Amphenol Corp Class A APH
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

Operator: Hello and welcome to the Second Quarter Earnings Conference Call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. Until then, all lines will remain in a listen-only mode. 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, Ms. Diana Reardon. Ma'am, you may begin.

Diana G. Reardon - EVP and CFO: Thank you. Good afternoon. My name is Diana Reardon. I am Amphenol's CFO. I am here together with Adam Norwitt, our CEO, and we'd like to welcome you all to our second quarter call.

Q2 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'll then have a question-and-answer session.

The Company closed the second quarter with sales of $1.136 billion and EPS of $0.95, meeting the high end of our guidance and achieving a new EPS record. Sales were up 7% in both U.S. dollars and local currencies compared to Q2 of 2012. From an organic standpoint, excluding both acquisitions and currency effects, sales in Q2 2013 were up 3% versus last year. Sequentially, sales were up 5%, both in U.S. dollars and organically from Q1.

Breaking down sales into our two major components, our Cable business, which comprised 8% of our sales in the quarter, was up 19% from last year as a result of a 2012 acquisition. The Interconnect business, which comprised 92% of our sales, was up 6% from last year as a result of both increased demand and prior year acquisitions. Adam will comment further on trends by market in a few minutes.

Operating income was $224 million in Q2. Operating margin was 19.7%, up from 19.4% last year and from 19.2% last quarter. A very good conversion margin on incremental sales of over 24% from last year and over 30% from last quarter.

From a segment standpoint, in the Cable segment, margins were 13.8% and comparable prior year levels. In the Interconnect business, margins were 22%, up from 21.6% last year. The year-over-year Interconnect operating margin improvement primarily reflects the positive impacts of higher volume and cost reduction actions.

We're very pleased with the Company's operating margin achievement of 19.7% and we continue to believe that the Company's entrepreneurial operating structure and culture of cost control allows us to react in a fast and flexible manner, thereby constantly adjusting the business to maximize profitability and will continue to be a very dynamic environment. Through the deployment of these strategies, the management team has achieved industry-leading operating margins and remains fully committed to driving enhanced performance.

Interest expense for the quarter was $15.6 million compared to $15.1 million last year, reflecting higher average debt levels from the Company's stock buyback program. Other income was $3 million, up from $2.6 million last year, primarily as a result of higher interest income on higher levels of cash and short-term cash investments.

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