold and silver used in plating; aluminum, copper, brass and steel used for contacts, shells and cable; and plastic materials used in molding connector bodies, inserts and cable. In general, increases in the cost of raw materials, labor and services have been offset by price increases, productivity improvements and cost saving programs.
Risk Management
The Company has, to a significant degree, mitigated its exposure to currency risk in its business operations by manufacturing and procuring its products in the same country or region in which the products are sold so that costs generally reflect local economic conditions. In other cases involving U.S. export sales, raw materials are a significant component of product costs for the majority of such sales, and raw material costs are generally dollar based on a worldwide scale, such as basic metals and petroleum-derived materials.
Stock Split
On January 17, 2007, the Company announced a 2-for-1 stock split that was effective for stockholders of record as of March 16, 2007, and these additional shares were distributed on March 30, 2007. The share information included herein reflects the effect of such stock split.
Recent Accounting Changes
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141R, Business Combinations (SFAS 141R). The objective of SFAS 141R is to improve the relevance and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS 141R establishes principles and requirements for how the acquirer: (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree; (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The areas that are most applicable to the Company with regard to SFAS 141R are: (1) that SFAS 141R requires companies to expense transaction costs as incurred; (2) that any subsequent adjustments to a recorded performance-based liability after its initial recognition will need to be adjusted through income as opposed to goodwill; and (3) any noncontrolling interest will be recorded at fair value. SFAS 141R is effective for the Company for acquisitions completed on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). The objective of SFAS 160 is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements. The
22
presentation and disclosure requirements apply retrospectively for all periods presented. The areas that are most applicable to the Company with regard to SFAS 160 are: (1) SFAS 160 requires companies to classify expense related to noncontrolling interests share in income below net income (earnings per share will still be determined after the impact of noncontrolling interests share in net income of the Company as is the current practice). During the years ended December 31, 2008 and 2007, the Company included expense related to the noncontrolling interests share in income of $10.4 million and $10.5 million, respectively, in other expenses, net and (2) SFAS 160 requires the liability related to noncontrolling interests to be presented as a separate caption within shareholders equity. As of December 31, 2008 and 2007, the liability related to noncontrolling interests was $19.1 million and $14.8 million, respectively, and is included in other long-term liabilities. The Company believes the primary impacts of SFAS 160 will be as described above.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 amends and expands the disclosure requirements of SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133) with the intent to provide users of financial statements with an enhanced understanding of: (1) how and why an entity uses derivative instruments; (2) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (3) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. To meet those objectives, SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe this pronouncement will significantly impact its disclosure requirements.
Pensions
The Company and certain of its domestic subsidiaries have a defined benefit pension plan (U.S. Plan) covering certain of its U.S. employees. U.S. Plan benefits are generally based on years of service and compensation and are generally noncontributory. Certain foreign subsidiaries also have defined benefit plans covering employees. The pension expense for all pension plans approximated $12.0 million, $16.0 million and $17.0 million in 2008, 2007 and 2006, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, including an expected long-term rate of return on the U.S. Plan assets. In developing the expected long-term rate of return assumption for the U.S. Plan, the Company evaluated input from its external actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The Company also considered its historical nineteen-year compounded return of 8.5%, which has been in excess of these broad equity and bond benchmark indices. The expected long-term rate of return on the U.S. Plan assets is based on an asset allocation assumption of 60% with equity managers, with an expected long-term rate of return of 9%; 25% with fixed income managers, with an expected long-term rate of return of 6.8% and 15% with high yield bond managers, with an expected rate of return of 6%. As of December 31, 2008, the asset allocation was 45% with equity managers and 37% with fixed income managers, including high yield managers and 18% in cash. The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology the Companys expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plan at December 31, 2008 and 2007 is 8.25% and 9.25%, respectively. This reduction in the long-term rate of return will have the effect of increasing 2009 pension expense by approximately $2.4 million.
The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The discount rate for the U.S. Plan on this basis was 6.25% at both December 31, 2008 and 2007. Although future changes to the discount rate are unknown, had the discount rate increased or decreased 50 basis points, the accrued benefit obligation would have increased or decreased by approximately $15.5 million.
Effective January 1, 2007, the Company effected a curtailment related to the U.S. Plan, which resulted in no additional benefits being credited to salaried employees who had less than 25 years service with the Company, or who had not attained age 50 and who had less than 15 years of service with the Company. This change had the impact of decreasing pension expense during 2007 by approximately $2.9 million. For affected employees, the curtailment in additional U.S. Plan benefits was replaced with a Company match defined contribution plan to which the Company contributed approximately $1.9 million and $1.7 million in 2008 and 2007, respectively.
The Company made cash contributions to the U.S. Plan of $20 million in both 2008 and 2007. The liability for accrued pension and post-employment benefit obligations under all the Companys pension and post-retirement benefit plans (the Plans) increased in 2008 to $165.9 million ($4.2 million of which is included in other accrued expenses representing required contributions to be
23
made during 2009 for foreign plans) from $101.8 million in 2007 primarily due to a reduction in plan assets in the U.S. Plan offset by the cash contributions made to the Plans in 2008 and by the foreign currency translation effect of the foreign pension plans. The Company estimates that, based on current actuarial calculations, it will make a voluntary cash contribution to the U.S. Plan in 2009 of approximately $15 million to $20 million. Cash contributions in subsequent years will depend on a number of factors including the investment performance of the U.S. Plan assets and the impact of the Pension Protection Act of 2006 which was signed into law in August 2006. The Pension Protection Act is effective for plan years beginning in 2008 and did not have a material impact on the Companys consolidated financial condition or results of operations.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are adjusted as new information becomes available. The Companys significant accounting policies are set forth below.
Revenue Recognition - The Companys primary source of revenues is from product sales to its customers. Revenue from sales of the Companys products is recognized at the time the goods are delivered and title passes, provided the earning process is complete and revenue is measurable. Delivery is determined by the Companys shipping terms, which are primarily FOB shipping point. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and reserves are determined and adjusted as needed based upon historical experience, contract terms and other related factors. The shipping costs for the majority of the Companys sales are paid directly by the Companys customers. In the broadband communication market (approximately 10% of consolidated sales), the Company pays for shipping cost to the majority of its customers. Shipping costs are also paid by the Company for certain customers in the interconnect products and assemblies market. Amounts billed to customers related to shipping costs are immaterial and are included in net sales. Shipping costs incurred to transport products to the customer which are not reimbursed are included in selling, general and administrative expense.
Inventories - Inventories are stated at the lower of standard cost, which approximates average cost, or market. Provisions for slow-moving and obsolete inventory are made based on historical experience and product demand. Should future product demand change, existing inventory could become slow-moving or obsolete, and provisions would be increased accordingly.
Depreciable Assets - Property, plant and equipment are carried at cost less accumulated depreciation. The appropriateness and the recoverability of the carrying value of such assets are periodically reviewed taking into consideration current and expected business conditions. Historically, the Company has not had any significant impairments.
Goodwill - The Company performs its annual evaluation for the impairment of goodwill for the Companys reporting units in accordance with SFAS No. 142, as of each June 30. Goodwill impairment for each reporting unit is evaluated using a two-step approach requiring the Company to determine the fair value of the reporting unit and to compare that to the carrying value of the reporting unit including goodwill. If the carrying value exceeded the fair value, the goodwill of the reporting unit would be potentially impaired and a second step of additional testing would be performed to measure the impairment loss. Historically, the Company has not had any impairments.
Defined Benefit Plan Obligation The defined benefit plan obligation is based on significant assumptions such as mortality rates, discount rates and plan asset rates of return as determined by the Company in consultation with the respective benefit plan actuaries and investment advisors.
The significant accounting policies are more fully described in Note 1 to the Companys Consolidated Financial Statements.
24
Disclosures about contractual obligations and commitments
The following table summarizes the Companys known obligations to make future payments pursuant to certain contracts as of December 31, 2008, as well as an estimate of the timing in which such obligations are expected to be satisfied:
Contractual Obligations (dollars in thousands) |
|
Total |
|
Less than
|
|
1-3
|
|
3-5
|
|
More than
|
|
|||||
Long-term debt (1) |
|
$ |
784,601 |
|
$ |
121 |
|
$ |
778,951 |
|
$ |
5,480 |
|
$ |
49 |
|
Capital lease obligations |
|
1,858 |
|
318 |
|
872 |
|
359 |
|
309 |
|
|||||
Operating leases |
|
76,971 |
|
20,945 |
|
30,395 |
|
17,367 |
|
8,264 |
|
|||||
Purchase obligations |
|
139,634 |
|
135,823 |
|
2,932 |
|
879 |
|
|
|
|||||
Accrued acquisition-related obligations (2) |
|
120,357 |
|
120,357 |
|
|
|
|
|
|
|
|||||
Accrued pension and post employment benefit obligations (3) |
|
37,537 |
|
4,220 |
|
8,773 |
|
9,452 |
|
15,092 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total (4) |
|
$ |
1,160,958 |
|
$ |
281,784 |
|
$ |
821,923 |
|
$ |
33,537 |
|
$ |
23,714 |
|
(1) The Company has excluded expected interest payments from the above table as this calculation is largely dependent on average debt levels the Company expects to have at the end of each of the years presented as well as the expected interest rates on the debt not covered by interest rate swaps. The actual interest payments made in 2008 were $39,180. Expected debt levels, and therefore expected interest payments, are difficult to predict as they are significantly impacted by such items as future acquisitions, repurchases of treasury stock, dividend payments as well as payments or additional borrowing made to reduce or increase the underlying revolver balance.
(2) Accrued acquisition-related obligations consist of obligations for additional purchase price and performance-based cash consideration.
(3) Included in this table are estimated benefit payments expected to be made under the Companys unfunded pension and post-retirement benefit plans. The Company also maintains several funded pension and post-retirement benefit plans the most significant of which covers its U.S. employees. Over the past several years, there has been no minimum requirement for Company contributions to the U.S. Plan due to prior contributions made in excess of minimum requirements, but the Company has made contributions to the U.S. Plan in the range of $15,000 to $20,000 in each of the last few years and expects to make this same level of contribution in 2009. As a result, it is not possible to reasonably estimate expected required contributions in the above table since several assumptions are required to calculate the minimum required contributions, such as the discount rate and expected asset returns.
(4) As of December 31, 2008, the Company has FASB Interpretation No. 48 liabilities of $38,058. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with the non-current FIN 48 liabilities it is very difficult to make a reasonably reliable estimate of the amount and period in which these non-current liabilities might be paid.
Item 7A. 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.
Foreign Currency Exchange Rate Risk
The Company conducts business in several international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Companys sales, gross margins and retained earnings. The Company attempts to minimize currency exposure risk by producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency and by managing its working capital although there can be no assurance that this approach will be successful, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Companys worldwide operations. The Company does not engage in purchasing forward exchange contracts for speculative purposes.
Interest Rate Risk
As of December 31, 2008, the Company had interest rate swap agreements that fix the Companys LIBOR interest rate on $150.0 million, $250.0 million and $250.0 million of floating rate bank debt at 4.40%, 4.65% and 4.73%, expiring in December 2009, December 2009 and July 2010. At December 31, 2008, the Companys average LIBOR rate was 4.09%. A 10% change in the LIBOR interest rate at December 31, 2008 would have the effect of increasing or decreasing interest expense by approximately $0.2 million. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2009, although there can be no assurances that interest rates will not significantly change.
25
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Amphenol Corporation
Wallingford, Connecticut
We have audited the accompanying consolidated balance sheets of Amphenol Corporation and subsidiaries (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders equity and other comprehensive income, and cash flows for each of the three years in the period ended December 31, 2008. We also have audited the Companys internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control. Our responsibility is to express an opinion on these financial statements and an opinion on the Companys internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Amphenol Corporation and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
February 23, 2009
26
Consolidated Statements of Income
(dollars in thousands, except per share data)
|
|
Year Ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|||
Net sales |
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
Cost of sales |
|
2,187,318 |
|
1,920,900 |
|
1,683,250 |
|
|||
Gross profit |
|
1,049,153 |
|
930,141 |
|
788,180 |
|
|||
|
|
|
|
|
|
|
|
|||
Selling, general and administrative expense |
|
416,914 |
|
377,283 |
|
342,841 |
|
|||
Casualty loss related to flood |
|
|
|
|
|
20,747 |
|
|||
Operating income |
|
632,239 |
|
552,858 |
|
424,592 |
|
|||
|
|
|
|
|
|
|
|
|||
Interest expense |
|
(39,627 |
) |
(36,876 |
) |
(38,799 |
) |
|||
Other expenses, net |
|
(10,458 |
) |
(14,998 |
) |
(12,521 |
) |
|||
Income before income taxes |
|
582,154 |
|
500,984 |
|
373,272 |
|
|||
Provision for income taxes |
|
(163,003 |
) |
(147,790 |
) |
(117,581 |
) |
|||
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
419,151 |
|
$ |
353,194 |
|
$ |
255,691 |
|
|
|
|
|
|
|
|
|
|||
Net income per common share Basic |
|
$ |
2.39 |
|
$ |
1.98 |
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
|||
Average common shares outstanding Basic |
|
175,663,797 |
|
178,453,249 |
|
178,927,644 |
|
|||
|
|
|
|
|
|
|
|
|||
Net income per common share Diluted |
|
$ |
2.34 |
|
$ |
1.94 |
|
$ |
1.39 |
|
|
|
|
|
|
|
|
|
|||
Average common shares outstanding - Diluted |
|
178,813,013 |
|
182,503,969 |
|
183,347,326 |
|
|||
|
|
|
|
|
|
|
|
|||
Dividends declared per common share |
|
$ |
.06 |
|
$ |
.06 |
|
$ |
.06 |
|
See accompanying notes to consolidated financial statements.
27
(dollars in thousands, except per share data)
|
|
December 31, |
|
||||
|
|
2008 |
|
2007 |
|
||
Assets |
|
|
|
|
|
||
Current Assets: |
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
214,987 |
|
$ |
183,641 |
|
Accounts receivable, less allowance for doubtful accounts of $14,982 and $12,468, respectively |
|
515,999 |
|
510,411 |
|
||
Inventories: |
|
|
|
|
|
||
Raw materials and supplies |
|
130,572 |
|
112,488 |
|
||
Work in process |
|
233,003 |
|
227,293 |
|
||
Finished goods |
|
148,932 |
|
117,101 |
|
||
|
|
512,507 |
|
456,882 |
|
||
Other current assets |
|
92,371 |
|
72,874 |
|
||
Total current assets |
|
1,335,864 |
|
1,223,808 |
|
||
Land and depreciable assets: |
|
|
|
|
|
||
Land |
|
18,699 |
|
19,159 |
|
||
Buildings and improvements |
|
149,631 |
|
143,382 |
|
||
Machinery and equipment |
|
686,949 |
|
636,949 |
|
||
|
|
855,279 |
|
799,490 |
|
||
Accumulated depreciation |
|
(510,764 |
) |
(483,296 |
) |
||
|
|
344,515 |
|
316,194 |
|
||
Goodwill |
|
1,232,335 |
|
1,091,828 |
|
||
Other long-term assets |
|
81,445 |
|
43,903 |
|
||
|
|
$ |
2,994,159 |
|
$ |
2,675,733 |
|
|
|
|
|
|
|
||
Liabilities & Shareholders Equity |
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
||
Accounts payable |
|
$ |
305,950 |
|
$ |
295,391 |
|
Accrued salaries, wages and employee benefits |
|
59,644 |
|
54,963 |
|
||
Accrued income taxes |
|
65,846 |
|
39,627 |
|
||
Accrued acquisition-related obligations |
|
120,357 |
|
55,212 |
|
||
Other accrued expenses |
|
82,596 |
|
74,213 |
|
||
Current portion of long-term debt and capital lease obligations |
|
439 |
|
1,075 |
|
||
Total current liabilities |
|
634,832 |
|
520,481 |
|
||
Long-term debt and capital lease obligations |
|
786,020 |
|
721,561 |
|
||
Accrued pension and post-employment benefit obligations |
|
161,669 |
|
101,804 |
|
||
Other long-term liabilities |
|
62,213 |
|
66,973 |
|
||
Commitments and contingent liabilities (Notes 2, 8 and 13) |
|
|
|
|
|
||
Shareholders Equity: |
|
|
|
|
|
||
Class A Common Stock, $.001 par value; 500,000,000 shares authorized; 171,186,218 and 181,082,138 shares issued at December 31, 2008 and 2007, respectively |
|
171 |
|
181 |
|
||
Additional paid-in capital (deficit) |
|
22,746 |
|
(43,647 |
) |
||
Accumulated earnings |
|
1,467,099 |
|
1,431,635 |
|
||
Accumulated other comprehensive loss |
|
(140,591 |
) |
(43,644 |
) |
||
|
|
|
|
|
|
||
Treasury stock, at cost; nil and 2,241,794 shares at December 31, 2008 and 2007, respectively |
|
|
|
(79,611 |
) |
||
Total shareholders equity |
|
1,349,425 |
|
1,264,914 |
|
||
|
|
$ |
2,994,159 |
|
$ |
2,675,733 |
|
See accompanying notes to consolidated financial statements.
28
Consolidated Statements of Changes in Shareholders Equity and Other Comprehensive Income
(dollars in thousands)
|
|
Common |
|
Additional Paid in Capital |
|
Comprehensive |
|
Accumulated |
|
Accum. Other Comprehensive |
|
|
|
Total Shareholders |
|
||||||||
|
|
Stock |
|
(Deficit) |
|
Income (Loss) |
|
Earnings |
|
Income (Loss) |
|
Treasury Stock |
|
Equity |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance January 1, 2006 |
|
$ |
178 |
|
$ |
(164,171 |
) |
|
|
$ |
985,317 |
|
$ |
(77,742 |
) |
$ |
(54,347 |
) |
$ |
689,235 |
|
||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
|
|
|
|
$ |
255,691 |
|
255,691 |
|
|
|
|
|
255,691 |
|
|||||||
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Translation adjustments |
|
|
|
|
|
16,829 |
|
|
|
16,829 |
|
|
|
16,829 |
|
||||||||
Revaluation of interest rate derivatives |
|
|
|
|
|
1,894 |
|
|
|
1,894 |
|
|
|
1,894 |
|
||||||||
Adjustment to initially apply SFAS 158, net of tax (Note 6) |
|
|
|
|
|
|
|
|
|
(19,282 |
) |
|
|
(19,282 |
) |
||||||||
Defined benefit plan liability adjustment |
|
|
|
|
|
(2,783 |
) |
|
|
(2,783 |
) |
|
|
(2,783 |
) |
||||||||
Other comprehensive income |
|
|
|
|
|
15,940 |
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income |
|
|
|
|
|
$ |
271,631 |
|
|
|
|
|
|
|
|
|
|||||||
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
(72,658 |
) |
(72,658 |
) |
||||||||
Retirement of treasury stock |
|
(2 |
) |
|
|
|
|
(87,787 |
) |
|
|
87,789 |
|
|
|
||||||||
Stock compensation |
|
|
|
195 |
|
|
|
|
|
|
|
|
|
195 |
|
||||||||
Stock options exercised, including tax benefit |
|
3 |
|
34,837 |
|
|
|
|
|
|
|
|
|
34,840 |
|
||||||||
Dividends declared |
|
|
|
|
|
|
|
(10,685 |
) |
|
|
|
|
(10,685 |
) |
||||||||
Stock-based compensation expense |
|
|
|
9,718 |
|
|
|
|
|
|
|
|
|
9,718 |
|
||||||||
Balance December 31, 2006 |
|
$ |
179 |
|
$ |
(119,421 |
) |
|
|
$ |
1,142,536 |
|
$ |
(81,084 |
) |
$ |
(39,216 |
) |
$ |
902,994 |
|
||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
|
|
|
|
$ |
353,194 |
|
353,194 |
|
|
|
|
|
353,194 |
|
|||||||
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Translation adjustments |
|
|
|
|
|
26,078 |
|
|
|
26,078 |
|
|
|
26,078 |
|
||||||||
Revaluation of interest rate derivatives |
|
|
|
|
|
(10,070 |
) |
|
|
(10,070 |
) |
|
|
(10,070 |
) |
||||||||
Defined benefit plan liability adjustment |
|
|
|
|
|
21,432 |
|
|
|
21,432 |
|
|
|
21,432 |
|
||||||||
Other comprehensive income |
|
|
|
|
|
37,440 |
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income |
|
|
|
|
|
$ |
390,634 |
|
|
|
|
|
|
|
|
|
|||||||
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
(93,594 |
) |
(93,594 |
) |
||||||||
Retirement of treasury stock |
|
(1 |
) |
|
|
|
|
(53,198 |
) |
|
|
53,199 |
|
|
|
||||||||
Cumulative effect of adoption of FIN 48 |
|
|
|
|
|
|
|
(163 |
) |
|
|
|
|
(163 |
) |
||||||||
Stock compensation |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
207 |
|
||||||||
Stock options exercised, including tax benefit |
|
3 |
|
63,123 |
|
|
|
|
|
|
|
|
|
63,126 |
|
||||||||
Dividends declared |
|
|
|
|
|
|
|
(10,734 |
) |
|
|
|
|
(10,734 |
) |
||||||||
Stock-based compensation expense |
|
|
|
12,444 |
|
|
|
|
|
|
|
|
|
12,444 |
|
||||||||
Balance December 31, 2007 |
|
$ |
181 |
|
$ |
(43,647 |
) |
|
|
$ |
1,431,635 |
|
$ |
(43,644 |
) |
$ |
(79,611 |
) |
$ |
1,264,914 |
|
||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
|
|
|
|
$ |
419,151 |
|
419,151 |
|
|
|
|
|
419,151 |
|
|||||||
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Translation adjustments |
|
|
|
|
|
(36,589 |
) |
|
|
(36,589 |
) |
|
|
(36,589 |
) |
||||||||
Revaluation of interest rate derivatives |
|
|
|
|
|
(8,691 |
) |
|
|
(8,691 |
) |
|
|
(8,691 |
) |
||||||||
Defined benefit plan liability adjustment |
|
|
|
|
|
(51,667 |
) |
|
|
(51,667 |
) |
|
|
(51,667 |
) |
||||||||
Other comprehensive loss |
|
|
|
|
|
(96,947 |
) |
|
|
|
|
|
|
|
|
||||||||
Comprehensive income |
|
|
|
|
|
$ |
322,204 |
|
|
|
|
|
|
|
|
|
|||||||
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
(293,626 |
) |
(293,626 |
) |
||||||||
Retirement of treasury stock |
|
(11 |
) |
|
|
|
|
(373,226 |
) |
|
|
373,237 |
|
|
|
||||||||
Stock compensation |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
198 |
|
||||||||
Stock options exercised, including tax benefit |
|
1 |
|
49,879 |
|
|
|
|
|
|
|
|
|
49,880 |
|
||||||||
Dividends declared |
|
|
|
|
|
|
|
(10,461 |
) |
|
|
|
|
(10,461 |
) |
||||||||
Stock-based compensation expense |
|
|
|
16,316 |
|
|
|
|
|
|
|
|
|
16,316 |
|
||||||||
Balance December 31, 2008 |
|
$ |
171 |
|
$ |
22,746 |
|
|
|
$ |
1,467,099 |
|
$ |
(140,591 |
) |
$ |
|
|
$ |
1,349,425 |
|
||
See accompanying notes to consolidated financial statements.
29
Consolidated Statements of Cash Flow
(dollars in thousands)
|
|
Year Ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
419,151 |
|
$ |
353,194 |
|
$ |
255,691 |
|
Adjustments for cash from operations: |
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
91,302 |
|
82,348 |
|
73,124 |
|
|||
Stock-based compensation expense |
|
16,316 |
|
12,444 |
|
9,718 |
|
|||
Non-cash charge related to flood |
|
|
|
|
|
9,307 |
|
|||
Net change in operating assets and liabilities: |
|
|
|
|
|
|
|
|||
Accounts receivable |
|
1,419 |
|
(87,013 |
) |
(60,603 |
) |
|||
Inventory |
|
(47,570 |
) |
(22,724 |
) |
(81,878 |
) |
|||
Other current assets |
|
(7,504 |
) |
(7,232 |
) |
(8,916 |
) |
|||
Excess tax benefits from stock-based payment arrangements |
|
(21,307 |
) |
(23,691 |
) |
(10,043 |
) |
|||
Accounts payable |
|
2,699 |
|
43,651 |
|
46,382 |
|
|||
Accrued income taxes |
|
13,623 |
|
5,466 |
|
17,922 |
|
|||
Other accrued liabilities |
|
18,644 |
|
28,549 |
|
27,929 |
|
|||
Accrued pension and post employment benefits |
|
(15,940 |
) |
(6,316 |
) |
(2,326 |
) |
|||
Other long-term assets |
|
9,387 |
|
8,732 |
|
11,370 |
|
|||
Other |
|
1,303 |
|
491 |
|
1,920 |
|
|||
Cash flow provided by operations |
|
481,523 |
|
387,899 |
|
289,597 |
|
|||
Cash flow from investing activities: |
|
|
|
|
|
|
|
|||
Additions to property, plant and equipment |
|
(108,280 |
) |
(103,772 |
) |
(82,421 |
) |
|||
Proceeds from disposal of fixed assets |
|
940 |
|
5,354 |
|
5,921 |
|
|||
Purchases of short-term investments |
|
(2,938 |
) |
(1,360 |
) |
|
|
|||
Acquisitions, net of cash acquired |
|
(135,807 |
) |
(179,300 |
) |
(22,473 |
) |
|||
Cash flow used in investing activities |
|
(246,085 |
) |
(279,078 |
) |
(98,973 |
) |
|||
Cash flow from financing activities: |
|
|
|
|
|
|
|
|||
Net change in borrowings under revolving credit facilities |
|
61,914 |
|
41,622 |
|
(102,557 |
) |
|||
Payment of fees and expenses related to refinancing |
|
|
|
|
|
(1,144 |
) |
|||
Purchase of treasury stock |
|
(293,625 |
) |
(93,594 |
) |
(72,658 |
) |
|||
Proceeds from exercise of stock options |
|
27,081 |
|
34,550 |
|
21,882 |
|
|||
Excess tax benefits from stock-based payment arrangements |
|
21,307 |
|
23,691 |
|
10,043 |
|
|||
Dividend payments |
|
(10,617 |
) |
(10,710 |
) |
(10,724 |
) |
|||
Cash flow used in financing activities |
|
(193,940 |
) |
(4,441 |
) |
(155,158 |
) |
|||
Effect of exchange rate changes on cash and cash equivalents |
|
(10,152 |
) |
5,126 |
|
|
|
|||
Net change in cash and cash equivalents |
|
31,346 |
|
109,506 |
|
35,466 |
|
|||
Cash and cash equivalents balance, beginning of period |
|
183,641 |
|
74,135 |
|
38,669 |
|
|||
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents balance, end of period |
|
$ |
214,987 |
|
$ |
183,641 |
|
$ |
74,135 |
|
|
|
|
|
|
|
|
|
|||
Cash paid during the year for: |
|
|
|
|
|
|
|
|||
Interest |
|
$ |
39,180 |
|
$ |
36,238 |
|
$ |
39,109 |
|
Income taxes |
|
124,929 |
|
100,772 |
|
77,849 |
|
See accompanying notes to consolidated financial statements.
30
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
Note 1-Summary of Significant Accounting Policies
Operations
Amphenol Corporation (Amphenol or the Company) operates two business segments which consist of manufacturing and selling interconnect products and assemblies, and manufacturing and selling cable products. The Company sells its products to customer locations worldwide.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and liquid investments with an original maturity of less than three months. The carrying amount approximates fair value of those instruments.
Sale of Receivables
A subsidiary of the Company has an agreement 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 Agreement). The Company services, administers and collects the receivables on behalf of the purchaser. The Agreement includes certain covenants and provides for various events of termination and expires in July 2009. Upon expiration, the Company intends to replace the Agreement with a similar program. Due to the short-term nature of the accounts receivable, the fair value approximates carrying value. Program fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain fees and administrative expenses and are included in other expenses, net, in the accompanying Consolidated Statements of Income. The aggregate value of receivables transferred to the pool for the year 2008, 2007 and 2006 were $1,068,229, $1,065,892 and $854,372, respectively. At December 31, 2008 and 2007, $104,388 and $119,932, respectively, of accounts receivable were transferred to the subsidiary, but not purchased by the financial institution and are therefore included in the accounts receivable balance in the accompanying Consolidated Balance Sheets. At December 31, 2008 and 2007, approximately $85,000 of receivables were sold and are therefore not reflected in the accounts receivable balance in the accompanying Consolidated Balance Sheets.
Inventories
Inventories are stated at the lower of standard cost, which approximates average cost, or market. The principal components of cost included in inventories are materials, direct labor and manufacturing overhead.
Depreciable Assets
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation of property, plant and equipment is recorded on a straight-line basis over the respective asset lives determined on a composite basis by asset group or on a specific item basis using the estimated useful lives of such assets which range from 3 to 12 years for machinery and equipment and 20 to 40 years for buildings. Leasehold building improvements are depreciated over the shorter of the lease term or estimated useful life. It is the Companys policy to periodically review fixed asset lives.
31
Goodwill
The Company performs its annual evaluation for the impairment of goodwill for the Companys reporting units in accordance with SFAS No. 142 (SFAS 142), as of each June 30. The Company has defined its reporting units as the operating segments within its two reportable business segments Interconnect Products and Assemblies and Cable Products, as the components of these operating segments have similar economic characteristics. Goodwill impairment for each reporting unit is evaluated using a two-step approach requiring the Company to determine the fair value of the reporting unit and to compare that to the carrying value including goodwill. If the carrying value exceeded the fair value, the goodwill of the reporting unit would be potentially impaired and a second step of additional testing would be performed to measure the impairment loss. As of June 30, 2008, and for each previous year in which the impairment test has been performed, the fair market value of the Companys reporting units exceeded their carrying values and therefore no impairment was recognized.
Intangible Assets
Intangible assets are included in other long-term assets and consist primarily of proprietary technology, customer relationships and license agreements and are amortized over the periods of benefit.
Revenue Recognition
The Companys primary source of revenues is from product sales to its customers.
Revenue from sales of the Companys products is recognized at the time the goods are delivered and title passes, provided the earning process is complete and revenue is measurable. Delivery is determined by the Companys shipping terms, which are primarily FOB shipping point. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and reserves are determined and adjusted as needed based upon historical experience, contract terms and other related factors.
The shipping costs for the majority of the Companys sales are paid directly by the Companys customers. In the broadband communication market (approximately 10% of consolidated sales), the Company pays for shipping costs to the majority of its customers. Shipping costs are also paid by the Company for certain customers in the interconnect products and assemblies market. Amounts billed to customers related to shipping costs are immaterial and are included in net sales. Shipping costs incurred to transport products to the customer which are not reimbursed are included in selling, general and administrative expense.
Retirement Pension Plans
Costs for retirement pension plans include current service costs and amortization of prior service costs over periods of up to thirty years. It is the Companys policy to fund current pension costs taking into consideration minimum funding requirements and maximum tax deductible limitations. The expense of retiree medical benefit programs is recognized during the employees service with the Company as well as amortization of a transition obligation previously recognized. The recognition of expense for retirement pension plans and medical benefit programs is significantly impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets and future health care costs. The Company uses third-party specialists to assist management in appropriately measuring the expense associated with pension and other post-retirement plan benefits.
Stock Options
The Company accounts for its option awards under the Statement of Financial Accounting Standards (SFAS) No. 123(R), Share Based Payment, and recognizes compensation expense in the accompanying Consolidated Statements of Income over the service period that the awards are expected to vest. The Company recognizes expense for stock-based compensation with graded vesting on a straight-line basis over the vesting period of the entire award. Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures will be adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of expense to be recognized in future periods. The Companys income before income taxes was reduced by $16,316, $12,444 and $9,718 for the years ended December 31, 2008, 2007 and 2006, respectively. The expense incurred for stock-based compensation plans is classified in selling, general and administrative expenses on the accompanying Consolidated Statements of Income.
32
The fair value of stock options has been estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
2008 |
|
2007 |
|
2006 |
|
Risk free interest rate |
|
3.2 |
% |
4.8 |
% |
4.9 |
% |
Expected life |
|
5.5 years |
|
5 years |
|
5 years |
|
Expected volatility |
|
28.0 |
% |
26.0 |
% |
30.0 |
% |
Expected dividend yield |
|
0.1 |
% |
0.2 |
% |
0.2 |
% |
Income Taxes
Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. Deferred income taxes are not provided on undistributed earnings of foreign affiliated companies which are considered to be permanently invested. It is not practicable to estimate the amount of tax that might be payable. Deferred tax assets are regularly assessed for recoverability based on both historical and anticipated earnings levels and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes.
Foreign Currency Translation
The financial position and results of operations of the Companys significant foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated at current exchange rates and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments is included as a component of accumulated other comprehensive income (loss) within shareholders equity. Transaction gains and losses related to operating assets and liabilities are included in selling, general and administrative expense, and those related to non-operating assets and liabilities are included in other expenses, net.
Research and Development
Costs incurred in connection with the development of new products and applications are expensed as incurred. Research and development expenses for the creation of new and improved products and processes were $68,058, $62,397 and $53,730, for the years 2008, 2007 and 2006, respectively.
Environmental Obligations
The Company recognizes the potential cost for environmental remediation activities when site assessments are made, remedial efforts are probable and related amounts can be reasonably estimated; potential insurance reimbursements are not recorded. The Company regularly assesses its environmental liabilities through reviews of contractual commitments, site assessments, feasibility studies and formal remedial design and action plans.
Net Income per Common Share
Basic income per common share is based on the net income for the year divided by the weighted average number of common shares outstanding. Diluted income per common share assumes the exercise of outstanding, dilutive stock options using the treasury stock method. On January 17, 2007, the Company announced a 2-for-1 stock split that was effective for stockholders of record as March 16, 2007 and these additional shares were distributed on March 30, 2007. The share information herein reflects the effect of such stock split.
Derivative Financial Instruments
Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for on an accrual basis. Income and expense are recorded in the same financial statement caption as that arising from the related asset or liability. For example, amounts to be paid or received under interest rate swap agreements are recognized as an increase or decrease of interest expense in the periods in which they accrue. Gains and losses on derivatives designated as cash flow hedges resulting from changes in fair value are recorded in other comprehensive income, and subsequently reflected in net income in a manner that matches the timing of the actual income or expense of such instruments with the hedged transaction. As of December 31, 2008, the Company had interest rate protection in the form of swaps that effectively fixed the
33
Companys LIBOR interest rate on $150,000, $250,000 and $250,000 of floating rate bank debt at 4.40%, 4.65% and 4.73%, expiring in December 2009, December 2009 and July 2010, respectively.
Recent Accounting Changes
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R). The objective of SFAS 141R is to improve the relevance and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS 141R establishes principles and requirements for how the acquirer: (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree; (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The areas that are most applicable to the Company with regard to SFAS 141R are: (1) that SFAS 141R requires companies to expense transaction costs as incurred; (2) that any subsequent adjustments to a recorded performance-based liability after its initial recognition will need to be adjusted through income as opposed to goodwill; and (3) any noncontrolling interest will be recorded at fair value. SFAS 141R is effective for the Company for acquisitions completed on or after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). The objective of SFAS 160 is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements apply retrospectively for all periods presented. The areas that are most applicable to the Company with regard to SFAS 160 are: (1) SFAS 160 requires companies to classify expense related to noncontrolling interests share in income below net income (earnings per share will still be determined after the impact of noncontrolling interests share in net income of the Company as is the current practice.) During the years ended December 31, 2008 and 2007, the Company included expense related to the noncontrolling interests share in income of $10,426 and $10,518, respectively, in other expenses, net and (2) SFAS 160 requires the liability related to noncontrolling interests to be presented as a separate caption within shareholders equity. As of December 31, 2008 and 2007, the liability related to noncontrolling interests was $19,144 and $14,834, respectively, and is included in other long-term liabilities. The Company believes the primary impacts of SFAS 160 will be as described above.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 amends and expands the disclosure requirements of SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133) with the intent to provide users of financial statements with an enhanced understanding of: (1) how and why an entity uses derivative instruments; (2) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (3) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. To meet those objectives, SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe this pronouncement will significantly impact its disclosure requirements.
34
Note 2Long-Term Debt and Capital Lease Obligations
Long-term debt consists of the following:
|
|
Average Interest Rate |
|
|
|
December 31, |
|
||||
|
|
at December 31, 2008 |
|
Maturity |
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
|
|
|
|
||
Revolving Credit Facility |
|
4.49 |
% |
2011 |
|
$ |
778,000 |
|
$ |
711,600 |
|
Notes payable to foreign banks and other debt |
|
5.34 |
% |
2009-2018 |
|
8,459 |
|
11,036 |
|
||
|
|
|
|
|
|
786,459 |
|
722,636 |
|
||
Less current portion |
|
|
|
|
|
439 |
|
1,075 |
|
||
Total long-term debt and capital lease obligations |
|
|
|
|
|
$ |
786,020 |
|
$ |
721,561 |
|
The Companys senior unsecured Revolving Credit Facility is comprised of a five-year $1,000,000 unsecured revolving credit facility that is scheduled to expire in August 2011, of which $778,000 was drawn at December 31, 2008. At December 31, 2008, availability under the Revolving Credit Facility was $207,200, after a reduction of $14,800 for outstanding letters of credit. The Companys interest rate on borrowings under the Revolving Credit Facility is LIBOR plus 40 basis points. The Company also pays certain annual agency and facility fees. The Revolving Credit Facility requires that the Company satisfy certain financial covenants. At December 31, 2008, the Company was in compliance with all financial covenants under the Revolving Credit Facility, and the Companys credit rating from Standard & Poors was BBB- and from Moodys was Baa3.
As of December 31, 2008, The Company had interest rate swap agreements of $150,000, $250,000 and $250,000 that fix the Companys LIBOR interest rate at 4.40%, 4.65% and 4.73%, expiring in December 2009, December 2009 and July 2010, respectively. The fair value of such agreements represents the amounts that the Company would receive or pay if the agreements were terminated. The fair value of swaps indicated that termination of the agreements at December 31, 2008 would have resulted in a pre-tax loss of $24,957; such loss, net of tax of $9,234, was recorded in accumulated other comprehensive loss.
The maturity of the Companys long-term debt over each of the next five years ending December 31, is as follows:
2009 - $439; 2010 - $1,450; 2011 - $778,373; 2012 - $269; 2013 - $5,570; thereafter $358.
The Company estimates that the fair value of its long-term debt approximates book value.
Note 3Fair Value Measurements
Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 establishes a new framework for measuring fair value of financial and non-financial instruments and expands related disclosures. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis. Broadly, the SFAS 157 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. SFAS 157 establishes market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs.
The valuation techniques required by SFAS 157 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 |
Quoted prices for identical instruments in active markets. |
|
|
Level 2 |
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
|
|
Level 3 |
Significant inputs to the valuation model are unobservable. |
The Company maintains policies and procedures to value instruments using the best and most relevant data available including independent price validation for certain instruments.
35
The Companys only financial instruments subject to SFAS 157 with annual and interim disclosure requirements are derivative instruments which represent interest rate swaps that are independently valued using market observable Level 2 inputs including interest rate yield curves. At December 31, 2008, the fair values of derivative instruments were a liability of $24,957.
The Company does not have any other significant financial or non-financial assets and liabilities that are measured at fair value on a non-recurring basis.
Note 4Income Taxes
The components of income before income taxes and the provision for income taxes are as follows:
|
|
Year Ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
Income before taxes: |
|
|
|
|
|
|
|
|||
United States |
|
$ |
173,373 |
|
$ |
206,922 |
|
$ |
135,904 |
|
Foreign |
|
408,781 |
|
294,062 |
|
237,368 |
|
|||
|
|
$ |
582,154 |
|
$ |
500,984 |
|
$ |
373,272 |
|
|
|
|
|
|
|
|
|
|||
Current provision: |
|
|
|
|
|
|
|
|||
United States |
|
$ |
63,052 |
|
$ |
74,900 |
|
$ |
58,355 |
|
Foreign |
|
100,744 |
|
64,137 |
|
54,653 |
|
|||
|
|
$ |
163,796 |
|
$ |
139,037 |
|
$ |
113,008 |
|
|
|
|
|
|
|
|
|
|||
Deferred provision: |
|
|
|
|
|
|
|
|||
United States |
|
$ |
2,564 |
|
$ |
11,829 |
|
$ |
6,667 |
|
Foreign |
|
(3,357 |
) |
(3,076 |
) |
(2,094 |
) |
|||
|
|
(793 |
) |
8,753 |
|
4,573 |
|
|||
Total provision for income taxes |
|
$ |
163,003 |
|
$ |
147,790 |
|
$ |
117,581 |
|
At December 31, 2008, the Company had $23,873 and $4,025 of foreign tax loss and credit carryforwards, and state tax credit carryforwards net of federal benefit, respectively, of which $6,117 and $114, respectively, expire or will be refunded at various dates through 2022 and the balance can be carried forward indefinitely.
A valuation allowance of $9,946 and $6,086 at December 31, 2008 and 2007, respectively, has been recorded which relates to the foreign net operating loss carryforwards and state tax credits. The net change in the valuation allowance for deferred tax assets was an increase of $3,860 and $1,943 in 2008 and 2007, respectively. The net change in the valuation allowance in both 2008 and 2007 was related to foreign net operating loss and foreign and state credit carryforwards.
Differences between the U.S. statutory federal tax rate and the Companys effective income tax rate are analyzed below:
|
|
Year Ended December 31, |
|
||||
|
|
2008 |
|
2007 |
|
2006 |
|
|
|
|
|
|
|
|
|
U.S. statutory federal tax rate |
|
35.0 |
% |
35.0 |
% |
35.0 |
% |
State and local taxes |
|
.6 |
|
1.1 |
|
1.5 |
|
Foreign earnings and dividends taxed at different rates |
|
(8.3 |
) |
(7.3 |
) |
(6.0 |
) |
Valuation allowance |
|
.4 |
|
|
|
.1 |
|
Other |
|
.3 |
|
.7 |
|
.9 |
|
Effective tax rate |
|
28.0 |
% |
29.5 |
% |
31.5 |
% |
36
The Companys deferred tax assets and liabilities, excluding a valuation allowance, were comprised of the following:
On July 13, 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes and provides guidance on classification and disclosure requirements for tax contingencies. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company adopted the provisions of FIN 48 on January 1, 2007. The total amount of the liability accrued for unrecognized tax benefits as of the adoption date was approximately $30,000, which includes interest and penalties. As a result of the implementation in 2007, the Company recognized an increase in the liability for unrecognized tax benefits and a reduction in retained earnings of approximately $200. At December 31, 2008, the amount of the liability for unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $35,666. As of December 31, 2008, the Company does not have any tax positions for which management believes it is reasonably possible that the total amounts of unrecognized benefits will significantly increase or decrease within the next twelve months.
A tabular reconciliation of the gross amounts of unrecognized tax benefits excluding interest and penalties at the beginning and end of the year for both 2008 and 2007 is as follows:
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
||
Unrecognized tax benefits as of January 1 |
|
$ |
29,412 |
|
$ |
26,429 |
|
|
|
|
|
|
|
||
Gross increases and gross decreases for tax positions in prior periods |
|
964 |
|
1,003 |
|
||
|
|
|
|
|
|
||
Gross increases - current period tax position |
|
4,140 |
|
5,752 |
|
||
|
|
|
|
|
|
||
Settlements |
|
(19 |
) |
(1,677 |
) |
||
|
|
|
|
|
|
||
Lapse of statute of limitations |
|
(3,225 |
) |
(2,095 |
) |
||
|
|
|
|
|
|
||
Unrecognized tax benefits as of December 31 |
|
$ |
31,272 |
|
$ |
29,412 |
|
The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the year ended December 31, 2008, the provision for income taxes included $760 in estimated interest and penalties. As of December 31, 2008, the liability for unrecognized tax benefits included $6,652 for tax-related interest and penalties.
The Company files income tax returns with the U.S., various states as well as foreign jurisdictions. With few exceptions, the Company is subject to income tax examinations by tax authorities for years on or after 2005.
Note 5Shareholders Equity
The Company has two option plans for employees (the Option Plans), the 1997 Option Plan and the 2000 Option Plan. The Option Plans authorize the granting of additional stock options by a committee of the Board of Directors. At December 31, 2008, the maximum number of shares of common stock available for the granting of additional stock options under the Option Plans was
37
3,829,560. Options granted under the Option Plans vest ratably over a period of five years and are exercisable over a period of ten years from the date of grant. In addition, shares issued in conjunction with the exercise of stock options under the Option Plans are subject to Management Stockholder Agreements.
In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the Directors Option Plan). The Directors Option Plan is administered by the Board of Directors. At December 31, 2008, the maximum number of shares of common stock available for the granting of additional stock options under the Directors Option Plan was 260,000. Options granted under the Directors Option Plan vest ratably over a period of three years and are exercisable over a period of ten years from the date of grant.
The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility was calculated based on the historical volatility of the stock of the Company and implied volatility derived from related exchange traded options. The average expected life was based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share was based on the Companys dividend rate.
Stock-based compensation expense includes the estimated effects of forfeitures which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ from such estimates. Changes in estimated forfeitures are recognized in the period of change and impact the amount of expense to be recognized in future periods.
Stock option activity for 2006, 2007 and 2008 was as follows (on a post stock split basis):
|
|
Options |
|
Weighted
Average
|
|
Weighted
|
|
Aggregate
|
|
||
|
|||||||||||
|
|||||||||||
|
|||||||||||
|
|||||||||||
Options outstanding at December 31, 2005 |
|
12,787,012 |
|
$ |
12.34 |
|
6.44 |
|
|
|
|
Options granted |
|
2,275,200 |
|
26.82 |
|
|
|
|
|
||
Options exercised |
|
(2,035,946 |
) |
10.75 |
|
|
|
|
|
||
Options cancelled |
|
(110,840 |
) |
16.44 |
|
|
|
|
|
||
Options outstanding at December 31, 2006 |
|
12,915,426 |
|
15.11 |
|
6.34 |
|
|
|
||
Options granted |
|
2,247,500 |
|
34.61 |
|
|
|
|
|
||
Options exercised |
|
(3,248,008 |
) |
10.79 |
|
|
|
|
|
||
Options cancelled |
|
(635,020 |
) |
25.45 |
|
|
|
|
|
||
Options outstanding at December 31, 2007 |
|
11,279,898 |
|
19.72 |
|
6.55 |
|
|
|
||
Options granted |
|
2,142,700 |
|
45.93 |
|
|
|
|
|
||
Options exercised |
|
(2,063,881 |
) |
13.12 |
|
|
|
|
|
||
Options cancelled |
|
(128,880 |
) |
28.94 |
|
|
|
|
|
||
Options outstanding at December 31, 2008 |
|
11,229,837 |
|
25.82 |
|
6.69 |
|
$ |
52,850 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Exercisable at December 31, 2008 |
|
5,376,999 |
|
$ |
16.52 |
|
5.10 |
|
$ |
46,352 |
|
A summary of the status of the Companys non-vested options as of December 31, 2008 and changes during the year then ended is as follows:
|
|
Options |
|
Weighted Average Fair
|
|
|
Non-vested options at December 31, 2007 |
|
5,681,951 |
|
$ |
8.24 |
|
Options granted |
|
2,142,700 |
|
14.79(1 |
) |
|
Options vested |
|
(1,842,933 |
) |
6.92 |
|
|
Options cancelled |
|
(128,880 |
) |
9.37 |
|
|
|
|
|
|
|
|
|
Non-vested options at December 31, 2008 |
|
5,852,838 |
|
$ |
11.03 |
|
38
(1) The weighted-average fair value at grant date of options granted during 2007 and 2006 were $10.98 and $9.20, respectively.
During the years ended December 31, 2008 and 2007, the following activity occurred under the Companys plans:
|
|
2008 |
|
2007 |
|
||
Total intrinsic value of stock options exercised |
|
$ |
73,386 |
|
$ |
86,530 |
|
Total fair value of stock awards vested |
|
12,745 |
|
11,151 |
|
||
On December 31, 2008 the total compensation cost related to non-vested options not yet recognized is approximately $47,462, with a weighted average expected amortization period of 3.61 years.
The Company pays a quarterly dividend on its common stock of $.015 per share. The Company paid its fourth quarterly dividend in the amount of $2,567 or $.015 per share on January 7, 2009 to shareholders of record as of December 17, 2008. Cumulative dividends declared during 2008 were $10,461. Total dividends paid in 2008 were $10,617 including those declared in 2007 and paid in 2008.
Balances of related after-tax components comprising accumulated other comprehensive loss included in shareholders equity at December 31, 2006, 2007 and 2008 are as follows:
|
|
Foreign
|
|
Revaluation of
|
|
Defined
|
|
Accumulated
|
|
||||
Balance at January 1, 2006 |
|
$ |
(5,970 |
) |
$ |
1,150 |
|
$ |
(72,922 |
) |
$ |
(77,742 |
) |
Translation adjustments |
|
16,829 |
|
|
|
|
|
16,829 |
|
||||
Revaluation of interest rate derivatives, net of tax of $1,176 |
|
|
|
1,894 |
|
|
|
1,894 |
|
||||
Adjustment to initially apply SFAS 158,Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, net of tax of $11,868 |
|
|
|
|
|
(19,282 |
) |
(19,282 |
) |
||||
Defined benefit plan liability adjustment, net of tax of $1,713 |
|
|
|
|
|
(2,783 |
) |
(2,783 |
) |
||||
Balance at December 31, 2006 |
|
10,859 |
|
3,044 |
|
(94,987 |
) |
(81,084 |
) |
||||
Translation adjustments |
|
26,078 |
|
|
|
|
|
26,078 |
|
||||
Revaluation of interest rate derivatives, net of tax of $6,209 |
|
|
|
(10,070 |
) |
|
|
(10,070 |
) |
||||
Defined benefit plan liability adjustment, net of tax of $12,712 |
|
|
|
|
|
21,432 |
|
21,432 |
|
||||
Balance at December 31, 2007 |
|
36,937 |
|
(7,026 |
) |
(73,555 |
) |
(43,644 |
) |
||||
Translation adjustments |
|
(36,589 |
) |
|
|
|
|
(36,589 |
) |
||||
Revaluation of interest rate derivatives, net of tax of $5,104 |
|
|
|
(8,691 |
) |
|
|
(8,691 |
) |
||||
Defined benefit plan liability adjustment, net of tax of $30,344 |
|
|
|
|
|
(51,667 |
) |
(51,667 |
) |
||||
Balance at December 31, 2008 |
|
$ |
348 |
|
$ |
(15,717 |
) |
$ |
(125,222 |
) |
$ |
(140,591 |
) |
Note 6Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income by the weighted-average number of common shares and dilutive common shares outstanding, which relates to stock options. A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding as of December 31 is as follows (dollars in thousands, except per share amounts):
39
|
|
2008 |
|
2007 |
|
2006 |
|
|||
Net income |
|
$ |
419,151 |
|
$ |
353,194 |
|
$ |
255,691 |
|
Basic average common shares outstanding |
|
175,663,797 |
|
178,453,249 |
|
178,927,644 |
|
|||
Effect of dilutive stock options |
|
3,149,216 |
|
4,050,720 |
|
4,419,682 |
|
|||
Dilutive average common shares outstanding |
|
178,813,013 |
|
182,503,969 |
|
183,347,326 |
|
|||
Earnings per share: |
|
|
|
|
|
|
|
|||
Basic |
|
$ |
2.39 |
|
$ |
1.98 |
|
$ |
1.43 |
|
Dilutive |
|
$ |
2.34 |
|
$ |
1.94 |
|
$ |
1.39 |
|
Excluded from the computations above were anti-dilutive shares of 5.9 million, nil and 2.2 million for the years ended December 31, 2008, 2007 and 2006, respectively.
Note 7Benefit Plans and Other Postretirement Benefits
The Company and certain of its domestic subsidiaries have a defined benefit pension plan (U.S. Plan), which, subject to the curtailment described below, covers its U.S. employees. U.S. Plan benefits are generally based on years of service and compensation and are generally noncontributory. Certain foreign subsidiaries have defined benefit plans covering their employees. Certain U.S. employees not covered by the U.S. Plan are covered by defined contribution plans. The following is a summary of the Companys defined benefit plans funded status as of the most recent actuarial valuations; for each year presented below, projected benefits exceed assets.
|
|
December 31, |
|
||||
|
|
2008 |
|
2007 |
|
||
Change in benefit obligation: |
|
|
|
|
|
||
Benefit obligation at beginning of year |
|
$ |
388,553 |
|
$ |
394,644 |
|
Service cost |
|
7,247 |
|
8,306 |
|
||
Interest cost |
|
22,897 |
|
21,306 |
|
||
Plan participants contributions |
|
370 |
|
392 |
|
||
Plan amendments |
|
|
|
5,914 |
|
||
Actuarial (gain) loss |
|
(8,919 |
) |
(30,430 |
) |
||
Foreign exchange translation |
|
(16,712 |
) |
8,440 |
|
||
Benefits paid |
|
(19,542 |
) |
(20,019 |
) |
||
|
|
|
|
|
|
||
Benefit obligation at end of year |
|
373,894 |
|
388,553 |
|
||
|
|
|
|
|
|
||
Change in plan assets: |
|
|
|
|
|
||
Fair value of plan assets at beginning of year |
|
301,581 |
|
271,581 |
|
||
Actual return on plan assets |
|
(64,729 |
) |
23,020 |
|
||
Employer contributions |
|
22,596 |
|
22,463 |
|
||
Plan participants contributions |
|
370 |
|
392 |
|
||
Foreign exchange translation |
|
(18,346 |
) |
2,184 |
|
||
Benefits paid |
|
(18,840 |
) |
(18,059 |
) |
||
|
|
|
|
|
|
||
Fair value of plan assets at end of year |
|
222,632 |
|
301,581 |
|
||
|
|
|
|
|
|
||
Accrued benefit obligation |
|
$ |
151,262 |
|
$ |
86,972 |
|
|
|
Year Ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
Components of net pension expense: |
|
|
|
|
|
|
|
|||
Service cost |
|
$ |
7,337 |
|
$ |
8,306 |
|
$ |
9,740 |
|
Interest cost |
|
23,000 |
|
21,306 |
|
18,804 |
|
|||
Expected return on plan assets |
|
(26,256 |
) |
(23,020 |
) |
(22,491 |
) |
|||
Net amortization of actuarial losses |
|
8,106 |
|
9,479 |
|
10,974 |
|
|||
|
|
|
|
|
|
|
|
|||
Net pension expense |
|
$ |
12,187 |
|
$ |
16,071 |
|
$ |
17,027 |
|
40
|
|
Weighted-average assumptions used to determine
|
|
||||||
|
|
Pension Benefits |
|
Other Benefits |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
Discount rate: |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
6.25 |
% |
6.25 |
% |
6.25 |
% |
6.25 |
% |
International plans |
|
6.20 |
% |
5.57 |
% |
n/a |
|
n/a |
|
Expected long-term return on assets |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
8.25 |
% |
9.25 |
% |
n/a |
|
n/a |
|
International plans |
|
6.74 |
% |
8.11 |
% |
n/a |
|
n/a |
|
Rate of compensation increase: |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
3.00 |
% |
3.00 |
% |
n/a |
|
n/a |
|
International plans |
|
2.43 |
% |
2.61 |
% |
n/a |
|
n/a |
|
|
|
Weighted-average assumptions used to determine net
|
|
||||||
|
|
Pension Benefits |
|
Other Benefits |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
Discount rate: |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
6.25 |
% |
5.75 |
% |
6.25 |
% |
5.75 |
% |
International plans |
|
5.57 |
% |
4.67 |
% |
n/a |
|
n/a |
|
Expected long-term return on assets: |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
9.25 |
% |
9.50 |
% |
n/a |
|
n/a |
|
International plans |
|
8.11 |
% |
8.17 |
% |
n/a |
|
n/a |
|
Rate of compensation increase: |
|
|
|
|
|
|
|
|
|
U.S. plans |
|
3.00 |
% |
3.00 |
% |
n/a |
|
n/a |
|
International plans |
|
2.61 |
% |
2.68 |
% |
n/a |
|
n/a |
|
The pension expense for U.S. and foreign plans (the Plans) is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on the Plans assets. The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. The Companys U.S. Plan comprised the majority of the accrued benefit obligation, pension assets and pension expense. The discount rate for the U.S. Plan was 6.25% at both December 31, 2008 and 2007. Although future changes to the discount rate are unknown, had the discount rate increased or decreased 50 basis points, the accrued benefit obligation would have increased or decreased by approximately $15,500.
Effective January 1, 2007, the Company effected a curtailment related to the U.S. Plan which resulted in no additional benefits being credited to salaried employees who had less than 25 years service with the Company, or who had not attained age 50 and who had less than 15 years of service with the Company. This change had the impact of decreasing pension expense during 2007 by approximately $2,900. For affected employees, the curtailment in additional U.S. Plan benefits was replaced with a Company match defined contribution plan to which the Company contributed approximately $1,900 and $1,700 in 2008 and 2007, respectively.
The pension expense is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, including an expected long-term rate of return on U.S. Plan assets. In developing the expected long-term rate of return assumption for the U.S. Plan, the Company evaluated input from our actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices. The Company also considered its historical nineteen-year compounded return of 8.5%, which has been in excess of these broad equity and bond benchmark indices. The expected long-term rate of return on the U.S. Plan assets is based on an asset allocation assumption of 60% with equity managers, with an expected long-term rate of return of 9%; 25% with fixed income managers, with an expected long-term rate of return of 6.8% and 15% with high yield bond managers, with an expected rate of return of 6%. As of December 31, 2008, the asset allocation was 45% with equity managers and 37% with fixed income managers, including high yield managers and 18% in cash. The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology, the Companys expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plan at December 31, 2008 and 2007 is 8.25% and 9.25%, respectively. This reduction in the long-term rate of return will have the effect of increasing pension expense in 2009 by approximately $2,400. The Company has also adopted an unfunded Supplemental Employee Retirement Plan (SERP), which provides for the payment of the portion of annual pension which cannot be paid from the retirement plan as a result of regulatory
41
limitations on average compensation for purposes of the benefit computation. The largest non-U.S. pension plan, in accordance with local custom, is unfunded and had a projected benefit obligation of approximately $48,000 and $51,000 at December 31, 2008 and 2007, respectively. Such obligation is included in the accompanying Consolidated Balance Sheets and in the tables above.
The Company made cash contributions to the U.S. Plan of $20,000 in both 2008 and 2007, and the U.S. Plan made benefit payments of $16,450 and $15,800 in 2008 and 2007, respectively. The liability for accrued pension and post employment benefit obligations under all the Companys pension and post-retirement benefit plans (the Plans) increased in 2008 to $165,889, ($4,220 of which is included in other accrued expenses representing required contributions to be made during 2009 for foreign plans) from $101,804 in 2007 primarily due to a significant reduction in plan assets in the U.S. Plan offset by the cash contributions made to the Plans in 2008 and by the foreign currency translation effect of the foreign pension plans. The Company estimates that, based on current actuarial calculations, it will make a voluntary cash contribution to the U.S. Plan in 2009 of approximately $15,000 to $20,000. Cash contributions in subsequent years will depend on a number of factors, including the investment performance of the U.S. Plan assets and the impact of the Pension Protection Act of 2006, which was signed into law in August 2006. The Pension Protection Act is effective for plan years beginning in 2008 and did not have a material impact on the Companys consolidated financial condition or results of operations.
The Company offers various defined contribution plans for U.S. and foreign employees. Participation in these plans is based on certain eligibility requirements. Effective January 1, 2007, in conjunction with the curtailment of certain additional U.S. Pension Plan benefits for salaried employees described above, the Company began matching the majority of employee contributions to the U.S. defined contribution plans with cash contributions up to a maximum of 5% of eligible compensation. The Company provided matching contributions of approximately $1,900 for the year ended December 31, 2008.
The Company maintains self-insurance programs for that portion of its health care and workers compensation costs not covered by insurance. The Company also provides certain health care and life insurance benefits to certain eligible retirees through post-retirement benefit programs. The Companys share of the cost of such plans for most participants is fixed, and any increase in the cost of such plans will be the responsibility of the retirees. The Company funds the benefit costs for such plans on a pay-as-you-go basis. Since the Companys obligation for postretirement medical plans is fixed and since the accumulated postretirement benefit obligation (APBO) and the net postretirement benefit expense are not material in relation to the Companys financial condition or results of operations, the Company believes any change in medical costs from that estimated will not have a significant impact on the Company. The discount rate used in determining the APBO was 6.25% at both December 31, 2008 and 2007. Summary information on the Companys postretirement medical plans is as follows:
|
|
|
|
December 31, |
|
||||
|
|
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
|
|
||
Change in benefit obligation: |
|
|
|
|
|
|
|
||
Accrued benefit obligation at beginning of year |
|
|
|
$ |
14,832 |
|
$ |
15,249 |
|
Service cost |
|
|
|
173 |
|
178 |
|
||
Interest cost |
|
|
|
888 |
|
864 |
|
||
Paid benefits and expenses |
|
|
|
(816 |
) |
(1,405 |
) |
||
Actuarial loss |
|
|
|
(450 |
) |
(54 |
) |
||
|
|
|
|
|
|
|
|
||
Accrued benefit obligation at end of year |
|
|
|
$ |
14,627 |
|
$ |
14,832 |
|
|
|
Year ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|||
Components of net post-retirement benefit cost: |
|
|
|
|
|
|
|
|||
Service cost |
|
$ |
173 |
|
$ |
178 |
|
$ |
134 |
|
Interest cost |
|
888 |
|
864 |
|
745 |
|
|||
Amortization of transition obligation |
|
62 |
|
62 |
|
62 |
|
|||
Net amortization of actuarial losses |
|
984 |
|
1,151 |
|
1,069 |
|
|||
|
|
|
|
|
|
|
|
|||
Net postretirement benefit cost |
|
$ |
2,107 |
|
$ |
2,255 |
|
$ |
2,010 |
|
42
Note 8Leases
At December 31, 2008, the Company was committed under operating leases which expire at various dates. Total rent expense under operating leases for the years 2008, 2007, and 2006 was $24,044, $25,176 and $23,441, respectively.
Minimum lease payments under non-cancelable operating leases are as follows:
2009 |
|
$ |
20,945 |
|
2010 |
|
17,161 |
|
|
2011 |
|
13,234 |
|
|
2012 |
|
9,645 |
|
|
2013 |
|
7,722 |
|
|
Beyond 2013 |
|
8,264 |
|
|
Total minimum obligation |
|
$ |
76,971 |
|
Note 9Goodwill and Other Intangible Assets
As of December 31, 2008, the Company has goodwill totaling $1,232,335, of which $1,158,786 related to the Interconnect Products and Assemblies segment with the remainder related to the Cable Products segment. In 2008, goodwill increased by $140,507 primarily as a result of recording liabilities for performance-based additional cash consideration related to acquisitions of approximately $131,700, which was related to the Interconnect Products and Assemblies segment. In addition, the Company made three acquisitions in the Interconnect and Product Assemblies segment with an aggregate acquisition price of approximately $84,100 less the fair value of net tangible and identifiable intangible assets acquired of $35,000. These increases were offset by a reclassification of $14,100 from goodwill to other long-term assets, which represents the fair value assigned to identifiable intangible assets associated with the Companys acquisitions in 2007, and a reduction due to currency translation of approximately $25,000. The Company is in the process of completing its analysis of fair value attributes of the assets acquired related to its 2008 acquisitions and anticipates that the final assessment of values will not differ materially from the preliminary assessment.
The Company does not have any intangible assets not subject to amortization other than goodwill. As of December 31, 2008, the Company has acquired amortizable intangible assets with a total gross carrying amount of approximately $81,600, of which $36,700, $31,400 and $6,000 relate to proprietary technology, customer relationships and license agreements, respectively, with the remainder relating to other amortizable intangible assets. The accumulated amortization related to these intangibles as of December 31, 2008 totaled approximately $25,000 of which $6,600, $9,800 and $2,200 relate to proprietary technology, customer relationships and license agreements, respectively, with the remainder relating to other amortizable intangible assets. As of December 31, 2007, the Company had acquired amortizable intangible assets with a total gross carrying amount of $53,500, of which $30,700, $9,500 and $6,000 related to proprietary technology, customer relationships and license agreements, respectively, with the remainder relating to other amortizable intangible assets. The accumulated amortization related to these intangibles as of December 31, 2007 totaled approximately $14,800, of which $4,200, $4,000 and $1,600 related to proprietary technology, customer relationships and license agreements, respectively, with the remainder relating to other amortizable intangible assets. Intangible assets are included in other long-term assets in the accompanying Consolidated Balance Sheets. The acquired intangible assets have a total weighted-average useful life of approximately 9 years. The license agreements, proprietary technology and customer relationships have a weighted-average useful life of 8 years, 15 years and 4.5 years, respectively. The aggregate amortization expense for the year ended December 31, 2008 was approximately $9,800 and amortization expense estimated for each of the next five fiscal years is approximately $11,000 in 2009, $10,000 in 2010, $8,300 in 2011, $8,100 in 2012 and $4,800 in 2013.
Note 10Reportable Business Segments and International Operations
The Company has two reportable business segments: (i) Interconnect Products and Assemblies and (ii) Cable Products. The Interconnect Products and Assemblies segment produces connectors and connector assemblies primarily for the communications, 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 and are described in Note 1 herein. 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.
43
|
|
Interconnect Products and
|
|
Cable Products |
|
Total |
|
|||||||||||||||||||||
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
external |
|
$ |
2,950,570 |
|
$ |
2,569,281 |
|
$ |
2,207,508 |
|
$ |
285,901 |
|
$ |
281,760 |
|
$ |
263,922 |
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
intersegment |
|
3,844 |
|
3,901 |
|
3,875 |
|
15,932 |
|
14,780 |
|
16,892 |
|
19,776 |
|
18,681 |
|
20,767 |
|
|||||||||
Depreciation and amortization |
|
80,404 |
|
75,554 |
|
65,958 |
|
5,257 |
|
5,446 |
|
6,023 |
|
85,661 |
|
81,000 |
|
71,981 |
|
|||||||||
Segment operating income |
|
648,605 |
|
558,646 |
|
450,257 |
|
32,535 |
|
34,864 |
|
31,007 |
|
681,140 |
|
593,510 |
|
481,264 |
|
|||||||||
Segment assets |
|
1,490,695 |
|
1,366,234 |
|
1,053,711 |
|
87,113 |
|
86,388 |
|
86,162 |
|
1,577,808 |
|
1,452,622 |
|
1,139,873 |
|
|||||||||
Additions to property, plant and equipment |
|
106,004 |
|
100,672 |
|
79,866 |
|
2,017 |
|
2,889 |
|
1,788 |
|
108,021 |
|
103,561 |
|
81,654 |
|
|||||||||
Reconciliation of segment operating income to consolidated income before taxes:
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|||
Segment operating income |
|
$ |
681,140 |
|
$ |
593,510 |
|
$ |
481,264 |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
(39,627 |
) |
(36,876 |
) |
(38,799 |
) |
|||
Other expenses, net |
|
(43,043 |
) |
(43,206 |
) |
(38,728 |
) |
|||
Stock-based compensation expense |
|
(16,316 |
) |
(12,444 |
) |
(9,718 |
) |
|||
Casualty loss related to flood |
|
|
|
|
|
(20,747 |
) |
|||
|
|
|
|
|
|
|
|
|||
Consolidated income before income taxes |
|
$ |
582,154 |
|
$ |
500,984 |
|
$ |
373,272 |
|
Reconciliation of segment assets to consolidated total assets:
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|||
Segment assets |
|
$ |
1,577,808 |
|
$ |
1,452,622 |
|
$ |
1,139,873 |
|
Goodwill |
|
1,232,335 |
|
1,091,828 |
|
926,242 |
|
|||
Other assets |
|
184,016 |
|
131,283 |
|
129,282 |
|
|||
|
|
|
|
|
|
|
|
|||
Consolidated total assets |
|
$ |
2,994,159 |
|
$ |
2,675,733 |
|
$ |
2,195,397 |
|
Geographic information:
|
|
Net sales |
|
Land and depreciable assets, net |
|
|||||||||||
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
|||||
United States |
|
$ |
1,159,349 |
|
$ |
1,155,846 |
|
$ |
1,059,974 |
|
$ |
112,000 |
|
$ |
108,223 |
|
China |
|
557,243 |
|
382,489 |
|
264,972 |
|
102,734 |
|
72,489 |
|
|||||
Other International Locations |
|
1,519,879 |
|
1,312,706 |
|
1,146,484 |
|
129,781 |
|
135,482 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
3,236,471 |
|
$ |
2,851,041 |
|
$ |
2,471,430 |
|
$ |
344,515 |
|
$ |
316,194 |
|
Revenues by geographic area are based on the customer location to which the product is shipped.
44
Note 11Other Expenses, net
The components of other income (expense) are set forth below
|
|
Year Ended December 31, |
|
|||||||
|
|
2008 |
|
2007 |
|
2006 |
|
|||
Program fees on sale of accounts receivable |
|
$ |
(3,093 |
) |
$ |
(5,191 |
) |
$ |
(5,018 |
) |
Minority interests |
|
(10,426 |
) |
(10,518 |
) |
(6,001 |
) |
|||
Agency and commitment fees |
|
(1,785 |
) |
(1,820 |
) |
(2,057 |
) |
|||
Interest income |
|
4,657 |
|
2,744 |
|
709 |
|
|||
Other |
|
189 |
|
(213 |
) |
(154 |
) |
|||
|
|
|
|
|
|
|
|
|||
|
|
$ |
(10,458 |
) |
$ |
(14,998 |
) |
$ |
(12,521 |
) |
Note 12Casualty loss related to flood
The Company incurred damage at its Sidney, New York manufacturing facility as a result of severe and sudden flooding during the period from June 28 through July 1, 2006. For the year ended December 31, 2006, the Company recorded charges of $20,747 for recovery and clean up expenses and property related damage, net of insurance and grant recoveries. The Sidney facility had limited manufacturing and sales activity for the period from June 28 to July 14, 2006 but the plant was substantially back to full production at the end of the third quarter of 2006.
Note 13Commitments and Contingencies
In the course of pursuing its normal business activities, the Company is involved in various legal proceedings and claims. Management does not expect that amounts, if any, which may be required to be paid by reason of such proceedings or claims will have a material effect on the Companys consolidated financial position or results of operations.
Certain operations of the Company are subject to federal, state and local 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 all applicable environmental laws and regulations and that the costs of continuing compliance will not have a material effect on the Companys financial condition or results of operations.
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)), Amphenol and Honeywell were named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Honeywell jointly consented to perform certain investigations and remedial 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. 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. For sites covered by the Honeywell Agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, Honeywell is obligated to reimburse Amphenol 100% of such costs. Honeywell representatives continue to work closely with the Company in addressing the most significant environmental liabilities covered by 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 Companys financial condition or results of operations. The environmental investigation, remedial and monitoring activities identified by the Company, including those referred to above, are covered under the Honeywell Agreement.
45
Note 14Selected Quarterly Financial Data (Unaudited)
|
|
Three Months Ended |
|
||||||||||
|
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
||||
2008 |
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
770,714 |
|
$ |
846,817 |
|
$ |
863,658 |
|
$ |
755,282 |
|
Gross profit |
|
250,906 |
|
276,590 |
|
281,251 |
|
240,406 |
|
||||
Operating income |
|
150,296 |
|
168,223 |
|
171,320 |
|
142,400 |
|
||||
Net income |
|
97,468 |
|
109,995 |
|
112,955 |
|
98,733 |
|
||||
Net income per shareBasic |
|
.55 |
|
.63 |
|
.64 |
|
.57 |
|
||||
Net income per shareDiluted |
|
.54 |
|
.61 |
|
.63 |
|
.56 |
|
||||
Stock priceHigh |
|
45.48 |
|
50.00 |
|
52.28 |
|
40.50 |
|
||||
Low |
|
34.19 |
|
37.66 |
|
39.10 |
|
18.38 |
|
||||
2007 |
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
651,084 |
|
$ |
688,836 |
|
$ |
733,851 |
|
$ |
777,270 |
|
Gross profit |
|
210,568 |
|
225,624 |
|
239,142 |
|
254,807 |
|
||||
Operating income |
|
122,597 |
|
133,413 |
|
143,350 |
|
153,498 |
|
||||
Net income |
|
77,704 |
|
83,996 |
|
91,501 |
|
99,993 |
|
||||
Net income per shareBasic |
|
.44 |
|
.47 |
|
.51 |
|
.56 |
|
||||
Net income per shareDiluted |
|
.43 |
|
.46 |
|
.50 |
|
.55 |
|
||||
Stock priceHigh |
|
34.06 |
|
36.63 |
|
40.11 |
|
47.16 |
|
||||
Low |
|
30.75 |
|
32.80 |
|
33.28 |
|
39.49 |
|
||||
2006 |
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
568,991 |
|
$ |
606,598 |
|
$ |
636,418 |
|
$ |
659,423 |
|
Gross profit |
|
179,815 |
|
192,700 |
|
201,734 |
|
213,931 |
|
||||
Operating income |
|
98,391 |
|
93,010 |
(1) |
108,557 |
(1) |
124,634 |
|
||||
Net income |
|
57,274 |
|
53,341 |
(1) |
66,699 |
(1) |
78,377 |
|
||||
Net income per shareBasic(2) |
|
.32 |
|
.30 |
(1) |
.37 |
(1) |
.44 |
|
||||
Net income per shareDiluted(2) |
|
.31 |
|
.29 |
(1) |
.36 |
(1) |
.43 |
|
||||
Stock priceHigh(2) |
|
26.25 |
|
30.81 |
|
32.20 |
|
35.25 |
|
||||
Low(2) |
|
21.94 |
|
24.67 |
|
25.15 |
|
30.44 |
|
(1) Includes a one-time charge for expenses incurred in connection with a flood at the Companys Sidney, New York facility of $15,000 and $5,747, or $.06 and $.02, per diluted share after taxes during the second and third quarter of 2006, respectively.
(2) All information has been updated to reflect the 2 for 1 stock split in March 2007.
Item 9. Changes in and Disagreements with Independent Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Under the supervision and with the participation of the Companys management, including the Companys 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 Companys principal executive and financial officers, to allow timely decisions regarding required disclosure. There has been no change in the Companys 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.
46
Management Report on Internal Control
Management is responsible for establishing and maintaining adequate internal control over financial reporting of Amphenol Corporation and Subsidiaries (the Company). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the internal control over financial reporting based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework. Based on that evaluation, management concluded that the Companys internal control over financial reporting was effective as of December 31, 2008.
Deloitte and Touche LLP has audited the Companys internal control over financial reporting as of December 31, 2008 in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). Those standards require that Deloitte and Touche LLP plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Deloitte and Touche LLP has issued an unqualified report stating the Company has maintained effective internal control over financial reporting as of December 31, 2008.
February 23, 2009
None.
47
Item 10. Directors, Executive Officers and Corporate Governance
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Directors of the Registrant is incorporated by reference from the Companys definitive proxy statement which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Pursuant to Instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Executive Officers of the Registrant is incorporated by reference from the Companys definitive proxy statement which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Information regarding the Companys Code of Business Conduct and Ethics is available on the Companys website, www.amphenol.com. In addition a copy may be requested by writing to the Companys World Headquarters at:
358 Hall Avenue
P.O. Box 5030
Wallingford, CT 06492
Attention: Investor Relations
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information required in Item 11 is incorporated by reference from the Companys definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Pursuant to Instruction G(3) to Form 10-K, the information required in Item 12 is incorporated by reference from the Companys definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pursuant to Instruction G(3) to Form 10-K, the information required in Item 13 is incorporated by reference from the Companys definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
Item 14. Principal Accountant Fees and Services
Pursuant to Instruction G(3) to Form 10-K, the information required in Item 14 is incorporated by reference from the Companys definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within 120 days following the end of the fiscal year covered by this report.
48
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Consolidated Financial Statements
|
Page |
|
|
26 |
|
Consolidated Statements of Income Years Ended December 31, 2008, 2007 and 2006 |
27 |
28 |
|
29 |
|
Consolidated Statements of Cash Flow Years Ended December 31, 2008, 2007 and 2006 |
30 |
31 |
|
47 |
(a)(2) Financial Statement Schedules for the Three Years Ended December 31, 2008 Schedule
Report of Independent Registered Public Accounting Firm on Schedule |
50 |
51 |
Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the consolidated financial statements or notes thereto.
49
Report of Independent Registered Public Accounting Firm on Schedule
We have audited the consolidated financial statements of Amphenol Corporation and subsidiaries (the Company) as of December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, and the Companys internal control over financial reporting as of December 31, 2008, and have issued our report thereon dated February 23, 2009; such consolidated financial statements and report are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
February 23, 2009
50
AMPHENOL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2008, 2007 and 2006
(Dollars in thousands)
|
|
Balance at
|
|
Charged to
|
|
Acquisitions |
|
Deductions |
|
Balance at end
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2008 Allowance for doubtful accounts |
|
$ |
12,468 |
|
$ |
2,089 |
|
$ |
699 |
|
$ |
(274 |
) |
$ |
14,982 |
|
2007 Allowance for doubtful accounts |
|
14,677 |
|
371 |
|
418 |
|
(2,998 |
) |
12,468 |
|
|||||
2006 Allowance for doubtful accounts |
|
11,162 |
|
5,939 |
|
57 |
|
(2,481 |
) |
14,677 |
|
|||||
51
Pursuant to the requirements of Section 13 or 15d 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 in the Town of Wallingford, State of Connecticut on the 23rd day of February 2009.
|
AMPHENOL CORPORATION |
|
|
|
|
|
|
|
|
/s/ R. Adam Norwitt |
|
|
|
R. Adam Norwitt |
|
|
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the date indicated below.
|
Title |
|
Date |
|
|
|
|
|
|
/s/ R. Adam Norwitt |
|
President and Chief Executive Officer |
|
February 23rd, 2009 |
R. Adam Norwitt |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Diana G. Reardon |
|
Senior Vice President and Chief Financial Officer |
|
February 23rd, 2009 |
Diana G. Reardon |
|
(Principal Financial Officer and Principal Accounting Officer) |
|
|
|
|
|
|
|
/s/ Martin H. Loeffler |
|
Chairman of the Board of Directors |
|
February 23rd, 2009 |
Martin H. Loeffler |
|
|
|
|
|
|
|
|
|
/s/ Ronald P. Badie |
|
Director |
|
February 23rd, 2009 |
Ronald P. Badie |
|
|
|
|
|
|
|
|
|
/s/ Stanley L. Clark |
|
Director |
|
February 23rd, 2009 |
Stanley L. Clark |
|
|
|
|
|
|
|
|
|
/s/ Edward G. Jepsen |
|
Director |
|
February 23rd, 2009 |
Edward G. Jepsen |
|
|
|
|
|
|
|
|
|
/s/ Andrew E. Lietz |
|
Director |
|
February 23rd, 2009 |
Andrew E. Lietz |
|
|
|
|
|
|
|
|
|
/s/ John R. Lord |
|
Director |
|
February 23rd, 2009 |
John R. Lord |
|
|
|
|
|
|
|
|
|
/s/ Dean H. Secord |
|
Director |
|
February 23rd, 2009 |
Dean H. Secord |
|
|
|
|
52
(a)(3) Listing of Exhibits
53
* Incorporated herein by reference as stated.
** Filed herewith.
54
Exhibit 10.24
AMPHENOL CORPORATION
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
(Amended and Restated Effective January 1, 2009)
AMPHENOL CORPORATION
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
PREAMBLE
Amphenol Corporation (Amphenol) formally adopted a Supplemental Employee Retirement Plan, effective January 25, 1996, for a select group of senior management personnel of Amphenol and its Affiliated Companies to insure that the overall effectiveness of the executive compensation and retirement programs of Amphenol and its Affiliated Companies will attract, retain and motivate qualified senior management personnel. The Supplemental Employee Retirement Plan has been amended from time to time, and is being amended and restated, effective January 1, 2009, to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other applicable guidance issued thereunder.
Section I. Definitions.
When used herein the following words shall have the meanings below unless the context clearly indicates otherwise. To the extent additional definitions of words or terms (not defined below) are necessary or helpful, the definitions of such words or terms in the Basic Retirement Plans shall apply unless the context clearly indicates otherwise.
1.1 Affiliated Company means any trade or business entity, or predecessor company of such entity, if any, which is a member of a controlled group of corporations as defined under the Internal Revenue Code Section 414, of which Amphenol is also a member.
1.2 Basic Retirement Plan means any defined benefit pension plan intended to be qualified under Section 401 of the Code, sponsored by Amphenol Corporation or any Affiliated Company, as amended from time to time.
1.3 Basic Retirement Plan Benefit means the annual benefit to which a Participant is entitled from the Basic Retirement Plan.
1.4 Benefit Commencement Date means the date on which a Participants benefits under the Plan commence.
1.5 Company means Amphenol Corporation and its subsidiaries and any successors thereto.
1.6 Compensation means the Participants Compensation as defined in the Basic Retirement Plan.
1.7 Code means the Internal Revenue Code of 1986, as amended.
1.8 Participant means any employee of the Company who meets the eligibility requirements of Section II and who is designated and approved as set forth in Section II.
1.9 Pension Committee means the Pension Committee as designated by the Board of Directors, from time to time, or if none, the Board of Directors of the Company.
1.10 Plan means the Amphenol Corporation Supplemental Employee Retirement Plan.
1.11 Retirement Date means a Participants Normal Retirement Date, Early Retirement Date or Late Retirement Date as the context may indicate and as defined in Section III of the Plan.
1.12 Section 409A means Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other applicable guidance issued thereunder.
1.13 Supplemental Retirement Plan Benefit means the annual benefit payable in accordance with the Plan.
1.14 Surviving Spouse means the spouse of the Participant who is legally married to the Participant, and is not legally separated or divorced from the Participant, and with respect to an active Participant, has been so married for a period of not less than 12 months as of the Annuity Starting Date or death of the Participant.
1.15 Years of Service means the Participants Years of Accrual Service as defined in and accrued under the Basic Retirement Plan.
Section II. Eligibility to Participate.
2.1. Eligibility .
(a) General . Each senior management employee of the Company shall be eligible to become a Participant in the Plan but shall only become a Participant upon such employee being designated as a Participant by the Pension Committee in writing and provided further that at the time of such designation and approval the employee is a Participant in a Basic Retirement Plan. Notwithstanding the preceding sentence, effective January 1, 2000, any employee of the Company who is actively employed and a Participant in the Basic Retirement Plan, and whose benefit under the Basic Retirement Plan has been limited by the application of Section 401(a)(17) or Section 415 of the Code, shall be eligible to become a Participant in the Plan; provided, however, that a ny employee of the Company shall only become a Participant eligible for a benefit determined pursuant to Section 3.2(a)(iii) upon such employee being designated in writing by the Pension Committee as a Participant with respect to that portion of the Plan.
(b) January 1, 2007 Basic Retirement Plan Freeze . No salaried employee shall become a participant in the Basic Retirement Plan after December 31, 2006. An inactive participant in the Basic Retirement Plan who is reemployed by the Company or a participating employer under the Basic Retirement Plan as a salaried employee after December 31, 2006 shall not resume participation in the Basic Retirement Plan or this Plan.
2.2. Cessation of Eligibility . Once an employee becomes a Participant, he or she shall remain a Participant until his or her termination of employment with the Company and thereafter until all benefits to which the Participant or the Participants Surviving Spouse is entitled under the Plan have been paid; provided, however, that if a Participant ceases to be a Participant in a Basic Retirement Plan prior to the first to occur of his or her Retirement Date and the date of his or her termination of employment with the Company, he or she shall cease to be a Participant hereunder on the date he or she ceases to be a Participant in a Basic Retirement Plan.
Section III. Eligibility, Amount, Form and Commencement of Benefits.
3.1 Eligibility . Each Participant who satisfies the vesting requirements under a Basic Retirement Plan shall be eligible to receive a benefit from the Plan.
3.2 Retirement Benefits . The Supplemental Retirement Plan Benefit payable to a Participant as of the Benefit Commencement Date shall be calculated as: an annual benefit, payable in the Normal Form provided under the Basic Retirement Plan, equal to (a) less (b):
(a) is the annual benefit which is derived from Employer and Employee contributions, if any, payable to the Participant or Participants Surviving Spouse or other applicable beneficiary, if any, under the Basic Retirement Plan as of the Participants Benefit Commencement Date, such benefit to be calculated:
(i) as if the compensation limitation imposed to determine benefits by Section 401(a)(17) of the Code was $500,000 for Plan Years prior to 2007, and 3.33 multiplied by the Section 401(a)(17) limitation for the applicable Plan Year for 2007 and subsequent Plan Years;
(ii) without regard to any limitations under Code Section 415; and
(iii) for a Participant who receives a portion of his or her remuneration from the Employer or a Participating Employer under the Basic Retirement Plan and a portion from a Foreign Subsidiary (that is not a Participating Employer in the Basic Retirement Plan), as if the definition of compensation under the Basic Retirement Plan includes compensation paid, on or after January 1, 2004, by such Foreign Subsidiary; provided, however, that such Participant is not eligible to participate in a plan of deferred compensation provided by such Foreign Subsidiary, or any person or corporation other than the Employer, with respect to such remuneration; and
(b) is the annual benefit which is derived from Employer and Employee contributions, if any, and which would be payable to the Participant or the Participants Surviving Spouse or other applicable beneficiary, if any, under the Basic Retirement Plan if benefits commenced under that plan on the Participants Benefit Commencement Date under this Plan .
No benefit shall be payable under this Plan to a Participant or Surviving Spouse, or other beneficiary unless a benefit is or will be payable to such Participant, Surviving Spouse or beneficiary under the Basic Retirement Plan. The calculation of the Supplemental Retirement Plan Benefit shall be done by Amphenol in consultation with the consulting actuary for the Companys Basic Retirement Plans. The benefits so determined and the interpretation of Amphenol based upon such actuarial input shall be final and binding on the Company, the Participant and the Participants Surviving Spouse or other applicable beneficiary, if any.
3.3 Death Prior to Benefit Commencement . If a Participant dies prior to his or her Benefit Commencement Date, his or her Surviving Spouse, if any, shall be entitled to a Supplemental Retirement Plan Benefit equal to the death benefit payable to the Surviving Spouse calculated in accordance with Section 3.2 above, and payable in the form of a life annuity for the life of the Surviving Spouse. Said death benefit shall be payable commencing upon the later of: the first day of the month immediately following death or the earliest date retirement benefits could have been paid to the Participant under the Basic Retirement Plan as in effect on December 31, 2008 if he or she had ceased to be an Employee on the date of his or her death and survived to such date.
3.4 Disability Prior to Termination of Employment . If a Participant becomes Disabled, as defined below, prior to his or her termination of employment, he or she shall be entitled to a Supplemental Retirement Plan Benefit equal to the disability benefit payable under the Basic Retirement Plan calculated in accordance with Section 3.2 above. In accordance with Sections 4.1 and 4.2, the Supplemental Retirement Plan Benefit shall be payable in the form of a life annuity, the actual type of which shall be elected by the Participant from the options available under the Basic Retirement Plan prior to the date payments commence, and shall commence on the first day of the month following the date on which a Participant attains age 65. For purposes of this Section, a Participant is Disabled, in accordance with Section 409A, when, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, he or she receives income replacement benefits for a period of 6 months under an accident and health plan covering employees of Amphenol. If a participant incurs a disability that does not constitute a Disability as set forth in the preceding sentence, Supplemental Retirement Plan Benefits shall not commence pursuant to this Section.
3.5 Change in Control . Upon a Change in Control, as defined below and in accordance with Section 409A, notwithstanding any provision of this Plan to the contrary, Participants shall be 100% vested. A Participant who did not reach his or her Benefit Commencement Date prior to the Change in Control shall receive his or her Supplemental Retirement Plan Benefit, calculated in accordance with Section 3.2 based upon his or her Years of Service and Compensation as of the date of the Change in Control, in an immediate lump sum that shall be actuarially equivalent, using the actuarial assumptions in the Basic Retirement Plan but without adjustment pursuant to Code Section 417(e)(3)(D), to the annuity calculated under 3.2 above.
A Change in Control shall be considered to have occurred only if the circumstances satisfy one of the following, which shall be construed to be consistent with the requirements of Treasury Regulation Section 1.409A-3(i)(5) (except to the extent that such regulations are superseded by subsequent guidance under Section 409A):
(I) Change in the ownership of the Company . A change in the ownership of the Company shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that,
together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company.
(II) Change in the effective control of the Company . A change in the effective control of the Company shall occur on the date that either (A) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(D)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or (B) a majority of members of the Companys Board of Directors is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of Companys Board of Directors prior to the date of the appointment or election.
(III) Change in the ownership of a substantial portion of the Companys assets . A change in the ownership of a substantial portion of the Companys assets shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)(C)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition. For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
3.6 Termination of Employment . If a vested Participants employment with the Company is terminated prior to attaining Early Retirement Age, the Participant and his or her Surviving Spouse or beneficiary shall have a right to receive deferred Supplemental Plan Benefits, subject to Section 6.1 hereof.
Section IV. Form and Commencement of Benefits to a Participant (General).
4.1 Form of Benefits . Except as provided in Section 3.5, Supplemental Retirement Plan Benefits payable to a Participant pursuant to Section III will be payable in the form of a life annuity, the actual type of which shall be elected by the Participant from the options available under the Basic Retirement Plan, prior to the date of payment, provided that (i) each such annuity form is actuarially equivalent to each other form of annuity that can be chosen under this Plan by the Participant, using the same equivalencies as set forth in the Basic Retirement Plan provided said actuarial assumptions and methods shall at all times be applied consistently and be reasonable, (ii) each such form of annuity must have the same initial payment date, and (iii) the Plan has otherwise complied with the requirements of IRS Regulation 1.409A-2(b)(2)(ii).
4.2 Commencement of Benefits . Supplemental Retirement Plan Benefits payable under this Plan to a Participant pursuant to Section III will commence on the first day of the month following the earlier of: (a) a Change in Control, or (b) the later of the Participants: (i) termination from employment or (ii) attainment of the earliest retirement age under the Basic Retirement Plan as in effect on December 31, 2008; provided, however, if the Participant becomes Disabled prior to termination of employment his or her benefit shall commence upon the first day of the month following his or her 65 th birthday. Notwithstanding the preceding, Supplemental Retirement Plan Benefits payable to a Specified Employee upon his or her termination of employment shall be delayed as set forth in Section 6.13. In the event of any commencement of benefits prior to Normal Retirement Date, such benefits shall be subject to the same actuarial adjustment for early commencement, if any, as are made for benefits under the Basic Retirement Plan.
4.3 Acceleration/Commutation of Benefits . Except as may be permitted under Section 409A, or otherwise applicable law, payment of Supplemental Retirement Plan Benefits shall not be accelerated. Notwithstanding anything herein to the contrary, the Company may, in its discretion, automatically pay out a Participants vested Supplemental Retirement Plan Benefit in a lump sum, provided that such payment satisfies the requirements in (I) through (III) below:
(I) Such payment results in the termination and liquidation of the entirety of the Participants interest under the Plan (as defined in Reg. Section 1.409A-1(c)(2)), including all agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Reg. Section 409A-1(c)(2);
(II) Such payment is not greater than the applicable dollar amount under Code Section 402(g)(1)(B); and
(III) Such exercise of the Companys discretion is evidenced in writing no later than the date of such payment.
Section V. Amendment and Termination.
5.1 Amendment or Termination . Amphenol intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole opinion of Amphenol, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution by the Board of Directors of Amphenol which shall be effective on the date of such resolution. No amendment or termination of the Plan shall directly or indirectly deprive any Participant, Surviving Spouse or beneficiary of all or any portion of any Supplemental Retirement Plan Benefit which has commenced prior to the effective date of the resolution amending or terminating the Plan nor any benefit accrued prior to the effective date of a resolution amending or terminating the Plan.
5.2 Termination Benefits . In the event of termination of the Plan or a Participants participation in the Plan, each actively employed or disabled Participant on the termination date shall become vested in his or her accrued Supplemental Retirement Plan Benefit as of the termination date. Such accrued Supplemental Retirement Plan Benefit shall be calculated as set forth in paragraph 3.2 above based upon the Participants Years of Accrual Service, Compensation and Basic Retirement Plan Benefit, as of the termination date. For purposes of determining a Participants accrued Supplemental Retirement Plan Benefit pursuant to this paragraph, the Participants Basic Retirement Plan Benefit shall be his or her then accrued benefits from the Basic Retirement Plan payable at Normal Retirement Age. Payment of a Participants accrued Supplemental Retirement Plan Benefit shall not be dependent upon the continuation of employment with the Company following the Plan termination date. Accrued Supplement Retirement Plan Benefits shall become payable at the date for commencement of payment of a Supplemental Retirement Plan Benefit pursuant to the terms of paragraph 4.2 above.
5.3 Corporate Successors . The Plan shall not be automatically terminated by a transfer or sale of assets of Amphenol or by the merger or the consolidation of Amphenol into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of paragraph 5.1 and 5.2.
Section VI. Miscellaneous.
6.1 Forfeiture of Benefit . Notwithstanding any other provision of the Plan, future payment of a Supplemental Retirement Plan Benefit hereunder to a Participant, Surviving Spouse or beneficiary will, at the discretion of the Retirement Committee, be discontinued and forfeited hereunder to the Participant, Surviving Spouse or beneficiary, at any time if any of the following circumstances occur:
(a) the Participant engages in activities deemed competitive with and/or materially detrimental to the Company following his or her termination of employment with the Company;
(b) the Participant performs acts of willful malfeasance or gross negligence in a matter of material importance to the Company, and such acts are discovered by the Company at any time prior to the death of the Participant.
The Pension Committee shall have the sole and unlimited discretion with respect to the application and the provisions of this Section and the exercise of discretion shall be conclusive and binding upon the Participant, Surviving Spouse and beneficiary and all other persons.
6.2 No Effect on Employment Rights . Nothing contained herein will confer upon any Participant the right to be retained in the employ or service of the Company nor
limit the rights of the Company to discharge or otherwise deal with Participants without regard to the existence of the Plan.
6.3 Funding . The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. Nothing in this Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust fund of any kind. Any funds which may be set aside to provide for benefits hereunder shall continue for all purposes to be part of the general funds of the Company and no person other than the Company shall have any interest in such funds. No Participant, Surviving Spouse, beneficiary or any other person shall have any interest in any particular assets of the Company by reason of the right or prospective right to receive a benefit under the Plan, and any such Participant, Surviving Spouse, beneficiary or other person shall only have the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. Nothing contained in this Plan shall constitute a guarantee by the Company or any officer or other member or other entity or member of the control group or other persons associated with the Company that the assets of the Company will be sufficient to pay any benefit hereunder.
6.4 Spendthrift . No benefit payable under the Plan shall be subject to any manner of anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge prior to actual receipt thereof by the payee; and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge prior to such receipt shall be null and void; and the Company shall not be liable in any manner for or subject to the debt, contracts, liabilities, engagement or torts of any person entitled to any benefit under the Plan.
6.5 Administration . The Pension Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. All provisions set forth in the Basic Retirement Plans with respect with the administrative powers and duties of the Pension Committee, expenses of administration and the procedure for filing claims and review of claims shall be also applicable with respect to this Plan. The Pension Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions, personnel files, records, benefit calculations and other information furnished by any actuary, accountant, Controller, legal counsel or the person employed by or engaged by the Company with respect to the Plan.
6.6 Disclosure . Each Participant shall receive a copy of the Plan and the Pension Committee will make available for inspection by any Participant, Surviving Spouse or beneficiary, a copy of any rules and regulations adopted by the Pension Committee or administrator of the Plan as well as make available any annual reports filed by the Plan.
6.7 Applicable Law . The Plan is established under and will be constructed according to the Internal Revenue Code of 1986, as amended, and valid regulations issued thereunder, and the laws of the State of Connecticut, to the extent that such laws are not preempted by the Employee Retirement Income Security Act of 1974, as amended, and
valid regulations published thereunder. Each Participant hereof consents and submits to the jurisdiction of the state or federal court situated in the State of Connecticut in any action or proceeding arising out of or relating to this Plan, and agrees that all claims in respect of any such action or proceeding shall be heard and determined exclusively in such courts.
6.8 Incapacity . In the event a Participant, Surviving Spouse or beneficiary is declared incompetent and a conservator of the person legally charged with the care of his or her person or his or her estate is appointed, any benefits under this Plan to which the Participant, Surviving Spouse or beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of the person or his or her estate. Except as provided above in this paragraph when the Pension Committee in its sole discretion determines that a Participant, Surviving Spouse or beneficiary is unable to manage his or her financial affairs, the Retirement Committee may direct the Company to make such distributions to any person for the benefit of such Participant, Surviving Spouse or beneficiary.
6.9 Unclaimed Benefit . Each Participant shall keep the Company or the Pension Committee informed of his or her current address and the current address of his or her spouse or beneficiary. The Pension Committee shall not be obliged to search for the whereabouts of any person. If the location of a Participant, Surviving Spouse, or other beneficiary is not made known to the Pension Committee within seventy-five (75) days after the date which any payment of the Supplemental Retirement Plan Benefit is due to be made, then the Company shall have no further obligation to pay any benefit hereunder to such Participant, Surviving Spouse, beneficiary or any other person and such benefit shall be irrevocably forfeited.
6.10 Limitation or Liability . Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as an Employee, agent, fiduciary or any other capacity of the Company or as a member of the Pension Committee or Board of Directors shall be liable to any Participant, former Participant, Surviving Spouse, beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan or any other forfeiture or nonpayment of any benefits under the Plan.
6.11 No Guarantee of Benefits . Nothing contained in the Plan shall constitute a guarantee by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder.
6.12 Administration . The Company shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof except for those duties and authority which are reserved to the Pension Committee.
6.13 Compliance with Section 409A. This Plan is intended to comply with Section 409A, and as such will be interpreted in a manner consistent with the provisions set forth therein. With respect to any deferred compensation within the meaning of Section 409A that is payable or commences to be payable under this Plan solely by reason
of the Participants termination of employment, such amount shall be payable or commence to be payable as soon as, and no later than, the date on which the Participant experiences a separation from service as defined in Section 409A, subject to the six-month delay described below, if applicable.
If the Participant is a Specified Employee within the meaning of Section 409A at the time his or her employment terminates and any amount payable to the Employee by virtue of his or her separation from service constitutes deferred compensation within the meaning of Section 409A, any such amounts that otherwise would be payable during the first six months following separation from service shall be delayed and accumulated for a period of six months and paid in a lump sum on the first day of the seventh month. Amounts exempt from Section 409A shall not be so delayed.
IN WITNESS WHEREOF , Amphenol has caused this amended and restated Plan to be executed this day of December, 2008.
|
|
AMPHENOL CORPORATION |
||
|
|
|
||
|
|
|
||
|
|
By: |
|
|
|
|
|
|
|
|
|
Name: |
|
|
|
|
|
|
|
|
|
Its: |
|
|
Exhibit 10.44
The CORPORATE plan for Retirement SM
EXECUTIVE P LAN
Adoption Agreement
IMPORTANT NOTE
This document has not been approved by the Department of Labor, the Internal Revenue Service or any other governmental entity. An Employer must determine whether the plan is subject to the Federal securities laws and the securities laws of the various states. An Employer may not rely on this document to ensure any particular tax consequences or to ensure that the Plan is unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act with respect to the Employers particular situation. Fidelity Management Trust Company, its affiliates and employees cannot and do not provide legal or tax advice or opinions in connection with this document. This document does not constitute legal or tax advice or opinions and is not intended or written to be used, and it cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed on the taxpayer. This document must be reviewed by the Employers attorney prior to adoption.
Plan Number: 44381 |
|
ECM NQ 2007 AA |
(07/2007) |
|
10/23/2008 |
© 2007 Fidelity Management & Research Company |
ADOPTION AGREEMENT
ARTICLE 1
1.01 |
|
PLAN INFORMATION |
|
||||
|
|
|
|
||||
|
|
(a) |
Name of Plan: |
||||
|
|
|
|
||||
|
|
|
This is the Amphenol Corporation Supplemental Defined Contribution Plan (the Plan). |
||||
|
|
|
|
||||
|
|
(b) |
Plan Status ( Check one.) : |
||||
|
|
|
|
||||
|
|
|
(1) |
Adoption Agreement effective date: 1/1/2009. |
|||
|
|
|
|
|
|||
|
|
|
(2) |
The Adoption Agreement effective date is (Check (A) or check and complete (B)) : |
|||
|
|
|
|
|
|||
|
|
|
|
(A) |
o |
A new Plan effective date. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) |
x |
An amendment and restatement of the Plan. The original effective date of the Plan was: 6/1/2007 . |
|
|
|
(c) |
Name of Administrator, if not the Employer: |
|
|
|
|
|
|
|
|
1.02 |
|
EMPLOYER |
|
|
|
(a) |
Employer Name: Amphenol Corporation |
|
|
|
|
|
|
(b) |
The term Employer includes the following Related Employer(s) (as defined in Section 2.01(a)(25)) participating in the Plan: |
|
|
|
|
|
|
Amphenol Interconnect Products Corporation |
|
|
|
Times Fiber Communications, Inc. |
|
|
|
Amphenol Cables on Demand Corp. |
|
|
|
Amphenol T&M Antennas, Inc. |
1
1.03 |
|
COVERAGE |
||||
|
|
|
||||
|
|
(Check (a) and/or (b).) |
||||
|
|
|
|
|
|
|
|
|
(a) |
x |
The following Employees are eligible to participate in the Plan (Check (1) or (2)) : |
||
|
|
|
|
|
|
|
|
|
|
|
(1) |
o |
Only those Employees designated in writing by the Employer, which writing is hereby incorporated herein. |
|
|
|
|
|
|
|
|
|
|
|
(2) |
x |
Only those Employees in the eligible class described below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
An Employee who is (1) a member of a select group of management or highly compensated employees (2) either (i) not eligible to accrue a benefit under the Employers defined benefit plan after January 1, 2007 or (ii) affected by a deferral limit to the primary qualified pension plan in which he or she participates and (3) specifically designated in writing as eligible by Amphenol Corporation. |
|
|
(b) |
o |
The following Directors are eligible to participate in the Plan (Check (1) or (2)) : |
1.04 |
|
COMPENSATION |
|
|
|
|
|
|
|
(If Section 1.03(a) is selected, select (a) or (b). If Section 1.03(b) is selected, complete (c)) |
|
|
For purposes of determining all contributions under the Plan: |
|
|
(a) |
x Compensation shall be as defined, with respect to Employees, in the Amphenol Corporation Employee Savings/401(k) Plan maintained by the Employer: |
|
|
|
|
(1) |
o |
to the extent it is in excess of the limit imposed under Code section 401(a)(17). |
|
|
|
|
|
|
|
|
|
|
|
(2) |
x |
notwithstanding the limit imposed under Code section 401(a)(17). |
|
|
(b) |
o Compensation shall be as defined in Section 2.01(a)(9) with respect to Employees (Check (1), and/or (2) below, if, and as, appropriate) : |
2
|
|
|
|
(1) |
o |
but excluding the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
o |
but excluding bonuses, except those bonuses listed in the table in Section 1.05(a)(2). |
|
|
(c) |
o |
Compensation shall be as defined in Section 2.01(a)(9)(c) with respect to Directors, but excluding the following: |
|
|
|
|
|
|
|
|
|
|
1.05 |
|
CONTRIBUTIONS ON BEHALF OF EMPLOYEES |
|
|
|
(a) |
|
Deferral Contributions (Complete all that apply): |
|
|
|
|
(1) |
o |
Deferral Contributions. Subject to any minimum or maximum deferral amount provided below, the Employer shall make a Deferral Contribution in accordance with, and subject to, Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the applicable calendar year (or portion of the applicable calendar year). |
Deferral Contributions |
|
Dollar Amount |
|
% Amount |
||||
Type of Compensation |
|
Min |
|
Max |
|
Min |
|
Max |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note: With respect to each type of Compensation, list the minimum and maximum dollar amounts or percentages as whole dollar amounts or whole number percentages.)
|
|
|
|
(2) |
o |
Deferral Contributions with respect to Bonus Compensation only. The Employer requires Participants to enter into a special salary reduction agreement to make Deferral Contributions with respect to one or more Bonuses, subject to minimum and maximum deferral limitations, as provided in the table below. |
3
|
|
Treated As |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Non- |
|
Dollar Amount |
|
% Amount |
|
||||
Deferral Contributions
|
|
Performance
|
|
Performance
|
|
Min |
|
Max |
|
Min |
|
Max |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note: With respect to each type of Bonus, list the minimum and maximum dollar amounts or percentages as whole dollar amounts or whole number percentages. In the event a bonus identified as a Performance-based Bonus above does not constitute a Performance-based Bonus with respect to any Participant, such Bonus will be treated as a Non-Performance-based Bonus with respect to such Participant.) |
|||
|
|
|
|||
|
(b) |
Matching Contributions (Choose (1) or (2) below, and (3) below, as applicable): |
|||
|
|
|
|||
|
|
(1) |
o |
The Employer shall make a Matching Contribution on behalf of each Employee Participant in an amount described below: |
|
|
|
|
|
|
|
|
|
|
(A) |
o |
% of the Employee Participants Deferral Contributions for the calendar year. |
|
|
|
|
|
|
|
|
|
(B) |
o |
The amount, if any, declared by the Employer in writing, which writing is hereby incorporated herein. |
|
|
|
|
|
|
|
|
|
(C) |
o |
Other: |
4
|
|
|
(B) |
The Q P Match actually made to such Employee Participant under the QP for the applicable calendar year. |
|||
|
|
|
|
|
|||
|
|
Provided, however, that the Matching Contributions made on behalf of any Employee Participant pursuant to this Section 1.05(b)(2) shall be limited as provided in Section 4.02 hereof. |
|||||
|
|
|
|
|
|||
|
|
(3) |
o |
Matching Contribution Limits (Check the appropriate box (es)) : |
|||
|
|
|
|
|
|||
|
|
|
(A) |
o |
Deferral Contributions in excess of % of the Employee Participants Compensation for the calendar year shall not be considered for Matching Contributions. |
||
|
|
|
|
|
|
||
|
|
|
(B) |
o |
Matching Contributions for each Employee Participant for each calendar year shall be limited to $ . |
||
|
|
|
|
|
|
||
|
(c) |
Employer Contributions |
|||||
|
|
|
|||||
|
|
(1) |
o |
Fixed Employer Contributions. The Employer shall make an Employer Contribution on behalf of each Employee Participant in an amount determined as described below: |
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
|
|
(2) |
x |
Discretionary Employer Contributions. The Employer may make Employer Contributions to the accounts of Employee Participants in any amount (which amount may be zero), as determined by the Employer in its sole discretion from time to time in a writing, which is hereby incorporated herein. |
|||
|
|
|
|
|
|||
1.06 |
CONTRIBUTIONS ON BEHALF OF DIRECTORS |
||||||
|
|
||||||
|
(a) |
o Director Deferral Contributions |
|||||
|
|
|
|||||
|
|
|
|
The Employer shall make a Deferral Contribution in accordance with, and subject to, Section 4.01 on behalf of each Director Participant who has an executed deferral agreement in effect with the Employer for the applicable calendar year (or portion of the applicable calendar year), which deferral agreement shall be subject to any minimum and/or maximum deferral amounts provided in the table below. |
|||
Deferral Contributions |
|
Dollar Amount |
|
% Amount |
|
||||
Type of Compensation |
|
Min |
|
Max |
|
Min |
|
Max |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
(Note: With respect to each type of Compensation, list the minimum and maximum dollar amounts or percentages as whole dollar amounts or whole number percentages.)
|
(b) |
Matching and Employer Contributions: |
|
|
(1) |
o |
Matching Contributions. The Employer shall make a Matching Contribution on behalf of each Director Participant in an amount determined as described below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
o |
Fixed Employer Contributions. The Employer shall make an Employer Contribution on behalf of each Director Participant in an amount determined as described below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
o |
Discretionary Employer Contributions. The Employer may make Employer Contributions to the accounts of Director Participants in any amount (which amount may be zero), as determined by the Employer in its sole discretion from time to time, in a writing, which is hereby incorporated herein. |
1.07 |
DISTRIBUTIONS |
|
|
|
The form and timing of distributions from the Participants vested Account shall be made consistent with the elections in this Section 1.07. |
|
|
|
(a) (1) Distribution options to be provided to Participants |
6
|
|
(A) Specified
|
|
(B) Specified
|
|
(C) Separation
|
|
(D) Earlier of
|
|
(E) Earlier of
|
|
(F) Disability |
|
(G)
|
|
(H) Death |
|
Deferral Contribution |
|
x Lump Sum |
|
o Lump Sum |
|
x Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
|
|
x Installments |
|
o Installments |
|
x Installments |
|
o Installments |
|
o Installments |
|
o Installments |
|
|
|
o Installments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching Contributions |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
|
|
o Installments |
|
o Installments |
|
o Installments |
|
o Installments |
|
o Installments |
|
o Installments |
|
|
|
o Installments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer Contributions |
|
x Lump Sum |
|
o Lump Sum |
|
x Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
o Lump Sum |
|
|
|
x Installments |
|
o Installments |
|
x Installments |
|
o Installments |
|
o Installments |
|
o Installments |
|
|
|
o Installments |
|
(Note: If the Employer elects (F), (G), or (H) above, the Employer must also elect (A), (B), (C), (D), or (E) above, and the Participant must also elect (A), (B), (C), (D), or (E) above. In the event the Employer elects only a single payment trigger and/or payment method above, then such single payment trigger and/or payment method shall automatically apply to the Participant. If the employer elects to provide for payment upon a specified date or age, and the employer applies a vesting schedule to amounts that may be subject to such payment trigger(s), the employer must apply a minimum deferral period, the number of years of which must be greater than the number of years required for 100% vesting in any such amounts. If the employer elects to provide for payment upon disability and/or death, and the employer applies a vesting schedule to amounts that may be subject to such payment trigger, the employer must also elect to apply 100% vesting in any such amounts upon disability and/or death.)
7
(D) |
o |
is determined to be disabled pursuant to the following disability insurance program: the definition of disability under which complies with the requirements in regulations under Code section 409A. |
|
|
|
||
|
(Note: If more than one box above is checked, then the Participant will have a Disability if he satisfies at least one of the descriptions corresponding to one of such checked boxes.) |
||
(3) |
|
x |
Regardless of any payment trigger and, as applicable, payment method, to which the Participant would otherwise be subject pursuant to (1) above, the first to occur of the following Plan-level payment triggers will cause payment to the Participant commencing pursuant to Section 1.07(c)(1) below in a lump sum, provided such Plan-level payment trigger occurs prior to the payment trigger to which the Participant would otherwise be subject. |
Payment Trigger
(A) |
o |
|
Separation from Service prior to: |
|
|
|
|
(B) |
o |
|
Separation from Service |
(C) |
x |
|
Death |
(D) |
o |
|
Change in Control |
8
|
follows the applicable triggering event described in 1.07(a). |
9
|
o |
1 |
|
o |
2 |
|
o |
3 |
|
o |
4 |
|
o |
5 |
|
o |
6 |
|
|
|
o |
7 |
|
o |
8 |
|
o |
9 |
|
o |
10 |
|
o |
11 |
|
o |
12 |
|
|
|
o |
13 |
|
o |
14 |
|
o |
15 |
|
o |
16 |
|
o |
17 |
|
o |
18 |
|
|
|
o |
19 |
|
o |
20 |
|
o |
21 |
|
o |
22 |
|
o |
23 |
|
o |
24 |
|
|
|
o |
25 |
|
o |
26 |
|
o |
27 |
|
o |
28 |
|
o |
29 |
|
o |
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Note: Only elect a term of one year if Section 1.07(d)(1)(A) and/or Section 1.07(d)(1)(B) is elected above.) |
(e) |
|
Conversion to Lump Sum |
||
|
|
|
||
|
|
o |
|
Notwithstanding anything herein to the contrary , if the Participants vested Account at the time such Account becomes payable to him hereunder does not exceed $ distribution of the Participants vested Account shall automatically be made in the form of a single lump sum at the time prescribed in Section 1.07(c)(1). |
|
|
|
|
|
(f) |
|
Distribution Rules Applicable to Pre-effective Date Accruals |
||
|
|
|
|
|
|
|
x |
|
Benefits accrued under the Plan (subject to Code section 409A) prior to the date in Section 1.01(b)(1) above are subject to distribution rules not described in Section 1.07(a) through (e), and such rules are described in Attachment A Re: PRE EFFECTIVE DATE ACCRUAL DISTRIBUTION RULES. |
10
1.08 |
|
VESTING SCHEDULE |
|||
|
|
|
|||
|
|
(a) |
(1) |
|
The Participants vested percentage in Matching Contributions elected in Section 1.05(b) shall be based upon the following schedule and unless Section 1.08(a)(2) is checked below will be based on the elapsed time method as described in Section 7.03(b). |
|
|
|
|
|
|
|
|
|
(2) |
|
o Vesting shall be based on the class year method as described in Section 7.03(c). |
|
|
|
|
|
|
|
|
(b) |
(1) |
|
The Participants vested percentage in Employer Contributions elected in Section 1.05(c) shall be based upon the following schedule and unless Section 1.08(b)(2) is checked below will be based on the elapsed time method as described in Section 7.03(b). |
Years of Service |
|
Vesting % |
1 |
|
0 |
2 |
|
0 |
3 |
|
0 |
4 |
|
0 |
5 |
|
100 |
|
|
|
(Note: Contributions with respect to Directors, which are 100% vested at all times, are subject to the rule in this subsection (d).) |
11
(e) |
|
A Participant will be 100% vested in his Matching Contributions and Employer Contributions upon (Check the appropriate box(es)) : |
(1) |
x |
Retirement eligibility is the date the Participant attains age 65 and completes 0 Years of Service, as defined in Section 7.03(b). |
|
|
|
(2) |
x |
Death. |
|
|
|
(3) |
x |
The date on which the Participant becomes disabled, as determined under Section 1.07(a)(2). |
|
|
|
(Note: Participants will automatically vest upon Change in Control if Section 1.07(a)(1)(G) is elected.) |
(f) |
|
o |
Years of Service in Section 1.08 (a)(1) and Section 1.08 (b)(1) shall include service with the following employers: |
1.09 INVESTMENT DECISIONS
|
|
A Participants Account shall be treated as invested in the Permissible Investments as directed by the Participant unless otherwise provided below: |
|
|
|
|
|
|
1.10 ADDITIONAL PROVISIONS
The Employer may elect Option below and complete the Superseding Provisions Addendum to describe overriding provisions that are not otherwise reflected in this Adoption Agreement.
|
|
x |
The Employer has completed the Superseding Provisions Addendum to reflect the provisions of the Plan that supersede provisions of this Adoption Agreement and/or the Basic Plan Document. |
12
ATTACHMENT A
Re: PRE EFFECTIVE DATE ACCRUAL DISTRIBUTION RULES
Plan Name: |
|
Amphenol Corporation Supplemental Defined Contribution Plan (the Plan) |
For contributions and related earnings for tax years beginning prior to 1/1/2009 the following shall apply:
If a Participant elects a date of distribution, such date shall apply to all contributions to the Plan during the period (and earnings attributable to those contributions), including employer contributions. If the Participant dies before the elected payment date, the Participant shall be considered to have terminated employment and the Participants benefit will be paid to the Participants Beneficiary commencing pursuant to Section 1.07(c)(1). In the absence of such date election, all contributions to the Plan during the period (and earnings attributable to those contributions), shall be distributed upon termination of employment. All distributions from the Plan shall be paid in a lump sum commencing pursuant to Section 1.07(c)(1).
13
ATTACHMENT B
Re: SUPERSEDING PROVISIONS
for
Plan Name: |
|
Amphenol Corporation Supplemental Defined Contribution Plan (the Plan) |
(a) |
Superseding Provision(s) The following provisions supersede other provisions of this Adoption Agreement and/or the Basic Plan Document as described below: |
|
1. |
Section 1.05(a)(1) of the Adoption Agreement is hereby amended to read as follows: |
|||
|
|
|
|||
|
|
The Employer shall make a Deferral Contribution in accordance with, and subject to, Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the calendar year (or portion of the calendar year) in question, not to exceed: |
|||
|
|
|
|||
|
|
(a) |
for a Participant with estimated compensation for the prior year* of less than the Code Section 401(a)(17) limit for such prior year, |
||
|
|
|
|
|
|
|
|
|
(i) |
the Code Section 402(g) limit for the Plan Year less |
|
|
|
|
(ii) |
the product of the: |
|
|
|
|
|
|
|
|
|
|
|
(A) |
Employers qualified 401(k) plan-level cap on deferrals by Highly Compensated Employees as in effect as of the commencement of the deferral period, and |
|
|
|
|
(B) |
Compensation Factor for each Participant determined in accordance with the following chart. |
Estimated Compensation |
|
|
|
|
(Prior Year)* |
|
Compensation Factor |
|
|
|
|
|
|
|
Less than $125,000 |
|
$ |
100,000 |
|
$125,000.01 - $150,000 |
|
$ |
125,000 |
|
$150,000.01 $175,000 |
|
$ |
150,000 |
|
$175,000.01 - $200,000 |
|
$ |
175,000 |
|
$200,000.01 $225,000 |
|
$ |
200,000 |
|
$225,000.01 $250,000 |
|
$ |
225,000 |
|
$250,000.01 $275,000 |
|
$ |
250,000 |
|
$275,000.01 and over |
|
$ |
275,000 |
|
|
|
(b) |
for a Participant with estimated compensation for the prior year* in excess of the Code Section 401(a)(17) limit for such prior year, the maximum deferral amount shall be 5% of the Participants estimated compensation for the Plan Year in excess of the Code Section 401(a)(17) limit for the Plan Year to a maximum of 6.66 multiplied by such limit. Estimated compensation for the Plan Year shall be determined by Amphenol Corporation, in its sole discretion, prior to the commencement of each deferral election period. |
14
* As determined by Amphenol Corporation, in its sole discretion, prior to the commencement of each deferral election period. (For new Employees, an estimate of projected current year Compensation shall be substituted.)
2. Section 1.07(a)(2)(B) of the Adoption Agreement is hereby amended by substituting 6 for 3 in the final clause thereof.
3. Section 8.01(d) of the Basic Plan Document is hereby amended to clarify that, in the absence of a date of distribution election by a Participant, contributions to the Plan during the period (and earnings attributable to those contributions) shall be distributed upon Separation from Service.
4. Section 8.03 of the Basic Plan Document is amended to clarify to the extent permitted by applicable law that the deferral election, if any, of a Participant who receives an unforeseeable emergency distribution shall be cancelled pursuant to 26 CFR section 1.409A-3(j)(viii).
15
Exhibit 21.1
|
|
State/ Country of |
|
Name(s) under which Subsidiary does |
List of Subsidiaries |
|
Incorporation |
|
business (1) |
|
|
|
|
|
Amphenol Printed Circuits, Inc. |
|
Delaware, U.S.A. |
|
Amphenol |
Amphenol Aerospace France, Inc. |
|
Delaware, U.S.A. |
|
Amphenol |
Amphenol Air LB North America, Inc. |
|
Canada |
|
Amphenol Air LB |
Amphenol Air LB GmbH |
|
Germany |
|
Amphenol Air LB |
Air LB International Development S.A. |
|
Luxembourg |
|
Amphenol Air LB |
Amphenol Air LB S.A.S. |
|
France |
|
Amphenol Air LB |
Amphenol Alden Products Co. |
|
Delaware, U.S.A. |
|
Alden |
Amphenol Alden Products Mexico, S.A. de C.V. |
|
Mexico |
|
Alden |
Amphenol Antel, Inc. |
|
Illinois, U.S.A. |
|
Amphenol Antel |
Amphenol Assembletech (Xiamen) Co., Ltd. |
|
China |
|
Amphenol Assembletech China |
Amphenol Australia Pty Ltd. |
|
Australia |
|
Amphenol |
Amphenol Cables On Demand Corp. |
|
Delaware, U.S.A. |
|
Amphenol |
Amphenol Commercial Products (Chengdu) Co., Ltd. |
|
China |
|
Amphenol |
Amphenol (Changzhou) Connector Systems Co. Ltd. |
|
China |
|
Amphenol (Changzhou) TCS Co., Ltd. |
Amphenol CNT (Xian) Technology Co., Ltd. |
|
China |
|
Amphenol |
Amphenol Connex Corporation |
|
Delaware, U.S.A. |
|
Connex |
Amphenol Benelux B.V. |
|
The Netherlands |
|
Amphenol |
Amphenol Borg Limited |
|
England |
|
Amphenol |
Amphenol Borg Pension Trustees Ltd. |
|
England |
|
Amphenol |
Amphenol do Brasil LTDA. |
|
Brazil |
|
Amphenol |
Amphenol Canada Corp. |
|
Canada |
|
Amphenol |
Amphenol Commercial and Industrial UK, Limited |
|
England |
|
Amphenol |
Amphenol Connexus AB |
|
Sweden |
|
Connexus |
Amphenol Connexus Ou |
|
Estonia |
|
Amphenol |
Amphenol-Daeshin Electronics and Precision Co., Ltd. |
|
Korea |
|
Amphenol Dae Shin, Dae Shin, |
Amphenol East Asia Electronic Technology |
|
China |
|
AEAL, Amphenol |
(Shenzen) Co. Ltd. |
|
|
|
|
Amphenol East Asia Limited |
|
Hong Kong |
|
Amphenol |
Amphenol RF Asia Limited |
|
Hong Kong |
|
Amphenol |
Amphenol France Acquisition SAS |
|
France |
|
Amphenol |
Amphenol France S.A.S. |
|
France |
|
Amphenol |
Amphenol Funding Corp. |
|
Delaware U.S.A. |
|
Amphenol |
Amphenol Germany GmbH |
|
Germany |
|
Amphenol |
Amphenol Gesellschaft m.b.H. |
|
Austria |
|
Amphenol, AVIN |
Amphenol Holding UK, Limited |
|
England |
|
Amphenol |
Amphenol Intercon Systems, Inc. |
|
Delaware, U.S.A. |
|
Intercon |
Amphenol Interconnect India Private Limited |
|
India |
|
Amphenol India |
Amphenol Interconnect Products Corporation |
|
Delaware, U.S.A. |
|
AIPC, Amphenol |
Amphenol International Ltd. |
|
Delaware, U.S.A. |
|
Amphenol International |
Amphenol Italia, S.R.L. |
|
Italy |
|
Amphenol |
Amphenol Japan Ltd. |
|
Japan |
|
Amphenol |
Amphenol-Kai Jack, Inc. |
|
British Virgin Islands |
|
Kai Jack |
Amphenol-Kai Jack Industrial Co., Ltd. |
|
Taiwan |
|
Amphenol RF |
Amphenol-Kai Jack (Shenzen), Inc. |
|
China |
|
Kai Jack |
Amphenol Limited |
|
England |
|
Amphenol, LTD |
Amphenol Malaysia Sdn Bhd. |
|
Malaysia |
|
T&M Antennas |
Amphenol Middle East Enterprises |
|
U.A.E. |
|
Amphenol |
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
|
|
State/ Country of |
|
Name(s) under which Subsidiary does |
List of Subsidiaries |
|
Incorporation |
|
business (1) |
|
|
|
|
|
Amphenol Netherlands Holdings 1B.V. |
|
Netherlands |
|
Amphenol |
Amphenol Netherlands Holdings 2B.V |
|
Netherlands |
|
Amphenol |
Amphenol Omniconnect India Private Limited |
|
India |
|
Amphenol |
Amphenol Optimize Manufacturing Co. |
|
Arizona, U.S.A. |
|
Optimize |
Amphenol Optimize Mexico S.A. de C.V. |
|
Mexico |
|
Optimize |
Amphenol PCD, Inc. |
|
Delaware, U.S.A. |
|
Amphenol PCD |
Amphenol PCD (Shenzen) Co., Ltd. |
|
China |
|
PCD |
Amphenol Shouh Min Enterprise (Hong Kong) |
|
Hong Kong |
|
Amphenol |
Company Limited |
|
|
|
|
Amphenol Socapex S.A.S. |
|
France |
|
Socapex |
Amphenol SV Microwave Acquisition Corp. |
|
Delaware, U.S.A. |
|
Amphenol SV Microwave |
Amphenol T&M Antennas, Inc. |
|
Delaware, U.S.A. |
|
T&M Antennas, Amphenol T&M |
Amphenol TCS Ireland Ltd. |
|
Ireland |
|
Amphenol TCS Ireland Limited |
Amphenol TCS (Malaysia) Sdn Bhd |
|
Malaysia |
|
Amphenol TCS (Malaysia) Sdn Bhd |
Amphenol TCS de Mexico S.A. de C.V. |
|
Mexico |
|
Amphenol TCS de Mexico S.A. de C.V. |
Amphenol TCS Sweden AB |
|
Sweden |
|
Amphenol |
Amphenol Technology (Zhuhai) Co. Ltd. |
|
China |
|
Amphenol |
Amphenol-TFC (Changzhou) Communications |
|
China |
|
Amphenol, Times Fiber, TFC |
Equipment Co., Ltd. |
|
|
|
|
Amphenol TFC do Brasil Ltda. |
|
Brazil |
|
Amphenol |
Amphenol TFC Fios E Cabos do Brasil Ltda. |
|
Brazil |
|
Amphenol |
Amphenol TFC MDE Participacoes Ltda. |
|
Brazil |
|
Amphenol |
Amphenol Taiwan Corporation |
|
Taiwan |
|
Amphenol |
Amphenol Technical Products International Co. |
|
Canada |
|
Technical Products International, TPI |
|
|
|
|
Amphenol TPI |
Amphenol Technology (Shenzen) Co. Ltd. |
|
China |
|
Amphenol |
Amphenol Tuchel Electronics GmbH |
|
Germany |
|
Tuchel |
Amphenol USHoldco Inc. |
|
Delaware, U.S.A. |
|
Amphenol |
C&S Antennas, Inc. |
|
Delaware, U.S.A. |
|
Amphenol |
C&S Ltd. |
|
U.K. |
|
Amphenol |
CSA Ltd. |
|
U.K. |
|
Amphenol |
Changzhou Amphenol Fuyang Communication |
|
China |
|
Fuyang |
Equipment Company Limited |
|
|
|
|
ETD Amphenol Fiber Optic Tech. (Shenzen) Co., Ltd. |
|
China |
|
ETD |
Fiber Systems International, Inc. |
|
Texas, U.S.A. |
|
FSI |
Filec Europe Centrale s.r.o. |
|
Czech Republic |
|
Filec |
Filec Production S.A.S. France |
|
France |
|
Filec |
Filec S.A.S. |
|
France |
|
Filec |
FSI Holdings, Inc. |
|
Nevada, U.S.A. |
|
Amphenol |
Guangzhou Amphenol Electronics Co. Ltd. |
|
China |
|
Amphenol |
Guangzhou Amphenol Electronics Communication Co., Ltd. |
|
China |
|
Amphenol, GEC |
Guangzhou Amphenol Sincere Flex Circuits Co., Ltd. |
|
China |
|
Sincere |
Hangzhou Amphenol Phoenix Telecom Parts Co. Ltd. |
|
China |
|
Phoenix |
Jaybeam Ltd. |
|
U.K. |
|
Jaybeam |
Jaybeam Wireless Holding, Inc. |
|
Delaware, U.S.A. |
|
Jaybeam |
Jaybeam Wireless, Inc. |
|
Delaware, U.S.A. |
|
Jaybeam |
Jaybeam Ltd. |
|
U.K. |
|
Jaybeam |
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
|
|
State/ Country of |
|
Name(s) under which Subsidiary does |
List of Subsidiaries |
|
Incorporation |
|
business (1) |
|
|
|
|
|
Jaybeam Wireless SAS |
|
Delaware, U.S.A. |
|
Jaybeam |
KE Ostrov Elektrik, s.r.o. |
|
Czech Republic |
|
Konfektion E. |
Konfektion E Elektronik GmbH |
|
Germany |
|
Konfektion E. |
Konfektion E Elektronik, spol. s.r.o. |
|
Czech Republic |
|
Konfektion E. |
Konfektion E CZ, s.r.o. |
|
Czech Republic |
|
Konfektion E. |
Konfection E SK, s.r.o. |
|
Slovakia |
|
Konfektion E. |
Konnektech, Ltd. |
|
Michigan, U.S.A. |
|
Amphenol |
Korea Air Electronics Co., Ltd. |
|
Korea |
|
KAE |
LPL Technologies Holding GmbH |
|
Germany |
|
Amphenol |
Lectric SARL |
|
Tunisia |
|
Amphenol |
Matir, S.A. |
|
Uruguay |
|
Amphenol |
Amphenol Phoenix Co., Ltd. |
|
Korea |
|
Phoenix Korea |
Precision Cable Manufacturing Corporation de |
|
Mexico |
|
Amphenol |
Mexico, S.A. de C.V. |
|
|
|
|
Pyle-National Ltd. |
|
England |
|
Pyle-National |
RSI International Ltd. |
|
U.K. |
|
Amphenol |
Shanghai Amphenol Airwave Communication Co., Ltd. |
|
China |
|
Shanghai Airwave, T&M Antennas |
Shouh Min Industry (Shenzhen) Co., Ltd. |
|
China |
|
Amphenol |
Sine Systems Corporation |
|
Delaware, U.S.A. |
|
Sine |
Societe dEtudes et de Fabrication (SEFEE) |
|
France |
|
Amphenol |
Sonocable S.L. |
|
Spain |
|
Amphenol |
Spectra Strip Limited |
|
England |
|
Amphenol |
Amphenol Steward Enterprises, Inc. |
|
Texas, U.S.A. |
|
Steward |
SV Microwave Components Group, Inc. |
|
Florida, U.S.A. |
|
SV Microwave |
SV Microwave, Inc. |
|
Florida, U.S.A. |
|
SV Microwave |
SV Microwave Technologies, Inc. |
|
Delaware, U.S.A. |
|
SV Microwave |
Terrier Technologies Pty Ltd. |
|
South Africa |
|
Terrier |
TFC South America S.A. |
|
Argentina |
|
Times Fiber |
Tianjin Amphenol KAE Co., Ltd. |
|
China |
|
KAE |
Amphenol Tianjin Co., Ltd. |
|
China |
|
HTEC |
Times Fiber Canada Limited |
|
Canada |
|
Times Fiber |
Times Fiber Communications, Inc. |
|
Delaware, U.S.A. |
|
Times Fiber |
Times Wire and Cable Company |
|
Delaware, U.S.A. |
|
Amphenol |
U-Jin Cable Industrial Co., Ltd. |
|
Korea |
|
U-JIN |
(1) Each Subsidiary also does business under the corresponding corporate name listed in column 1.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-35901 and 333-86618 on Form S-8 of our reports dated February 23, 2009, relating to the consolidated financial statements and consolidated financial statement schedule of Amphenol Corporation and subsidiaries and the effectiveness of Amphenol Corporation and subsidiaries internal control over financial reporting, appearing in this Annual Report on Form 10-K of Amphenol Corporation for the year ended December 31, 2008.
/s/ Deloitte & Touche LLP
February 23, 2009
Exhibit 31.1
Amphenol
Corporation
Certification pursuant to
Section 302 of
the Sarbanes-Oxley Act of 2002
Certification
I, R. Adam Norwitt, as the principal executive officer of the registrant, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2008 of Amphenol Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report,
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: February 23, 2009 |
|
|
|
|
|
/s/ R. Adam Norwitt |
|
|
R. Adam Norwitt |
|
|
President and Chief Executive Officer |
|
|
Exhibit 31.2
Amphenol
Corporation
Certification pursuant to
Section 302 of
the Sarbanes-Oxley Act of 2002
Certification
I, Diana G. Reardon, as the principal financial officer of the registrant, certify that:
1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2008 of Amphenol Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report,
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: February 23, 2009 |
|
|
|
|
|
/s/ Diana G. Reardon |
|
|
Diana G. Reardon |
|
|
Senior Vice President and Chief Financial Officer |
|
|
Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Amphenol Corporation (the Company) on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, R. Adam Norwitt, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 23, 2009 |
|
|
|
|
|
/s/ R. Adam Norwitt |
|
|
R. Adam Norwitt |
|
|
President and Chief Executive Officer |
|
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Amphenol Corporation and will be retained by Amphenol Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Amphenol Corporation (the Company) on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Diana G. Reardon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 23, 2009 |
|
|
|
|
|
/s/ Diana G. Reardon |
|
|
Diana G. Reardon |
|
|
Senior Vice President and Chief Financial Officer |
|
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Amphenol Corporation and will be retained by Amphenol Corporation and furnished to the Securities and Exchange Commission or its staff upon request.