Item 1. Business

General

Amphenol Corporation (together with its subsidiaries, “Amphenol” or the “Company”) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor- based products and coaxial and high-speed specialty cable. The Company estimates, based on reports of industry analysts, that the worldwide sales of interconnect and sensor-related products were approximately $133 billion in 2014.

The Company was incorporated in 1987. Certain predecessor businesses, which now constitute part of the Company, have been in business since 1932.

The Company’s strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a world-wide basis while maintaining continuing programs of productivity improvement and cost control. The Company operates through two reporting segments: Interconnect Products and Assemblies and Cable Products and Solutions. The Interconnect Product and Assemblies segment primarily designs, manufacturers and markets a broad range of connector and connector systems, value-add products and other products, including antennas and sensors, used in a broad range of applications in a diverse set of end markets. Interconnect products include connectors, which when attached to an electrical, electronic or fiber optic cable, a printed circuit board or other device, facilitate transmission of power or signal. Value-add systems generally consist of a system of cable, flexible circuits or printed circuit boards and connectors for linking electronic equipment. The Cable Products and Solutions segment primarily designs, manufacturers and markets cable, value-added products and components for use primarily in the broadband communications and information technology markets as well as certain applications in other markets.

The table below provides a summary of our reporting segments, the 2014 net sales contribution of each segment, the primary industry and end markets that we service and our key products:

Reporting Segment		Interconnect Products and Assemblies		Cable Products and Solutions
% of 2014 Net Sales:		93%		7%
Primary End Markets		· Automotive · Broadband Communications · Commercial Aerospace · Industrial · Information Technology and Data Communications · Military · Mobile Devices · Mobile Networks		· Automotive · Broadband Communications · Industrial · Information Technology and Data Communications · Mobile Networks
Key Products		Connector and Connector Systems: · fiber optic interconnect products · harsh environment interconnect products · high speed interconnect products · power interconnect products, bus bars and distribution systems · radio frequency interconnect products and antennas · other connectors Value-Add Products: · backplane interconnect systems · cable assemblies and harnesses · cable management products Other: · antennas · flexible and rigid printed circuit boards · hinges · installation accessories · molded parts · sensors and sensor-based products		Cable: · coaxial cable · power cable · specialty cable Value-Add Products: · cable assemblies Components: · combiner/splitter products · connector and connector systems · fiber optic components

		· switches · touch panels and lenses

Information regarding our operations by reporting segment and the Company’s long-lived assets appears in Note 11 of the Notes to the Consolidated Financial Statements.

Our Strategy

The Company’s overall strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a worldwide basis while maintaining continuing programs of productivity improvement and cost control. Specifically, our business strategy is as follows:

· Pursue broad diversification - The Company constantly drives to increase its diversity of markets, customers, applications and products. Due to the tremendous variety of opportunities in the electronics industry, management believes that it is very important to ensure participation wherever significant growth opportunities are available. This diversification positions us to proliferate our technologies across the broadest array of opportunities and reduces our exposure to any particular market, thereby reducing the variability of our financial performance. An overview of the Company’s market and product participation is described under “Markets”.

· Develop performance-enhancing interconnect solutions - The Company seeks to expand the scope and number of its preferred supplier relationships. The Company works closely with its customers at the design stage to create and manufacture innovative solutions. These products generally have higher value-added content than other interconnect products and have been developed across the Company’s markets. The Company is focused on technology leadership in the interconnect areas of radio frequency, power, harsh environment, high-speed and fiber optics, as well as sensors, as it views these technology areas to be of particular importance to our global customer base.

· Expand global presence - The Company intends to further expand its global manufacturing, engineering, sales and service operations to better serve its existing customer base, penetrate developing markets and establish new customer relationships. As the Company’s global customers expand their international operations to access developing world markets and lower manufacturing costs in certain regions, the Company is continuing to expand its international footprint in order to provide just-in-time capabilities to these customers. The majority of the Company’s international operations have broad capabilities including new product development. The Company is also able to take advantage of the lower manufacturing costs in some regions, and has established low-cost manufacturing and assembly facilities in the three major geographical markets of the Americas, Europe/Africa and Asia.

· Control costs - The Company recognizes the importance in today’s global marketplace of maintaining a competitive cost structure. Innovation, product quality and comprehensive customer service are not mutually exclusive with controlling costs. Controlling costs is part of a mindset. It is having the discipline to invest in programs that have a good return, maintaining a cost structure as flexible as possible to respond to changes in the marketplace, dealing with suppliers and vendors in a fair but prudent way to ensure a reasonable cost for materials and services and creating a mindset of managers to manage the Company’s assets as if they were their own.

· Pursue strategic acquisitions and investments - The Company believes that the fragmented interconnect industry continues to provide significant opportunities for strategic acquisitions. Accordingly, we continue to pursue acquisitions of high growth potential companies with strong management teams that complement our existing business while further expanding our product lines, technological capabilities and geographic presence. Furthermore, we seek to enhance the performance of acquired companies by leveraging Amphenol’s business strategy and access to low-cost manufacturing around the world. In 2014, the Company invested $518 million in two separate acquisitions in the automotive and industrial markets, which broadened and enhanced the Company’s customer base and product offerings in these markets.

· Foster collaborative, entrepreneurial management - Amphenol’s management system is designed to provide clear income statement and balance sheet responsibility in a flat organizational structure. Each general manager is incented to grow and develop his or her business and to think entrepreneurially in providing innovative, timely and cost-effective solutions to customer needs. In addition, Amphenol’s general managers have access to the resources of the larger organization and are encouraged to work collaboratively with other general managers to meet the needs of the expanding marketplace and to achieve common goals.

Markets

The Company sells products to customers in a diversified set of end markets.

Automotive - Amphenol is a leading supplier of advanced interconnect systems and sensors for a growing array of automotive applications. In addition, Amphenol has developed advanced technology solutions for hybrid-electric vehicles and is working with the leading global customers to proliferate these advanced interconnect products into next-generation automobiles. Sales into the automotive market represented approximately 15% of the Company’s net sales in 2014 with sales into the following primary end applications:

· engine management and control

· exhaust monitoring and cleaning

· hybrid-electric vehicles

· infotainment and communications

· lighting

· safety and security systems

· telematics systems

Broadband Communications - Amphenol is a world leader in broadband communication products for the cable, satellite and telco video and data networks, with industry-leading engineering, design and manufacturing expertise. The Company offers a wide range of products to service the broadband market, from customer premises cables and interconnect devices to distribution cable and fiber optic components, as well as interconnect products integrated into headend equipment. Sales into the broadband communications market represented approximately 7% of the Company’s net sales in 2014 with sales into the following primary end applications:

· cable modems

· cable, satellite and telco networks

· high-speed internet hardware

· network switching equipment

· satellite interface devices

· set top boxes

Commercial Aerospace - Amphenol is a leading provider of high-performance interconnect systems and components to the rapidly expanding commercial aerospace market. In addition to connector and assembly products, the Company also provides high technology cable management products. All of Amphenol’s products are specifically designed to operate in the harsh environments of commercial aerospace while also providing substantial weight reduction, simplified installation and minimal maintenance procedures. Sales into the commercial aerospace market represented approximately 6% of the Company’s net sales in 2014 with sales into the following primary end applications:

· aircraft and airframe power distribution

· avionics

· controls and instrumentation

· engines

· in-flight entertainment

· lighting and control systems

· wire bundling and cable management

Industrial - Amphenol is a technology leader in the design, manufacture and supply of high-performance interconnect systems and sensors for a broad range of industrial applications. Amphenol’s core competencies include application-specific industrial interconnect solutions utilizing integrated assemblies, including with both cable and flexible printed circuits, as well as high-power interconnects requiring advanced engineering and system integration. In particular, our innovative solutions facilitate the increasing demands of embedded computing and power distribution. Sales into the

industrial market represented approximately 17% of the Company’s net sales in 2014 with sales into the following primary end applications:

· alternative and traditional energy generation

· factory and machine tool automation

· geophysical

· heavy equipment

· instrumentation

· LED lighting

· marine

· medical equipment

· rail mass transit

Information Technology and Data Communications - Amphenol is a global provider of interconnect solutions to designers and manufacturers of internet-enabling systems. With our industry-leading high speed, power and fiber optic technologies, together with superior simulation and testing capability and cost effectiveness, Amphenol leads the way in interconnect development for the information technology (“IT”) and datacom market. Whether industry standard or application-specific designs are required, Amphenol provides customers with products that enable performance at the leading edge of next-generation, high-speed technology. Sales into the IT and datacom market represented approximately 16% of the Company’s net sales in 2014 with sales into the following primary end applications:

· data centers

· internet appliances

· optical and copper networking equipment

· servers

· storage systems

Military - Amphenol is a world leader in the design, manufacture and supply of high-performance interconnect systems and antennas for harsh environment military applications. Such products require superior performance and reliability under conditions of stress and in hostile environments such as rapid and severe temperature changes, vibration, pressure, humidity and nuclear radiation. Amphenol provides an unparalleled product breadth, from military specification connectors to customized high-speed board level interconnects; from flexible to rigid printed circuit boards; from backplane systems to completely integrated assemblies. Amphenol is a technology leader, participating in all major programs from the earliest inception across each phase of the production cycle. Sales into the military market represented approximately 11% of the Company’s net sales in 2014 with sales into the following primary end applications:

· avionics

· communications

· engines

· ground vehicles and tanks

· naval

· ordnance and missile systems

· radar systems

· rotorcraft

· satellite and space programs

· unmanned aerial vehicles

Mobile Devices - Amphenol designs and manufactures an extensive range of interconnect products, antennas and electromechanical components found in a wide array of mobile computing devices. Amphenol’s capability for high-volume production of these technically demanding, miniaturized products, combined with our speed of new product introduction, are critical drivers of the Company’s long-term success in this market. Sales into the mobile devices market represented approximately 17% of the Company’s net sales in 2014 with sales into the following primary end applications:

· mobile and smart phones, including wearable devices and other accessories

· mobile computing devices, including laptops, tablets, ultrabooks and e-readers

Mobile Networks - Amphenol is a leading global interconnect solutions provider to the mobile networks market. The Company offers a wide product portfolio. The Company’s products are used in virtually every wireless communications standard, including 3G, 3.5G, 4G, LTE, TD-LTE and other future IP-based solutions. In addition, the Company works with service providers around the world to offer an array of antennas and installation-related site solution interconnect products. Sales into the mobile

networks market represented approximately 11% of the Company’s net sales in 2014 with sales into the following primary end applications:

· cellular base stations

· cell site antenna systems

· combiners, filters and amplifiers

· core network controllers

· mobile switches

· radio links

· wireless routers

Customers and Geographies

The Company manufactures and sells a broad portfolio of products on a global basis to customers in various industries. Our customers include many of the leaders in their respective industries, and our relationships with them typically date back many years. We believe that this diversified customer base provides us an opportunity to leverage our skills and experience across markets and reduces our exposure to particular end markets. Additionally, we believe that the diversity of our customer base is an important strength of the Company.

There has been a trend on the part of original equipment manufacturer (“OEM”) customers to consolidate their lists of qualified suppliers to companies that have a broad portfolio of leading technology solutions, design capability, global presence, and the ability to meet quality and delivery standards while maintaining competitive prices. The Company has positioned its global resources to compete effectively in this environment. As an industry leader, the Company has established close working relationships with many of its customers on a global basis. These relationships allow the Company to better anticipate and respond to these customer needs when designing new products and new technical solutions. By working with customers in developing new products and technologies, the Company is able to identify and act on trends and leverage knowledge about next-generation technology across our products. In addition, the Company has concentrated its efforts on service, procurement and manufacturing improvements focused on increasing product quality and lowering product lead-time and cost. For a discussion of risks related to the Company’s foreign operations, see the risk factor titled “The Company is subject to the risks of political, economic and military instability in countries outside the United States” in Part I, Item 1A herein.

The Company’s products are sold to thousands of OEMs in approximately 70 countries throughout the world. The Company also sells certain products to electronic manufacturing services (“EMS”) companies, to original design manufacturers (“ODMs”) and to communication network operators. No single customer accounted for more than 10% of the Company’s net sales for the years ended December 31, 2014, 2013 or 2012.

The Company sells its products through its own global sales force, independent representatives and a global network of electronics distributors. The Company’s sales to distributors represented approximately 13% of the Company’s net sales in 2014. In addition to product design teams and customer collaboration arrangements, the Company uses key account managers to manage customer relationships on a global basis such that it can bring to bear its total resources to meet the worldwide needs of its multinational customers.

Manufacturing

The Company is a global manufacturer employing advanced manufacturing processes including molding, stamping, plating, turning, extruding, die casting and assembly operations as well as proprietary process technology for specialty and coaxial cable production as well as sensor fabrication. Outsourcing of certain manufacturing processes is used when cost-effective. Substantially all of the Company’s manufacturing facilities are certified to the ISO9000 series of quality standards, and many of the Company’s manufacturing facilities are certified to other quality standards, including QS9000, ISO14000, TS16949 and TS16469.

The Company’s manufacturing facilities are generally vertically integrated operations from the initial design stage through final design and manufacturing. The Company has an established manufacturing presence in over 30 countries. Our global coverage positions us near many of our customers’ locations and allows us to assist them in consolidating their supply base and lowering their production costs. In addition, the Company generally relies on local general management in every region, which we believe creates a strong degree of organizational stability and deeper understanding of local markets. We believe our balanced geographic distribution lowers our exposure to any particular geography. The Company designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa. The Company believes that its global presence is an important competitive advantage, as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers.

The Company employs a global manufacturing strategy to lower its production and logistics costs and to improve service to customers. The Company’s strategy is to maintain strong cost controls in its manufacturing and assembly operations. The Company is continually evaluating and adjusting its expense levels and workforce to reflect current business conditions and maximize the return on capital investments. The Company sources its products on a worldwide basis. To better serve certain high volume customers, the Company has established just-in-time facilities near these major customers. The Company’s international manufacturing and assembly facilities generally serve the respective local markets and coordinate product design and manufacturing responsibility with the Company’s other operations around the world. The Company has lower cost manufacturing and assembly facilities in China, Macedonia, Malaysia, Mexico, India, Indonesia, Eastern Europe and North Africa to serve regional and world markets. For a discussion of risks attendant to the Company’s foreign operations, see the risk factor titled “The Company is subject to the risks of political, economic and military instability in countries outside the United States” in Part I, Item 1A herein.

Net sales by geographic region as a percentage of our total net sales were as follows:

		For the Years Ended
		2014		2013		2012
United States		31	%	31	%	32	%
China		27	%	27	%	25	%
Other international locations		42	%	42	%	43	%
Total		100	%	100	%	100	%

Net sales by geographic area are based on the customer location to which the product is shipped.

Research and Development

The Company generally implements its product development strategy through product design teams and collaboration arrangements with customers, which result in the Company obtaining approved vendor status for its customers’ new products and programs. The Company focuses its research and development efforts primarily on those product areas that it believes have the potential for broad market applications and significant sales within a one to three year period. The Company seeks to have its products become widely accepted within the industry for similar applications and products manufactured by other potential customers, which the Company believes will provide additional sources of future revenue. By developing application specific products, the Company has decreased its exposure to standard products, which generally experience greater pricing pressure.

Our research, development, and engineering efforts are supported by approximately 1,700 people and are performed primarily by individual operating units focused on specific markets and technologies. The Company’s research and development expense for the creation of new and improved products and processes was $114.8 million, $103.4 million and $92.5 million for 2014, 2013 and 2012, respectively.

Intellectual Property

Patents and other proprietary rights are important to our business. We also rely upon trade secrets, manufacturing know-how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive position. We review third-party proprietary rights, including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities, and monitor the intellectual property claims of others.

We own a large portfolio of patents that principally relate to electrical, optical, electronic, antenna and sensor products. We also own a portfolio of trademarks and are a licensee of various patents and trademarks. Patents for individual products extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. Trademark rights may potentially extend for longer periods of time and are dependent upon national laws and use of the trademarks.

While we consider our patents and trademarks to be valued assets, we do not believe that our competitive position or our operations are dependent upon or would be materially impacted by the loss of any single patent or group of related patents.

Raw Materials

The Company purchases a wide variety of raw materials for the manufacture of its products, including precious metals such as gold and silver used in plating, aluminum, steel, copper, titanium and metal alloy products used for cable, contacts and connector shells, certain rare earth metals used in sensors and plastic materials used for cable and connector bodies and inserts. Such raw materials are generally available throughout the world and are purchased locally from a variety of suppliers. The Company is generally not dependent upon any one source for raw materials, or if one source is used the Company attempts to protect itself through long-term supply agreements. Information regarding our purchasing obligations related to commitments to purchase certain goods and services is disclosed in Note 13 of the Notes to the Consolidated Financial Statements.

Competition

The Company encounters competition in substantially all areas of its business. The Company competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. Competitors within the Interconnect Products and Assemblies segment include TE Connectivity, Molex, Yazaki, Foxconn, Sensata, FCI, JST, Delphi, Hirose and JAE, among others. The primary competitors within the Cable Products and Solutions segment are Commscope and Belden, among others. In addition, the Company competes with a large number of smaller companies who compete in specific geographies, markets or products.

Backlog

The Company estimates that its backlog of unfilled orders as of December 31, 2014 was approximately $1,043 million compared with backlog of approximately $1,032 million as of December 31, 2013. Orders typically fluctuate from quarter to quarter based on customer demand and general business conditions. Unfilled orders may generally be cancelled prior to shipment of goods. It is expected that all or a substantial portion of the backlog will be filled within the next 12 months. Significant elements of the Company’s business, such as sales to the communications related markets (including wireless communications, information technology and data communications) and broadband communications and sales to distributors, generally have short lead times. Therefore, backlog may not be indicative of future demand.

Employees

As of December 31, 2014, the Company had approximately 50,700 employees worldwide, of which approximately 40,600 were located in lower cost regions. Of these employees, approximately 42,200 were hourly employees and the remainder were salaried employees. The Company believes that it has a good relationship with its unionized and non-unionized employees.

Environmental Matters

Certain operations of the Company are subject to environmental laws and regulations which govern the discharge of pollutants into the air and water, as well as the handling and disposal of solid and hazardous wastes. The Company believes that its operations are currently in substantial compliance with applicable environmental laws and regulations and that the costs of continuing compliance will not have a material effect on the Company’s financial condition, results of operations or cash flows.

Other

The Company’s annual report on Form 10-K and all of the Company’s other filings with the Securities and Exchange Commission (“SEC”) are available to view, without charge, on the Company’s web site, www.amphenol.com, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available without charge, from Amphenol Corporation, Investor Relations, 358 Hall Avenue, Wallingford, CT 06492.

Cautionary Information for Purposes of Forward Looking Statements

Statements made by the Company in written or oral form to various persons, including statements made in this annual report on Form 10-K and other filings with the SEC, that are not strictly historical facts are “forward looking” statements. Such statements should be considered as subject to uncertainties that exist in the Company’s operations and business environment. Certain of the risk factors, assumptions or uncertainties that could cause the Company to fail to conform with expectations and predictions are described below under the caption “Risk Factors” in Part I, Item IA and elsewhere in this annual report on Form 10-K. Should one or more of these risks or uncertainties occur, or should the Company’s assumptions

prove incorrect, actual results may vary materially from those described in this annual report on Form 10-K as anticipated, believed, estimated or expected. We do not intend to update these forward looking statements.