安費諾 (APH) 2004 Q4 法說會逐字稿

Thank you for holding.

All participants will be on a listen-only mode until the question-and-answer session of today's conference.

I would also like to inform all participants this conference is being recorded.

If anyone has any objection you may disconnect your line at this time.

I would now like to introduce Diana Reardon, Senior Vice President, and CFO of Amphenol.

Thank you, good afternoon.

My name is Diana Reardon, and I Amphenol's CFO.

I'm here together with Martin Loeffler, the CEO and we would like to welcome everyone to our fourth quarter earnings conference call.

The fourth-quarter results were released this morning.

I will provide some financial commentary on the quarter, and Martin will give an overview of the business and current trends.

We will then have a question-and-answer session.

The fourth quarter was a record quarter in all respects.

Sales for the quarter were 404 million, up 18 percent in U.S. dollars and 15 percent in local currencies over the fourth quarter of 2003.

And up 5 percent sequentially from Q3.

Breaking down sales into our two major components, the interconnect component which comprised 87 percent of our sales in the quarter was up 20 percent compared to last year with increases in the majority of end markets in all major geographic regions.

Our cable business, which comprised 13 percent of our sales, was up 6 percent from last year as a result of increases in international broadband cable television market.

In addition, late in Q3 we acquired a French manufacturer of automotive cable assemblies that contributed approximately 11 million in sales in Q4.

Operating income for the quarter was strong at 76 million compared to 58 (ph) million last year.

Operating margin was 18.8 percent, an increase of from 16.8 percent last year and up 50 basis points sequentially from Q3, 2004.

Margin (technical difficulty) last year was driven by expanding margins in both segments while the improvement over Q3 2004 resulted from stronger interconnect margins.

In the cable segment margins increased approximately 100 basis points over last year as price increases implemented in late Q2 were partially offset by a continued increase in material costs.

From a sequential standpoint, cable margins declined approximately 60 basis points as material costs continue to increase.

In January the Company implemented price increases of 5 to 7 percent on coaxial cable for broadband applications.

In the interconnect segment, margins increased over 200 basis points versus last year and 60 basis points versus Q3 2004.

As a result of the continuing development of new high margin application-specific products, excellent operating leverage on incremental volume and aggressive programs of cost control.

On any industry comparative basis profitability continues to be very good.

Interest expense for the quarter was 5.5 million compared to 6.5 million last year (technical difficulty) lower debt levels.

Other expense was 1.3 million compared to 1.1 million last year.

Tax expense was at an effective rate of approximately 34 percent, the same rate as last year.

Net income was 45.6 million, and exceeded 11 percent of sales, another indication of our excellent profitability.

Diluted EPS for the quarter was a record 51 cents per share, up 38 cents from 37 cents last year and the 12th consecutive quarterly increase.

During the quarter we generated a very strong cash flow from operations of 69 million.

The cash flow from operations was used to fund capital expenditures of 15 million, payments related to acquisitions of 11 million, a reduction in sale of receivables under the Company's receivable securitization program of 5 million and debt reduction of approximately 25 million.

In addition, during the quarter the Company received 7.9 million of proceeds, including the related tax benefit from the exercise of stock options and purchased approximately $13 million of its stock.

Approximately 3.5 million shares remain available for purchase under the Company's stock buyback program at the end of the year.

The balance sheet is in great shape.

Working capital turnover increased during the year, led by a reduction in Accounts Receivable days sales outstanding from 66 last year to 64 at the end of this year, and an improvement in inventory turnover from 3.9 times at the end of last year to 4.2 times at the end of this year.

Long-term debt was 434 million at the December 31st.

In 2004 we have reduced our long-term debt by $98 million.

The amount of receivables sold under our receivable securitization program was 80 million at the end of '04 compared to 74 million at the end of '03.

Finally, orders for the quarter reflected a book-to-bill ratio of approximately .98 to 1 for the quarter and for the year the book-to-bill ratio was 1.01 to 1.

Also of note during the quarter in January for the first time in its history, the Company's Board of Directors approved commencement of the payment of a 3 cent per share quarterly dividend on the Company's common stock.

Certainly from a financial perspective it was a record quarter and a record year.

Martin will now provide an overview of the business and current trends.

Thank you very much, Diana.

Good afternoon, and welcome to our traditional conference call at the time of our earnings release.

Since we are really still in the beginning of the year, I would like to extend to all of you and your families a very happy new year with good health and a lot of success.

Obviously Amphenol has been very successful in 2004, and we look forward to continued success in 2005.

In the following I would like to provide some highlights of the fourth quarter and the full year achievements, talk about trends in and progress in the markets that we serve, and also give an outlook of the full year 2005 and indication of our first quarter performance outlook.

As far as fourth-quarter highlights are concerned, I would like to really just point out that we are extremely pleased with the continuation of our consistent trend of superior growth and profitability.

The fourth quarter, the full year were really a record year for Amphenol and put us to a different level in the connector industry.

Sales in the quarter increased by 18 percent over prior year, and the sales were driven essentially by all the markets that we serve and the geographic regions Asia, Europe and North America.

The strongest growth we have experienced in the mobile communication market we will talk more about it, and followed by the industrial and military segments, which both were also very strong in the quarter.

Geographically we had excellent growth in Europe, 34 percent up, Asia 15 percent up and North America, 9 percent up.

Europe clearly had a benefit in that quarter of the CLEC acquisition with $11 million of incremental sales otherwise Europe would have been up 11 percent in the quarter.

Very pleased with the sequential increase of 5 percent over the third quarter.

As we discussed earlier, we expected the fourth quarter to be sequentially stronger than the third quarter, as that is the seasonal pattern, and it ended up the strongest quarter of the year.

For the first time in the history of Amphenol we have achieved and exceeded $400 million of sales in a given quarter.

That was driven by a strong continuation of our coaxial cable business.

Usually the fourth quarter because of weather and conditions towards the end the fourth quarter is a seasonally slower quarter for coaxial cable, but coaxial cable sales held up very strongly in the quarter, possibly because of the anticipated and expected price increase on 1/1/05.

Nevertheless, the connector business contributed also strong lead to the increase, sequential increase as well as the CLEC acquisition.

So overall from a sales standpoint we feel that the economic favorable environment, as well as our competitive strength has allowed us to continue to grow.

Essentially the broadbased customer base and now our increasing preferred supplier relationships allows us to gain position in the markets that we serve.

Our strong global presence serving very diverse market gives us the dynamic flexibility to participate in growth segments around the world.

We continue to develop new complete interconnect solutions for our customers, which again is driving growth.

Just to note that tremendous model change in mobile phones gives us the opportunity to introduce rapidly new products, which is driving growth and the same is the case in other segments of our markets.

And in spite of our size now over $1.5 billion in sales, Amphenol has organized itself to remain agile and be able to adjust itself dynamically to the changing market environments around the world.

Profitability also remains good in the quarter.

Our industry-leading profit margin expanded further to 18.8 percent in the quarter, which is 50 basis points up over the previous quarter, very consistent growth of our margin throughout the year.

EPS increased for the 12th consecutive quarter to a record of 51 cents per share.

Twelve consecutive quarters.

This is three years, quite a long time.

Every quarter the EPS higher than the next quarter.

That is quite a remarkable achievement, and the 13th quarter is up, as an original Austrian, I am a little bit suspicious about it, but nevertheless we will overcome the suspicion and certainly try to continue that trend.

The net income rose to a record 11 percent of sales.

That is also remarkable since we still continue to be a moderately leveraged Company.

We believe that this strong profitability reflects directly on our ability to convert incremental sales into strong profits.

To continue to bring to the market application-specific products which have higher margins and to preserve the good mix between these application-specific products and stand (ph) the products that we also sell.

We continue our cost control programs and have further expanded into low-cost regions.

Almost 9,000 of our employees -- that is 56 percent of our total workforce -- are now in lower-cost areas, certainly a strong benefit to be low-cost producer and be able to compete in all the market segments that we serve.

And we certainly have a more favorable pricing environment in general, even if in pockets of our business there is still quite some pressure on price, especially with some of the increased material costs.

As Diana already mentioned, operating cash flow remains very strong for the year; we generated $202 million of operating cash flow which we continue to invest in areas where we believe they are accretive to shareholder value.

First, our investment goes into new products, and I am pleased to say that again in the fourth quarter we exceeded the 20 percent target that we have set for ourselves of sales from new products.

In addition, we have opened throughout the year several new facilities and R&D centers that will have, create a solid basis for our further expansion and growth outlook for 2005.

We continue to use our cash for incremental and complementary acquisitions; we call them the tuck-in acquisitions, CLEC was one in 2004, and we have several other acquisition potentials of smaller companies in the pipeline that we are pursuing.

We are engaged in the stock buyback program of about 5 million shares over the next two years, which also is accretive at the current levels.

We have reduced debt this year to the tune of almost $100 million, and that certainly is also accretive as our financial burden is being reduced.

And I am very, very pleased to announce that for the first time in the 15-year history of the Company as a public Company we are now distributing and started distributing a dividend of 3 cents per share starting in the first quarter of 2005.

This certainly is recognized as our confidence, the Company's confidence in its future earning power and just financial strength.

We expect that this dividend payment will be well received by existing shareholders and open our shareholder opportunity for even a broader base.

Let me now make a few words to the trends in the progress in the various markets that we serve.

First in the communications and technology sectors and market segments, which includes mobile phone market both infrastructure and phones, as well as the broadband and the Internet-related market.

All of these markets had excellent growth with the exception of the Internet market, where we have a slight decline in the fourth quarter compared to a strong performance in the fourth quarter of last year.

The highest growth in that segment we have achieved in mobile infrastructure with 36 percent increase, mobile phones 20 percent increase and broadband 10 percent increase.

We are very pleased with that performance.

In mobile infrastructure the growth was primarily driven by the continuation of the upgrade and expansion of mobile networks around the world, including new developing countries.

In addition, we continue to be very successful in penetrating the mobile installation market.

We have clearly benefited from the growing penetration that we have with Verizon on the EV-DO program, as well as much deployment that goes on in India as well as some excellent growth in Asia, including China in the mobile installation market.

As far as mobile phones are concerned, again a very strong performance and growing faster than the industry in that area and gaining share.

Which is related to a significant introduction of new products, which is driven really by a very strong change of phone models, a rapid change of phone models that is going on as our customers somewhat in fierce competition over market share in that area.

We are benefiting from that trend very strongly through our very broad customer base in that area.

As I mentioned in broadband communications, which is essentially driven by our coaxial cable business we are very pleased that the trend in the fourth quarter was strong and anticipation probably of the price increase that we implemented on the first of January of this year.

This price increase will have an effect only partly offset the material cost increases that have occurred over the year 2004 and continue to occur in that area.

Nevertheless, it is an opportunity to pass some of these cost increases forward to our customers, and continue a good relationship with these customers in this market segment.

At the same time, we foresee for the year 2005 that the growth that we have been able to achieve in that segment in 2004, 17 percent up our sales in 2004, may ease somewhat in 2005 as our customers have announced some capital spending reductions for the year.

Nevertheless, we proceed that the broadband market remains a good market for us with excellent cash flow for the Company.

As far as the Internet-related market is concerned, the data communication equipment, the computers as well as storage equipment, we have seen some sporadic demand in that area essentially driven by the tremendous technological change that is going on relative to high-speed data communication, relative to the miniaturization, relative to the change to serial busses from parallel busing and so forth.

All of this shows that some programs have very enormous strength, other programs are weaker which results in somewhat more sporadic demand in that area.

But we believe as these technologies settle down further and be accepted by our customers' customers, I think we will see a more stable demand as we go into 2005.

In the segments outside of the communication segments we had excellent results, as well.

And the industrial segment was up 24 percent in the quarter, military aerospace was up 19 percent and automotive 37 percent.

Obviously the 37 percent is primarily driven by the acquisition of CLEC, which added 11 million as I said earlier.

Without that the growth in automotive would be relatively stable year-over-year in that segment.

Essentially due to the fact that calming (ph) backup production slowed very dramatically in the fourth quarter, especially with several of the European manufacturers.

Very well-publicized that some of the General Motors companies in Europe had very slow demand as well as other European car manufacturing that had some impact on this.

Nevertheless, we remain very excited about the automotive segment for Amphenol because we are participating essentially in the electronics, new electronics in cars, the safety devices, the entertainment systems as well as global positioning systems that have been used in implementing more and more cars which is driving our growth.

And we have a lot of confidence for this segment to continue to be strong in the year 2005 because very strong all year 2004 for us.

The industrial market also has excellent growth not only this quarter but a very positive outlook for the future as a continuation of a trend that requires higher performance, more sophisticated equipment especially as it relates to power distribution where we participate in a very strong way.

In a variety of different segments of the industrial market, which continues to be a very good opportunity for us to introduce new interconnect solutions for our customers at high margins which contribute to growth.

The military segment remained very strong in the quarter.

There was some publication and comments about defense spending reductions in certain programs.

Obviously we always very mindful of those changes in defense spending that are coming along.

Nevertheless, our breadth of participation in programs is so diverse and so broad that we are clearly so diversified that one or the other change in the program really doesn't have any material impact on this overall strong performance in the military segment.

And we see actually very strong offsetting factors, including improving commercial aircraft business both in North America as well as in Europe.

The breadth of our penetration in a military aspect is also a very, very strong component for our future outlook for 2005, which remains very strong for Amphenol.

Especially as we know that the EFA (ph) program is going to its next phase of production in 2005 where we are a strong participant.

For the full year 2004 we have a really record achievements.

Sales were up 23 percent to over 1.5 billion in sales for the first time in the history of the Company, to achieve such a high-level of revenues.

The operating profit margin improves again; this year 160 basis points over last year, and instead in spite of continued rising material costs throughout the year.

Net income as a percent of sales exceeded 10 percent for the full year of 2004, and EPS grew a record 44 percent to a record $1.82 per share.

So we're very pleased with this performance.

We are confident, we are going with a lot of confidence into the year 2005, as we have clearly a stronger position now ourselves in the markets that we serve in the geographic regions that we participate in.

With this confidence in mind we can clearly say that the year 2004 was a record year.

On the other side, 2005 will show some more moderate economic environment.

We're not going to experience in our opinion the same strong growth that we experienced in the first half of 2004 in 2005.

The reason for this is that in the first half of 2004 there was pent-up demand from the recession of the years before, and that certainly resulted in some incremental demand that we haven't experienced the same level in the fourth quarter.

Having said all that, we still believe in a very strong outlook for the year 2005, and believe that our sales will increase somewhere in the range between 9 and 12 percent for the year.

We also believe that we will have the opportunity and the capability in sight to turn these incremental sales and gain good operating leverage on these incremental sales.

And grow EPS at kind of double the rate of that sales increase by 18 to 23 percent for the year 2005.

We give here a very strong guidance right out of the starting block because we really feel that 2005 will have a good start in the first quarter, and we look forward to another record year in this year that we just engaged in.

We thank you all for your support in 2004 and look forward to working very closely with you as we engage in this new year.

Thank you very much, and I would like to open it for questions now.

(OPERATOR INSTRUCTIONS) Patrick Parr of UBS.

Martin I was wondering if you could rank your various end markets in terms of where you expect the highest growth for '05 and compare that to where you would expect potentially the slowest growth in 2005.

And any help in terms of quantifying your expectations by end market will be helpful as well.

Thanks.

Thank you very much, Pat.

That is a very loaded question because you know we are working in a very diverse and very diverse market segments and to have really a crystal ball in each of them is going to be very difficult.

But I would like to give you a more general answer to this and say that we believe that our mobile infrastructure, mobile phone markets really continue to be strong.

Even if in mobile phones in the first quarter seasonally we expect probably but not the same strength as in the fourth quarter.

As far as the military and industrial markets are concerned, we believe they will continue to be very strong for us throughout 2005.

Obviously we have in the automotive segment not as high of an expectation because generally the car production may not be as high but as I said earlier, we always an grow at a higher rate than production rate of cars because of the increased electronics in those cars.

I think the market that we will be very much for the future is the Internet-related markets where there are these technological changes going on that I mentioned where I believe we will have, to really gain share in order to get to the same growth rates, gain share significantly in order to get to the same growth rates as in these other market segments.

Broadband communications, as I mentioned, we believe will be relatively flat, maybe even declining over 2004 because of the capital spending reductions of the operators in that market.

Overall, though, we believe that the 9 to 12 percent growth overall will be strong.

Higher somewhat in those markets that I mentioned, a little bit lower in the broadband and Internet market.

Okay, and maybe I missed this but did you give any color as to the expectations of the first quarter?

Thank you very much for that question, I clearly wanted to say something about the first quarter, and as you all understand 2004 we believe will show a year where we will see true seasonality.

At least that is our current outlook.

True seasonality meaning that the second and fourth quarter will be the higher quarters; the first and the third quarters will be the lower quarters.

So as we look at the first quarter we believe that we will be either somewhat slightly below the fourth-quarter performance which was a record performance, over 400 million, or at the level of the fourth quarter somewhere in that range.

Both in EPS, as well as in sales terms.

Thank you, Pat.

Michael Walker.

Credit Suisse First Boston.

I heard you just say a couple times that you think the coaxial cable business could be a little weaker again in 2005.

I assume if that's the case especially if raw material prices are increasing its hard for you to get margins up.

But you have had margins as high as 22 percent in that business a couple years ago.

Is it reasonable to assume that at some point maybe late '05 or even '06, that margins could get back up towards the high teens or even low 20s in that business at some point?

That is a very fine question because we certainly have been working on the improvement of the margins in the coaxial cable business diligently.

And as you well know, material content is very high in coaxial cable, so we're very dependent on material prices.

And obviously if material prices change to the better, margins will change right quickly.

We also look at the mix of our business between international and domestic where further price action is possible to offset or to gain actually a little bit more against the material price increases that we have been enduring actually throughout the year 2004.

We have had two price increases, one in June of 2004 and now in the beginning of the year, but again the 10 to 12 percent increase over those two segments is not sufficient to offset all the material price increases that we have.

As far as revenues are concerned, we had a very strong year, 17 percent sales increase in that segment.

We believe that with the capital spending that will be somewhat more moderate in terms of growth but relatively flat to the year 2004 levels.

Steven Fox.

Steve Fox from Merrill Lynch.

Just a couple questions about '05.

Looking out by region can you sort of run through where the highest expectations are?

I would assume its still in Asia but what do you expect for the European economies in general?

You have a very good assumption here, Steve.

I still believe that Asia is going to be very strong, even if China was clearly slowed down by the government somewhat in the second half.

But still they have good growth.

And we have good opportunities for further expansion in that region and thereby gaining position.

Europe has recovered somewhat in certain segments.

I think the industrial market in Europe is certainly, as far as the medical market, as far as fact or information market is concerned that has clearly improved.

We see obviously the wireless market has been where the players there have been doing very well, as well.

And we see that continuing in 2005.

The only concern relative to Europe we have somewhat with the automotive manufacturers, even if we have seen in the first few weeks of January quite a strong demand in that segment.

But it is really related to the electronics that I am talking about in the car but not necessarily on a broad basis.

Matt Sheerin.

Thomas Weisel Partners.

Just a question concerning your EPS guidance for the year for up 18 to 23 percent.

Where is the leverage left in the model?

You basically are almost at historic highs in both gross margin and operating margin if you take out a couple of quarters in 2000.

So where's the leverage left here, particularly on the gross margin side?

Diana, you want to talk about that?

I think that we still express to be able to improve gross margin next year.

We talked about certainly at the operating margin level we continue to get good conversion margins on incremental volume.

The higher margin applications, specific products and the new products also contributed in a positive fashion there.

And we continue to be very aggressive from a cost containment standpoint.

So we do believe that there continues to be opportunity to improve operating margin above and beyond the level that we've achieved in Q4.

Scott Craig.

Banc of America Securities.

Just a couple questions Martin, first with regards to pricing and the connector business.

Do you see opportunities in any particular segments where we can get some price increases to help offset the raw material increases from a connector side of the business?

And then -- and I have another follow-up if you get to that one first.

Thank you very much.

Yes, we have opportunities for price increases.

We actually have increased our prices in the military aerospace segment.

As far as standard products are concerned which are mostly sold through distribution and most of the programs really priced on an application-specific basis which usually carry good margins.

We have also increased on prices in most of our industrial markets by some percent points to help us in those areas as well.

As far as the other markets are concerned, and as I mentioned earlier in broadband we have also increased it on January first.

The other markets, mobile infrastructure, phones and Internet-related market I am very program related and product related with faster cycles, where there is not a broad increase possible other than on a program and project to project basis.

Jeff Beach.

With Stifel Nicolaus.

A couple questions.

You talked about a soft automotive market in Europe, but you've also acquired additional product content with CLEC.

Can you gain market share as early as 2005, and outperform the industry in Europe with this acquisition?

This is a very fine question, good afternoon, thank you.

We have outperformed I think the industry for a long period of time in automotive, and the reason really in terms of growth, and the reason there is clearly they are participating in growth areas of that automotive business.

That will continue in 2005 just with our traditional business.

CLEC will add on to it because they have some value added technologies that will help us.

In addition CLEC has a very fine capability in Northern Africa in terms of manufacturing, which is significantly more cost competitive than the ones that we have in Eastern Europe.

Which gives us further leverage to either improve margins or further gain market share in that market segment.

So we believe that in the automotive segment in 2005 we will continue to perform better than the general market.

Tom Dinges.

J.P. Morgan.

Just a couple of quick ones for you.

Diana, can you try and go through the leverage question one other way?

As we look at the operating expense line, because you have already kind of covered what you expect to happen on the margins, you've been growing operating expenses just a few percentage points slower than you have been able to grow sales and been able to get some leverage there.

Is that one of the areas where you are starting to see that you are going to get additional leverage there as your pushing more and more of the head count and again more of the overhead into the lower cost regions?

And then also, specific to the debt you paid down a fair amount this year; what is the expectation as you use that, as you look into next year?

And then I have a quick follow-up.

Let me just address first the leverage once more.

I'm sure Diana will respond to the debt question that you have.

As far as leverage is concerned, we still have quite some fixed costs in our business.

Not only in SG&A, but as also in material, in the manufacturing area.

And obviously we have clearly a tendency in Amphenol to continue to grow that fixed cost at a lower pace than our revenue growth, which gives us ultimate on the leverage in that.

So the leverage is certainly related to volume increase.

As regards debt service and financial leverage, I think given the significant amount of cash flow that the Company generates and will generate next year, clearly there will be some continued debt service and therefore some continued contribution from reduced interest expense next year.

I think it is certainly getting smaller as the debt gets paid down, but there will certainly still be some positive contribution there.

Relative to the specific question relative to SG&A, I think that we certainly do achieve operating leverage both at the gross margin line and at the SG&A line.

And I think in part of your question you wondered whether there is some impact from the move to low-cost areas, and certainly there is benefit in all of the functions that we perform within the Company as we build up our expertise in resources in these low-cost regions, whether it's in manufacturing expertise or R&D sales and marketing and so forth.

And that is one of the factors that does contribute to the ability to improve the operating income ratios as we move forward.

(inaudible)

Martin (ph) Capital, this is (indiscernible) on behalf of Earl. (inaudible) can you talk about the coaxial business?

You talked about the price increases of January 1st.

Could you comment on what your competition is doing and do you see further price increases down the year?

To help with the margins?

You talked about CapEx growing and maybe the sales being flat or down.

But maybe your margins could improve with a series of price increases.

Well, as we all know this is a market with limited competition.

And obviously we are following the leader in that market as far as price increases are concerned.

We did so in June.

We did so in January of this year.

Whether there are further price increases planned for the year, I don't know.

We certainly would want to see them happen as material costs continue to increase, but we certainly cannot anticipate and expect that to happen before we see some evidence from major competitors doing so.

Whether there is opportunity, we will see whether there is because we always have to be mindful relative to material prices itself.

When they come down obviously we look at things differently, and so we will have to just wait.

We just implemented one price increase and wait and see how the material costs play out as we go into the year.

Kevin Sarseni. (ph)

Langenberg & Co. Two questions on your guidance, revenue guidance of 9 to 12 percent.

Is there any FX in there or do how you calculate that?

We anticipate and expect stable currency rates in that.

Obviously there is some natural built in as if exchange rates would be staying at exactly the same rate as they are right now.

But relative to the total growth that is not so significant.

So we have just assumed at this point in time currencies to remain stable at current levels.

(indiscernible)

(indiscernible) from RBC Capital Markets.

Question on the cable side.

You said revenues were kind of stronger this quarter because people were prebuying parts to the price increases so would that imply that Q1 revenues would be softer than typical?

And also the price increases you are implementing the last time you guys did that you had more success in the price increases holding in the U.S. in North America versus rest of the world.

Is that kind of what you expect (indiscernible).

This is a very fine question.

Obviously we right now speculate that some of the shipments that we had in the fourth quarter were in anticipation of some price increases, especially in the national markets.

But weather and other conditions have even a greater influence on whether the first quarter comes out stronger or not as strong as the fourth quarter.

Usually the first quarter is not very strong in the coaxial cable business because of just the climatic situation.

So second and third quarters are usually the strong quarters and those are the quarters we are looking forward to judge whether we will have a very strong year or not in that market segment.

(indiscernible)

Deutsche Bank.

I have one clarification and two questions.

First on the clarification it sounds like you're going to be experiencing all of the margin improvement in the connector business given your expectations for roughly flat pricing as raw material prices are roughly stable.

And the first question is can get some more granularity on the end markets and what they did on a sequential basis?

And the second question is on guidance.

You guys (indiscernible) expectations past eight quarters, and you guys usually give out relatively cautious guidance.

Looking at where we are today and expectations for flat to declining sales in 1Q, how comfortable are you with where your guidance, and why did you guys provide such strong guidance when clearly you didn't need to (indiscernible) the guidance above street estimates (indiscernible) this year?

Well, we give guidance not relative to what the general consensus is.

We give guidance to where our confidence level is, where if there is strength in the business that we see is and so forth.

And so the last thing we have done over the last eight quarters -- actually over the last history, past history of the company to expose ourselves into areas that we don't feel good enough to deliver.

So what I Amphenol suggesting is that we feel that the economic environment remains favorable, that we are in very strong diverse markets and geographies, that we have a number of new products in all of these segments in the pipeline to be issued, launched.

So we have built strength as I mentioned as a competitor in 2004.

We have achieved a new platform, and that gives us quite some confidence with new preferred supplier relationships and so forth to continue that trend into 2005.

(indiscernible)

Yuri Krackan (ph) Lehman Brothers.

What is your capital expenditure outlook for '05?

Somewhere in the I'd say 45 to 55 million range.

We tend to spend somewhere between 3 and 4 percent of sales.

I think if you look back over the past few years it has probably been between 2 and 4 percent of sales.

We would expect to continue spending in that range.

We certainly are very careful in terms of our spending.

We look to achieve and have historically achieved a very high return on investment.

Most of our capital spending tends to be in tooling for new product development and of course, in the related machinery and equipment spending.

Jeff Beach.

Stifel Nicolaus.

In this quarter you didn't run through the percentage of sales by segment.

Could you do that for us?

I think in one way I did, I didn't specifically address each one, but I have I think noted most of the growth in most of the segments earlier.

I can certainly reiterate them.

One of the strongest growth we had in mobile infrastructure, 36 percent in mobile phones.

We grew 20 percent, very strong growth in industrial market with 24 percent and military aerospace, 19 percent.

I mentioned that Internet was somewhat down from the prior period from prior year, which was a very strong quarter, we were down 4 percent and in automotive we were up 37 percent.

So those are the numbers per market segment as I thought we went through maybe little faster than in the past.

I would accept two more questions, please.

There are no other questions at this time.

Okay, there are no further questions, I would like to thank you all for their interest in Amphenol.

We clearly finished up a record quarter, a record year, and we are looking forward to 2005 to continue this consistent trend of strong profitability and growth.

Thank you very much, and goodbye.