安費諾 (APH) 2014 Q4 法說會逐字稿

Hello and welcome to the fourth-quarter earnings conference call for Amphenol Corporation. Following today's presentation there will be a formal question-and-answer session.

(Operator Instructions)

At the request of the Company today's conference is being recorded. If anyone has objections you may disconnect at this time.

I would now like to introduce today's conference host, Ms. Diana Reardon. Ma'am, you may begin.

Thank you. My name is Diana Reardon and I am Amphenol's CFO. I'm here together with Adam Norwitt, our CEO, and we would like to welcome everyone to our fourth-quarter earnings call.

Q4 results were released this morning. I will provide some financial commentary on the quarter and Adam will give an overview of the business and current trends. We will then have a question-and-answer session.

The Company closed the fourth quarter with sales of $1.427 billion and EPS excluding one-time items of $0.63 beating the high end of the Company's guidance and achieving new records of performance in both sales and earnings per share. Sales were up 15% in US dollars and 17% in local currencies compared to Q4 of 2013.

From an organic standpoint excluding both acquisitions and currency effects sales in Q4 were up 7%. From a sequential standpoint sales were up 5% in US dollars and 3% organically from Q3.

Breaking down sales into our two major components, our cable business which comprised 6% of our sales was up 3% from last year. Our interconnect business, which comprised 94% of our sales, was up 15% from last year reflecting the benefits of both good organic growth and the Company's acquisition program. Adam will comment further on trends by market in a few minutes.

For the full year sales were $5.346 billion, up 16% in US dollars and 8% organically over 2013, a very strong performance. Operating income excluding one-time items increased to $288 million in the quarter. Operating margin, also excluding one-time items, increased to 20.2% in Q4 compared to 19.7% last year and 19.9% last quarter.

This represents the third consecutive quarter of ROS improvement in 2014. The sequential increase of 30 basis points in operating margin over the third quarter and the achievement in the quarter of a new record ROS of 20.2% resulted from an increase in operating margins in our interconnect business.

From a segment perspective in the cable segment margins were 12.1%, down from 12.5% last quarter and 12.2% last year primarily due to the impact of market pricing and some impact from product mix. In our interconnect business margins increased to 22.4%, up 30 basis points from last quarter and 60 basis points from last year. We are very very pleased with the Company's operating margin achievement both with the full-year achievement of 19.6% excluding one-time items, which reflects the impact earlier in 2014 of the lower-than-average profitability level of certain acquisitions and in particular with a consistent quarterly improvement in profitability during the year culminating in the achievement of 20.2% ROS and Q4.

The improvement in ROS achieved consistently during the year reflects excellent operating execution both organically and in our acquisition program in addition to aggressive cost management. This excellent performance is a direct result of the strength and commitment of the Company's entrepreneurial management team which continues to foster a high-performance, action-oriented culture in which each individual operating unit is able to appropriately adjust to market conditions and thereby maximize both growth and profitability in what certainly continues to be a very dynamic environment.

Through the careful fostering of such a culture and the deployment of these strategies the management team has achieved industry-leading operating margins and remains fully committed to driving enhanced performance. The Company recorded one-time charges of $10 million, or $0.02 per share in the quarter which include the amortization of the value associated with acquired backlog relating to the Casco acquisition completed in the third quarter and also acquisition-related transaction costs.

The Company also recorded acquisition costs in last year's fourth quarter of $3 million, or a penny per share. The acquisition-related costs include professional fees, transaction taxes and other external expenses relating to the acquisitions closed in the respective time periods.

Interest expense for the quarter was $20 million compared to $16 million last year due to higher average debt levels resulting from the Company's acquisition and stock buyback programs. From a sequential standpoint interest expense in the fourth quarter declined about $1 million from Q3 to Q4 and will further decline by another $3 million or so in Q1 2015 due to a reduction in the Company's average effective interest rate.

The lower average rate is a result of a new note issuance in September replacing a higher cost note maturity in November and the implementation of a new commercial paper program. Other income in the quarter was $5.2 million, up from $3.9 million last year, primarily as a result of higher interest income and higher levels of cash and short-term cash investments. The Company's effective tax rate in the quarter was 26.4% compared to 26.3% last year both excluding one-time items.

For the full year also excluding one-time items the rates were 26.5% and 26.3% in 2014 and 2013 respectively. On an as-reported basis the Company's effective tax rate was approximately 26.2% in Q4 2014 and 26.5% for the full-year 2014 compared to 26.2% and 24.6% for the respective 2013 time periods. The full-year 2013 included the impact of a net income tax benefit of $3.6 million, or a penny per share relating primarily to the completion of prior-year audits.

In addition, it also included an income tax benefit of $11 million or $0.03 per share resulting from the reinstatement on January 2, 2013, of certain federal income tax provisions relating primarily to research and development and US taxes on foreign income. Our 2015 guidance incorporates an effective tax rate excluding one-time items of 26.5%.

Net income excluding one-time items was approximately 14% of sales in the quarter and earnings per share, also before one-time items, increased a strong 19% to $0.63 in Q4. For the full-year 2014 EPS excluding one-time items was $2.25, up 17% over last year, an excellent performance. Orders for the quarter were $1.427 billion, up 15% from last year resulting in a book-to-bill ratio of about 1 to 1.

The Company continues to be an excellent generator of cash and we had very strong cash flow in the fourth quarter. Cash flow was $273 million, or 140% of net income. For the full year operating cash flow was $881 million and 123% of net income.

The Company continues to target cash flow from operations in excess of net income. The Company had good working capital management during the quarter. Inventory stood at $866 million at the end of the year, up 2% from September.

Inventory days were 79 days, down 1 day from both September 2014 and December 2013 levels. Accounts Receivable was $1.1 billion at the end of the year, up about 3% from September.

Day sales outstanding was 71 days, up 1 day from September 2014 and December 2013. And accounts payable was $618 million, up about 3% from September and from a days perspective was 57 days, up 1 day compared to both September and prior December levels.

The strong cash flow from operations along with net proceeds from our commercial paper program of $671 million and $12 million of stock option proceeds were used primarily to purchase $139 million of the Company's stock to fund $46 million of capital expenditures and $50 million of acquisition payments relating to the December acquisition of Goldstar to fund the November maturity of the Company's 4 3/4 $600 million five-year note and to repay $22 million under the Company's revolving credit facility. This resulted in an increase in cash and cash equivalents of about $96 million in the quarter.

During the quarter the Company repurchased 2.9 million shares under its January 2013 20 million share stock buyback program. This completed the authorization under that program and the Board of Directors has authorized a new two-year 10 million stock share repurchase program that commences this month.

At the end of the year cash and short-term investments were $1.33 billion, the majority of which is held outside the US. Our total debt stood at $2.67 billion bringing net debt to $1.34 billion.

And as we previously disclosed in September of this year, the Company established a new $1.5 billion commercial paper program that's supported by the Company's $1.5 billion revolving credit facility. And at quarter end the Company had issued $671 million in commercial paper under the program.

EBITDA in the quarter was $330 million bringing the full-year EBITDA to $1.2 billion. From a financial perspective this was an excellent performance.

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

Well, thank you very much Diana. And I would like to offer my welcome to all of you on the phone. And hopefully it is not too late to wish you as well a happy New Year here in January.

As Diana mentioned I'm going to highlight some of our achievements here in the fourth quarter and the full year. And then I will spend some time to discuss the trends and our progress across our various served markets. Finally, I will make some comments on our outlook for the first quarter as well as for the full year of 2015.

Turning to the fourth quarter, I think as Diana just reviewed the fourth quarter was an excellent quarter for the Company in virtually all respects, as we exceeded the high end of our guidance while setting new records in sales and earnings. Our revenue increased a very strong 15% from prior year and 5% sequentially, reaching the record level of $1.427 billion. And the Company similarly booked a record $1.427 billion in orders, which represented a book-to-bill of exactly 1 to 1.

Diana also highlighted that we reached in the quarter the highest levels of profitability in the Company's history with our operating margins expanding 50 basis points from prior year to 20.2%, a great achievement by any benchmark. We are also very pleased that our Board of Directors has approved the 10 million share stock buyback program that we announced today which follows the completion of our January 2013 program.

What I can just say with respect to the fourth quarter and for the year I am extremely proud of our team. Our results this quarter confirm once again the true value of the discipline as well as the agility of Amphenol's entrepreneurial organization. We continued to capitalize on the many available opportunities for growth while also driving superior operating performance.

We also made great progress in our acquisition program in the fourth quarter with the acquisition of Goldstar Electric Systems, which was completed during the month of December. Goldstar is a China-based manufacturer of high technology interconnect assemblies for the industrial heavy equipment industry. And the Company has facilities in two important new locations in China and has annual revenues of approximately $40 million.

There is no question that the addition of Goldstar strengthens what is already a very robust presence that we have in the China industrial market and provides a great complement to our already fast-growing industrial interconnect business. We are especially pleased that the entire management team of Goldstar has joined Amphenol and I personally look forward to them driving continued growth in the Company for many years to come.

This acquisition is very consistent with our ongoing and successful strategy to acquire complementary companies with strong management, leading technology and an excellent market presence. And as we welcome this outstanding new team to Amphenol we remain very confident that our successful acquisition program will continue to create value for Amphenol into the future.

I'd like to make a couple of comments just about the full year of 2014 and I think we can say very simply that 2014 was an outstanding year for the Company as we grew strongly while establishing new records in sales and earnings. We expanded our position in the overall market growing sales by 16% to a new record, $5.346 billion. And we did that while generating EPS of $2.25, a growth of 17% from prior year and achieving 19.6% operating margin.

We are also very pleased to have created further value with our acquisition program in 2014 with the important acquisitions of Casco and then Goldstar, which we just announced. These fine companies are significant additions to Amphenol which further expand our position in the automotive, interconnect and sensors market as well as in the industrial interconnect market.

It is our consistent focus across Amphenol on growing with the broadening array of customers across the many diversified end markets that has resulted in us strengthening our position across the board in the electronics industry. In addition, our entrepreneurial organization has accelerated the development of innovative interconnect technologies in support of our clear long-term mission which is to be the enabler of the electronics revolution. These developments have allowed Amphenol to capitalize on exciting new markets and thereby have broadened the opportunity for the Company for our future growth.

So as we close 2014 I can just say that we are confident that we have now built a new platform of strength from which the Company can drive even stronger performance into the future.

Now turning to the trends in our served markets, I just want to comment that once again in the quarter our diversification across these end markets remains one of the greatest assets of the Company with no market representing more than 17% of our sales for the full-year 2014. The military market represented 10% of our sales in the quarter and 11% of our sales for the full year. Sales in the military market increased 3% from prior year driven by growth in military vehicle communications and airframe applications and grew 2% sequentially.

For the full-year 2014, our sales were up slightly and that is despite what have been very well reported reductions in overall military spending in many Western countries. We are pleased to have seen some stabilization in the demand environment in particular in the United States defense market but while we do not expect any significant rebounds in overall spending and while world events continue to create uncertainty around these global spending patterns, we are confident that our position remains strong. The increasing electronic content in military equipment together with our broad program participation and strong positions in high-growth emerging markets have created good platforms for future growth.

While we expect a slight moderation of sales going into the first quarter, for the full-year 2014 we do anticipate a modest increase in sales from these levels as we benefit from the ramp-up of new programs as well as from our new designs on next-generation military equipment.

The commercial aerospace market represented 6% of our sales in the quarter as well as for the full year of 2014. Sales increased a very strong 6% from prior year and actually 8% organically as we continued to capitalize on increased demand resulting from higher production levels of next-generation jetliners on which we have strong content.

Sequentially our sales grew by 4% from the seasonally lower third quarter. And as we look back at the full year of 2014 our sales grew strongly, rising from 2013 by 18% including acquisitions and 10% organically, clearly outperforming the overall market for jetliners. We are very pleased with our continued progress in the commercial air market as we've taken excellent advantage of the proliferation of new electronics on next-generation jetliners which we are enabling with our high technology interconnect products.

Looking forward we expect sales to essentially remain at roughly these levels in the first quarter but we continue to have a positive outlook for the commercial air market in 2015 and beyond as production volumes continue to ramp up and as new platforms launch, thereby creating an exciting long-term opportunity for Amphenol.

The industrial market represented 16% of our sales in the fourth quarter and 17% of our sales for the full year of 2014, effectively one of our two largest markets in the year. Sales in this market grew by a very strong 35% on a year-over-year basis and this is driven in particular by growth in the medical, heavy equipment and oil and gas segments together with contributions from our acquisitions that have been completed during the course of the past year.

On a sequential basis our sales were slightly lower than prior quarters, demand moderated seasonally in several segments of the industrial market. For the full year of 2014 we are just very pleased with this market where sales grew by an extremely strong 44% as we benefited from the acquisition of Advanced Sensors as well as strong 14% organic growth in the worldwide industrial market. We are very pleased with our outstanding progress this year in this market.

Our expansion within the many growth segments of the market including medical, heavy equipment, oil and gas as well as factory automation, has been complemented by a successful extension into sensors as well as our continued development of high technology interconnect products. The addition of Goldstar here in the fourth quarter represents yet another step forward in our successful expansion, in particular within the high-growth China industrial market.

While we have seen some recent slowing in certain segments of the industrial market including in particular the oil and gas area, looking ahead we expect sales to remain stable in the first quarter. And we continue to look forward to a strong year in the industrial market in 2015 as we benefit from the Goldstar acquisition as well as from our continued progress at diversification to the many exciting segments of the industrial market.

The automotive market represented 17% of our sales in the fourth quarter and represented 15% of our sales for the full year of 2014. Sales increased an excellent and higher-than-expected 62% from prior year and 24% sequentially.

Organic growth in the quarter was a very very strong 21% year-over-year and 5% sequentially, really strong by any measure. This significant year-over-year growth was driven by ongoing ramp-ups of new, high technology programs as well as generally higher vehicle production volumes combined with the significant benefits from both the Advanced Sensors and Casco acquisitions that we've completed over the course of the last year.

For the full year of 2014 we are very pleased as we have achieved excellent growth of 49% in US dollars and 21% organically for the total of 2014. No question that these results reflect our success and our drive to expand our interconnect and now sensor product offering into new vehicles around the world and we look forward to further capitalizing on the accelerating revolution of automotive electronics in the future. Our expanded product offering now extends to many exciting areas of the market from hybrid and electric drives to safety and security, telematics and infotainment, exhaust management and engine control and transmission and braking, all areas which position us strongly for future growth in the automotive market.

For the first quarter, we anticipate a moderate increase in sales compared to fourth quarter and a more than 30% increase in US dollars and 45% increase in local currencies compared to the prior year's first quarter. For the full-year 2015 we expect strong double-digit growth in this market, as we realize the benefits of the Casco acquisition as well as of our very successful expansion of the range of automotive electronics into which our interconnect and sensor products are designed.

The mobile devices market represented 20% of our sales in the quarter and 17% of our sales for the full-year 2014. Our sales increased by a stronger-than-expected 4% from prior year on increased sales of products sold into smartphones and smartphone accessories as well as laptops, which more than offset a reduction in tablet-related sales.

Sequentially we grew a very strong 21% from the third quarter again on increased sales of smartphones and accessories as well as some sequential increase in tablet sales. This was another excellent demonstration of our team's ability to quickly react and to flex our manufacturing capacity to increase customer demands, no doubt a critical asset in this very dynamic market.

For the full-year 2014 sales increased by 5%, which certainly represented better performance than we had anticipated coming into the second half of the year. We are confident that our highly reactive and agile organization will continue to secure a strong position in the ever dynamic mobile device market and remain encouraged by our excellent technology position across a wide range of new mobile computing platforms.

In particular, mobile functionality is being integrated into an ever broader array of devices thereby expanding the growth opportunity for both our interconnect as well as antenna products. Looking into the first quarter, we do expect a roughly 25% sequential reduction in sales due to normal seasonality combined with the impact from strong ramp-ups of new products in the fourth quarter. Just wanted to note that this is very similar to the seasonal decline that we experienced coming into the first quarter of this last year, 2014.

At this point we expect sales for the full year of 2015 to remain roughly at these 2014 levels as increases in products sold into smartphones and accessories as well as laptops are offset by expected reductions in sales related to tablet computers. Regardless of the overall demand environment, though, we remain extremely confident that our dynamic, agile team has positioned us to benefit from any increases in demand that may arise in this exciting market.

The mobile networks market represented 9% of our sales in the quarter and 11% of our sales for the full year and sales grew again strongly from prior year expanding by 13% on growth and products sold both into wireless OEMs as well as direct to wireless service providers. As expected, sales declined sequentially by 19% as operators around the world moderated their spending from their earlier high levels of investment.

No question that 2014 was an excellent year for our team working in the mobile networks market as they were able to capitalize on the expanded buildouts around the world growing our sales by a very strong 24% from prior year, all organic. Our clear outperformance of the overall wireless market this year is a great affirmation of the strength of both our broad interconnect as well as antenna technologies combined with our excellent position with OEM and operator customers around the world.

Based on the latest information we have from those customers and looking out into the first quarter and beyond, we do expect a further moderation of sales in the first quarter and at this time we anticipate a slight reduction in our sales to the mobile networks market for 2015 as operators digest the significant investments that were made in 2014. But regardless we remain very well-positioned in this market due to our broad design and positions on new base station platforms as well as our strong presence with a diverse range of global wireless operators.

The information technology and data comm market represented 16% of our sales in the quarter as well as for the full year of 2014. Very pleased that this market performed better than expected in the fourth quarter as our sales decreased by only a very slight amount from prior year as expected moderations of demand in networking equipment more than offset growth in storage-related products and servers. Our sales increased actually by 3% sequentially on the strengthening of sales of our products incorporated into both networking as well as storage equipment.

No question that 2014 was a challenging year in the IT data comm market as the overall market experienced significant dynamics and one could even say disruption. As a result, growth in storage and servers that we did achieve was more than offset by declines in networking equipment sales and thus our total sales declined slightly for the year. Nevertheless, despite those market dynamics we made tremendous progress this year in our development of advanced high technology products as well as in our initiative to penetrate the many newly arising Web 2.0 and data center customers.

Regardless of the many structural changes in this market, all of our IT customers are pushing their equipment to new levels of performance in order to handle the rapid expansion of data, which is driven in particular by new mobile devices and by the continuing spread of video on the Internet as well as by the acceleration of cloud-based computing. While we expect a further seasonal moderation of IT data comm demand in the first quarter, we do anticipate this market to return to growth in 2015. And we are excited by the potential of these new technologies together with our accelerating progress with new data center customers.

The broadband market represented 6% of our sales in the quarter and 7% of our sales for the full-year 2014. Sales in this market decreased slightly from prior year and by roughly 5% sequentially as domestic MSO buildout activity slowed due to traditional seasonality. For the full year our sales moderated slightly from 2013 as growth in our new products as well as with nontraditional customers was offset by overall reductions in investments by cable operators, which we believe is in part related to the ongoing consolidation that is occurring in the broadband industry.

While we expect demand to remain at these levels in the first quarter we look forward to some degree of renewed growth in the broadband market in 2015 as operators expand their spending in support of higher-speed data offerings and as we realize the benefits of our expanded offerings of cable and interconnect products.

In summary, I just want to say that we are all extremely proud of the Company's excellent growth and record performance in both the fourth quarter and the full year of 2014. And despite the many uncertainties that remain in the global economy, our organization continues to execute extremely well and expand our market position.

The Company's superior performance is a direct reflection of our distinct competitive advantages, leading technology, our broadened and increasing position with customers across a diverse range of end markets in the electronics industry, our presence around the world and a very lean and agile flexible cost structure as well as an entrepreneurial and dynamic management team that at the end of the day makes it happen.

Now turning to our outlook for the first quarter and into 2015, I just want to comment that there no doubt continues to be a great deal of geopolitical and market uncertainty around the world including in particular the increased volatility and significant weakening of certain overseas currencies. Accordingly, and based on a continuation of the current economic environment as well as on constant exchange rates, we now expect in the first-quarter and the full-year 2015 the following results.

For the first quarter we expect sales in the range of $1.286 billion to $1.326 billion and EPS in the range of $0.55 to $0.57 respectively. This represents a sales increase versus prior year of 3% to 6% in US dollars and 7% to 10% in local currency as well as an EPS increase of 10% to 14% compared to prior year.

For the full-year 2015 we anticipate sales in the range of $5.493 billion to $5.653 billion as well as EPS in the range of $2.41 to $2.49. For the full year this represents sales and EPS growth excluding one-time items of 3% to 6% and 7% to 11% respectively over 2014 levels.

In constant currencies this guidance represents a year-over-year growth of 6% to 9%. We are very encouraged by this strong outlook in sales and earnings especially given the many dynamics in the global economy. And I remain extremely confident in the ability of the outstanding Amphenol management team to build upon these newly established record levels of revenue and EPS and to continue to capitalize on the many opportunities to grow our market position and expand our profitability into 2015.

Operator, at this stage we would be very happy to take any questions that there may be.

Thank you. (Operator Instructions) Amit Daryanani, RBC Capital Markets.

Two questions for me. One, I think you guys spent a fair bit of time talking about just some of the FX impact in Q1 and in 2015. Is there a way to think about what is the FX impact on your EPS and potentially even free cash flow for the year?

Sure. I think that if you think about what the potential FX impacts on income are I think you've got two components. One is the translation component, which is just the mathematics of converting foreign currency sales into US dollars and I think we have disclosed what the sales impact of that is.

I would tell you that if you wanted to compute that impact you could probably use an average ROS on those sales. So it would be about the same percentage on income that it is on sales.

The second potential impact is for a mismatch between selling price and cost structure. And I think that is one where we have a very active program to manage that risk and I think we've done a very good job historically of being able to manage that down to a level that has never been material for the business.

And we don't expect to see anything different in the current environment with respect to that. I think the translation impact is the only one that you would have.

Got it. That's really helpful and I guess I get $0.07 to $0.08 impact to EPS based on the return on sales math. I guess Adam, maybe you could just touch on the M&A environment, your capital allocation in 2015 as you go forward?

And maybe just touch on your ability or desire to do deals. How big of a deal would you like to do? And this may be a little naive but do you think a declining euro the way it has makes it increase the probability of you guys doing deals in Europe given you have a better currency today than six months ago?

I think what I would just say relative to the overall M&A environment, we continue to feel that we have a very strong position as what we termed the acquirer of choice in the industry. We are very pleased with the acquisition that we made here in the fourth quarter of Goldstar, just an outstanding company, not located in Europe but certainly an outstanding company where it is in China.

And we continued to see in terms of capital allocation that M&A remains the best return for us on our capital together with new product expansion and then we have obviously the buyback as well as the dividend program that Diana has talked about very often. But relative to M&A we continue to be very aggressive. We continue to have a very robust pipeline of deals.

And I think what we are very pleased with is as we've expanded the Company and expanded the kind of scope of the interconnect solution that we are approaching including everything from connectors to cable assemblies to flex assemblies to antennas as well as now sensors, the universe of opportunities for acquisitions if anything has grown over the last half of a decade for us. And that opens up many many opportunities for us to pursue interesting companies.

Relative to size, there is no question that we have the wherewithal from a capital standpoint and a financial strength to do deals of quite significant size and we would not shy away from that. At the same time we have a very simple but also pretty strict criteria for acquisitions and that has not changed. It starts with management and us looking to find companies that are run by strong managers who want to really succeed beyond where they have succeeded in the past by being part of Amphenol.

We look for companies that have outstanding technology and technology that is really complementary to us and we look for companies that have a complementary market position in an area where we see growth potential. I think size has never been one of those criterias and it continues not to be a criteria but no doubt with the financial strength that we have created over these years we have probably more capacity to make a bigger acquisition if that was certainly available.

Relative to the declining euro, things go up and things go down. And I think you know well having followed the Company for many many years that we are not opportunistic in the sense that when a currency goes down we immediately change and we hunt for companies in that area to try to get something on the cheap or otherwise. That's really not the mindset that we approach.

We take a very long view to these acquisitions. And we have a pipeline of acquisitions that is made up of companies in every geography around the world. And certainly we will continue to pursue them regardless of where the currency rates have moved in a given day.

Craig Hettenbach, Morgan Stanley.

Adam, question on the sensor market and as you bring that business into the fold, just curious kind of the opportunity set that you are seeing from a product development and design standpoint with your customers, if you can give us an insight into that?

It's just really exciting. Here we are roughly 13 months after having acquired the advanced sensors business, 13 months and three days to be exact and we continue to just have positive surprises I would say every month every quarter almost every week in terms of validating our original intention to get into the sensors market.

How would I describe that? I said early on that we were very excited by the sensor market in particular because we saw a great combination of the technology of interconnect and sensors that the value of a sensor comes not just from that sensor element but rather from that total package that you are selling to customers and very frequently that is an interconnect package.

That was obviously we said that at the day when we bought the Company and I can tell you that now 13 months later knowing a lot more than we knew 13 months ago no question that that has been validated. When we go to customers there is no doubt about it, there is a positive reception to -- by the customers to the idea that we can bring to those meetings an engineer who gets the sensor, who gets the underlying technology of the sensing element together with an engineer who gets how to connect that into the system.

Because at the end of the day you can have the best element in the world but if it doesn't connect into the system it doesn't matter. It just won't work. And I think that is a challenge that our customers have wrestled with for many many years.

And again that has just been validated time and again as I've visited customers and as I have talked to our team and those in and our of our team met customers and otherwise, that that combination of the interconnect together with the sensor is a very very compelling proposition for our customers. So I think as it relates to the product development we have seen a lot of activities between our organization pre-acquisition, the interconnect engineering teams, together with the sensing engineering teams that came with Advanced Sensors and then later Casco.

Does that mean that you flip a switch and the sales go up by a precipitous amount in a moment? Of course that doesn't mean that because there is a lead time to designing those products, you are working in many cases on very long cycle, harsh environment programs in either the automotive or the industrial market, medical, heavy equipment and places like that. So these aren't just immediate switches that you can flip, but at the end of the day there is no doubt that there is a positive momentum behind that and that we see great opportunities in the future to leverage the sensors together with the connectors.

Got it. Thanks. And as my follow-up for Diana, appreciate the color and context around FX.

Any commentary on metal prices particularly copper with the decline if that is a little bit of help? Or above and beyond that any kind of puts and takes to below the line-out margins as you think through 2015?

Yes, relative to the contributors to margin and commodity prices and oil in this kind of thing, I think as we have said before there are many contributors to margin and it is never easy to single out specific items. But certainly in addition to strong sales growth and good operational execution, a more supportive commodity environment normally is a positive certainly in product areas where metals or certain plastics or even transportation costs can be particularly important. But the way that we look at this really the ultimate impact on margin depends largely on the balance between input costs and pricing and that balance tends really to be dependent upon the perceptions of demand levels.

And I would say that right now given the current extreme market volatility whether you talk about currencies or commodities or oil, economic growth, it really prevents a bit of a challenge in terms of for some markets in terms of establishing what that direction and what that demand is. And so we really right now wouldn't say that we see any particular abnormal advantage or tailwind from a margin perspective on a consolidated basis relative to any of these trends from a commodity standpoint. But I think also as we have said in response to this question in the past, you can be certainly assured that our management team is going to do the best to capture and keep any advantage that does present itself in the marketplace from commodities, oil or anything else that comes up -- along.

Amitabh Passi, UBS.

I had a question and a follow-up. Maybe this is a bit of a finer point and a subtle point, Adam, but I was curious if I look at your first-quarter 2015 guidance it seems like much of the impact is seasonal in some of your markets like mobile devices, concerns around FX.

I am just curious, are you sensing maybe an increasing level of caution across the board in terms of order patterns or maybe lead times, or are orders being pushed out? I am just wondering if there is a sense of caution in terms of the overall demand environment, or do you think again it is around FX and just maybe seasonality?

I think that as we look into the first quarter one thing I will say is the whole world there is a sense of uncertainty. I think that has not been a change. Every quarter there seems to be something new about which the TVs can speak and the newspapers can write.

But there is no doubt that there is a lot of uncertainty in the world today. I think as we look at our guidance, I think you correctly characterized that there are some seasonal effects. There is obviously the impact of currency, which is a very dramatic volatility and as Diana mentioned, you can't even look at that currency in a vacuum.

It is reflective of some overall dynamic going on in the worldwide market. I think there are also some specific markets, a market like for example a mobile infrastructure where as I mentioned, we don't expect that market to grow this year after having a fabulous growth in 2014, a little bit because operators are digesting that which they built over the course of the recent quarters here.

So I think it is largely seasonality. At the same time there is no doubt about it a general sense of uncertainty. I would not point, though, that there has been any significant pullbacks of orders.

There have not been any cancellations or pullouts or some of those more sort of short-term things that one would look at as a sign of a kind of an immediate impending doom. There is certainly none of that that we have seen.

Excellent. And then just as a follow-up, I guess more specifically on the IT datacom segment, you spoke about returning to growth this year. It looks like in 2014 storage might have been a bit better than networking, so just wanted to understand what drives growth this year?

Are all your end markets storage servers, networking performing better? Are you getting greater traction with some of the web scale players? Just any help you can give in terms of the growth drivers.

Sure. I think I mentioned in my earlier remarks that this has been a very challenging market in particular because of just the significant structural changes that have happened in that market. And you have really what you know very well and better than I through your coverage of that space a true disruption that has happened and a shifting of the balance of power in that.

And you see that as the OEMs released their results, some of which have come out just in the last 24 or 48 hours. And what we have done in that time, and thank goodness we have the agility and the nimble organization to do so, is to very rapidly redeploy our resources towards those web-centric cloud computing-type companies towards the ODM manufactures, towards the direct data center market. And those are efforts that we have really been accelerating over the course of the last year and which we would expect to pay more significant dividends going ahead.

As I look at those groups, servers, storage and networking, I don't think that we see a kind of a different shape to those going into this year. There is no doubt that in 2014 networking was the real drag on the performance. That networking business was down significantly compared to a server and storage business that were actually up on a full-year basis.

I think going into this year we wouldn't expect that to be so much of a differential between those spaces. But, again, who knows to be honest because that is a space where there is more change to come. No question you will see new players arise and old players disappear and you will see further shifts in the balance of who is spending what money.

But what will not change, and that is very clear, is that data will continue to grow exponentially and the desire to process that data and in fact the need to process the data, this is not going to abate. It is a question of hunting down who is ultimately doing it. And in that case I'd bet on a nimble organization like ours more than any other to go in and ferret that out and establish where those new buying patterns are happening.

Matt Sheerin, Stifel.

Just a question to Adam regarding the GE sensor business. You talked about the cross-selling opportunity and obviously the opportunities within sensors.

From an operating perspective I know the margins there were below Amphenol's margins. What kind of progress have you made and how much is left?

Yes, I think we would say that we've made very good progress there. If you look that's not the only factor.

We've had a lot of great execution in driving our margins up quarter to quarter over the course of this year. But very clearly we did talk about it in the first quarter last year that the dilutive effect of the lower-than-average margins of the Advanced Sensors business did pull down our margins in the first quarter.

I think the fact that we have brought those margins back up and now in the last quarter 50 basis points higher than before we acquired the Advanced Sensors business is a reflection of the great execution of our total team as well as some impact from improvement in Advanced Sensors. No one is ever done in Amphenol, though, so there will be much room to go.

Got you. And regarding your commentary on the oil and gas market being softer, which obviously makes sense, how big a business is that for you relative to your industrial exposure? And are you just seeing backlog or bookings start to fall going into the year?

Look, the beauty of our industrial business and very much like total Amphenol is we have a very very broad industrial business and there is not any segment across our industrial business which dominates that space. And while it is true that oil and gas has been one of the helpful drivers and that it will not be a help going into this year, it is still a market that we continue to believe will have strong performance as I mentioned in my early remarks.

So look there is no question when the price of oil drops by more than half people are going to drill less, they are going to hunt less and they are going to explore less and they're going to ultimately use less equipment and those equipment makers are going to use less connectors in making that smaller amount of equipment so that is what it is. Our team will react very well. We have a very broad presence in many areas of the energy market and that's not even just confined to oil and gas, it includes alternative energy.

But you can rest assured that those individuals in the Company who are in that space who have seen no doubt about it some pullbacks in order volumes, they are taking the appropriate Amphenol-like reactions in terms of measuring their resources and adjusting their resources accordingly while we reallocate resources to the high-growth opportunities that still remain across the industrial market.

Mark Delaney, Goldman Sachs.

I was hoping if you could talk first on the M&A situation and have you seen any change in the valuations and the level of competitive activity for any of your competitors are trying to bid for some of the same customers that you are and is that impacting the valuations that you are able to get?

I commented earlier that we still feel very positive about the M&A environment and there is no doubt about that. Multiples go up and multiples go down. We tend not to chase market multiples.

We tend to develop long-term relationships with companies. And then ultimately if we develop mutually a trust between us we are usually able to find a fair price that satisfies both sides. And I think that has been our approach in acquisitions.

We are not a kind of tactical deal-based acquisition company. We are very much a long-term view towards acquisitions. There are certainly lots of companies in our space and in other spaces related to our space who want to make lots of acquisitions and they are going to buy some companies and we're not going to buy some companies but that is no change.

That has been the case for a decade and a half across this industry. But over the course of that time period we have managed to buy somewhere around 70 companies and we've acquired 12 companies just in the last three years as the equity markets have expanded and multiples have expanded. And we have continued to still be able to find good companies for fair prices.

I don't say cheap, we're not trying to get cheap prices, but we are getting fair prices and excellent companies. And I think we will continue to find good opportunities to continue on that path.

Understood. And then you also mentioned the expansion of the buyback program in your prepared remarks. If you could just help us understand how you plan on implementing the buyback?

Sure. We implement the buyback program as we always have done in the past. Really each quarter we take a look at a very balanced look at what our acquisition program looks like and we then make the decision on that basis as to how much additional capital it makes sense to deploy.

If you go back and look at last year, if you look at the last five years what the result of that has been that about half of the free cash flow of the Company has gone back to shareholders in the form either of dividends or stock buybacks. And so if one wanted some sort of proxy one could use that historical pattern.

I would just say that we will and we do, I think as Adam said before, we prioritize the acquisition program in terms of use of the Company's financial strength because we really believe that that provides the best long-term return for the Company and for the shareholders. But other than that if you wanted to use a historical pattern for a proxy of what the Company would do in the stock buyback program I would think that would be fine.

Steven Fox, Cross Research.

Two questions for me. Adam, first off on the auto market outlook you discussed for 2015 you mentioned strong double-digit growth. I wasn't sure what that meant from an organic statement versus say how fast you're going to grow over global vehicle production.

And then you did mention a bunch of market extensions there, I don't know if you could highlight one or two that are driving that? And then real quick on tablets declining this year, is that a function of unit demand for tablets, market share shifts that your customers or with your products, or just any design changes that is impacting you? A little color there would help, thanks.

Sure. Thanks very much, Steve.

I think with your first part on the auto market, we do have still a very positive outlook for that market and we have just made outstanding progress. Our whole organization who works in that space, I just can't applaud them enough for what they've achieved here over the course of the last five years in terms of expanding our product offering and getting really positioned on high-technology complex interconnect systems that are enabling next-generation electronics in cars.

So as we look going into next year, and I mentioned we have strong double-digit outlook, we have also a very strong outlook organically in that space. And I don't know what the latest numbers are for car expectations. I know you wrote that in the report, but I -- sorry, but I forget exactly the number you said. But I know maybe that's a low single digit or so outlook for car volumes.

And we would certainly expect our business to perform significantly above those levels on an organic basis as a result of these excellent design-ins we have on really long-term next-generation systems.

Relative to the mobile devices market, and I did mention we expect growth in smartphones and related accessories together with our laptops being offset by some reduction in tablets, I think that reduction in tablets is a combination, but what is predominantly driven by just unit volume expectations in the tablet space where I think that has been widely reported of some of the unit volumes that go.

We talked I think a number of quarters ago about some content reductions in the tablet space, and while there may be some impact from that, I think the broader impact comes really from the reduction in units of tablets.

Shawn Harrison, Longbow Research.

Two questions. The first on mobile networks is, is there any way with the weakness you are anticipating for 2015, if you could maybe give some geographic insights and maybe if you are seeing a region up versus other regions down.

And then second, Diana, I just wanted to confirm. I think last time on the call you said you are targeting CapEx for this year around 3% to 3.5% of sales? Just wondering if that number holds true?

I think it's a little too early to say what region is going to perform at what level in the mobile networks market going forward. I think what we are very pleased with here in 2014 is that all the regions, Asian, North America and Europe all grew in double digits.

I think that growth was strongest in Asia, there is no question, but we had also very very strong growth in Europe and excellent growth in North America as well. So looking at this year on the basis of our expectations that some of these operators are going to be taking a little time to digest their investments, I don't know that that would be so much differential across the regions but it's early to say in that market.

And from a CapEx standpoint that still would hold true, Shawn. It would be about the 3%, 3.5% of sales, so it would be down from 2014 levels where we were funding some new buildings and so forth that will not repeat in 2015.

Thanks a lot.

Jim Suva, Citi.

Adam and Diana, congratulations to you and your team there at Amphenol for great results and outlook. I have one question for Adam and one question for Diana and they are pretty unrelated.

But Adam when you talked about the integration of your acquisition such as the GE sensor market and things like that and great progress there, but I have to wonder about on the cross-selling opportunity is that still more to come in the future? And the reason why I ask is a lot of designs for connectors and interconnect with sensors are designed in from a product conception and necessarily don't rule out immediately to say hey stop using this competitor's connector and start using Amphenol's connectors.

So I guess the question Adam is, is that still more in the future to come and if so does that typically take, and I guess this is your first real sensor company acquisition, do you envision that more like a two to three year down the road of being able to design in more Amphenol content, or when do you expect that to happen and is that still more upside? And then for Diana, on the question a little follow-up on the raw materials, if I remember correctly I think the coaxial business has a significantly more percent wise of say copper and plastics/petroleum-based products and if so can you walk us through about the timing of when raw materials could potentially help your Company such as I believe you'd have to buy the materials, procure it, then put it together then sell it.

So maybe there is a little bit of a lagging impact to raw materials going lower to your margins, so maybe a couple quarters down the road. And do you typically give back like half and keep half the savings in general, or how should we think about that? Thank you.

I don't know that I would give a very different answer on the cable business than I gave on the interconnect business. I think that the -- going way way back in the cable business when we had no ancillary products and we had a lot of hardline cable there was one commodity in particular that was certainly a dominant piece of the puzzle there.

I would say now the business is a little more diverse from a product standpoint to start with. And I think you have that same relationship that I talked about between pricing and cost structure. And so I wouldn't say that in that business we necessarily see a significant tailwind at this point.

I would reiterate though that if we certainly get the opportunity for significant savings and get the opportunity from a demand standpoint to keep those we certainly are quite good at doing that. We have a very good profitability track record and we will certainly make every effort to get the most bang for the buck there. But we really just don't see in either segment at this point a significant benefit coming through purely because of the commodity prices.

And Jim, relative to your first question on the integration and the various opportunities for cross-selling, I would just say once again that we have -- there's tremendous activity across the Company of getting engineers together with engineers, getting salespeople together with salespeople and working with customers. But you correctly point out that there is a time cycle, there is a cycle to program development.

It is not always that you have to be there on the first day of conception of something because in fact it is not always at that time when the connectors or the sensors are designed in. And I think there is one additional thing.

As you look in industrial and in particular in automotive, there is an advent now of more what I would call midcycle upgrades and that comes from a very simple dynamic. It is the fact that all of us are used now to upgrading our personal technology on a very frequent basis.

We are getting a new phone every six months. My kids would prefer to have one every three months I think but they're getting it every year or two, and very unhappy because of it. But we have a human need to upgrade technology because there is such a rapid pace of improvement of the functionality of that technology.

The automakers, the industrial equipment makers, they have not been blind to this dynamic. And thus you are starting to see more and more potential for what I would call non-mission-critical midcycle upgrades. We saw that very clearly in things like lighting.

We made a wonderful acquisition several years ago of a company in automotive lighting. And immediately what we saw was they are changing the lights much more frequently than they are changing the body types. It's called a cosmetic upgrade.

They are doing the same things with some of these electronic systems. So putting in a new temperature sensing system of some sort, putting in some sort of new telematics system, whatever that is there are these midcycle upgrades, which have the potential to shorten the life cycle that is there.

I can tell you I was just a couple of weeks ago in Las Vegas at this consumer electronics show, which I in many ways wouldn't wish on my worst enemy because you wear through at least a pair of shoes and you bump into a lot of people over the course of a few hours. But what was amazing is just to see the proliferation in the automotive industry of the electronics. That show is becoming an automotive show where it used to be a computer show years ago.

And I think that's another reflection of this expansion of electronics that you see of things that are moving faster than just new body types and new engine types and new transmissions that used to be the kind of gating feature on these long lifecycles. So I think it is true that the cross-selling will take time. It always takes time regardless because we are not in the business of throwing these new companies into chaos.

We let them run their company the day they come into Amphenol, we don't want things to change. From that respect we want the same people to be running that business and performing. But then we slowly open doors of opportunity to them both collaborating with their peers and opening doors into customers where they wouldn't otherwise have had a presence and therein lies the long-term value that we can create with these acquisitions.

William Stein, SunTrust.

I'd like to dig into the very good operating margin performance for a second. You have long had 20% aggregate operating margin sort of bogey, I think this is the second time you've exceeded it, and you have had 25% fall-through target and you had very good fall through in the quarter.

I'm wondering if either owing to your growing revenue in sensors and more integrated products, Adam, that you discussed you talked about flex circuits and other sort of more integrated products, I'm wondering if that is potentially resulting in the ability to deliver higher still either fall through our aggregate operating margins?

No, maybe I'll make some comment briefly and then let Diana also address this. I think that is not really the main driver. We believe that there is good profit opportunities across all the spaces that we participate in and I think those areas that you point out really open up great opportunities for profitable growth for the Company and expansion.

I think that we have done a great job in 2014 in terms of expansion and you referred to that. I think we've also guided in 2015 on a year-over-year basis to strong margin expansion and I think that the keys to that really are the same as they've always been.

It's a focus on technology and it is a culture of accountability, attention to detail from a cost standpoint and the Company's entrepreneurial structure. I think as Adam said that applies across the board to everything that we do that doesn't apply more or less to one technology or the other.

I think that if you look at the 2015 guidance and you look at the earnings-per-share growth that we've guided, if you just take the high end as an example, we've got a 6% sales growth from a high end and we've got an 11% earnings-per-share growth. And so if you look at the diversified group of EPS growth drivers that are really contributing to that performance, I think this is extremely strong guidance for the year and you've got organic sales growth in multiple markets that drives that.

You've got margin expansion that I talked about with our margins going from about 19.6% to 20% next year. We've got the contribution from our acquisition program that Adam talked about at length. We've got the contribution from the stock buyback program.

We've got a lower effective interest rate from the refinancing actions that we took in 2014. So I think that when we look at the guidance we have given in 2015 we don't see any need to set any other goals and I think these are great goals.

This is a very strong performance both from an operating margin perspective and from a total EPS growth standpoint. And I think as a team we certainly will feel very very good about the achievement of those goals as we have laid them out for 2015.

Great. That's helpful. Thank you.

Wamsi Mohan, Bank of America Merrill Lynch.

Adam, could you comment a little bit about the diversification within mobile devices given the flat guidance for the year, particularly if you are participating with some of the newer players that seem to be gaining share rapidly in the emerging smartphone market? Thanks.

Sure, I think I discussed earlier about the product diversification. And I think I will just remind you that we have a strong position really across the board with customers in every space in the mobile devices market. I think that our position is not totally different from the various market share positions of the various customers that are out there and that has always been the case.

And I think what we have been very successful over the years is regardless of who the winners are and who the losers are, we have managed over a very long term to build our business successfully and we remain committed to continuing that trend going forward. There is no question that there have been some very nice new companies who have come about and we have participated with many, if not all of those companies in a variety of fashions both with our interconnect as well as our antenna products and we will continue to do so.

And I think as you look into this coming year it remains a market that is a very hard market to predict. It remains a market where the winners of yesterday are not the winners of today and the winners of today may not be the winners of tomorrow.

But regardless we will remain committed to staying present with all of those. The whole underlying success that we've had is really based on a cultural difference of our organization who works in mobile devices, who effectively works across these many different customers and these many different products in a way that reflects just a tremendous agility, ducking and dodging as things come your way.

It is not an easy market for them but they do a fabulous fabulous job by remaining quick, by getting quickly onto the right programs and effectively all the programs. But ultimately the outlook that we have given is one that is reflective of the fact that it is a difficult market to predict and one where if as I said there are further opportunities for growth I'm sure our organization will be the first to really pounce upon those and execute well.

Thanks, Adam. And a quick one for Diana if I could, just a follow-up on comments from the previous question. Your 2015 guidance at the midpoint incremental margins are well north of 30% and when you look at the realized incremental margins across the last several quarters, they have been very strong, north of 20% in 20% to 25% range for most of the time and if you look over the last several years that has been true, too.

So what do you think is really changing within that is driving the incremental almost 10 points more of incremental margin within the guidance range?

We don't see 10 points more of incremental margin when we look at the guidance. We see conversion margins as they call them that are a little above 25% but certainly not 30%.

So I guess I don't have exactly the same math that you have. It is true that we had some quarters in 2014 to your point that were in excess of 30%. And I think that when we talk through those quarters, and those really were Q2 and Q3, we had certainly strong operating execution, we had some contribution from some of the acquisitions coming up to speed.

And I think as I said before it is hard to pinpoint so precisely every single element of that contributes to enhanced operating income margins. But I think that we feel certainly very comfortable with the guidance that we have given.

It does include, as I said before, an expansion in ROS for the year and does have conversion margins that are I would say slightly higher than our 25% goal but not materially different. And we continue to go along and think that that is the appropriate goal for the Company. We always try to do more, try to do better if we can but I think we will feel quite good at the end of the day when we achieve these 2015 goals.

Brian White, Cantor Fitzgerald.

Just on the March quarter outlook, at the midpoint it looks like sales fall 8% sequentially. I know historically the last five years it has been flat on average. So what is really driving the seasonality that seems a little more magnified in this March quarter?

The five years I'm not sure what acquisition impacts you have in there. I think if you look from an organic standpoint the first quarter tends to be down unless you have a particular market that is doing something unusual. If you would look at last year's first quarter as an example we did still have a sequential decline but in that particular quarter as an example the mobile network market had a big sequential upswing.

So you do have some markets that from time to time behave unusually in the first quarter but I think as far as we're concerned our normal range is down 4%, 5% kind of range. Maybe this is a percent more at the high end of guidance.

It is a couple percent more at the low end of guidance. I guess it depends upon which you want to look at. But I don't think we feel that this is an unusual first quarter from a seasonality perspective.

Okay. Because the only first quarter I see that is weaker was first quarter of 2009, which was down 13%. In the history I never see a quarter go down more than that.

Yes. Sometimes we have acquisitions, Brian, that come in the first quarter that muck up the comparisons. You kind of need to look at the organic numbers and I would just off the top of my head, I don't have all the stats in front of me but our sales tend to be down a few percent in the first quarter on an organic basis.

Okay. And then Adam, when we think about this sensor market do you feel like you have all the tools in that market that you would like, you can service all the verticals that you would like, or what percent of the way through are you? It sounds like a big opportunity, it's exciting and it is new?

Yes, it is a big opportunity. It is exciting and it is new. That is all very true.

But do we have all the tools, I would say do we have all the products to offer all the attractive markets? The answer is absolutely not. I think when we acquired the GE Advanced Sensors business we were very excited by one thing in particular, which was it was a very diversified company.

But it was very diversified but it was certainly not everything. And so it was a great place to start the advanced sensors because it gave us a presence across the automotive and industrial market.

Within the industrial market it gave us a presence in a variety of areas, heavy equipment, medical, HVAC, in smart buildings and things like that. It gave us also an access into pressure and temperature, gas and moisture. And then the addition of Casco added to our automotive sensor offering with rain sensing and light as well as additional temperature sensing.

But no question we are far far from having what I would call a comprehensive sensor portfolio and that is the great opportunity. Because the opportunity comes both in our organic developments of new products, which our teams are certainly doing and are being driven and supported to do much more than they were under the umbrella of a big industrial conglomerate. And at the same time we have a robust pipeline of sensor acquisitions which over the coming years and half decades and decades ahead we will pursue with the same level of aggression and effectiveness that we have done in the interconnect market.

And we don't today have every connector either. It's a big beautiful diversified market where we still see great opportunities for expansion and I think that is doubly true with the sensors.

Mike Wood, Macquarie Securities Group.

This is actually Ryan Hunter on for Mike and I just have a few quick questions. First in regards to the Goldstar acquisition, was this more opportunistic due to declines in the China heavy equipment market over the past few years, or a technology acquisition and the synergies with your auto and current industrial business?

Yes, I think this was not opportunistic. We have known the company for a very long time. We have a great sense of understanding and also optimism relative to the China industrial market in its totality and I think we see great opportunities for continued expansion with the company.

It's a fabulous fabulous company. Really you walk into their factory you don't feel like you are out in the middle of nowhere China, which is kind of where their operations are.

You feel like you are in really a world-class manufacturing operation. And thus the customers who want to have that same world-class support, they really flock to Goldstar.

And I think there is a great opportunity domestically in China but there is an equal and attractive opportunity servicing customers around the world with their low-cost base. And so those are -- it's a very very exciting company and certainly far from opportunistic in our case.

All right, cool. And we've seen a recent drop in input costs like gold and copper and can you guys discuss what tailwinds you have embedded in your fiscal year 2015 guidance from price cost and what end market would be the biggest beneficiaries?

Yes, I think Diana already mentioned a lot about the fact that we see that what is important is not necessarily the input cost but the balance of input costs in the end market environment. And I think as she mentioned very well, we will no doubt seize on whatever opportunity comes from those input costs but it is not just an automatic.

There is not just an automatic flowthrough. And if the market environment -- if those input costs are reflective of an overall market environment which is not as robust, then you don't tend to just put everything into one pocket.

Very good. Well, I think this was the last question and we truly appreciate all of your attention and support and look forward to seeing you or hearing from you at least in three months from now. Happy New Year again and we'll talk to you soon.

Thank you.

Thank you for attending today's conference and have a nice day.