Amphenol Corporation is one of the world's largest designers manufacturers and marketers of electrical electronic and fiber optic connectors interconnect systems and coaxial and flat-ribbon cable. The primary end markets for the company's products are communication systems for the converging technologies of voice video and data communications commercial and military aerospace electronics applications and industrial factory automation equipment and automotive and mass transportation applications. Amphenol Corp. has a market cap of $5.8 billion; its shares were traded at around $33.9 with a P/E ratio of 15.5 and P/S ratio of 1.9. The dividend yield of Amphenol Corp. stocks is 0.2%. Amphenol Corp. had an annual average earning growth of 21.9% over the past 5 years.
Highlight of Business Operations:Net sales were $660.0 in the first quarter of 2009 compared to $770.7 for the same period in 2008, a decrease of 14% in U.S. dollars and 11% in local currencies. Sales of interconnect products and assemblies (approximately 91% of sales) decreased 14% in U.S. dollars and 11% in local currencies in the first quarter of 2009 compared to 2008 ($602.0 in 2009 versus $700.6 in 2008). Sales decreased significantly in the automotive, telecommunications and data communications and industrial markets as a result of a weak end market demand resulting from the global economic crisis. Sales in the military aerospace market were relatively flat as moderate growth in defense-related sales were offset by a weak commercial aircraft market. Sales in the wireless communications market grew primarily as a result of strength in China-related programs and the impact of acquisitions. Sales decreases occurred in all major geographic regions. Sales of cable products (approximately 9% of sales) decreased 17% in U.S. dollars and 11% in local currencies in the first quarter of 2009 compared to the same period in 2008 ($58.0 in 2009 versus $70.1 in 2008), primarily attributable to a slowdown in spending in broadband and cable television markets resulting from current weak economic conditions and difficult credit markets.
Other expenses, net, for the first quarter of 2009 and 2008 were $0.2 and $0.5 (excludes net income attributable to noncontrolling interests reclassified in accordance with SFAS 160), respectively, and comprised primarily agency and commitment fees on the Companys credit facilities and program fees on the sale of accounts receivable ($0.7 in 2009 and $1.4 in 2008) offset by interest income ($0.6 in 2009 and $1.0 in 2008).
Cash provided by operations was $142.8 in the first three months of 2009 compared to $109.6 in the same 2008 period. The increase in cash flow is related primarily to a decrease in components of working capital, the sale of $6.0 of receivables under the Companys receivable securitization program in addition to an increase in non-cash expenses including stock-based compensation and depreciation which more than offset a reduction in net income. The components of working capital decreased $34.3 in the first three months of 2009 due primarily to decreases of $58.6 and $46.1 in accounts receivable and inventory, respectively, which were partially offset by decreases in accounts payable and accrued liabilities of $56.7 and $14.4, respectively. The components of working capital increased $18.9 in the first three months of 2008 due primarily to increases of $22.8 in inventory, an increase in prepaid expenses and other assets of $7.7 and a decrease in accounts payable of $16.4 offset by a decrease in accounts receivable of $22.0 and an increase in accrued expenses of $6.0.
Accounts receivable decreased $56.5 to $459.5, reflecting the impact of lower sales levels and a decrease due to translation resulting from the comparatively stronger U.S. dollar at March 31, 2009 compared to December 31, 2008 (Translation) partially offset by the impact of acquisitions of $16.9. Days sales outstanding was 72 days at both March 31, 2009 and December 31, 2008. Inventories decreased $32.8 to $479.7, primarily due to adjustments to production activity in response to lower demand levels and Translation offset by the impact of acquisitions of $19.3. Inventory days, excluding the impact of acquisitions, increased from 88 at December 31, 2008 to 93 at March 31, 2009. The increase in inventory days resulted primarily from a slowdown in sales activity in the first quarter of 2009 as a result of the global economic slowdown. The Company will continue to focus on inventory reduction as adjustments to production activity continue in response to lower demand levels. Land and depreciable assets, net, increased $1.1 to $345.6 reflecting capital expenditures of $17.2 as well as fixed assets from acquisitions of $9.5, offset by depreciation of $20.0, $5.1 due to Translation and disposals of $0.5. Goodwill increased $102.6 to $1,334.9, primarily as a result of two acquisitions in the Interconnect Products and Assemblies segment made during the period. Other long-term assets increased $19.8 to $101.3 primarily due to an increase in identifiable intangible assets resulting from acquisitions made in the first quarter of 2009 partially offset by a decrease in long-term deferred tax assets. Accounts payable decreased $48.8 to $257.2 primarily as a result of a decrease in purchasing activity during the period related to lower first quarter 2009 sales levels offset by the impact of acquisitions of $10.4 during the quarter and to a lesser extent Translation. Total accrued expenses decreased $116.3 to $212.2 primarily due a reduction in accrued acquisition-related obligations of $102.8 as well as a decrease in accrued income taxes and Translation of $16.3.
For the first three months of 2009, cash from operations of $142.8, net borrowings from the Revolving Credit Facility of $85.9, sales of short-term investments of $1.4, proceeds from the exercise of stock options including tax benefits from stock-based payment arrangements of $0.3 and cash on hand of $64.5 were used to fund acquisition-related payments of $261.5, capital expenditures of $16.9 and dividend payments of $5.1. For the first three months of 2008, cash from operating activities of $109.6, net borrowings from the revolving credit facility of $127.1, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $0.6 and cash on hand of $3.5 were used to fund purchases of treasury stock of $143.7, acquisition related payments of $70.4, capital expenditures of $20.0, purchases of short-term investments of $4.2 and dividend payments of $2.7.
As of March 31, 2009, the Company had interest rate swap agreements of $150.0, $250.0 and $250.0 that fix the Companys LIBOR interest rate at 4.40%, 4.65% and 4.73%, respectively, expiring in December 2009, December 2009 and July 2010, respectively. The fair value of swaps indicated that termination of the agreements as of March 31, 2009 would have resulted in a pre-tax loss of $21.0; such loss, net of tax of $7.8, is recorded in accumulated other comprehensive loss.
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