安費諾 (APH) 2005 Q1 法說會逐字稿

Welcome and thank you for standing by.

At this time, all participants are in listen-only mode.

During the question-and-answer session, please press star 1 on the touch-tone phone if you'd like to ask a question.

Today's conference call is being recorded.

If you have any objections, you may disconnect at this time.

At this time, I'd like to now turn our conference call over to Ms. Diana Reardon, Chief Financial Officer.

Ma'am, you may begin.

Thank you.

Good afternoon.

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

I'm here together with Martin Loeffler, the CEO, and we'd like to welcome everyone to our first quarter call.

Q1 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.

And then we'll have a question-and-answer session.

The first quarter was a record quarter in all respects.

Sales for the quarter were 409 million, up 15% in U.S. dollars and 13% in local currencies over the first quarter of 2004, and up 1% sequentially from Q4.

Breaking down sales into our two major components, the interconnect business, which comprises 88% of our sales in the quarter, was up 16% compared to a year ago, with increases in all major end markets and geographic regions.

Our cable business, which comprised 12% of sales, was up 8% from last year, as a result of increases in broadband cable television markets.

Since December 31, 2004, the Company has completed three acquisitions with aggregate annual sales of approximately $70 million.

The acquisitions complement and broaden the Company's presence in a number of market segments and include a Korean manufacturer of handset-related products, a U.S. manufacturer of fiber optic products for high-performance military and industrial markets, and a U.S. manufacturer of high-speed, high-density interconnect products for computer and communications-related markets.

Sales in the first quarter of 2005 included approximately 19.5 million from acquisitions completed subsequent to the first quarter of 2004, including approximately 8 million from the three acquisitions just mentioned.

Excluding these sales, the sales increase over last year's first quarter would be approximately 10%.

Operating income for the quarter was strong at 77.3 million compared to 61.3 million last year.

Operating margin was 18.9%, an increase from 17.3% last year and up 10 basis points sequentially from Q4 2004.

Margin improvement over last year was driven by expanding margins in both segments.

In the cable segment, margins increased approximately 70 basis points over last year to 12.8%, as price increases implemented in 2004 were partially offset by a continued increase in material costs.

From a sequential standpoint, cable margins were comparable to Q4 levels as material costs increases offset the impact of the January price increase on coaxial cable for broadband applications.

In the interconnect segment, margins increased over 150 basis points versus last year and were comparable to Q4 2004 levels.

Increases over the prior year relate to the continuing development of new higher margin application-specific products, excellent operating leverage on incremental volume, and aggressive programs of cost control.

On any industry-comparative basis profitability continued to be very strong.

Interest expense for the quarter was 5.4 million, compared to 5.8 million last year, reflecting lower debt levels.

Other expense was 1.7 million, compared to 1.5 million last year.

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

Net income was 46.4 million and exceeded 11% of sales, another indication of our excellent profitability.

Diluted EPS for the quarter was a record $0.52 per share, up 30% from a year ago and the 13th consecutive quarterly increase.

During the quarter, we generated a strong cash flow from operations of 39 million.

The cash flow from operations, along with borrowings under the Company's credit facility of 24 million, and 4 million of cash on hand, were used to fund 12 million of capital expenditures and payments relating to acquisitions of 53 million.

In addition, during the quarter the Company received 4 million of proceeds in the related tax benefit from the exercise of stock options and purchased 127,000 shares of its stock at an average price of $37, for a total of 4.7 million.

Approximately 3.4 million shares remained available for purchase under the Company's stock buyback program at the end of the quarter.

The balance sheet is in good shape.

Accounts receivable and inventory balances increased as a result of acquisitions and higher activity levels.

Accounts receivable day sales outstanding, excluding the impact of acquisitions, were 66 days at the end of the quarter, compared to 64 days at the end of the year.

Inventory turnover, again excluding the impact of acquisitions, remained at 4.2 times, consistent with year-end.

Long-term debt was 458 million at the end of March, up 26 million from year-end, reflecting additional borrowings to fund a portion of the price of acquisitions completed in the quarter.

The Company's leverage and interest coverage ratios remained very strong at 1.6 times and 14 times, respectively.

The amount of receivables sold under our receivable securitization program was 85 million at the end of the quarter, compared to 80 million at the end of 2004.

Orders for the quarter reflected a book-to-bill ratio of approximately 1.03 to 1.

Certainly from a financial perspective it was an excellent quarter.

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

Thank you very much, Diana, and welcome to our traditional conference call at the time when we release our earnings.

As Diana just mentioned, I will just highlight the few achievements of the first quarter, continue to discuss some trends and progress in the markets that we serve, and conclude with some comments on the outlook for 2005 and the next quarter.

Some highlights of the first quarter.

We are extremely pleased with the first quarter results in all respects.

I think they reflect a consistently strong trend in our business.

We have set new record levels in sales and earnings just on the heels of a very, very strong Q4.

Sales increased 15% in U.S. dollars in the first quarter compared to last year.

And that despite a generally more moderate demand environment than during the economic rebound that we experienced at the beginning of last year.

We are also pleased with the sequential performance of - - in the first quarter because the effects of Chinese New Year this year were much more pronounced than a year ago.

And it certainly had a very strong seasonal impact on Q4.

Overall, the first quarter is usually seasonally a slower quarter than Q4.

So clearly, first quarter results, in terms of sales, are very strong.

And this strength really comes from our continued opportunity to gain position as a preferred supplier in all of our served markets.

The strength comes also from our broad coverage on a global basis of all the accounts in a broad way logistics, engineering, sales, manufacturing.

We service our customers on a local basis - - worldwide.

And that gives us certainly a competitive advantage.

We continue to introduce new integrated interconnect solutions for newly emerging technologies, which is another driver in most of our growth.

And, in addition, we continue our strategy of complementing our internal growth with strategic acquisitions.

Diana just mentioned that in the - - since the beginning of the year, we added three companies to our family, two in the first quarter and one most recently in April.

These three companies fit exactly the model that we look for in acquisitions.

They bring very strong management, they bring strong technology and complementary technology, and allow us to have a fast start on a geographic basis in an area where we need further expansion, Korea in this case.

So we are very excited about the future potential of these three acquisitions and they now join, as small companies, a big family of Amphenol that can provide global resources for their further expansion.

And I will talk a little bit more about these acquisitions as we talk about the market trends.

As Diana mentioned, profitability remains strong in the quarter as well.

And that in spite of a continued challenging pricing environment and inflationary increases.

They certainly are a force against improving margins.

Nevertheless, we have been able to further improve our operating margins to 18.9% in the quarter and very pleased with that performance.

EPS grew a strong 30% over last year to a new record.

And net income, clearly a measure of our strong profitability, exceeded 11% this quarter.

For the first time, we declared a dividend to our shareholders, which was paid on the 6th of April, which was $0.03 per share.

We are very proud of this.

This happened for the first time since Amphenol went public in 1991.

This level of profitability is a direct result of our good conversion margins of the incremental sales to the bottom.

We call it operating leverage.

The higher margins of application-specific products that we continue to introduce contribute also to these higher margins and, last, not least, our ongoing cost control.

We have, for example, just in this quarter, discontinued our production of commercial product in Canada as well as in France.

It's very costly to discontinue these operations in those high-cost areas.

We have done it, we have done it without any one-time expenses or one-time charges that we have taken.

And we are very pleased that these operations now continue in low-cost areas at a much better margin level. 57% of our work force is now in low-cost areas, 55% it was at the end of Q4.

Some general trends in our business as well as in the markets that we serve.

The first quarter growth was clearly broad based in all major markets that we serve and in all geographic regions.

As compared to last year, we achieved our strongest growth, again in military aerospace, industrial, and in the wireless communication markets.

On a sequential basis, sales increased in the military aerospace, industrial, and automotive markets and were partially offset by modest declines in communications-related markets.

Geographically, sales in Europe and North America were stronger than in Asia.

Clearly, the reason was the expensive effect of the Chinese New Year this year.

Overall, we continue to benefit from our diversity in our - - the markets that we serve, the geoographies and products.

Let me now make a few comments to the various market segments that we serve in more detail.

Sales in the mobile network market increased a strong 18%.

We continue to gain position in the growing cell site installation market, while the OEM market was somewhat more moderate.

We expect that this strong trend will continue throughout 2005, especially as we expect that the OEM market will return to more strength, as 3G licenses will be awarded, or I expect it to be awarded in the second half of this year in China, and more 3G installations really go into operation.

In the mobile phone market, we achieved an increase of 17%.

Certainly, our acquisition of Felek [ph] in Korea contributed to this.

Without that acquisition, growth in the mobile phone market would have been 3% on a year-over-year basis.

As far as this Korean company is concerned, we are very excited about their presence and strength with the local Korean manufacturers.

In addition, they bring complementary product for mobile phones to Amphenol, which we can then sell on a worldwide basis.

In addition, they have very advanced metal injection molding technology for hinges that we already sell in high volumes integrated with the electronics.

And that hinge production is going to give us lower cost and a higher capacity for the future expansion.

Most of these phones today have some sort of hinge, either sliding or rotating or flipping, and we are a strong participant in that area.

Overall, we believe that the mobile phone market will continue to be a strong contributor to Amphenol as we continue to serve more of half of the world production with our products.

Sales of the coaxial cable and other products for broadband cable television markets increased 6% during the quarter, driven in part by subscribers growth of new digital services for video, high-speed data, and voice services.

We expect that the second and third quarter in this broadband market will be seasonally stronger than the first quarter.

Sales to the computer, datacom and the storage market grew 3 - - 5% as the demand continues to be somewhat sporadic in that market.

We are, however, very excited about our new customer wins, especially in storage and disc drive markets, as well as with our new design-in positions in emerging high-speed and power applications.

Our recent acquisition in North America of Intercom Systems, will add another portfolio of products of high-density, high-speed devices that will help us further penetrate this important market for Amphenol.

As far as those markets are concerned that are outside of the communications and computer-related market, we also had very strong performance.

Sales in the automotive markets were up 27%, however, on a year-over-year comparison.

That includes the acquisition of Felek, that we talked about at the last quarter, which we acquired in the fourth quarter.

Without Felek, sales in the automotive market would be slightly below last year, but sequentially up.

Overall, we see a relatively slow automotive market, but we are confident that we will continue to grow in that market, as - - with the launch of new car models more electronics will be in the cars and, therefore, more interconnect solutions from Amphenol required.

Sales in the industrial market increased a strong 19%.

This growth was very broad-based in the rail transportation market, factory automation, medical, as well as offshore oil exploration markets.

We feel that this market will continue to be strong for us for several quarters to come, as we have introduced new interconnect solutions for data busing, as well as power distribution, which are very high - - much in demand.

Sales in the military and aerospace market increased a strong 17% against last year, another very strong quarter for military aerospace.

We continue clearly to benefit from our breadth of program participation.

In this segment also we acquired a company in the first quarter, which is Fiber Systems International here in North America, that has a very strong technology in fiber optic products for harsh environment applications.

Amphenol is already a leader in that segment in Europe.

With this complementary acquisition, we now become the world's leader in harsh-environment fiber optic systems.

We are very excited about all these acquisitions because they fit the mold, as I said earlier, to bring excellent management, incremental technology, and geographic presence that we would - - that would take a long time and great investments to start in Greenfield.

A few comments to our outlook.

We are very pleased with the results that we have seen and it gives us confidence in our excellent position in diverse and global markets.

We have competitive strengths and the ability of our Asia - - agile organization to dynamically adjust to the changing and dynamically changing requirements of the various markets that we serve is very great.

And, therefore, we believe that we have excellent opportunities for continued strong growth and profitability as we move through 2005.

Considering or assuming that there will be no change in the current economic situation and in currencies, we revised our prior guidance upwards for 2005.

Our prior guidance for the sales increase was 9 to 12%.

Our new guidance is 11 to 14%.

And this guidance clearly includes a more conservative view on the contributions of these acquisitions.

We don't know how they will unfold.

We are very confident and certainly have some upside to report if all folds out as we expect.

As a result of this higher guidance in sales, we also expect EPS to grow further but to a new range of 20 to 25% increase over last year compared to our prior guidance of 18 to 23%.

We expect good conversion margins and good operating leverage to continue from these incremental sales.

For the second quarter, we expect a sequential increase over the first quarter.

And the sequential increase in the range of sales of - - to 430 to $440 million in sales and EPS in the range of $0.55 to $0.57 a share.

Both of these increases are sequential as well as year-over-year increases.

Amphenol has clearly had an excellent start in 2005 and we are very excited about our bright future.

With this, I'd like to open it for questions that you may have.

And I would ask you to contain your questions to just one at a time so that we can cover all the questions that the audience may have.

Thank you very much for considering this.

[OPERATOR INSTRUCTIONS] Our first question today comes from Matt Sheerin with Thomas Weisel Partners.

You may ask your question, sir.

Thank you and good afternoon.

Good afternoon.

My question, Martin, is regarding your comments on Asia and then also handsets.

Handset growth, organically, was up just 3%, so it looks like it's slowing there and also you talked about Asia being slow with the Chinese New Year.

Have you seen any signs of business picking up in Asia in general?

And then on handsets, have you seen signs of inventory correction still playing out or any signs that things might pick up there as well?

This is a very fine question.

Obviously it's well-publicized that the mobile phone market wasn't that strong in the first quarter, at least as far as many of our customers are concerned.

We have a very broad customer base and I think we have clearly, even with the 3%, outperformed that market in terms of growth.

Nevertheless, the impact of Chinese New Year was maybe because there was just inventory in the pipeline left over from Q4, and that needs to be sold off.

And it is good to see that in the later part of March we have seen some revival, not necessarily with the same mix.

I think some of the multinational companies seem to be stronger in taking off here, rather than some of the local manufacturers in Asia.

But in the mix, certainly, some improving trend.

In addition, we see quite some model changes, which include more of the Amphenol products, where we are now confident that we will again see continued growth.

I think the first quarter usually is a slower quarter.

It was maybe more pronounced this year than it was last year.

In Asia, general there was some slowing and that was not only related to the mobile phone market but just generally.

If you look at the consumer electronics, if you look at some other market segments as far as service and storage systems are concerned, somewhat slower but, again, improving, clearly has improved in the second half of March and continues to have that trend here in April.

Thanks very much.

Thank you.

Thank you.

Our next question comes from Amit Daryanani with RBC Capital Markets.

You may ask your question.

Thank you.

A question on your full-year 2005 guidance.

At the midpoint of updated guidance you have versus the prior guidance you had given out last quarter, you're really calling for revenues to increase by $30 million.

It sounds like the acquisitions would alone add $60 million in revenue in calendar year '05.

Is there some degree of conservatism that's built into the new guidance or were some of these acquisitions baked into your prior guidance that you gave us?

Well, thank you very much.

This is certainly a very good question and we all have made that arithmetic.

And obviously there is a little bit caution in that guidance that we have.

We don't know how the market in general will unfold but, most importantly, how these acquisitions will unfold.

We are very excited and, hopefully, we will report just upside on this, but right now we have maybe a little bit more conservative view on this.

So you really aren't factoring $60 million contribution from these acquisitions at all?

60 million may be a little bit - - 60 million for the whole year.

Right.

But I'm talking about the outgoing periods.

It's somewhat less than this, more like 50 million.

All right.

Just one quick question also on the margin structure.

The operating margins are at 18.9% and close to all-time highs they've had.

Where do you expect to see the future leverage coming from on the operating side?

Well, the future leverage comes from exactly the same points that we had in the past, and this is that we add fixed costs in our business much slower than our volume is increasing.

And that will continue to give us good operating leverage.

So we don't - - we add expenses prudently on the fixed side and that is really one of the gating items to make sure that you get volume - - that you get the benefits from the volume increases.

And that is an ongoing strategy that Amphenol has.

And that has allowed us to inch up these margins time over time.

In addition, we are accelerating and try to accelerate our new product introductions.

And that is helped by the faster technology change, which again gives us a better mix and a richer mix on application-specific products as well that allows us to further improve the margins as well.

Thank you very much and I think we should go to the next question.

Thank you, our next question comes from David Pescherine with Smith Barney.

You may ask your question.

Thank you.

Martin, you mentioned that you had some charges for closing some Canada and France facilities and moving them to lower-cost geographies and you said that you ran them through the income statement, no one-time expenses.

But can you give us a sense as to what the expenses were that were run through and maybe we won't see in the next couple of quarters?

Well, we have had obviously that taken into account already in the fourth quarter of last year, so you have some of these effects already as a result here in the first quarter.

I am just mentioning this as one side note to say we continue to move to lower-cost areas and we continue to expense it as it occurs without taking these one-time charges.

But, obviously, it's a component of improving margins and some of the improvement in margins comes from exactly these actions but it's not all of the actions.

Thank you.

Our next question comes from Steven Fox with Merrill Lynch.

You may ask your question.

Hi, good afternoon.

Good afternoon.

Could you just, Martin, as you mentioned the June quarter is typically seasonally stronger, when you look at the served markets that you're involved in, which markets will you say have the most momentum going into June?

Which ones look a little bit on the weaker side?

If you could just sum that up, that would be great.

Thanks.

That's a very fine question.

We have that mix where we essentially serve seven distinct markets.

And I think the military aerospace, industrial, and automotive market will have continued momentum into the second quarter as we are at the beginning of new call launches, especially on the automotive side.

I think, however, there will be also some improvement in the mobile side, seasonally.

We see that already happening now.

The other markets, I think, will as far as the computer storage market is concerned, we will continue to see that a little bit more sporadic, even moving into the second quarter of this year as well.

Mobile infrastructure continues to have strong momentum.

Mobile infrastructure, as I mentioned earlier, was strong because of our gaining position.

That doesn't mean necessarily the market is very necessarily extremely robust.

But installation work continues, and we have been participating increasingly in this market because we have established a new standard for 3G antennas and new interconnect system, which is now broadly used in Europe, in North America, in Asia for all these new antenna installations.

And that is certainly giving us quite some momentum in that market.

Thank you.

Our next question comes from Mr. Michael Walker with First Boston.

You may ask your question.

Thanks.

Wondering if the margins on the acquisitions are roughly the same or if they're higher or lower than Amphenol overall.

Because I guess I have the same concern that a previous caller had, where if you back out possibly the earnings, accretion from the acquisitions, that you're actually saying your organic earnings outlook for this year is a little bit lower than you had expected.

So I guess I'm wondering the same question for the bottom line as well as the top.

That's very fine and I appreciate the question.

I think we, as you know, have quite high margins in our core business.

And we always try our acquisitions to bring up to these higher levels of margins that takes some time.

And this is where we have a little bit of caution in there built in.

But we are very confident that we can bring them up, as they are not at that level today, can bring them up to these higher levels over time.

Thank you.

Our next question comes from Yuri Krapivin with Lehman Brothers.

You may ask your question.

Good afternoon.

Good afternoon.

Another question on acquisitions.

I think you would typically spend between 40 and $50 million on acquisitions per year, and here already in the first quarter you spent $53 million.

Obviously, you never know when an attractive acquisition may come along, but is it safe to assume that for the balance of the year your cash use priorities will shift to that retirement and stock buybacks?

This is a very broad question and actually very close to the heart of how we best apply our cash.

The cash flow that we generate is best applied to new product introductions and tooling and capabilities internally to grow our business and second to acquisitions.

That gives us the highest return, and that's the reason why we certainly focus on this more than just pure debt reduction because that has certainly the lowest contribution.

We are moderately leveraged.

We feel very comfortable with the leverage that we have, so that doesn't have necessarily the highest priority here.

And, as you answered already your own question, the sense that, you know, these acquisitions come in spurts.

They are not here, you know, when you want them and you spread them quarter by quarter.

They come when they come and when you have an agreement.

Many of these acquisitions we have talked about to the owners a year ago, more than a year ago.

So, you know, they all just came together at the same time and that is more coincidence than the plan.

Obviously, what is absolutely interesting for us, we have still a fine pipeline of such opportunities.

It's a fragmented market.

We will continue to benefit from the fragmentation of the markets by taking advantage of these acquisitions.

With the strong cash flow that we have, we clearly - - and the capital structure we have, we can clearly afford more of these smaller acquisitions moving forward even in 2005.

Thank you.

Our next question comes from Patrick Parr with UBS.

Good afternoon guys.

Good afternoon.

You mentioned in your comments that you are struggling with raw materials price increases.

You seem to be doing a good job of managing that.

Could you give us a little color on what you're doing to manage it and what the impact might have been to metals and plastics costs to the quarter and what you might expect to happen in those various markets moving forward?

Thanks.

Thank you very much.

Again, we have such a broad use of different materials.

And more to look at the macro view of this situation, we clearly see that inflationary pressures are still there.

And the way we are handling those is usually through redesign of a product, which - - through - - to use a different material that is not as expensive, to see whether sources somewhere else in the world are cheaper than the ones that we are using.

It is also just a matter of seeing whether our suppliers, that is our own supplier performance valuation, whether they - - as they process the raw material, have efficiency gains that allow us to capture some of that cost reduction as well.

So there are many ways and methods to go about to hopefully reduce some of these material-price increases that are.

It is certainly somewhat of less of an issue on the connector side, even if it's there, because the material content is somewhat smaller than on the coaxial cable side.

There it is very difficult to battle because as we - - as Diana just said earlier, the price increase that was introduced in January of this year just barely offset some of the material price increases that we have seen because 80% of the cost is material there.

But we will continue to work that.

And we are diligent, especially when we use integrated solutions where we don't use always all of Amphenol products.

We find new sources of supply for these components and that is certainly also adding to the opportunity to combat these increases in the future.

Thank you.

Thank you.

Our next question comes from Jeff Beach with Stifel Nicolaus.

You may ask your question.

Yes, good morning.

Good afternoon.

Or good afternoon.

No, that's fine.

You are in a different time zone.

I understand.

You commented on the inflationary pressures kind of looking backward, but I'm monitoring and seeing copper and aluminum pricing going flat.

They haven't rolled over yet, but I'm also seeing every plastic price that I can find in the market seems to be declining in March and April.

And if these trends continue, is this something that you think through the course of this year, particularly with the plastic prices, could be something that would be a margin opportunity for you, or do you think this is something where the industry would lower prices so there's not really an opportunity to expand margins?

With these trends that you just cited, obviously there is always opportunity and we are watching this very carefully and will seize any opportunity there is.

At the same time, you see this in gasoline prices, that they quite substantially lag sometimes the crude-oil price changes, certainly not on the upside but on the downside.

And that is not different in some of the material that we are buying.

But we will take advantage of this.

But we have to to be cognizant of the fact that in many of these markets that we serve, there is still capacity and there is still the hunger of other competitors to participate.

And, therefore, it is not, I would say at this point in time, a pure seller's market.

And, therefore, the pricing will be playing a role in this combination of material cost decreases that potentially could happen and the requirements of customers to further get price reductions.

Because every single electronic equipment has to become just cheaper and get cheaper in the future.

And the component suppliers are the ones that have to contribute to make it cheaper.

Thank you.

Our next question comes from Tom Dinges with J.P. Morgan.

You may ask your question.

Good afternoon, Martin.

Good afternoon.

Very quickly, you had characterized overall generally moderate demand environment and followed that up very quickly by saying that pricing still remained a bit challenging.

In what areas do you still find that pricing is probably the most challenging?

And, secondly, as you look at just the coax business where you were able to raise some prices a couple times in the last, say, 7, 8 months, last quarter you had thought there was some buying that might have happened ahead of the price increase in January, yet you look and you had a pretty decent year-on-year and a slightly less than normal decline in the first quarter.

And was this just demand was probably a little bit better than you expected there, or are you being a bit more successful in just pushing through those price increases and that was one of the reasons why you had a little better quarter there?

Well, as far as the cable is concerned there obviously it was somewhat a little bit better than expected on that front.

At the same time, we are also diversifying.

And as we diversify in that cable business, there's incremental opportunity.

And that incremental has contributed in the first quarter and will continue to contribute in the future.

That is essentially the assemblies that we make with our cables for kits that are used in home installations for broadband access, either be it voice access or access for high television TV or for fast Internet access.

And these assemblies are quite in high demand because they are more subscriber sign-up related than just pure maintenance or new builds of plants.

And that certainly is a business that we have engaged in and has been very successful for us, and there is - - is contributing to that somewhat better result in the first quarter and will continue as we move forward.

Thank you.

Our next question comes from Scott Craig with Banc of America Securities.

You may ask your question.

Yes, hi, good afternoon.

Good afternoon.

Diana, can you just give us the amount of inventory that were on the books from the acquisitions in the quarter?

And then, secondly, Martin, and I apologize if I missed this, but can you discuss where you think you have opportunities for potential price increases as we work into mid-2005 in both the connector business and in the cable business?

Thanks.

Go ahead.

The inventory turns, excluding the acquisitions, were about 4.2 times for the quarter.

So I think that should help give some perspective of the inventory levels that came from the acquisitions in the quarter.

Obviously, the acquisitions came in at a time - - sometime during the month and we are carrying the whole inventory for the whole quarter on a comparative basis as well.

The same is true for SG&A expenses where, again, we have the expenses somewhat recorded in a different way.

So I think all of this on the inventory side is something that we'll flush out as we move forward, there is not any concern on our part that inventory's going in the wrong direction.

I think there was another question you had.

Thank you.

Our next question comes from Carter Shoop with Deutsche Bank.

You may ask your question.

Sure.

I think his second question was a question about potential price increases.

Yes.

Where you get the opportunity for potential price increases going forward.

My question, however, is a follow-up, A, on the raw-material price hikes.

And the question was do we - - is there an opportunity to really drive margins going forward as a result of a kind of flattening price environment?

Similar to the question, two questions ago, but I guess I wanted to better understand is, what is the lag between when the raw material prices go up and when your margins are pressured from your suppliers?

Is there a, say, like 90-day lag between the actual commodity prices and your inputs?

Our customers actually don't regard too much what happens in the material arena.

They have what they need and they put price pressure on whether these material costs go up or not.

So that's just a matter of fact.

They may be more receptive to talking to us in certain times, but certainly it's not our business and our business, which is really not commodity business like some of the passive components where you expand margins with pricing and then when the bad times come, you contract margins tremendously because you can't get the pricing.

We build our margins on the value that we bring to our customers in many different ways.

And that is in technology, that is in our logistics on a global basis, that is the service and the lead times that we provide them and especially providing solutions in the next-generation products.

And that's how we look at our pricing to our customers.

And there was a question relative to the pricing, in what markets we see more pressure than in others.

In general, it's everywhere there where we are participating more in more standard products rather than in these designed-in products that have longer life and where competitors come in over time, but then already the next generation comes to life.

So I think we're not in that kind of standard commodity business where the pricing in general has that tremendous impact.

Obviously, we would all love to have price increases.

We all would like to see less price decreases.

But we have lived with this for a long time, will continue this.

The margin expansion in Amphenol will not come necessarily from just this pricing.

It's more related to the cable business where pricing plays a very significant role in compensating for material increases as in this area, as I said earlier, material content is just so high.

Thank you.

Our next question comes from Kevin Sarsany with Langenberg & Company.

You may ask your question.

Thank you.

I don't want to be a complainer here, but overall growth has been very, very good.

I love the diversified mix.

But the one market that appears to be out of line with the end markets, in fact in the first quarter and last year, is computer.

What was the year-over-year growth, excluding the acquisitions?

And I think it was in last quarter you talked about needing to significantly gain share to grow at the other end market strength.

Do you think you're gaining or growing at the industry growth rate, or are you growing slower?

Do I understand correctly you're talking about the computer market?

The computer, Internet --

Computer market increased 3% in the first quarter over last year without the acquisition.

And without any currency effects, just to have a pure year-over-year comparison, we consider quite good.

As you look at some of - - you see the very mixed bag of performances in that market from certain companies.

In addition, integrating the pricing that is essentially in this market the most severe as more standard products are being sold.

So in this area, clearly we thought we had a very good performance and we look forward to actually a stronger performance moving forward as new generations of products with high speed technology is going to be rolled out.

Do you think you're gaining share in that market?

I think it is very hard to tell, as we are not a major player in that market, to say whether we are gaining or we are losing.

I think overall Amphenol is clearly gaining share in the industry.

Whether we are in a pocket, you know, better than another is hard to tell.

But overall, we clearly gained by a large margin against industry.

We have done that for 10 years and we continue to do so in the first quarter of this year.

Thank you.

Thank you.

Again, I'd like to remind parties, if you'd like to ask a question, please press star 1 on the touch tone of your phone.

If there are no more questions, we thank you very much for your interest in Amphenol and we will talk to you soon.

Thank you very much.

Good bye .

Thank you.

At this time, that does conclude our conference.

You may disconnect.