安費諾 (APH) 2015 Q2 法說會逐字稿

Hello and welcome to the second-quarter earnings conference call for Amphenol Corporation.

(Operator Instructions).

At the request of the Company today's conference is being recorded.

If anyone has any objections you may disconnect at this time.

I would now like to introduce today's conference host, Mr. Adam Norwitt.

Sir, you may begin.

Well, thank you very much and I'd like to offer my greetings to everybody on the call here today.

Thank you very much for joining us for our second-quarter earnings call.

I am Adam Norwitt, CEO of the Company, and I'm here together today on a very special day with Craig Lampo who is here for his first earnings call as our newly appointed Chief Financial Officer.

Our earnings were released this morning and in a moment Craig is going to provide some financial commentary on the quarter.

And then I will follow-up with an overview of the business and current trends.

And certainly at the end we will have a question-and-answer session as well.

But before going into the results I'd like to first introduce Craig Lampo who has been formally appointed as Amphenol's Chief Financial Officer effective yesterday, July 21.

And this has followed a very smooth transition period working together with Diana Reardon.

And I'd like to take this opportunity to express my deepest gratitude to Diana, who has stepped down as CFO after more than 10 years in the role.

During that time, as well as during her more than 27 years so far with the Company, Diana has made tremendous contributions to the performance of Amphenol.

It has been such a pleasure to work with her as CFO and I am especially pleased that Diana will remain strongly connected to Amphenol, both as a senior advisor to me and now as a member of our Board of Directors, to which she was appointed yesterday.

Craig Lampo assumes the role of CFO after serving also more than 10 years as our Vice President and Corporate Controller.

During that time Craig has worked hand-in-hand with Diana and me to drive the performance of the Company and thereby has gained an intimate appreciation of our strategy, operations and the financial management of the Company.

But most importantly, Craig is a true Amphenolian, steeped deeply in the unique culture of this fine Company.

And I personally look forward to continuing to work even more closely with Craig in his new role and I'm excited for the long-term positive impact that he will no doubt have on Amphenol's performance.

So I would like to please ask you to join me in extending my congratulations both to Diana as our newest Board member and to Craig Lampo as our new Chief Financial Officer.

And with that let a me turn it over to Craig for his financial review of the second quarter.

Craig, please.

Thank you, Adam.

It is my pleasure to be on the call for the first time and to provide some financial commentary on the quarter.

The Company closed the second quarter with sales of $1.351 billion and EPS of $0.58, excluding one-time items, meeting the high end of the Company's guidance.

Sales were up 3% in US dollars and 7% in local currencies compared to the second quarter of 2014.

From an organic standpoint, excluding both acquisitions and currency, sales in the quarter were up 1%.

Sequentially, sales were up 2% in US dollars and 1% organically from the first quarter.

Breaking down sales into our two major components, our Cable business, which comprised 6% of our sales, was down 10% from last year primarily due to a slowdown in spending by cable operators as well as the effect of translation.

The Interconnect business, which comprised 94% of our sales, was up 4% from last year reflecting the benefits of both good organic growth and the Company's acquisition program partially offset by translation.

Adam will comment further on the trends by market in a few minutes.

Operating income increased $266 million excluding one-time items in the second quarter.

Operating margin, excluding one-time items, increased to 19.7% compared to 19.5% last year.

A strong year-over-year conversion margin on incremental sales of 29%.

The increase of 20 basis points in operating margins over the prior year resulted from an increase in operating margins in the Interconnect business.

From a segment standpoint, in the Cable segment margins were 11.8% compared to 12.7% last year primarily as a result of lower volumes.

In the Interconnect segment margins were 21.9%, up 30 basis points from 21.6% last year.

The improvement in ROS reflects excellent operating execution both organically and from our acquisitions, in addition to aggressive cost management.

We are very pleased with the Company's operating margin achievements.

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 clearly 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 has recorded acquisition-related costs in the quarter of approximately $6 million or $0.02 per share.

The costs include professional fees and other external expenses related to the acquisition closed and announced in the quarter.

In accordance with the current accounting rules these costs are expensed as incurred.

In addition, we do anticipate additional one-time acquisition-related charges in the second half of 2015 related to the previously announced FCI acquisition.

These one-time charges will be separately disclosed, as is our practice, and are not included in our guidance.

Interest expense for the quarter was $17 million compared to $20 million last year, reflecting the benefit of a lower average effective interest rate in the quarter -- in the current quarter, more than offsetting the impact of higher average debt levels resulting from the Company's acquisition and stock buyback programs.

The lower average rate is a result of the new note issuance in September 2014 replacing a higher cost note maturity in November 2014.

And the implementation of a new commercial paper program.

Other income was $4 million in the second quarter, equal to last year and consists primarily of interest income on cash and short-term cash investments.

The Company's effective tax rate, excluding one-time items, was 26.5% in both the second quarter of 2015 as well as the second quarter 2014.

On and as reported basis the Company's effective tax rate was 27.1% in the second quarter of 2015.

Excluding one-time items net income was approximately 14% of sales in the quarter and EPS increased 7%, an excellent performance.

On an as reported basis the Company achieved EPS of $0.56, which included approximately $6 million or $0.02 of acquisition-related transaction costs as I just discussed.

Orders for the quarter were $1.362 billion, up 3% last year resulting in a book to bill ratio of 1.01 to 1.

The Company continues to be an excellent generator of cash.

Cash flow from operations was $235 million in the quarter, or approximately 130% of net income.

The Company continues to target cash flow from operations in excess of net income.

And for the six months ended June 30, operating cash flow was $423 million or 117% of net income.

From a working capital standpoint inventory was $893 million at the end of June, up approximately 2% from March.

Inventory days were 87 excluding acquisition impacts which was flat from March levels and at the higher and of our normal range.

The higher inventory level supports future step-ups in certain parts of our business.

And we expect inventory days to decline in the second half of the year.

Accounts receivable was approximately $1.1 billion at the end of June.

Consistent with March levels, days sales outstanding was 72 days excluding acquisition impacts, down three days from March levels and within our normal range.

And accounts payable was $560 million at the end of June, down approximately 4% from March levels.

Payable days were 55 days, down three days compared to March levels.

The cash flow from operations of $235 million, along with proceeds from stock option exercises of $30 million, were used primarily to purchase approximately $81 million of the Company's stock, to fund net capital expenditures of $43 million and to fund acquisition payments of $96 million related to the ProCom and DoCharm acquisitions.

During the quarter the Company repurchased 1.4 million shares under its January 2015, 10 million share stock repurchase program.

7.5 million shares remain available under the program through January 2017.

And as mentioned in the earnings release, the Company's Board of Director has approved an increase in the quarterly dividend on the Company's common stock from $0.125 to $0.14 per share, increasing the yield to just over 1%.

This increase is effective for payments beginning in October.

At June 30, cash and short-term investments were $1.4 billion, the majority of which is held outside the US.

Total debt at June 30 was $2.8 billion and net debt was approximately $1.4 billion.

At quarter end the Company had issued $758 million under its $1.5 billion commercial paper program and second-quarter 2015 EBITDA was approximately $313 million.

From a financial perspective this is certainly an excellent performance.

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

Thank you very much, Craig.

It is a pleasure, again, to be here.

And I will give some discussion around our second-quarter achievements.

In particular I plan to discuss the trends and progress in our served markets.

I'm also going to make some comments at the end about our third-quarter and our full-year guidance.

With respect to the second quarter, Craig has certainly given a very comprehensive overview, but I just wanted to reiterate how pleased I am that we've reported such strong performance in sales and EPS despite what has continued to be a very challenging economic environment.

We achieved sales of $1.351 billion, 3% increase from prior year in US dollars and 7% in local currencies.

And as Craig mentioned, our book to bill was 1.01 to 1, with the orders of $1.362 billion.

We are really pleased with the profitability of the Company in the quarter, which continued to be very strong at 19.7% operating margins.

And pleased, in addition that, our EPS reached the high end of guidance at $0.58, growing 7% or twice the rate of our sales growth.

Craig also mentioned the increase in the dividend and, just to reiterate, the 12% increase in the Company's dividend to $0.56 per year is really just another great confirmation of the financial strength of Amphenol.

I can just say how proud I am of our organization who, despite the many challenges and dynamics in the marketplace, was again able to react quickly and capitalize on opportunities across the diverse array of markets that we serve, all while continuing to exercise the discipline and drive necessary to achieve excellent operating performance.

It is just yet again a demonstration of the clear strength of Amphenol's entrepreneurial management culture.

In the second quarter our small headquarters acquisition team put a lot of work in, really made tremendous progress in the last quarter as we announced the signing of the largest transaction in the Company's history while also acquiring at the end of the quarter two outstanding smaller companies.

First, as you all know, we announced on June 29 that we had entered into exclusive negotiations to acquire FCI, for $1.275 billion subject to closing adjustments.

We were very pleased that as of the end of last week we now have signed a definitive purchase agreement for FCI, the completion of which is subject only to certain regulatory approvals.

FCI, which expects sales this year of approximately $600 million with an EBITDA margin of 20%, is a real global leader in interconnect solutions for the telecom, Datacom, wireless communications and industrial markets with a broad and complementary array of high speed power, input/output and miniaturized interconnect products.

We are particularly excited to add FCI's highly talented team of more than 7,000 employees worldwide to the Amphenol family, and I tell you this acquisition is just going to be excellent for Amphenol.

We are now going to be able to offer a much wider range of high-technology interconnect solutions to our respective customers across a broad array of end markets while also driving even stronger operating performance.

We anticipate closing the acquisition of FCI by the end of this year once we work our way through the various regulatory approvals.

Also very pleased in the quarter to have completed the acquisitions of ProCom and DoCharm, both right at the tail end of the second quarter.

ProCom is a Denmark-based manufacturer of harsh environment high-technology antennas, primarily for the industrial market, with annual sales of approximately $20 million.

ProCom is just an outstanding complement to our very successful global antenna business in the wireless communications markets.

And it further strengthens our position as a global leader in RF interconnect and antenna technology, while at the same time broadening our product offering for the worldwide industrial market.

DoCharm is a China-based manufacturer of highly engineered interconnect assemblies for the China automotive industry with annual sales of approximately $50 million.

In particular, DoCharm is a leader in China in the supply of interconnect assemblies for automotive lighting applications and will be an excellent complement to our already successful position in that segment in the Americas and Europe.

As we welcome these outstanding new teams to Amphenol we remain very confident that our successful acquisition program will continue to create great value for the Company.

It is really our ability to identify and execute upon acquisition opportunities while successfully bringing those companies into the Amphenol family.

That remains a core competitive advantage for the Company.

Turning to the quarter and our trends and progress across our various served markets, I would just point out that once again our balanced and broad end market diversification supported our strong performance in the second quarter.

And no single market represented in the quarter more than 19% of our total sales.

Turning first to the military market, that market represented 11% of our sales in the quarter.

Sales increased from prior year by 2% in US dollars and 5% in local currencies due to increases in military helicopter, communications and ordnance related products.

On a sequential basis sales were up 2% primarily with the contribution from the Invotec acquisition.

Looking ahead to the third quarter we expect sales to continue to increase moderately from these levels and we remain confident in achieving full-year growth in the military market in 2015.

While there is no question that overall military spending is not expanding, our technology leadership and broad program participation have enabled us to realize the growth we experienced here in the second quarter.

And as adoption of electronics grows across a wide range of military technologies, and as spending increases in certain emerging geographies, Amphenol remains extremely well-positioned for the long-term in the military market.

The commercial aerospace market represented 6% of our sales in the quarter and sales in this market were down slightly in local currency and down by about 7% in US dollars on a moderation of demand related in particular to small and business jets and commercial helicopters as well as some impact from aviation subsystems.

And this was not totally offset by what we did see as stronger performance of our sales to the major airline producers.

Sequentially our sales increased as we had expected by 3%.

While we remain confident that our commercial air sales will grow in the third quarter from these second-quarter levels due to the anticipated second half ramp up of several new airplane platforms, we expect the overall market to be up slightly in local currencies for the full year.

We continue to be extremely well-positioned on the latest generation of airliners with our Interconnect, value add cable and printed circuit assemblies, as well as cable management products.

And that strong and broad position creates an exciting long-term expansion opportunity for Amphenol.

The industrial market represented 17% of our sales in the quarter.

Our sales grew 4% in US dollars and 7% in local currency versus prior year and 2% in local currency sequentially.

This sales increase was driven by a very robust performance in the heavy equipment, instrumentation and alternative energy segments as well as by contributions from the Goldstar acquisition completed at the end of last year.

This growth was offset in part by further declines in the oil and gas segment as well as by some moderation of sales to rail mass transit customers.

Looking ahead we expect sales in the industrial market to increase from these levels in the third quarter and we do continue to anticipate double-digit sales growth in local currencies for the full year of 2015.

Long-term, we look forward to realizing the benefits of our broad industrial interconnect and sensor product offerings together with the newly acquired antenna products of ProCom.

The automotive market represented 19% of our sales in the quarter and our sales really increased significantly from prior year.

They grew 33% in US dollars, 45% in local currency and a very strong 16% organically.

In fact, we grew organically in all geographies.

This extremely strong performance reflected the ongoing benefits of the Casco acquisition made last year as well as continued growth of our sales of complex interconnect products used in a wide variety of applications including telematics, safety devices, emissions management as well as drive train control applications.

Sales in the automotive market increased sequentially also by a strong 5% from the first quarter.

We are very pleased to be continuing to outgrow the overall automotive market as we capitalize on a broadened suite of interconnect and sensor technologies which are being incorporated into a wide array of new advanced vehicle electronics.

With the recent addition of DoCharm that I already discussed, we have further strengthened our interconnect position in the China market while also clearly establishing ourselves as the global leader in automotive lighting interconnect.

Together with other acquisitions made during the last five years we now have a broad range of high-technology interconnect and sensor products that support a wide array of new electronics applications in cars.

In addition, we have become a preferred supplier to a broad range of automobile manufacturers around the world.

Looking towards the third quarter, we expect sales in the automotive market to increase further from these levels and we continue to look forward to an excellent 2015 and beyond for this exciting business.

The mobile devices market represented 16% of our sales in the quarter.

And sales increased by 5% from prior year and by a greater than expected 7% sequentially that was driven really by higher demand across a range of customers and programs.

We continue to expect a significant increase of sales in the second half, and that includes a sequential increase of approximately 40% in the third quarter, as we anticipate a significant increase of sales of our products in support of certain new programs.

For the full year we anticipate growth -- we continue to anticipate growth to be in the mid- to high-single-digits.

And we remain confident that despite the ever-changing landscape, as well as the certainly unique dynamics of the mobile devices market, are leading technology, preferred supplier relationships with a broad range of device makers and, most importantly, the excellent execution of our outstanding, agile organization positions us strongly for the future in the mobile devices market.

The mobile networks market represented 8% of our sales in the quarter and sales in this market were weaker than expected, declining by 27% in US dollars and 23% organically from prior year and by 7% sequentially as demand further moderated from operators essentially in all regions.

While we still expect a second half recovery in spending in the mobile networks market, it now appears that the speed and significance of that recovery may be more muted than we had originally expected.

Accordingly, we now expect a high teens percentage decline in our full-year sales in the mobile networks market.

But I want to say that regardless of these moderated sales expectations, we continue to be extremely well-positioned in the mobile networks market, and thus remain very confident that with our industry-leading breadth of interconnect and antenna products we will continue to participate broadly in ongoing next generation mobile network deployments wherever they happen around the world.

The information technology and data communications market represented 17% of our sales in the quarter.

Sales in this market increased by 3% from prior year and declined slightly on a sequential basis on lower-than-expected sales of storage-related products.

Compared to last year our robust sales into servers were offset in part by a weaker performance in networking and storage.

Looking ahead towards the third quarter, while we expect sales to remain essentially at these levels in the third quarter, we continue to remain confident to achieve full-year growth in the mid-single-digits in the IT datacom market.

As data consumption and processing requirements continue to accelerate, the IT datacom market is undergoing a real rapid transformation.

And that transformation is in particular around the cloud and web service providers who are driving just accelerated innovations across the entire architecture of data centers around the world.

It is really in just such a dynamic environment that our industry-leading products, high-technology as they are, our preferred relationships with leading equipment suppliers, as well as our very strong focus on service provider and data center customers directly have created an excellent platform for Amphenol to outperform in the IT datacom market.

The broadband market represented 6% of our sales in the quarter and our performance in this space was a bit softer than expected as US and Latin America cable operators constrain their spending and with sales declining about 7% from prior year and remaining essentially flat to the first quarter.

While we expect an increase in demand in the third quarter, we expect for the full year relatively flat performance now for the broadband market.

There continues to remain a heightened level of uncertainty in the capital spending plans of many of the multi-service operators, satellite and telco customers in the broadband space.

And that is in particular given the several high profile industry mergers which are still pending, as well as the significance of currency devaluations that have occurred in Latin America.

Nevertheless, and despite these market dynamics, we remain confident that we will realize long-term success in this market due to our proven capability to create innovative solutions for our customers to support the rapid growth in high-speed data delivery.

And as we drive further efforts to create these enabling technologies, we look forward to maintaining our leadership position in the broadband market.

So just to summarize the second quarter, I can only say how proud I am of our organization as once again our team executed extremely well in what has become a somewhat more challenging and dynamic market environment.

Our continued strong performance in 2015 is a clear reflection of the Company's distinct competitive advantages; our leading technology; our increasing position with customers across a diverse range of markets; our worldwide presence; and our lean and flexible cost structure.

Above all of these strengths though our greatest asset remains Amphenol's agile, entrepreneurial management team who reinforces that high-performance culture every day.

Now turning to our outlook, the global marketplace remains a highly uncertain environment.

Based on a continuation of these current economic conditions, and assuming that exchange rates remain stable at their current levels, we now expect in the third quarter and for the full year 2015 the following.

For the third quarter we expect sales in the range of $1.435 billion to $1.475 billion and EPS in the range of $0.64 to $0.66 respectively.

This represents a sales increase of 6% to 9% in US dollars and 10% to 13% in local currency, as well as an EPS increase of 10% to 14% in the quarter.

For the full year 2015 we expect sales in the range of $5.540 billion to $5.620 billion, an increase of 4% to 5% in US dollars, 7% to 9% in local currencies and 3% to 4% organically.

For EPS we expect for 2015, $2.43 to $2.47, an increase of 8% to 10% over 2014 excluding one-time items.

We are very encouraged by the Company's continued strong outlook in sales and earnings, especially given those many uncertainties that are still around the global marketplace.

It is clear that the ongoing revolution in electronics continues to create tremendous opportunities for Amphenol.

I am very confident in the ability of our outstanding management team to continue to capitalize on these opportunities both to grow our market position and expand our profitability.

And thereby to drive continued superior performance for Amphenol in 2015 and beyond.

And, operator, at this time we'd be very happy to take any questions that there may be.

(Operator Instructions).

Amit Daryanani, RBC.

I have a question and a follow-up.

On mobile devices, Adam, you're looking for 40% sequential growth in September.

That is probably stronger growth than you have seen for the last several years in September.

[Maybe you can] talk about is it units that you think are going up or is it content for you guys that is driving this much conviction that you can do that?

And baked into your full-year numbers how do you think December plays out in mobile devices?

Yes, well, thank you very much, Amit, for that question.

I think it is very strong performance.

As you know, over the last several years there are some years where the third quarter is very strong and other years where the fourth quarter is very strong.

But no doubt about it, the second half is usually very strong in the mobile device segment; I think this year is no different.

As we look towards the third quarter we see really a variety of levers of growth here.

And that includes units, that includes content, that includes really expansion of the various products that we are offering into the market.

We sell such a broad suite of products into that market, everything from antennas and interconnect to mechanisms, and even products that go onto the devices as well as products that go to support our customers in their production processes.

And so, there is just a real wide array of products that we are selling onto a wide array of applications with a diverse range of customers.

Relative to the December quarter, I think you can do the math that we would anticipate at this point that the December quarter would be sequentially down a bit from the third quarter.

Again, there are some years where the third quarter is stronger than the fourth and other years where the fourth quarter is stronger than the third.

It is not a market that I would ever want to give long-term predictions on the various seasonality and cadence of that market.

But this year we are very happy to still be in a very strong position.

And I would just one more time emphasize, if you look at our performance in this space, over the last several quarters we had a very strong fourth quarter and a very strong second half last year.

We had also a very strong -- a reduction in sales in the first quarter -- if I recall correctly it was nearly 30% from the first quarter to the -- from the fourth quarter to the first quarter we grew 7% sequentially last quarter and now we are going to grow 40% into the third quarter.

That is not an easy business to run.

And I just give so much credit to our organization being able to flex in such an environment.

At the end of the day that is one of the greatest competitive advantages that we have in this space.

So few can flex at that level in real-time with the needs of the customers.

I think ultimately that allows us to get maybe a little bit more than our fair share of the market opportunity.

Perfect, thank you.

And then if I could just follow up on FCI.

Could you just talk about what's the historical or the growth rate been for the Company for the last few years?

And as you integrate this once it closes is it reasonable to say the aspiration when you get closer to the Interconnect margins for Amphenol versus the corporate levels for FCI?

Yes, no, it is an excellent question and we are -- again, we are just very excited about FCI.

FCI has just an outstanding business and I wouldn't necessarily talk about specific growth rates, but I would just tell you that they have had good growth over the recent years.

It is a Company with a very long legacy.

It comes for many, many decades over certain iterations and ownerships.

And the business today that we are buying is really the core electronics commercial business of FCI.

And that is a business that just has done an outstanding job in gaining position across a wide array of products and markets.

I mentioned everything from high-speed to power, input-output connectors, miniaturized connectors, and has done a great job on a regional basis as well with customers where we don't necessarily have necessarily that strength.

And so, as we think about their future, certainly our aspiration for FCI would be for them to perform at or above the levels of Amphenol.

Otherwise we would not have bought the Company.

And as we think about operating performance, today the Company clearly does not perform at the levels of Amphenol.

As we talked about in the press release, they have EBITDA margins of around 20%, but their operating margins would be more in the low to mid teens.

And we certainly see great opportunities for FCI over a time period certainly, medium to long time period, to bring themselves up to Amphenol level margins.

That has been a recipe that we have applied for many years.

In fact, we are coming up to the 10th anniversary of the Teradyne Connection Systems, or TCS acquisition.

Believe it or not that was 10 years ago December that we acquired TCS.

And at the time that was a Company that didn't perform at the levels that Amphenol aspired to and was able to achieve.

And certainly over the years that organization was able, through being part of Amphenol, to really reach towards much higher levels of profitability.

And we would certainly have that long-term aspiration for FCI and long-term goals.

Amitabh Passi, UBS.

Congratulations to both Craig and Diana.

Adam, I just had a couple questions for you.

On just FCI, are there any cross-licensing agreements or potential revenue dissynergies that we need to be thinking about?

Just maybe an overarching comment there.

Sure, no, it is a very good question.

There are a couple of licensing arrangements that we have, like we have with many other companies in the industry.

But we don't really view that as revenue dissynergies.

Those licensing arrangements tend to be relatively -- the second source arrangements tend to have relatively small proportions and we don't see that as any material impact to the business.

I mean what we see much more is benefits.

When we think about the products and the complementary aspect of those products, as well as the complementary access to customers where there are certain customers where they have done much better and others where we have done much better.

And I think being able to bring that full suite of technologies between both those sets of customers is really something that will far outweigh any immaterial revenue kind of dissynergies, as you term it, from cross licensing.

Excellent.

And just a quick follow-up.

We have heard from a few other companies in the supply-chain, including semiconductor companies, of increasing levels of caution as the order progressed.

I am just curious how things potentially trended for you during the quarter.

Did you see a slowing in the quarter?

And essentially how you would characterize the environment today.

I think I would characterize the environment as throughout the course of the quarter the macro environment, I would say, felt a little worse at the end of the quarter than it felt at the beginning.

That didn't necessarily translate into the results of the Company, I would say.

I think our team did a fabulous job and we had what I would term a pretty normal cadence throughout the quarter in terms of you tend to have a pretty strong June in the second quarter and that was no different in this quarter.

But it was a bit more of a fight, I will tell you that.

And I think that the overall market environment continues to have a relatively high degree of uncertainty around it, and probably throughout the course of the quarter was a bit higher.

Any specific geographies or was that sort of a broad (technical difficulty)?

No, I would say that it is more broad.

I mean, look, I wouldn't -- we are not necessarily a canary in the coal mine for every market and every geography here.

But I just think that there is a general sense that there was uncertainty.

You have to fight sometimes a little bit harder for the last order.

Mark Delaney, Goldman Sachs.

Congratulations on the good quarter.

I was hoping first, Adam, maybe you could elaborate a little bit more on the strength that you are seeing in the mobile devices end market.

I know you talked about how it can be volatile from quarter to quarter, but you mentioned specifically that you are participating in things, some directly involved in the manufacturing process.

And I am just wondering is there a one-time nature to some of those sales or is there something that you would have an opportunity to participate in in future years?

Yes, no, look, I think we don't see that as a one-time thing.

What I would say is that in the mobile devices market the demand tends to have certain quarters where it is much higher than others.

And I don't think that will be any different regardless of whether you are participating on the product side or working with them in the production.

There tend to be ramp ups of products, there tend to be ramp ups of production processes, and there tend to be then some digestion of those ramp ups.

And I think you see that really in the ongoing results of the Company over many years where quarter to quarter you have certain quarters that are much stronger in the mobile devices space that tend to be more towards the second half of the year.

Not always.

I mean we have had in other years where actually the first quarter was not such a bad quarter because there was a certain set of product releases.

The cadence of when the activity gets hot and not hot in the mobile devices is something again that doesn't -- that is not entirely predictable in any year, year in and year out.

And we don't see that that is a very different dynamic regardless of whether you are selling products that go onto the device or helping to make the device or supporting accessories where we have also a very strong business related to accessories and devices.

I think all of those tend to be relatively lumpy and you have got to be in a position where you can strike while the iron is hot, while the opportunity is there.

And the better you can be at striking with a real agile organization at that time the more success you can have over the long term.

Okay, that is helpful, I appreciate that.

And then a second follow-up question if you could just help us to contextualize the FCI acquisition versus the broader M&A program at the Company.

I mean some of the deals the Company has done in recent years, GE, Casco and FCI, have been larger.

I mean I think to get to deals of this size you have to go back to the Teradyne Connection Systems business you mentioned from 10 years ago.

So there has been a noticeable increase in the size of the M&A.

I'm just wondering if you can talk about what other opportunities are there of this sort of deal size, hundreds of millions or billion-dollar type acquisitions.

And is that the type of size we should expect the Company to be looking to execute on going forward?

Sure.

Look, I think I have said for many years that we have some very strong criteria for acquisitions.

And that is first and foremost technology and we want companies with very, very strong technology.

And in addition equally -- equal billing with technology is we want outstanding people and then we want that to be complementary to the Company.

And the criteria that we have never had is size.

And I think that while it is true that the FCI acquisition is the largest acquisition we have made in the history of the Company in absolute dollars, from a proportional size the TCS acquisition was actually substantially bigger.

I think at the time it had sales of close to a third of the size of Amphenol.

So I think that we are a bigger Company and so we certainly have the capacity to do deals of a wide variety of sizes.

In terms of what is out there and what is available and what will be available, it is very hard to say.

I mean, there are plenty of companies out there of a certain size.

Will they ultimately one day be for sale?

There are some that we certainly hope they will be.

We are very patient, though.

I can tell you that even within FCI, I mean that has been a process of onward close to a decade where we have been knowing that Company, having dialogue.

And that is very similar to many of the acquisitions that we have made where we develop a very long-term dialogue with those companies.

And eventually there comes an inflection point where the owner of the Company, be that the owner/operator or in this case the financial owner, decides that they are ready to consider selling that.

And I think that there are large companies that are out there.

Will those be in the near-term or even medium-term actionable from an acquisition standpoint?

That is very hard to say.

So it doesn't mean that we won't do acquisitions also of smaller size.

As you saw in the quarter, we made two other acquisitions, $20 million in size, $50 million in size.

We will continue to pursue a very broad range of acquisition targets all around those criteria of having strong technology outstanding people and complementary market positions.

Mike Wood, Macquarie.

Regarding industrial and just local consumption oriented markets in China, there are two markets where some industrial companies had been reporting softness.

Can you just speak to what Amphenol is seeing there?

And regarding those trends, has there been any destocking or you think maybe sell-in is underperforming sell-through?

Yes, so, when you talk about industrial in certain of these geographies, I wouldn't necessarily say that the performance of our industrial business in this case was really geographically focused.

I mean there was nothing really of note geographically in our performance.

I think I mentioned that we saw a continued and relatively significant decline in our sales to oil and gas markets.

That is not geographical; I mean there is oil and gas in business in Asia, in Europe and in North America.

We also saw some declines in rail mass transit as well.

I think rail mass transit -- maybe there was a little bit more of that decline in Asia, but not so material to the impact.

So I wouldn't necessarily characterize the performance of our industrial business on a geographical basis.

The strength that we saw in places like heavy equipment and instrumentation, again just on an organic basis, were not necessarily geographically focused either.

I think those were in new areas where we have new technologies and in particular where we have seen just this increasing prevalence of adoption of new electronics onto industrial equipment.

And that is something that we see in particular in the heavy equipment and the sort of agriculture and mining and those type of large equipment areas -- very harsh environment large equipment areas of the industrial market where there is, seems to be actually quite an acceleration of the adoption of electronics.

As companies by to embed more functionality in their devices and in their equipment in order to compete in a marketplace which is maybe not so favorable.

Great.

And as a follow can you just speak to your capacity?

You mentioned your M&A pipeline, but just in terms of the leverage which I roughly calculate around two times EBITDA after FCI would be closed.

Do you feel at all constrained by additional deals this year or by an operational capacity?

Sure, I will take that one.

At the end of the quarter -- I mean the answer is no.

At the end of the quarter the Company has in excess of $2.1 billion of capacity between our cash and revolver availability.

Not to mention certainly our strong operating cash flow that the Company continues to generate.

As we previously disclosed, we have earmarked about $1.3 billion of that capacity for acquisitions of FCI, the majority of which will be funded with our international cash.

And certainly while this is a somewhat bigger deal than we've done in the past, as Adam just mentioned, relative to the size of Amphenol, certainly it is not our large deal.

And certainly is well within the Company's capital leverage capacity given full and appropriate consideration to certainly the importance of our ratings.

In the future we will certainly continue to have a thoughtful and balanced approach to deploying our capital and financial strength, giving appropriate consideration and priority of certainly first to our acquisition program and then to our dividend program.

And probably lastly, to our stock buyback program.

So in the near-term, depending on future acquisition activity, including FCI, that weighting may be a little bit more skewed towards our acquisition program.

But as a management team we believe this certainly provides the best long-term return to our shareholders.

Shawn Harrison, Longbow Research.

Congrats on the results.

And, Craig, congrats on the official appointment.

Wanted to dig in a little bit more on just mobile infrastructure in terms of where you are seeing the incremental weakness by geography, if you could help us out with that.

And the weakness that you are seeing in the back half, does that mean that you are seeing projects spill into 2016 or is this stuff just -- that is not going to be built out?

Yes, no, I think it is actually pretty interesting.

When you look at it on a year-over-year basis in local currency, essentially all geographies are down by the same amount.

And so, the amount by which we were down, that kind of 23% in local currency, that was spot on in each geography really kind of the same number.

And while that is a coincidence of course, because there is not necessarily a correlation, I think it is indicative of one thing.

And that is that you had a very significant build out cycle last year, no doubt about it.

And there is always some digestion.

But in addition to the digestion there is a little bit of what I would call indigestion that comes from a few (technical difficulty) happening.

And one of those is just broadly in the carrier space there is a lot of activity, corporate activity, mergers, discussions, acquisitions, regulatory things that are happening.

That is one.

And then you see that is more in the West in North America in particular and then a little bit in Europe.

But you have also in China some government-related actions that are happening that are also keeping a damper on the mobile infrastructure spending in the first half.

I think as we look towards the second half we do anticipate the second half being stronger than the first half, just not at the level that we had originally come into the year talking about.

I mean if you remember, Shawn, very well, last quarter we also had to adopt a bit more negative view of this market and we incrementally feel a little more negative this time.

And that doesn't feel so great in that wireless infrastructure market.

But it just appears that the spending is being extended a little bit and in the end the overall levels for the full year will be less.

Does that mean that it that is kind of permanently lost?

I don't think so whatsoever.

At the end of the day the data rates, the consumption, the expansion of devices is still going unabated.

I saw just a statistic which I am sure many of you saw this week, I mean overall mobile data usage up 51% year over year in the second quarter and on a global basis.

I mean those are numbers that have tremendous ultimate impact on the requirements to invest in next-generation networks.

And we see still an amazing amount of activity around designing the next generation.

You talk about 3G, then to 4G, LTE, then to 5G.

I am sure one day we are all going to be sitting around here and I'll have a full head of gray hair and we will be talking about 10G.

But there is just this sort of immutable march forward in the demands of mobile data that ultimately does drive the investment cycle.

And as I have said for years past, it goes in these cycles.

We never relax our efforts to gain strong position across a wide array of OEMs and service providers because we know that ultimately that pent-up demand has to get satisfied.

We saw that last year and we are very confident that over the coming years we will continue to see strong needs of capital investments and equipment upgrades and technology advances in the wireless infrastructure market.

That is very helpful, Adam.

And just as a follow-up on FCI, I guess one of the concerns I have received is that, FCI being owned by private equity for a number of years now, almost 10, maybe Bain has squeezed a lot of blood from the stone.

How do you generate the margins and generate -- push margins higher in that business?

Is it revenue synergies?

Is it ways to sprinkle -- I don't know if this is the best term -- the Amphenol dust on the business and bring it into the fold and there is opportunities there?

Is there something else?

Because I guess the general concern is that Bain was running it pretty lean.

What opportunities does Amphenol have to improve the cost structure and margin profile?

Sure, it is an excellent question.

And it is true; Bain owned it for nine years.

And I think by owning it for so long, by the way, we are not able to kind of starve the business either.

They had to and they did continue to invest very strongly in the business over many years.

As we look towards the operating improvements, I think you mentioned a number of things, and I am not going to claim that we have pixie dust at Amphenol.

But we certainly have an approach in the Company towards expansion of operating profitability and really alignment of accountabilities such that you achieve that operating profitability.

And that is something that we will work very hard with the FCI team, who is very excited, by the way, to be a part of that entrepreneurial culture.

And we think that in and of itself has tremendous impacts on the profitability of the Company.

That was something we saw at the time with TCS, that is something that we have seen with the GE sensors business.

I mean time and again when you bring a company in that has come maybe from a slightly different approach and you bring them into that decentralized, accountable model of Amphenol you have really some fabulous impact that comes from that.

Obviously from a revenue and a technology -- I mean there are a lot of great, great opportunities to leverage the unique technologies that each of us have where collectively we can create better solutions for our customer.

Either better cost solutions or better technology solutions.

I mean FCI has just certain really fantastic innovations across the Company where we will seek to apply some of those innovations more broadly across Amphenol and vice versa.

And I think that that can also have a great impact on the overall operating results of the Company.

Sherri Scribner, Deutsche Bank.

Adam, I was hoping you could help us think through the guidance.

It looks like you took the full-year guidance up at the low end but kept the high end the same.

But the third quarter numbers look better than most people's expectations.

So that implies that the fourth quarter was a bit lower than people's expectations.

It seems to me that that is probably related to the seasonality of the mobile devices segment this quarter.

But was hoping you could give us some thoughts on that seasonality this year and the fact that the guidance didn't really change that much.

Sure.

No, I think you have answered your own question, Sherri, as far as I am concerned.

As usual, you do the analysis perfectly.

It is very true that we have raised -- we never gave third-quarter guidance, first of all.

So I think we have always given full-year guidance and we are very happy to be able to sustain that full-year guidance.

I think we feel that the third quarter is strong in mobile and I think I already mentioned that we would anticipate in the December quarter to see a little bit of a sequential moderation in our sales into the mobile devices market.

I think relative to that full-year guidance we have obviously the benefit of the two acquisitions.

And I mentioned as well that from an organic standpoint we see our range at really a 3% to 4% organic growth range.

And that is a slight tick down from what we had seen before all for the reasons that I discussed in the various markets and in particular across the carrier market.

So, I think that the uncertainty in particular in those carrier-based markets, the mobile infrastructure and broadband markets, with all that is going on in that space that injects maybe a little bit more dose of conservatism into our outlook.

But net-net we are extremely pleased to have that guidance really holding at the high end, bringing that up at the low end and with a real strong sense of confidence given a market environment that we think has incrementally gotten a little bit more challenging throughout the course of the quarter.

Okay, that is helpful.

And it actually feeds into my follow-up which was in the press release you noted an increased level of uncertainty globally.

In answer now you just suggested maybe that is just related to the carrier segment.

But wanted to get a sense of where you are seeing the uncertainty.

Is it generally pretty broad, is it some segments like carrier or is it some other segments too?

Thank you.

Yes, thank you.

No, I think when I talked about the carrier, that is really the specific impact to our outlook.

I think the general comment about uncertainty in the marketplace is really more of a general one.

As I mentioned I think early on, just as the quarter went on it was a little bit more of a fight to get the orders.

I think our team is really up to the task and they did a fantastic job given that environment and we are confident that we will continue to do an excellent job given that environment going forward.

William Stein, SunTrust.

Congratulations on the good outlook relative to what we are seeing elsewhere.

And that is really what I would like to focus on.

One of the areas that some other component and semiconductor companies have talked about is channel inventory adjustments denting their Q3 outlooks.

I am wondering if you are saying anything in this regard, if you are seeing any actions by either end customers or the channel in reducing inventory?

Yes, look, in the channel as it is distribution, distribution represents under 13% of our sales in the quarter.

And I don't know that we have seen anything really marked in terms of massive inventory reduction or changes.

I wouldn't say that the distribution channel has been very frothy in the quarter.

And when we talk about it being a little bit more of a fight, maybe there is some component of that that is related to distribution.

But again, it hasn't been that there was like a pivot in the behavior of our distributors or in the behavior of the sell-through with our distributors.

I think that it is just a little bit more sometimes of a challenge and maybe a little bit more of a conservatism on their part.

But we don't see big inventory reductions, pullbacks, massive corrections coming out of that channel right now.

That is helpful.

And one follow up if I can.

I am wondering if you might give us an update on the progress of the sensor business?

You have done a couple of acquisitions there in the last year or two.

And I know that you highlighted some design wins in particular in automotive I think.

Maybe you could just kind of give us an update on how that part of the business is progressing?

Sure.

No, look, we continue to be really excited about our sensor business.

It is coming up, believe it or not, on a year and a half.

We passed the year and a half mark of owning the GE sensors business; end of this year it will already be two years.

Time flies.

And Casco was acquired nearly a year ago.

And I would just reiterate, as I have said on the last several calls, that we feel really excited about that.

And we continue to get great affirmation from customers that us owning a sensor business is a really good thing for the Company, a good thing for our customers and a good thing for the technology solutions that we can provide.

We are working very hard on a very collaborative basis across the Company to uncover and to pursue opportunities where we can really bring in a sensor and an interconnect together with maybe our industrial business or our automotive business.

And I would say that we have had good wins in that area.

I wouldn't point to anything that is really material to the outlook of the Company as yet, but I think the long-term prognosis for our sensor business is excellent as is the long-term prognosis for the opportunity of having that sensor and interconnect solution.

The ability to package the sensor together with a harsh environment or otherwise interconnect solution is something that is very special.

And it is something that our customers appear to have a great desire to engage with us on.

Craig Hettenbach, Morgan Stanley.

I guess it is not pixie dust, maybe the word is Amphenolian.

But just on the automotive business, that has come quite a far way in the last couple years through a mix of the organic as well as acquisitions.

Can you talk about where you are from a penetration standpoint and how much you have to gain from that versus just the overriding increasing content theme?

Sure.

I mean, look, we are still small on a relative basis compared to some of the major participants in the space.

But we are a little bit less small than we were five years ago, that is -- there is no doubt about it.

And we have made outstanding acquisitions over those five, six years and we have continued to do that here in the quarter -- at the end of the second quarter with DoCharm.

And I think when I look at that business today and I compare that business to circa 2009, a couple of things.

Number one is a much broader offering of products across a broader range of applications.

That is number one.

Number two is we now have kind of at a minimum a foot in the door, sometimes a leg and sometimes even the whole body, but at a minimum a foot in the door with the vast majority of major automotive OEMs in most geographies.

I think with the exception of Japan where we have never had a strong position.

And I wouldn't say that we have necessarily gained that strong position even if, with some of the Japanese OEMs outside of Japan, we have actually gained a strong position.

And then the third is just regionally.

Where our automotive business would have been six years ago two-thirds or three-quarters European, today that automotive business is actually quite balanced on a regional basis.

Europe is still marginally the largest territory.

But really it is marginal as compared to North America and Asia.

And with the acquisition that we've just made, that will bring even a stronger position with us in China both with the international as well as the indigenous participants in China.

And look we certainly read the papers and hear everybody talking about is there a downturn in China and all of this.

I mean the reality is we have still such a small position and still so much to gain across the range of electronics in those cars that we still feel a great sense of confidence in our automotive business.

And I think ultimately that has translated into the strong performance we had this quarter, 16% organic growth in the quarter.

And our continued outlook where we anticipate still for the year to have kind of mid-teens organic growth in the automotive market.

And that is clearly not reflective of just rising with the tide in overall unit sales.

So there is a lot of gaining of position on new applications with new products from us that is really driving that growth.

Got it, appreciate the color.

Just as a quick follow-up, you mentioned just some of the change occurring in the data center.

That has been another area of potential concern in terms of is there any slowing on the hyper scale side.

Any insight in terms of kind of what you are seeing from data center growth into the back half?

Sure.

I think I did talk about the fact that we had a good quarter in IT datacom compared to the overall market.

We still anticipate kind of a mid-single-digit growth in the IT datacom market for the year.

There is no question, this transformation that is happening in the IT datacom market, the real shifting of the balance of power from traditional OEMs building boxes and putting them in boxes and shipping them to this more sort of Web 2.0, cloud web service -- I mean there is so many different names you can call it.

That transformation continues unabated.

And I think that shifting of the balance of power is a very dangerous time in the market for someone who is caught unawares.

And I think our team has just done an outstanding job and we've made a lot of real significant organizational moves, let me say.

Taking people who were really strong people focused on certain areas and saying, I am cutting the cord with you there and putting you into something totally new.

It is hard for them because now they have got to go from wearing a tie to wearing shorts and Birkenstocks when they go to the customers.

But ultimately that transformation of our people and then the tailoring of the technologies to what the needs of the web service company -- that is something that we think is going to bear fruit long-term.

You've got to chase where the money is in a space like this.

And I think that we have done so far a great job of that.

But it is not a space without its peril when you see the dramatic change that is happening in that area.

Jim Suva, Citi.

Congratulations.

And to make up for my lack of smartness I will just ask one question with no follow-ups.

Can you just help us understand, FCI has been around for a very long time with a long history, although the Company has gone through a lot of international restructuring challenges and you announced that you are acquiring FCI Asia.

Can you help us better understand what does that all include?

Geographic reach?

A lot of their businesses over the past decade or 15 years have kind of been divested or slowed or closed down or things like that.

Are you acquiring all that is left in FCI?

And if so is there still much heavy lifting to do to get it integrated?

Or in the past their cost structure has been very French and Spanish and kind of Western Europe high cost basis.

If you'd just help us understand kind of what you are all buying here and what type of effort it is going to take.

Thank you.

Thank you, Jim, actually this was much more than one question, so you are still very smart.

Let me just clarify relative to FCI Asia, as it is called, that is the legal name of the Company.

FCI is a global Company, it happens to be headquartered in Singapore.

It has a long history and it was originally -- well, let me say on an interim basis it was a French Company.

Long ago [Ferg] Electronics, which is one of the predecessor companies, was certainly an American Company.

But FCI as a global business is really around the world.

They moved the headquarters to Asia a couple of years ago.

It is true that FCI used to have several other businesses, which over a certain number of years Bain took the approach to divest them kind of one by one.

They had in automotive business, I'm sure everybody is familiar with that.

They had a power business, a real high-voltage business that was divested a number of years back.

They had also this what was called microelectronics business which was a very specialized business that was also divested.

And this is -- we are buying really the totality of what Bain owns today, which was originally known as FCI Electronics, which was the commercial electronics interconnect business of FCI.

And that was always the piece of FCI that we had our eye on for this nearly a decade.

And in terms of the heavy lifting that has been done, I mean the Company has a great performance and it has performed better than maybe it did in the past.

But we still see excellent opportunities in the future to improve operating performance of the business.

And I think I already discussed a number of the different levers that we intend to exercise as we look towards improving the performance of FCI.

Steven Fox, Cross Research.

Thanks.

Just a couple quick ones around some of the comments you made, Adam, on acquisitions.

On the two acquisitions announced today I was wondering if you could just provide a couple of examples around where some of their -- the European deals you said they have, RF interconnect exposure into the industrial markets.

Can you give us some examples of that?

And similarly, for the Chinese business, where you said automotive lighting that complements some other deals you have done, can you just give us a couple of examples of that?

And then I had a quick follow up.

Sure, thank you very much, Steve.

So first with ProCom, ProCom is actually an antenna company.

Sorry if I misspoke.

It expands our RF interconnect and antenna offering, but it is really a focused antenna company in the industrial market.

And really predominantly in the industrial market.

It is a very special business in that they make antennas get used in very harsh environments.

I mean take for example on a freighter ship where you have very complex wireless communications that have to happen on a freighter in the middle of the ocean.

They would make those type of antennas.

They make antennas that are used in emergency radio systems for police and fire departments.

They make -- just a real wide variety of antennas that are used across a range of applications where we today don't participate.

And that is what is so exciting about ProCom.

It is obviously a small company, just over $20 million in sales.

But it is a company with a unique technology, then we would look to expand their presence to other geographies where today they are a very European focused company.

And together with our strong presence on industrial interconnect and with industrial customers we see here a great opportunity to leverage that antenna business into a new market area beyond just the wireless communications of mobile devices and mobile infrastructure where today we have a very strong position.

Relative to DoCharm, I did mention that DoCharm has -- one of their main specialties is around complex interconnect assemblies that go into automotive lighting applications.

You may recall that a number of years ago we acquired a Company called [Semtomei].

And Semtomei was really one of the leaders in automotive lighting in Europe and North America and that business has just done fantastic with us since we acquired it.

What we really like about that business is twofold.

One is in the lighting, that tends to be a very important application; lights have to work in a car.

And it also tends to be a little bit more of a harsher environment part of the car because it tends to be a little bit closer to the air and rain and moisture.

And so it allows you to really embed certain technology into that product for a product that really has to work.

It has a safety element to it in addition and it has to work in a slightly tougher environment.

And in addition, it is an area where lighting tends to change at a somewhat different and faster cadence than overall model changes.

You have what are called in cars facelifts now, and those facelifts are sort of mid platform changes in the car where they don't change the drive train, they don't change the underlying architecture of the car, but they do things to the car to make it look a little better, to upgrade a little bit the electronics.

And those facelifts and mid-cycle upgrades have started to become a real positive aspect of the automotive market whereby you used to really -- if you didn't get on something you had to wait three to five years to get onto the next one.

Today with that mid-cycle upgrade and those facelifts, it allows you to have a little bit different velocity to winning business.

And that is something that we really like about this lighting business.

I think the last thing I would say about DoCharm is, because it is a real indigenous Chinese Company founded by a fabulous entrepreneur, (technical difficulty) very successful in his space, it gives us a different level of position in the Chinese indigenous market.

And we are very happy that the entire management team is very committed to staying with Amphenol.

And they have great role models of companies in China who have been acquired by Amphenol, but whereby the owner has stayed with the Company for many, many years.

We have one where the owner has been with us still for 12 years after the fact.

And I think that the continuity of the management, together with the strength of presence with the local customers, is something that has a lot of value.

Great.

And then just -- that is really helpful.

And then just really quickly, during your prepared remarks you mentioned that Goldstar and Casco were helping organic growth.

And I was just wondering if you can clarify whether that was sales synergies with existing businesses or bringing their business into your customers?

Or were you just referring to their own growth on a standalone basis?

Thanks.

Yes, sorry, again if I misspoke, Steve, I apologize.

But I did not mean that they were helping our organic growth, I meant that our overall growth was aided by the additions of Goldstar and Casco.

Wamsi Mohan, Bank of America Merrill Lynch.

Adam, relative to most of your recent acquisitions, FCI appears to be very different in that you need to do a lot more heavy lifting with integrations, whereas in many of your other acquisitions you tended to acquire entities that just leveraged your scale, reach and technology.

but you don't have to sort of do much in terms of integration.

So two questions.

One, what are you expecting in terms of integration cost for this acquisition?

Will you be including that in your non-GAAP earnings as you refer to accretion?

And secondly, should we expect to see more acquisitions from Amphenol given the relative size that you are now as a Company that you would need to go after targets where you would have to on an ongoing basis be more involved in integration?

Thanks.

Sure.

Thank you very much for the question.

I think it is true that FCI is a larger company and that it has maybe some work to be done as it joins with Amphenol in terms of aligning it appropriately in the business.

But let's not forget that the core thing that we look to do in companies like that is to just instill the culture of Amphenol.

I think we talked about at the time when we acquired GE sensors that that was a very different culture, it was a very different organization.

And there was maybe a little bit more work that we had to do in that case to align the Company towards and Amphenol like measure of accountability and operating discipline.

And really to bring that sort of cultural change into the Company.

And that comes down to essentially making sure that you have got direct line management, general managers who run businesses to which they are held accountable and for which they have authority.

And I think that is the main thing that we would make sure is the case here with FCI.

I think we have really the -- all wherewithal to make sure that that is the case.

We have a great playbook to apply.

And ultimately it doesn't mean that we are going in and monkeying around with the whole thing, but rather we are making sure that there are the appropriate accountabilities for the focus businesses within FCI.

By the way, that is something that the current and soon-to-be prior owners were already heading towards with FCI.

As they migrated the business as they drove that towards more accountability, they were in many respects looking to emulate Amphenol already.

And so, I think we can just accelerate that emulation a little bit as it joins with us.

And maybe I'll let Craig comment a little bit on just how we would view costs related to the acquisition.

Sure.

I mean we would expect some similar charges to those we've had in the past for things like transaction-related fees, expenses and purchase accounting-related items like inventory and backlog valuations that would be amortized early in the first year.

But these -- and these items certainly would be one-time in nature and we would call these out.

In addition, certainly given the size of the deal, it is possible that there could be some other nonrecurring charges.

If so we would certainly call them out.

Thank you.

At this point we don't have any more questions over the phone.

That is very good.

Well, thank you again, everybody, for your attention today.

I know it is a busy day for all of you and we truly appreciate your time.

And I hope it is not too late to wish you all a very enjoyable and pleasant summer.

Hopefully you will get, after this busy earning season, a little bit of time to have some vacation with your families.

Thanks again and we will talk to you all in about 90 days.

Thank you.

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