10-K/A 1 a13-7125_110ka.htm 10-K/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

Amendment No. 1

 

(Mark One)

 

x      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended December 31, 2012

 

or

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to

 

Commission file number 1-10879

 

AMPHENOL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

(State of Incorporation)

 

22-2785165

(I.R.S. Employer Identification No.)

 

358 Hall Avenue, Wallingford, Connecticut 06492

203-265-8900

 

Securities registered pursuant to Section 12(b) of the Act:

 

Class A Common Stock, $.001 par value

 

New York Stock Exchange, Inc.

(Title of each class)

 

(Name of each exchange on which registered)

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x  No o

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act).  Yes o  No x

 

The aggregate market value of Amphenol Corporation Class A Common Stock, $.001 par value, held by non-affiliates was approximately $8,813 million based on the reported last sale price of such stock on the New York Stock Exchange on June 30, 2012.

 

As of January 31, 2013, the total number of shares outstanding of Registrant’s Class A Common Stock was 159,698,098.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive proxy statement, which is expected to be filed within 120 days following the end of the fiscal year covered by this report, are incorporated by reference into Part III hereof.

 

 

 



 

EXPLANATORY NOTE

 

Amphenol Corporation (the “Company”) is filing this Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2013 for the sole purpose of adding the electronic signature of the Company’s independent registered public accounting firm, Deloitte and Touche LLP, to the Report of Independent Registered Public Accounting Firm for the consolidated financial statements and the financial statements schedule listed in the Index at Item 15, and the effectiveness of the Company’s internal control over financial reporting.  The signature was inadvertently omitted from the previously filed Form 10-K.

 

In order to comply with certain requirements of the SEC’s rules in connection with the filing of this Amendment on Form 10-K/A, this amendment includes (i) the complete text of Item 8. Financial Statements and Supplementary Data and (ii) Item 15. Exhibits, Financial Statement Schedules.  This Amendment No. 1 on Form 10-K/A does not change or update the previously reported financial statements or any of the other disclosure contained in the original Form 10-K.

 

Consistent with the rules of the SEC, the certifications of the Company’s principal executive officer and principal financial officer as of the date of this Amendment No. 1 on Form 10-K/A are attached as exhibits to this Amendment No. 1 on Form 10-K/A. The only change in these certifications is their date.

 

2



 

PART II

 

Item 8. Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of

Amphenol Corporation

Wallingford, Connecticut

 

We have audited the accompanying consolidated balance sheets of Amphenol Corporation and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flow for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15.  We also have audited the Company’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Amphenol Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

/s/ DELOITTE & TOUCHE LLP

 

Hartford, Connecticut

February 22, 2013

 

3



 

AMPHENOL CORPORATION

Consolidated Statements of Income

(dollars in thousands, except per share data)

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Net sales

 

$

4,292,065

 

$

3,939,786

 

$

3,554,101

 

Cost of sales

 

2,948,853

 

2,696,126

 

2,395,873

 

Gross profit

 

1,343,212

 

1,243,660

 

1,158,228

 

Casualty loss related to flood

 

 

21,479

 

 

Change in contingent acquisition-related obligations

 

 

(17,813

)

 

Acquisition-related expenses

 

2,000

 

2,000

 

 

Selling, general and administrative expenses

 

512,867

 

486,316

 

457,871

 

Operating income

 

828,345

 

751,678

 

700,357

 

 

 

 

 

 

 

 

 

Interest expense

 

(59,613

)

(43,029

)

(40,741

)

Other income, net

 

10,109

 

8,103

 

4,072

 

Income before income taxes

 

778,841

 

716,752

 

663,688

 

Provision for income taxes

 

(219,333

)

(187,910

)

(161,275

)

Net income

 

559,508

 

528,842

 

502,413

 

Less: Net income attributable to noncontrolling interests

 

(4,191

)

(4,651

)

(6,008

)

Net income attributable to Amphenol Corporation

 

$

555,317

 

$

524,191

 

$

496,405

 

Net income per common share — Basic

 

$

3.44

 

$

3.09

 

$

2.86

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — Basic

 

161,522,080

 

169,640,115

 

173,785,650

 

 

 

 

 

 

 

 

 

Net income per common share — Diluted

 

$

3.39

 

$

3.05

 

$

2.82

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — Diluted

 

163,947,111

 

171,825,588

 

176,325,993

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.42

 

$

0.06

 

$

0.06

 

 

See accompanying notes to consolidated financial statements.

 

4



 

AMPHENOL CORPORATION

Consolidated Statements of Comprehensive Income

(dollars in thousands, except per share data)

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Net income

 

$

559,508

 

$

528,842

 

$

502,413

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

26,079

 

(9,679

)

18,504

 

Revaluation of derivatives

 

538

 

(287

)

2,363

 

Defined benefit plan liability adjustment

 

(23,343

)

(24,859

)

(4,495

)

Total other comprehensive income (loss), net of tax

 

3,274

 

(34,825

)

16,372

 

Total comprehensive income

 

562,782

 

494,017

 

518,785

 

 

 

 

 

 

 

 

 

Less: Comprehensive income attributable to noncontrolling interests

 

(4,412

)

(5,126

)

(7,047

)

 

 

 

 

 

 

 

 

Comprehensive income attributable to Amphenol Corporation

 

$

558,370

 

$

488,891

 

$

511,738

 

 

See accompanying notes to consolidated financial statements.

 

5



 

AMPHENOL CORPORATION

Consolidated Balance Sheets

(dollars in thousands, except per share data)

 

 

 

December 31,

 

 

 

2012

 

2011

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

690,850

 

$

515,086

 

Short-term investments

 

251,653

 

133,848

 

Total cash, cash equivalents and short-term investments

 

942,503

 

648,934

 

Accounts receivable, less allowance for doubtful accounts of $10,372 and $11,113, respectively

 

910,711

 

767,181

 

Inventories:

 

 

 

 

 

Raw materials and supplies

 

243,127

 

210,886

 

Work in process

 

271,669

 

255,581

 

Finished goods

 

218,922

 

183,395

 

 

 

733,718

 

649,862

 

Other current assets

 

119,983

 

115,260

 

Total current assets

 

2,706,915

 

2,181,237

 

Land and depreciable assets:

 

 

 

 

 

Land

 

21,874

 

21,930

 

Buildings and improvements

 

167,884

 

159,573

 

Machinery and equipment

 

943,573

 

854,867

 

 

 

1,133,331

 

1,036,370

 

Accumulated depreciation

 

(715,895

)

(655,869

)

 

 

417,436

 

380,501

 

Goodwill

 

1,932,740

 

1,746,113

 

Other long-term assets

 

158,372

 

137,374

 

 

 

$

5,215,463

 

$

4,445,225

 

 

 

 

 

 

 

Liabilities & Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

496,525

 

$

377,867

 

Accrued salaries, wages and employee benefits

 

89,142

 

83,810

 

Accrued income taxes

 

94,341

 

87,315

 

Other accrued expenses

 

108,213

 

93,125

 

Short-term debt

 

100,293

 

298

 

Total current liabilities

 

888,514

 

642,415

 

Long-term debt (Note 2)

 

1,606,204

 

1,376,831

 

Accrued pension and post-employment benefit obligations

 

244,571

 

207,049

 

Other long-term liabilities

 

33,992

 

34,144

 

Commitments and contingent liabilities (Notes 2, 10 and 16)

 

 

 

 

 

Equity:

 

 

 

 

 

Class A Common Stock, $.001 par value; 500,000,000 shares authorized; 159,857,738 and 163,122,474 shares issued and outstanding at December 31, 2012 and 2011, respectively

 

160

 

163

 

Additional paid-in capital

 

336,683

 

189,166

 

Accumulated earnings

 

2,210,120

 

2,102,497

 

Accumulated other comprehensive loss

 

(117,004

)

(120,057

)

Total shareholders’ equity attributable to Amphenol Corporation

 

2,429,959

 

2,171,769

 

Noncontrolling interests

 

12,223

 

13,017

 

Total equity

 

2,442,182

 

2,184,786

 

 

 

 

 

 

 

 

 

$

5,215,463

 

$

4,445,225

 

 

See accompanying notes to consolidated financial statements.

 

6



 

AMPHENOL CORPORATION

Consolidated Statements of Changes in Equity

(dollars in thousands, shares in millions)

 

 

 

Common Stock

 

Additional
Paid in

 

Accumulated

 

Accumulated
Other
Comprehensive

 

Treasury

 

Noncontrolling

 

Total

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Loss

 

Stock

 

Interests

 

Equity

 

Balance January 1, 2010

 

173

 

$

174

 

$

71,368

 

$

1,774,625

 

$

(100,090

)

$

 

$

16,741

 

$

1,762,818

 

Net income

 

 

 

 

 

 

 

496,405

 

 

 

 

 

6,008

 

502,413

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

15,333

 

 

 

1,039

 

16,372

 

Purchase of noncontrolling interests

 

 

 

 

 

(12,375

)

 

 

 

 

 

 

(7,792

)

(20,167

)

Acquisitions resulting in noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

10,285

 

10,285

 

Distributions to shareholders of noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,421

)

(4,421

)

Stock options exercised, including tax benefit

 

3

 

2

 

60,477

 

 

 

 

 

 

 

 

 

60,479

 

Dividends declared ($0.06 per common share)

 

 

 

 

 

 

 

(10,449

)

 

 

 

 

 

 

(10,449

)

Stock-based compensation

 

 

 

 

 

25,385

 

 

 

 

 

 

 

 

 

25,385

 

Balance December 31, 2010

 

176

 

$

176

 

$

144,855

 

$

2,260,581

 

$

(84,757

)

$

 

$

21,860

 

$

2,342,715

 

Net income

 

 

 

 

 

 

 

524,191

 

 

 

 

 

4,651

 

528,842

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

(35,300

)

 

 

475

 

(34,825

)

Purchase of noncontrolling interests

 

 

 

 

 

(15,962

)

 

 

 

 

 

 

(8,892

)

(24,854

)

Distributions to shareholders of noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,077

)

(5,077

)

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(672,191

)

 

 

(672,191

)

Retirement of treasury stock

 

(13

)

(13

)

 

 

(672,178

)

 

 

672,191

 

 

 

 

Stock options exercised, including tax benefit

 

 

 

 

 

31,594

 

 

 

 

 

 

 

 

 

31,594

 

Dividends declared ($0.06 per common share)

 

 

 

 

 

 

 

(10,097

)

 

 

 

 

 

 

(10,097

)

Stock-based compensation

 

 

 

 

 

28,679

 

 

 

 

 

 

 

 

 

28,679

 

Balance December 31, 2011

 

163

 

$

163

 

$

189,166

 

$

2,102,497

 

$

(120,057

)

$

 

$

13,017

 

$

2,184,786

 

Net income

 

 

 

 

 

 

 

555,317

 

 

 

 

 

4,191

 

559,508

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

3,053

 

 

 

221

 

3,274

 

Distributions to shareholders of noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,206

)

(5,206

)

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(380,023

)

 

 

(380,023

)

Retirement of treasury stock

 

(6

)

(6

)

 

 

(380,017

)

 

 

380,023

 

 

 

 

Stock options exercised, including tax benefit

 

3

 

3

 

116,105

 

 

 

 

 

 

 

 

 

116,108

 

Dividends declared ($0.42 per common share)

 

 

 

 

 

 

 

(67,677

)

 

 

 

 

 

 

(67,677

)

Stock-based compensation

 

 

 

 

 

31,412

 

 

 

 

 

 

 

 

 

31,412

 

Balance December 31, 2012

 

160

 

$

160

 

$

336,683

 

$

2,210,120

 

$

(117,004

)

$

 

$

12,223

 

$

2,442,182

 

 

See accompanying notes to consolidated financial statements.

 

7



 

AMPHENOL CORPORATION

Consolidated Statements of Cash Flow

(dollars in thousands)

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Net income

 

$

559,508

 

$

528,842

 

$

502,413

 

Adjustments for cash from operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

121,779

 

119,439

 

102,846

 

Net change in receivables sold under Receivables Securitization Facility

 

 

 

(82,000

)

Stock-based compensation expense

 

31,412

 

28,679

 

25,385

 

Non-cash casualty loss related to flood

 

 

10,388

 

 

Change in contingent acquisition related obligations

 

 

(17,813

)

 

Excess tax benefits from stock-based payment arrangements

 

(21,648

)

(5,995

)

(14,692

)

Net change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(123,870

)

(9,664

)

(157,657

)

Inventory

 

(45,934

)

(88,486

)

(65,179

)

Other current assets

 

(71

)

(8,890

)

(5,637

)

Accounts payable

 

99,416

 

(27,547

)

76,932

 

Accrued income taxes

 

34,092

 

26,947

 

(3,996

)

Other accrued liabilities

 

27,421

 

(2,613

)

35,466

 

Accrued pension and post employment benefits

 

296

 

(5,660

)

(1,247

)

Other long-term assets

 

(7,684

)

17,114

 

11,658

 

Other

 

(38

)

466

 

601

 

Cash flow provided by operating activities

 

674,679

 

565,207

 

424,893

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(129,099

)

(100,222

)

(109,458

)

Proceeds from disposal of fixed assets

 

4,828

 

8,118

 

1,851

 

Purchases of short-term investments

 

(379,605

)

(181,880

)

(198,228

)

Sales and maturities of short-term investments

 

261,800

 

146,373

 

138,012

 

Acquisitions, net of cash acquired

 

(251,523

)

(303,273

)

(180,402

)

Cash flow used in investing activities

 

(493,599

)

(430,884

)

(348,225

)

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

Long-term borrowings under credit facilities

 

819,556

 

873,200

 

793,406

 

Repayments of long-term debt

 

(988,800

)

(301,900

)

(748,017

)

Borrowings under senior notes

 

498,730

 

 

 

Payment of fees and expenses related to debt financing

 

(4,318

)

(2,125

)

(6,975

)

Purchase and retirement of treasury stock

 

(380,023

)

(672,191

)

 

Proceeds from exercise of stock options

 

95,451

 

26,086

 

46,616

 

Excess tax benefits from stock-based payment arrangements

 

21,648

 

5,995

 

14,692

 

Payment of contingent acquisition-related obligations

 

 

(40,000

)

 

Distributions to and purchases of noncontrolling interests

 

(5,206

)

(29,931

)

(24,588

)

Dividend payments

 

(70,122

)

(10,282

)

(10,413

)

Cash flow (used in) provided by financing activities

 

(13,084

)

(151,148

)

64,721

 

Effect of exchange rate changes on cash and cash equivalents

 

7,768

 

6,023

 

(114

)

Net change in cash and cash equivalents

 

175,764

 

(10,802

)

141,275

 

Cash and cash equivalents balance, beginning of year

 

515,086

 

525,888

 

384,613

 

Cash and cash equivalents balance, end of year

 

$

690,850

 

$

515,086

 

$

525,888

 

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

Interest

 

$

48,589

 

$

40,489

 

$

40,124

 

Income taxes

 

189,677

 

144,175

 

133,068

 

 

See accompanying notes to consolidated financial statements.

 

8



 

AMPHENOL CORPORATION

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

 

Note 1Summary of Significant Accounting Policies

 

Operations

 

Amphenol Corporation (together with its subsidiaries, “Amphenol” or the “Company”) operates two business segments which consist of manufacturing and selling interconnect products and assemblies, and manufacturing and selling cable products.  The Company sells its products to customer locations worldwide.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include the fair value of acquired assets and liabilities, stock-based compensation, pension obligations, gains or losses on derivative instruments, accounting for income taxes, inventories, goodwill and other matters that affect the consolidated financial statements and related disclosures.  Actual results could differ from those estimates.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of cash and liquid investments with an original maturity of less than three months. The carrying amounts approximate fair values of those instruments, the majority of which are in non-U.S. bank accounts.

 

Short-term Investments

 

Short-term investments consist primarily of certificates of deposit with original maturities of twelve months or less.  The carrying amounts approximate fair values of those instruments, the majority of which are in non-U.S. bank accounts.

 

Accounts Receivable

 

Accounts receivable is stated at net realizable value.  The Company regularly reviews accounts receivable balances and adjusts the receivable reserves as necessary whenever events or circumstances indicate the carrying value may not be recoverable.

 

Inventories

 

Inventories are stated at the lower of standard cost, which approximates average cost, or market. The principal components of cost included in inventories are materials, direct labor and manufacturing overhead. The Company regularly reviews inventory quantities on hand and evaluates the realizability of inventories and adjusts the carrying value as necessary based on forecasted product demand.

 

Depreciable Assets

 

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the respective asset lives determined on a composite basis by asset group or on a specific item basis using the estimated useful lives of such assets, which range from 3 to 12 years for machinery and equipment and 20 to 40 years for buildings. Leasehold building improvements are depreciated over the shorter of the lease term or estimated useful life. It is the Company’s policy to periodically review fixed asset lives.  Depreciation expense is included in both cost of sales and selling, general and administrative expense in the Consolidated Statements of Income based on the specific categorization and use of the underlying asset being depreciated. The Company assesses the impairment of property and equipment subject to depreciation, whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of our use of the asset, significant changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. There have been no significant impairments recorded as a result of such reviews during any of the periods presented.

 

9



 

Goodwill

 

The Company performs its annual evaluation for the impairment of goodwill for the Company’s reporting units as of each June 30. The Company has defined its reporting units as the two reportable business segments “Interconnect Products and Assemblies” and “Cable Products”, as the components of these reportable business segments have similar economic characteristics. In 2012, the Company utilized the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test in accordance with ASU 2011-08, Intangibles — Goodwill and Other: Testing for Goodwill Impairment (“ASU 2011-08”), which was adopted by the Company effective January 1, 2012. An entity is not required to calculate the fair value of a reporting unit unless the Company determines, based on a qualitative assessment of events and circumstances, that it is more likely than not that its fair value is less than its carrying amount.  As of June 30, 2012, and for each previous year in which the impairment test has been performed, the estimated fair value of the Company’s reporting units significantly exceeded their carrying values and therefore, the Company has not recognized any goodwill impairment in 2012, 2011 or 2010 in connection with its annual impairment test.

 

Intangible Assets

 

Intangible assets are included in other long-term assets and consist primarily of proprietary technology, customer relationships and license agreements and are amortized over the estimated periods of benefit. The Company assesses the impairment of long-lived assets, other than goodwill, including identifiable intangible assets subject to amortization, whenever significant events or significant changes in circumstances indicate the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of the use of the asset, changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. There have been no impairments recorded during any of the periods presented as a result of such reviews.

 

Revenue Recognition

 

The Company’s primary source of revenues is from product sales to its customers. Revenue from sales of the Company’s products is recognized at the time the goods are delivered and title passes, provided the earning process is complete and revenue is measurable.  Delivery is determined by the Company’s shipping terms, which are primarily freight on board (“FOB”) shipping point.  Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns.  These estimates and related reserves are determined and adjusted as needed based upon historical experience, contract terms and other related factors.

 

The shipping costs for the majority of the Company’s sales are paid directly by the Company’s customers.  In the broadband communications market (approximately 8% of consolidated sales in 2012), the Company pays for shipping costs to the majority of its customers.  Shipping costs are also paid by the Company for certain customers in the Interconnect Products and Assemblies segment.  Amounts billed to customers related to shipping costs are immaterial and are included in net sales.  Shipping costs incurred to transport products to the customer which are not reimbursed are included in selling, general and administrative expense.

 

Retirement Pension Plans

 

Costs for retirement pension plans include current service costs and amortization of prior service costs over the average working life expectancy. It is the Company’s policy to fund current pension costs taking into consideration minimum funding requirements and maximum tax deductible limitations. The expense of retiree medical benefit programs is recognized during the employees’ service with the Company as well as amortization of a transition obligation previously recognized.  The recognition of expense for retirement pension plans and medical benefit programs is significantly impacted by estimates made by management such as discount rates used to value certain liabilities, expected return on assets and future health care costs.  The Company uses third-party specialists to assist management in appropriately measuring the expense associated with pension and other post-retirement plan benefits.

 

Stock-Based Compensation

 

The Company accounts for its option and restricted share awards based on the fair value of the award at the date of grant and recognizes compensation expense over the service period that the awards are expected to vest.  The Company recognizes expense for stock-based compensation with graded vesting on a straight-line basis over the vesting period of the entire award.  Stock-based compensation expense includes the estimated effects of forfeitures, and estimates of forfeitures are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ from such estimates.  Changes in estimated forfeitures are recognized in the period of change and also impact the amount of expense to be recognized in future periods.  The Company’s income before income taxes was reduced by $31,412 ($22,709 after tax), $28,679 ($20,720 after tax) and $25,385 ($18,070 after tax) for the years ended December 31, 2012, 2011 and 2010, respectively, related to the expense incurred for stock-based compensation plans, which is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income.

 

10



 

The fair value of stock options has been estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

 

 

2012

 

2011

 

2010

 

Risk free interest rate

 

0.8

%

1.7

%

2.2

%

Expected life

 

4.6 years

 

4.6 years

 

5.6 years

 

Expected volatility

 

30.0

%

28.0

%

33.0

%

Expected dividend yield

 

0.8

%

0.1

%

0.1

%

 

Income Taxes

 

Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement reporting purposes.  At December 31, 2012, the cumulative amount of undistributed earnings of foreign affiliated companies was approximately $2,235,000.  Deferred income taxes are not provided on undistributed earnings of foreign affiliated companies as it is the Company’s intention to reinvest these earnings permanently outside the U.S.  It is not practicable to estimate the amount of tax that might be payable if undistributed earnings were to be repatriated as there is a significant amount of uncertainty with respect to the tax impact of the remittance of these earnings due to the fact that dividends received from foreign subsidiaries may generate additional foreign tax credits, which could ultimately reduce the U.S. tax cost of the dividend.  These uncertainties are further complicated by the significant number of foreign tax jurisdictions involved.  Deferred tax assets are regularly assessed for recoverability based on both historical and anticipated earnings levels and a valuation allowance is recorded when it is more likely than not that these amounts will not be recovered. The tax effects of an uncertain tax position taken or expected to be taken in income tax returns are recognized only if it is “more likely than not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date.  The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.  The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes.

 

Foreign Currency Translation

 

The financial position and results of operations of the Company’s significant foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated at current exchange rates and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments is included as a component of accumulated other comprehensive income (loss) within equity. Transaction gains and losses related to operating assets and liabilities are included in selling, general and administrative expense, and those related to non-operating assets and liabilities are included in other income, net.

 

Research and Development

 

Costs incurred in connection with the development of new products and applications are expensed as incurred.  Research and development expenses for the creation of new and improved products and processes were $92,480, $88,877 and $77,570, for the years 2012, 2011 and 2010, respectively, and are included in selling, general and administrative expenses.

 

Environmental Obligations

 

The Company recognizes the potential cost for environmental remediation activities when site assessments are made, remediation efforts are probable and related amounts can be reasonably estimated; potential insurance reimbursements are not recorded. The Company assesses its environmental liabilities as necessary and appropriate through regular reviews of contractual commitments, site assessments, feasibility studies and formal remedial design and action plans.

 

Net Income per Common Share

 

Basic income per common share is based on the net income attributable to Amphenol Corporation for the year divided by the weighted average number of common shares outstanding. Diluted income per common share assumes the exercise of outstanding, dilutive stock options using the treasury stock method.

 

11



 

Derivative Financial Instruments

 

Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for as cash flow hedges.  Gains and losses on derivatives designated as cash flow hedges resulting from changes in fair value are recorded in accumulated other comprehensive income (loss), and subsequently reflected in net income in a manner that matches the timing of the actual income or expense of such instruments with the hedged transaction. Any ineffective portion of the change in the fair value of designated hedging instruments is included in the Consolidated Statements of Income.

 

Recent Accounting Pronouncements

 

In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present either on the face of the Consolidated Statements of Income or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. ASU 2013-02 is effective prospectively for the Company for annual and interim periods beginning January 1, 2013. The Company does not expect that the adoption of this update will have a material effect on its financial statements.

 

In September 2011, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other: Testing for Goodwill Impairment (“ASU 2011-08”), which allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this amendment, the Company is not required to calculate the fair value of a reporting unit unless the Company determines, based on a qualitative assessment of events and circumstances, that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 was effective for the Company as of January 1, 2012. The Company utilized the option to assess qualitative factors pursuant to this update when performing its 2012 annual impairment assessment. The adoption of this update did not have a material effect on the Company’s financial statements.

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 improves comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements including (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (3) quantitative information required for fair value measurements categorized within Level 3 of the fair value hierarchy. ASU 2011-04 also provides guidance on measuring the fair value of financial instruments managed within a portfolio, and application of premiums and discounts in a fair value measurement. In addition, ASU 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The amendments in this guidance are to be applied prospectively, and were effective for the Company beginning January 1, 2012. The adoption of this update did not have a material effect on the Company’s financial statements.

 

12



 

Note 2—Long-Term Debt

 

Long-term debt consists of the following:

 

 

 

Average Interest Rate at

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

December 31,

 

 

 

2012

 

2011

 

Maturity

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

4.75% Senior Notes due November 2014 (less unamortized discount of $411 and $635 at December 31, 2012 and December 31, 2011, respectively)

 

4.75

%

4.75

%

2014

 

$

599,589

 

$

599,365

 

4.00% Senior Notes due February 2022 (less unamortized discount of $1,154 at December 31, 2012)

 

4.00

%

N/A

 

2022

 

498,846

 

 

Revolving Credit Facility

 

1.52

%

1.55

%

2016

 

500,400

 

692,400

 

Receivables Securitization Facility

 

0.86

%

2.14

%

2014

 

100,000

 

81,700

 

Notes payable to foreign banks and other debt

 

8.45

%

6.23

%

2013-2018

 

7,662

 

3,664

 

 

 

 

 

 

 

 

 

1,706,497

 

1,377,129

 

Less current portion

 

 

 

 

 

 

 

100,293

 

298

 

Total long-term debt

 

 

 

 

 

 

 

$

1,606,204

 

$

1,376,831

 

 

Revolving Credit Facility

 

In June 2011, the Company amended its $1,000,000 unsecured credit facility (the “Revolving Credit Facility”) to reduce borrowing costs and to extend the maturity date from August 2014 to July 2016. At December 31, 2012, borrowings and availability under the Revolving Credit Facility were $500,400 and $499,600, respectively.  As of December 31, 2012, the interest rate on borrowings under the Revolving Credit Facility was at a spread over LIBOR. The Revolving Credit Facility requires payment of certain annual agency and commitment fees and requires that the Company satisfy certain financial covenants.  At December 31, 2012, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

 

Senior Notes

 

In November 2009, the Company issued $600,000 principal amount of unsecured 4.75% Senior Notes due November 2014 (the “4.75% Senior Notes”) at 99.813% of their face value. Net proceeds from the sale of the 4.75% Senior Notes were used to repay borrowings under the Company’s Revolving Credit Facility. Interest on the 4.75% Senior Notes is payable semi-annually on May 15 and November 15 of each year to the holders of record as of the immediately preceding May 1 and November 1. The Company may, at its option, redeem some or all of the 4.75% Senior Notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of repurchase.  The 4.75% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness. The fair value of the 4.75% Senior Notes at December 31, 2012 and 2011 was approximately $640,000 and $643,000, respectively, based on recent bid prices in an active market and are therefore classified as Level 1 in the fair value hierarchy (Note 4).

 

In January 2012, the Company issued $500,000 principal amount of unsecured 4.00% Senior Notes due February 2022 (the “4.00% Senior Notes”) at 99.746% of their face value.  Net proceeds from the sale of the 4.00% Senior Notes were used to repay borrowings under the Company’s Revolving Credit Facility.  Interest on the 4.00%  Senior Notes is payable semi-annually on February 1 and August 1 of each year, beginning August 1, 2012, to the holders of record as of the immediately preceding January 15 and July 15.  The Company may, at its option, redeem some or all of the 4.00% Senior Notes at any time by paying 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase, plus a make-whole premium (if redeemed prior to November 1, 2021). The 4.00% Senior Notes are unsecured and rank equally in right of payment with the Company’s other unsecured senior indebtedness.  The fair value of the 4.00% Senior Notes at December 31, 2012 and 2011 was approximately $533,000 and nil, respectively, based on recent bid prices in an active market and are therefore classified as Level 1 in the fair value hierarchy (Note 4).

 

Receivables Securitization Facility

 

A subsidiary of the Company has entered into a Receivables Securitization Facility with a financial institution whereby the subsidiary can sell an undivided interest of up to $100,000 in a designated pool of qualified accounts receivable (the “Receivables Securitization Facility”). The Company services, administers and collects the receivables on behalf of the purchaser. The Receivables

 

13



 

Securitization Facility includes certain covenants and provides for various events of termination.  Transfers of receivables are reflected as debt issued in the Company’s Consolidated Statements of Cash Flow, and the value of the outstanding undivided interest held by investors at December 31, 2011 and 2012 is accounted for as a secured borrowing and is included in the Company’s Consolidated Balance Sheets as debt.  At December 31, 2012 and 2011, borrowings under the Receivables Securitization Facility were $100,000 and $81,700, respectively.  Fees incurred in connection with the Receivables Securitization Facility are included in interest expense.  Such fees were approximately $1,000, $1,600, and $1,500 for 2012, 2011 and 2010, respectively.  In January 2013, the Company amended the Receivables Securitization Facility to extend the expiration date to January 2014.

 

The carrying value of borrowings under the Company’s Revolving Credit Facility and Receivables Securitization Facility approximated their fair value at December 31, 2012 due to their relative short-term maturities and market interest rates and are therefore classified as Level 2 in the fair value hierarchy (Note 4).

 

The maturity of the Company’s debt over each of the next five years ending December 31 and thereafter, is as follows:

 

2013

 

$

100,293

 

2014

 

600,404

 

2015

 

94

 

2016

 

500,708

 

2017

 

6,152

 

Thereafter

 

498,846

 

 

 

$

1,706,497

 

 

The Company had $14,600 of issued and unused letters of credit at December 31, 2012.

 

Note 3—Contingent Consideration

 

In connection with an acquisition made during 2010, the Company made a contingent consideration payment to the sellers in April 2011 of $40,000 based on certain 2010 profitability levels of the acquired company. The Company would have been required to make a contingent consideration payment to the sellers in 2012, if certain 2011 profitability levels of the acquired company were achieved, up to a maximum aggregate undiscounted amount of $19,000.

 

The Company determined the fair value of the liability for this contingent consideration payment based on a probability-weighted approach, which through the first quarter of 2011 would have resulted in the maximum contingent consideration being paid. During the second quarter of 2011, the acquired company’s performance expectations were reduced as a result of a softening in demand in the defense market and the related deferral of certain defense related programs to periods beyond 2011 and therefore outside the contractual earn-out period. Therefore, it was determined that the payment related to 2011 profitability levels was no longer probable and the Company adjusted the remaining contingent consideration liability of approximately $17,800 as a gain in operating income. This adjustment had an impact on net income of approximately $11,200 in 2011. Based on the actual 2011 results of the acquired company, it was confirmed that the 2012 contingent consideration payment was in fact not payable.

 

Note 4—Fair Value Measurements

 

The Company follows the framework within the Fair Value Measurements and Disclosures topic of the Accounting Standards Codification, which requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. These requirements establish market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis.

 

The valuation techniques required are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

 

Level 1

 

Quoted prices for identical instruments in active markets.

 

 

 

Level 2

 

Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

 

 

Level 3

 

Significant inputs to the valuation model are unobservable.

 

14



 

The Company believes that the assets or liabilities subject to such standards with fair value disclosure requirements are derivative instruments.  The Company’s derivative instruments represent forward contracts, which are valued using bank quotations based on market observable inputs such as forward and spot rates and are therefore classified as Level 2 in the fair value heirarchy. The impact of the credit risk related to these financial assets is immaterial.  The fair values of the Company’s financial and non-financial assets and liabilities subject to such standards at December 31, 2012 and 2011 are as follows:

 

 

 

Fair Value Measurements at December 31, 2012

 

 

 

Total

 

Quoted Prices in Active
Markets for Identical

Assets (Level 1)

 

Significant
Observable
Inputs
(Level 2)

 

Significant
Unobservable Inputs
(Level 3)

 

Forward contracts

 

$

(6,018

)

$

 

$

(6,018

)

$

 

Total

 

$

(6,018

)

$

 

$

(6,018

)

$

 

 

 

 

 

 

Fair Value Measurements at December 31, 2011

 

 

 

Total

 

Quoted Prices in Active
Markets for Identical

Assets (Level 1)

 

Significant
Observable
Inputs
(Level 2)

 

Significant
Unobservable Inputs
(Level 3)

 

Forward contracts

 

$

5,105

 

$

 

$

5,105

 

$

 

Total

 

$

5,105

 

$

 

$

5,105

 

$

 

 

The Company does not have any other significant financial or non-financial assets and liabilities that are measured at fair value on a non-recurring basis.

 

Note 5—Derivative Instruments

 

The Company is exposed to certain risks related to its ongoing business operations.  The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk. Foreign exchange rate forward contacts were entered into in 2012 to manage the currency exposures on intercompany loans used to fund recent acquisitions. The hedges will terminate in 2013 upon maturity of the respective intercompany loans.

 

Derivative instruments are required to be recognized as either assets or liabilities at fair value in the Consolidated Balance Sheets. The Company designates foreign exchange rate forward contacts as cash flow hedges.

 

As of December 31, 2012 and 2011, the Company had the following derivative activity related to cash flow hedges:

 

 

 

 

 

Fair Value Assets

 

 

 

Balance Sheet Location

 

December 31, 2012

 

December 31, 2011

 

Derivatives designated as cash flow hedges:

 

 

 

 

 

 

 

Forward contracts

 

Other accrued expenses

 

$

(6,018

)

$

 

Forward contracts

 

Other current assets

 

 

5,105

 

Total derivatives designated as cash flow hedging instruments

 

 

 

$

(6,018

)

$

5,105

 

 

For the years ended December 31, 2012 and 2011, $538 and $(287), respectively, were recognized in accumulated other comprehensive loss associated with foreign exchange rate forward contracts. The amounts reclassified from accumulated other comprehensive loss to foreign exchange gain/loss in the accompanying Consolidated Statements of Income during the years ended December 31, 2012, 2011 and 2010 were not material.

 

15



 

Note 6—Income Taxes

 

The components of income before income taxes and the provision for income taxes are as follows:

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Income before income taxes:

 

 

 

 

 

 

 

United States

 

$

145,856

 

$

176,739

 

$

225,334

 

Foreign

 

632,985

 

540,013

 

438,354

 

 

 

$

778,841

 

$

716,752

 

$

663,688

 

 

 

 

 

 

 

 

 

Current tax provision:

 

 

 

 

 

 

 

United States

 

$

54,649

 

$

44,769

 

$

77,590

 

Foreign

 

163,060

 

128,608

 

79,607

 

 

 

$

217,709

 

$

173,377

 

$

157,197

 

 

 

 

 

 

 

 

 

Deferred tax provision (benefit):

 

 

 

 

 

 

 

United States

 

$

7,749

 

$

17,733

 

$

3,020

 

Foreign

 

(6,125

)

(3,200

)

1,058

 

 

 

1,624

 

14,533

 

4,078

 

Total provision for income taxes

 

$

219,333

 

$

187,910

 

$

161,275

 

 

At December 31, 2012, the Company had $54,946 and $3,517 of foreign tax loss and credit carryforwards, and U.S. state tax loss and credit carryforwards net of federal benefit, respectively, of which $32,603 and $45, respectively, will either expire or be refunded at various dates through 2027 and the balance can be carried forward indefinitely.

 

A valuation allowance of $17,896 and $19,129 at December 31, 2012 and 2011, respectively, has been recorded which relates to the foreign net operating loss carryforwards and U.S. state tax credits.  The net change in the valuation allowance for deferred tax assets was a decrease of $1,233 and a decrease of $962 in 2012 and 2011, respectively, which was related to foreign net operating loss and foreign and U.S. state credit carryforwards.

 

Differences between the U.S. statutory federal tax rate and the Company’s effective income tax rate are analyzed below:

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

U.S. statutory federal tax rate

 

35.0

%

35.0

%

35.0

%

State and local taxes

 

.6

 

.4

 

.8

 

Foreign earnings and dividends taxed at different rates

 

(7.9

)

(8.2

)

(11.5

)

Valuation allowance

 

(.2

)

(.2

)

(1.0

)

Tax impact of the delay in American Taxpayer Relief Act

 

1.5

 

 

 

Other

 

(.8

)

(.8

)

1.0

 

Effective tax rate

 

28.2

%

26.2

%

24.3

%

 

The 2012 tax rate reflects an increase in tax expense of $11,300, or $0.07 per diluted common share, resulting from the delay, by the U.S. government, in the reinstatement of certain federal income tax provisions for the year 2012 relating primarily to research and development credits and certain U.S. taxes on foreign income that are part of the tax provisions within the American Taxpayer Relief Act.  Such tax provisions were reinstated on January 2, 2013 with retroactive effect to 2012.  Under U.S. GAAP, the related benefit to the Company of $11,300 relating to the 2012 tax year will be recorded as a benefit in the first quarter of 2013 at the date of reinstatement; as such, between the fourth quarter of 2012 and the first quarter of 2013, there is no net impact on the Company from an income statement perspective.  The 2011 tax rate reflects a reduction in tax expense of $4,493 for tax reserve adjustments relating to the completion of the audits of certain of the Company’s prior year tax returns.  The 2010 tax rate reflects reductions in tax expense of $20,700 for tax reserve adjustments relating to the completion of the audit of certain of the Company’s prior year tax returns.  Excluding these adjustments as well as the net impact of  acquisition related expenses, the loss incurred related to the 2011 Sidney flood and the 2011 contingent consideration gain, the Company’s effective tax rate for 2012, 2011 and 2010 was 26.7%, 26.8% and 27.4%, respectively.

 

16



 

The Company’s deferred tax assets and liabilities included in Other Current Assets, Other Long-Term Assets and in Other Long-Term Liabilities in the accompanying Consolidated Balance Sheets, excluding the valuation allowance, comprised the following:

 

 

 

December 31,

 

 

 

2012

 

2011

 

Deferred tax assets relating to:

 

 

 

 

 

Accrued liabilities and reserves

 

$

21,841

 

$

16,363

 

Operating loss and tax credit carryforwards

 

17,967

 

18,270

 

Pensions, net

 

56,584

 

48,105

 

Inventory reserves

 

18,615

 

17,173

 

Employee benefits

 

30,298

 

29,760

 

 

 

$

145,305

 

$

129,671

 

 

 

 

 

 

 

Deferred tax liabilities relating to:

 

 

 

 

 

Goodwill

 

$

90,506

 

$

74,013

 

Depreciation

 

6,982

 

7,086

 

Contingent consideration

 

6,591

 

6,591

 

 

 

$

104,079

 

$

87,690

 

 

At December 31, 2012 and 2011, the amount of the liability for unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $16,171 and $21,886, respectively.

 

A tabular reconciliation of the gross amounts of unrecognized tax benefits excluding interest and penalties at the beginning and end of the year for 2012, 2011 and 2010 are as follows:

 

 

 

2012

 

2011

 

2010

 

Unrecognized tax benefits as of January 1

 

$

20,215

 

$

22,560

 

$

35,528

 

Gross increases and gross decreases for tax positions in prior periods

 

11,268

 

(64

)

2,036

 

Gross increases - current period tax position

 

1,483

 

2,278

 

2,968

 

Settlements

 

(3,127

)

(451

)

(11,880

)

Lapse of statute of limitations

 

(3,458

)

(4,108

)

(6,092

)

Unrecognized tax benefits as of December 31

 

$

26,381

 

$

20,215

 

$

22,560

 

 

The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2012, 2011 and 2010, the provision for income taxes included a net benefit of $315, $566 and $4,566 in estimated interest and penalties.  As of December 31, 2012, 2011 and 2010, the liability for unrecognized tax benefits included $2,812, $3,131 and $2,591 for tax-related interest and penalties.

 

The Company operates in over sixty tax jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2009 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit.  The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of December 31, 2012, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was $16,171 the majority of which is included in other long-term liabilities in the accompanying Consolidated Balance Sheets. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statute of limitations. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitations may close relating to existing unrecognized tax benefits of $5,600.

 

Note 7—Equity

 

Stock-Based Compensation:

 

In May 2009, the Company adopted the 2009 Stock Purchase and Option Plan (the “2009 Option Plan”) for Key Employees of the Company and its subsidiaries.  The Company currently also maintains the 2000 Stock Purchase and Option Plan (the “2000 Option Plan”).  No additional options can be granted under the 2000 Option Plan.  The 2009 Option Plan authorizes the granting of additional stock options by a committee of the Company’s Board of Directors. As of December 31, 2012, there were 4,970,270 shares of common stock available for the granting of additional stock options under the 2009 Option Plan. Options granted under the 2000 Option Plan and the 2009 Option Plan vest ratably over a period of five years and are exercisable over a period of ten years from the date of grant.

 

17



 

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “Directors Option Plan”). The Directors Option Plan is administered by the Company’s Board of Directors.  As of December 31, 2012, the maximum number of shares of common stock available for the granting of additional stock options under the Directors Option Plan was 70,000, although no additional options are expected to be granted under this plan.  Options granted under the Directors Option Plan vest ratably over a period of three years and are exercisable over a period of ten years from the date of grant.

 

In May 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “Restricted Stock Plan”). The Restricted Stock Plan is administered by the Company’s Board of Directors.  As of December 31, 2012, the maximum number of restricted shares available for future grants under the Restricted Stock Plan was 108,571.  Restricted shares granted under the Restricted Stock Plan generally vest on the first anniversary of the grant date.  Grants under the Restricted Stock Plan entitle the holder to receive shares of the Company’s common stock without payment.

 

The grant-date fair value of each option grant under the 2000 Option Plan, the 2009 Option Plan and the Directors Option Plan is estimated using the Black-Scholes option pricing model. The grant-date fair value of each restricted share grant is determined based on the closing share price of the Company’s stock on the date of the grant. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model for option grants requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility was calculated based on the historical volatility of the common stock of the Company and implied volatility derived from related exchange traded options. The average expected life was based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.

 

Stock Options

 

Stock option activity for 2010, 2011 and 2012 was as follows:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Weighted

 

Remaining

 

Aggregate

 

 

 

 

 

Average

 

Contractual

 

Intrinsic

 

 

 

Options

 

Exercise Price

 

Term (in years)

 

Value

 

 

 

 

 

 

 

 

 

 

 

Options outstanding at January 1, 2010

 

12,704,303

 

$

29.58

 

7.16

 

 

 

Options granted

 

2,602,500

 

43.00

 

 

 

 

 

Options exercised

 

(2,331,429

)

19.99

 

 

 

 

 

Options forfeited

 

(269,050

)

37.18

 

 

 

 

 

Options outstanding at December 31, 2010

 

12,706,324

 

33.93

 

7.18

 

 

 

Options granted

 

2,551,350

 

53.45

 

 

 

 

 

Options exercised

 

(1,037,674

)

25.14

 

 

 

 

 

Options forfeited

 

(203,100

)

39.75

 

 

 

 

 

Options outstanding at December 31, 2011

 

14,016,900

 

38.00

 

6.89

 

 

 

Options granted

 

2,990,000

 

53.31

 

 

 

 

 

Options exercised

 

(3,252,961

)

29.33

 

 

 

 

 

Options forfeited

 

(307,220

)

42.84

 

 

 

 

 

Options outstanding at December 31, 2012

 

13,446,719

 

43.39

 

7.08

 

$

286,596

 

Vested and non-vested expected to vest at December 31, 2012

 

12,329,575

 

43.01

 

6.98

 

$

267,483

 

Exercisable at December 31, 2012

 

5,495,542

 

$

37.02

 

5.55

 

$

152,103

 

 

18



 

A summary of the status of the Company’s non-vested options as of December 31, 2012 and changes during the year then ended is as follows:

 

 

 

Options

 

Weighted Average Fair
Value at Grant Date

 

 

 

 

 

 

 

Non-vested options at January 1, 2012

 

7,636,576

 

$

13.41

 

Options granted

 

2,990,000

 

12.96

 

Options vested

 

(2,368,179

)

13.07

 

Options forfeited

 

(307,220

)

13.09

 

Non-vested options at December 31, 2012

 

7,951,177

 

$

13.36

 

 

The weighted-average fair value at the grant date of options granted during 2011 and 2010 was $14.19 and $14.69, respectively.

 

During the years ended December 31, 2012, 2011, and 2010, the following activity occurred under the Company’s option plans:

 

 

 

2012

 

2011

 

2010

 

Total intrinsic value of stock options exercised

 

$

95,891

 

$

29,697

 

$

67,841

 

Total fair value of stock options vested

 

30,964

 

28,563

 

23,714

 

 

On December 31, 2012 the total compensation cost related to non-vested options not yet recognized is approximately $75,901, with a weighted average expected amortization period of 3.24 years.

 

Restricted Shares

 

As of December 31, 2012, the Company has issued 16,429 restricted shares with a weighted-average fair value at grant date of $53.26 per share.  As of December 31, 2012, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $348 with a weighted average expected amortization period of 0.39 years.

 

Stock Repurchase Program:

 

In January 2011, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company could repurchase up to 20,000,000 shares of its common stock during the three year period ending January 31, 2014 (the “2011 Program”). During the twelve months ended December 31, 2012, the Company repurchased 6,571,611 shares of its common stock under the 2011 Program for approximately $380,000.  During the twelve months ended December 31, 2011, the Company repurchased 13,428,389 shares of its common stock for approximately $672,200.  These treasury shares have been retired by the Company and common stock and accumulated earnings were reduced accordingly.  As of December 31, 2012, the Company has repurchased all shares authorized under the 2011 Program.

 

In January 2013, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 10,000,000 shares of its common stock during the two year period ending January 31, 2015 (the “2013 Program”). The price and timing of any such purchases under the 2013 Program will depend on factors such as levels of cash generation from operations, the volume of stock option exercises by employees, cash requirements for acquisitions, economic and market conditions and stock price.  Through February 15, 2013, the Company has repurchased 743,877 shares of its common stock under the 2013 Program for $50,290.  These treasury shares will be retired by the Company and common stock and accumulated earnings will be reduced accordingly.  At February 15, 2013, approximately 9,256,123 additional shares of common stock may be repurchased under the 2013 Program.

 

Dividends:

 

After declaration by the Board of Directors, the Company paid a quarterly dividend on its common stock of $0.105 per share in 2012 and $0.015 per share in 2011.  Total dividends declared during 2012, 2011 and 2010 were $67,677, $10,097 and $10,449,  respectively. Total dividends paid in 2012 were $70,122, including those declared in 2011 and paid in 2012, total dividends paid in 2011 were $10,282, including those declared in 2010 and paid in 2011, and total dividends paid in 2010 were $10,413, including those declared in 2009 and paid in 2010.

 

19



 

Accumulated Other Comprehensive Income (Loss):

 

Balances of related after-tax components comprising accumulated other comprehensive income (loss) included in equity at December 31, 2012, 2011 and 2010 are as follows:

 

 

 

Foreign Currency
Translation
Adjustment

 

Revaluation of
Derivatives

 

Defined Benefit
Plan Liability
Adjustment

 

Accumulated
Other Comprehensive
Income
(Loss)

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2010

 

$

24,141

 

$

(2,363

)

$

(121,868

)

$

(100,090

)

Translation adjustments

 

17,465

 

 

 

17,465

 

Revaluation of interest rate derivatives, net of tax of $1,486

 

 

2,363

 

 

2,363

 

Defined benefit plan liability adjustment, net of tax of $2,639

 

 

 

(4,495

)

(4,495

)

Balance at December 31, 2010

 

41,606

 

 

(126,363

)

(84,757

)

Translation adjustments

 

(10,154

)

 

 

(10,154

)

Revaluation of interest rate derivatives, net of tax of $173

 

 

(287

)

 

(287

)

Defined benefit plan liability adjustment, net of tax of $12,959

 

 

 

(24,859

)

(24,859

)

Balance at December 31, 2011

 

31,452

 

(287

)

(151,222

)

(120,057

)

Translation adjustments

 

25,858

 

 

 

25,858

 

Revaluation of forward contract derivatives, net of tax of $39

 

 

538

 

 

538

 

Defined benefit plan liability adjustment, net of tax of $8,936

 

 

 

(23,343

)

(23,343

)

Balance at December 31, 2012

 

$

57,310

 

$

251

 

$

(174,565

)

$

(117,004

)

 

Note 8—Earnings Per Share

 

Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amphenol Corporation by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income attributable to Amphenol Corporation by the weighted-average number of common shares and dilutive common shares outstanding, which relates to stock options. A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding as of December 31 is as follows (dollars in thousands, except per share amounts):

 

 

 

2012

 

2011

 

2010

 

Net income attributable to Amphenol Corporation shareholders

 

$

555,317

 

$

524,191

 

$

496,405

 

Basic average common shares outstanding

 

161,522,080

 

169,640,115

 

173,785,650

 

Effect of dilutive stock options

 

2,425,031

 

2,185,473

 

2,540,343

 

Dilutive average common shares outstanding

 

163,947,111

 

171,825,588

 

176,325,993

 

Earnings per share:

 

 

 

 

 

 

 

Basic

 

$

3.44

 

$

3.09

 

$

2.86

 

Diluted

 

$

3.39

 

$

3.05

 

$

2.82

 

 

Excluded from the computations above were anti-dilutive common shares of 4,551,578, 4,286,519 and 2,570,500 for the years ended December 31, 2012, 2011 and 2010, respectively.

 

20



 

Note 9—Benefit Plans and Other Postretirement Benefits

 

The Company and certain of its domestic subsidiaries have two defined benefit pension plans (the “U.S. Plans”), which cover certain U.S. employees and which represent the majority of the plan assets and benefit obligations of the aggregate defined benefit plans of the Company. The U.S. Plans’ benefits are generally based on years of service and compensation and are generally noncontributory.  Certain U.S. employees not covered by the U.S. Plans are covered by defined contribution plans.  Certain foreign subsidiaries have defined benefit plans covering their employees (the “International Plans”). The largest international pension plan, in accordance with local regulations, is unfunded and had a projected benefit obligation of approximately $70,000 and $48,000 at December 31, 2012 and 2011, respectively. Total required contributions to be made during 2013 for the unfunded International Plans amount to approximately $3,700. This amount, which is classified as other accrued expenses, and the obligations discussed above, are included in the accompanying Consolidated Balance Sheets and in the tables below.

 

The following is a summary of the Company’s defined benefit plans’ funded status as of the most recent actuarial valuations; for each year presented below, projected benefits exceed assets.

 

 

 

December 31,

 

 

 

2012

 

2011

 

Change in projected benefit obligation:

 

 

 

 

 

Projected benefit obligation at beginning of year

 

$

488,609

 

$

457,321

 

Service cost

 

9,175

 

7,832

 

Interest cost

 

22,021

 

22,684

 

Plan participants’ contributions

 

 

 

Plan amendments

 

271

 

 

Actuarial loss

 

66,617

 

27,642

 

Foreign exchange translation

 

4,604

 

(2,450

)

Benefits paid

 

(25,939

)

(24,420

)

Projected benefit obligation at end of year

 

565,358

 

488,609

 

 

 

 

 

 

 

Change in plan assets:

 

 

 

 

 

Fair value of plan assets at beginning of year

 

295,054

 

296,530

 

Actual return on plan assets

 

38,022

 

(2,001

)

Employer contributions

 

21,830

 

22,844

 

Foreign exchange translation

 

1,982

 

(2,131

)

Benefits paid

 

(22,465

)

(20,188

)

Fair value of plan assets at end of year

 

334,423

 

295,054

 

 

 

 

 

 

 

Funded status

 

$

(230,935

)

$

(193,555

)

 

The accumulated benefit obligation for the Company’s defined benefit pension plan was $541,093 and $469,547 at December 31, 2012 and 2011, respectively.

 

 

 

Year Ended December 31,

 

 

 

2012

 

2011

 

2010

 

Components of net pension expense:

 

 

 

 

 

 

 

Service cost

 

$

7,714

 

$

7,073

 

$

5,907

 

Interest cost

 

22,021

 

22,684

 

23,100

 

Expected return on plan assets

 

(24,951

)

(25,226

)

(28,016

)

Net amortization of actuarial losses

 

20,454

 

14,528

 

17,051

 

 

 

 

 

 

 

 

 

Net pension expense

 

$

25,238

 

$

19,059

 

$

18,042

 

 

21



 

 

 

Weighted-average assumptions used to determine
benefit obligations at December 31,

 

 

 

Pension Benefits

 

Other Benefits

 

 

 

2012

 

2011

 

2012

 

2011

 

Discount rate:

 

 

 

 

 

 

 

 

 

U.S. plans

 

3.75

%

4.45

%

3.45

%

4.25

%

International plans

 

3.97

%

4.97

%

n/a

 

n/a

 

Rate of compensation increase:

 

 

 

 

 

 

 

 

 

U.S. plans

 

3.00

%

3.00

%

n/a

 

n/a

 

International plans

 

2.57

%

2.83

%

n/a

 

n/a

 

 

 

 

Weighted-average assumptions used to determine net periodic
benefit cost for years ended December 31,

 

 

 

Pension Benefits

 

Other Benefits

 

 

 

2012

 

2011

 

2010

 

2012

 

2011

 

2010

 

Discount rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. plans

 

4.45

%

5.20

%

5.75

%

4.25

%

4.85

%

5.40

%

International plans

 

4.97

%

5.26

%

5.46

%

n/a

 

n/a

 

n/a

 

Expected long-term return on assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. plans

 

8.00

%

8.25

%

8.25

%

n/a

 

n/a

 

n/a

 

International plans

 

5.66

%

6.30

%

6.63

%

n/a

 

n/a

 

n/a

 

Rate of compensation increase:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. plans

 

3.00

%

3.00

%

3.00

%

n/a

 

n/a

 

n/a

 

International plans

 

2.83

%

2.97

%

2.96

%

n/a

 

n/a

 

n/a

 

 

The pension expense for the U.S. Plans and the International Plans (the “Plans”) approximated $25,200, $19,100 and $18,000 in 2012, 2011 and 2010, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on the respective Plans’ assets.

 

The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations.  The Company’s U.S. Plans comprised the majority of the accrued benefit obligation, pension assets and pension expense. The discount rate for the U.S. Plans was 3.75% at December 31, 2012 and 4.45% at December 31, 2011. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 50 basis points, the accrued benefit obligation would have decreased or increased by approximately $23,000.

 

The Company’s investment strategy for the Plans’ assets is to achieve a rate of return on plan assets equal to or greater than the average for the respective investment classification through prudent allocation and periodic rebalancing between fixed income and equity instruments. The current investment policy includes a strategy to maintain an adequate level of diversification, subject to portfolio risks.  The target allocations for the U.S. Plans, which represent the majority of the Plans’ assets, are 60% equity and 40% fixed income.  Short-term strategic ranges for investments are established within these long term target percentages.  The Company invests in a diversified investment portfolio through various investment managers and evaluates its plan assets for the existence of concentration risks.  As of December 31, 2012, there were no significant concentrations of risks in the Company’s defined benefit plan assets.  The Company does not invest pension assets and does not instruct investment managers to invest pension assets in Amphenol securities.  The Plans may indirectly hold the Company’s securities as a result of external investment management in certain commingled funds.  Such holdings would not be material relative to the Plans’ total assets.

 

In developing the expected long-term rate of return assumption for the U.S. Plans, the Company evaluated input from its external actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices.  The Company also considered its historical twenty-year compounded return of approximately 9%, which has been in excess of these broad equity and bond benchmark indices. As described above, the expected long-term rate of return on the U.S. Plans’ assets is based on an asset allocation assumption of 60% with equity managers (with an expected long-term rate of return of approximately 9%) and 40% with fixed income managers (with an expected long-term rate of return of approximately 7%).  As of December 31, 2012 and 2011, the asset allocation was 62% with equity managers and 37% with fixed income managers and 1% in cash for both years.  The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology, the Company’s expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plans at December 31, 2012 and 2011 is approximately 8.00% and 8.25%, respectively.

 

22



 

The Company’s plan assets are reported at fair value and classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The process requires judgment and may have effect on the placement of the plan assets within the fair value measurement hierarchy. The fair values of the Company’s pension plans’ assets at December 31, 2012 and 2011 by asset category are as follows (refer to Note 4 for definitions of Level 1, 2 and 3 inputs):

 

 

 

Fair Value Measurements at December 31, 2012

 

Asset Category

 

Total

 

Quoted Prices in Active
Markets for Identical

Assets (Level 1)

 

Significant
Observable
Inputs
(Level 2)

 

Significant
Unobservable Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

U.S. equities – large cap

 

$

93,047

 

$

71,668

 

$

21,379

 

$

 

U.S. equities – small/mid cap and other

 

25,159

 

 

25,159

 

 

International equities – growth

 

42,057

 

42,057

 

 

 

International equities – other

 

47,972

 

5,276

 

42,696

 

 

 

 

208,235

 

119,001

 

89,234

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

U.S. fixed income securities – intermediate term

 

59,983

 

59,983

 

 

 

U.S. fixed income securities – high yield

 

22,409

 

 

22,409

 

 

International fixed income securities – other

 

40,923

 

 

40,923

 

 

 

 

123,315

 

59,983

 

63,332

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

2,873

 

2,873

 

 

 

Total

 

$

334,423

 

$

181,857

 

$

152,566

 

$

 

 

 

 

Fair Value Measurements at December 31, 2011

 

Asset Category

 

Total

 

Quoted Prices in Active
Markets for Identical

Assets (Level 1)

 

Significant
Observable
Inputs
(Level 2)

 

Significant
Unobservable Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

U.S. equities – large cap

 

$

80,651

 

$

80,651

 

$

 

$

 

U.S. equities – small/mid cap and other

 

22,579

 

 

22,579

 

 

International equities – growth