Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the results of operations for the three years ended December 31, 2014, 2013 and 2012 has been derived from and should be read in conjunction with the consolidated financial statements included in Part II, Item 8 herein (dollars in millions except per share data).

Overview

The Company is a global designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensor and sensor-based products and coaxial and high-speed specialty cable. The Company operates through two reporting segments: (i) Interconnect Products and Assemblies and (ii) Cable Products and Solutions. In 2014, approximately 69% of the Company’s sales were outside the U.S. The primary end markets for our products are:

· information technology and communication devices and systems for the converging technologies of voice, video and data communications;

· a broad range of industrial applications and traditional and hybrid-electric automotive applications; and

· commercial aerospace and military applications.

The Company’s products are used in a wide variety of applications by numerous customers. The Company encounters competition in its markets and competes primarily on the basis of technology innovation, product quality, price, customer service and delivery time. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a global presence, can meet quality and delivery standards, have a broad product portfolio and design capability and have competitive prices. The Company has focused its global resources to position itself to compete effectively in this environment. 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’s strategy is to provide 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 in the areas in which it competes. The Company focuses its research and development efforts through close collaboration with its OEM customers to develop highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales within a one-to-three year period. The Company is also focused on controlling costs. The Company does this by investing in modern manufacturing technologies, controlling purchasing processes and expanding into lower cost areas.

The Company’s strategic objective is to further enhance its position in its served markets by pursuing the following success factors:

· Pursue broad diversification;

· Develop performance-enhancing interconnect solutions;

· Expand global presence;

· Control costs;

· Pursue strategic acquisitions and investments; and

· Foster collaborative, entrepreneurial management.

In 2014, the Company reported net sales, operating income and net income attributable to Amphenol Corporation of $5,345.5, $1,034.6 and $709.1, respectively, up 16%, 15% and 12%, respectively, from 2013. Sales and profitability trends are discussed in detail in “Results of Operations” below. In addition, a strength of the Company has been its ability to consistently generate cash. The Company uses cash generated from operations to fund capital expenditures and acquisitions,

repurchase shares of its common stock, pay dividends and reduce indebtedness. In 2014, the Company generated operating cash flow of $880.9.

Results of Operations

The Company effected a two-for-one stock split in the form of a stock dividend, payable to stockholders of record as of October 2, 2014, which was paid on October 9, 2014. The share and per share information included herein has been retroactively restated to reflect the effect of the stock split for all periods presented.

The following table sets forth the components of net income attributable to Amphenol Corporation as a percentage of net sales for the periods indicated.

		Year Ended December 31,
		2014		2013		2012
Net sales		100.0	%	100.0	%	100.0	%
Cost of sales		68.3		68.5		68.7
Acquisition-related expenses		0.2		0.2		—
Selling, general and administrative expenses		12.1		11.9		12.0
Operating income		19.4		19.4		19.3
Interest expense		(1.5	)	(1.4	)	(1.4	)
Other income, net		0.3		0.3		0.2
Income before income taxes		18.2		18.3		18.1
Provision for income taxes		(4.8	)	(4.5	)	(5.1	)
Net income		13.4		13.8		13.0
Net income attributable to noncontrolling interests		(0.1	)	—		(0.1	)
Net income attributable to Amphenol Corporation		13.3	%	13.8	%	12.9	%

2014 Compared to 2013

Net sales were $5,345.5 for the year ended December 31, 2014 compared to $4,614.7 for the year ended December 31, 2013, an increase of 16% in both U.S. dollars and in local currencies and 8% organically (excluding both currency and acquisition impacts) over the prior year. Sales in the Interconnect Products and Assemblies segment (approximately 93% of net sales) increased 17% in 2014 in both U.S. dollars and in local currencies and 8% organically compared to 2013 ($4,992.6 in 2014 versus $4,269.0 in 2013). The sales growth was driven by increases in nearly all of our served markets with contributions from both organic growth and the Company’s acquisition program; partially offset by a small decrease in sales in the information technology and data communications equipment market. Sales to the industrial market increased (approximately $276.2) reflecting particular growth within the energy and heavy equipment markets driven by the impact of organic growth and acquisitions. Sales to the automotive market increased (approximately $271.2), driven primarily by ongoing ramp ups of new, high-technology programs as well as higher vehicle production volumes and acquisitions. Sales to the mobile networks market increased (approximately $112.4), primarily due to an increase in worldwide network build-outs. Sales to the commercial aerospace market increased (approximately $49.7) primarily due to increased demand resulting from higher production levels of next generation jetliners and acquisitions. Sales to the mobile devices market increased (approximately $46.6) primarily due to growth in smartphones and accessories. Sales to the military market increased slightly (approximately $3.5). This was partially offset by reductions in sales to the information technology and data communications equipment market (approximately $20.2) due to declining networking product sales partially offset by growth in storage and server products. Sales in the Cable Products and Solutions segment (approximately 7% of net sales) increased 2% in 2014 in U.S. dollars and 3% in both local currencies and organically compared to 2013 ($352.9 in 2014 versus $345.7 in 2013) primarily due to growth in international markets. Cable Products and Solutions sales are primarily in the broadband communications market.

Geographically, sales in the U.S. in 2014 increased approximately 17% ($1,673.5 in 2014 versus $1,430.6 in 2013) compared to 2013. International sales for 2014 increased approximately 15% in U.S. dollars and in local currencies ($3,672.0 in 2014 versus $3,184.1 in 2013) compared to 2013 with particular strength in Europe. The comparatively stronger U.S. dollar in 2014 had the effect of decreasing net sales by approximately $3.1 when compared to foreign currency translation rates in 2013.

The gross profit margin as a percentage of net sales was 31.7% in 2014 compared to 31.5% in 2013. The increase in gross profit margin as a percentage of sales relates primarily to higher gross profit margins in the Interconnect Products and Assemblies segment due to increased volume and cost reduction actions.

Selling, general and administrative expenses were $645.1 and $548.0 and represented approximately 12.1% and 11.9% of net sales for 2014 and 2013, respectively. The increase in Selling, general and administrative expenses as a percentage of sales in 2014 compared to 2013 is partially due to higher selling, general and administrative expenses on a percent of net sales basis arising from the inclusion in 2014 of an acquisition in the interconnect product and assemblies segment completed late in 2013 that has higher selling, general and administrative expenses on a percent of net sales basis compared to the average of the Company. Administrative expenses increased approximately $46.7 in 2014 primarily related to increases in employee related benefits, stock-based compensation expense and amortization of acquisition-related identified intangible assets and represented approximately 4.8% and 4.6% of net sales in 2014 and 2013, respectively. Research and development expenses increased approximately $11.4 in 2014 reflecting increases in expenses for new product development and represented approximately 2.1% of net sales in 2014 and 2.2% of net sales in 2013. Selling and marketing expenses increased approximately $39.0 in 2014 primarily related to the increase in sales volume and represented approximately 5.1% of net sales for both 2014 and 2013.

On a consolidated basis, operating income margin was 19.4% for 2014 and 2013 and included the impact of acquisition-related expenses discussed below. Operating margin in the Interconnect Products and Assemblies segment was 21.8% for both 2014 and 2013 reflecting higher gross profit margin offset by higher selling, general and administrative expense as described above. Operating margin in the Cable Products and Solutions segment decreased to 12.4% in 2014 from 13.4% in 2013, primarily as a result of market pricing and product mix.

As separately presented in the Consolidated Statements of Income, the Company incurred $14.1 and $6.0 of acquisition-related expenses in 2014 and 2013, respectively, in connection with acquisitions made during each of these respective years. These expenses include amortization of the value associated with acquired backlog, professional fees, transaction-related fees, and other external expenses incurred in connection with acquisitions. For the years ended December 31, 2014 and 2013, these expenses had the impact on net income of $10.2, or $0.04 per share, and $4.6, or $0.01 per share, respectively. Excluding the effect of these expenses, operating income margin in 2014 and 2013 was 19.6% for both years.

Interest expense was $80.4 for 2014 compared to $63.6 for 2013. The increase is primarily attributable to higher average debt levels related to the Company’s stock repurchase program as well as acquisition activity.

Other income, net, increased to $18.3 in 2014 compared to $13.4 in 2013, primarily related to interest income on higher levels of cash, cash equivalents and short-term investments.

The provision for income taxes was at an effective rate of 26.5% in 2014 and 24.6% in 2013. The 2013 tax rate reflects a decrease in tax expense of $11.3, or $0.03 per 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. The 2013 tax rate also reflects a reduction in tax expense of $3.6 for tax reserve adjustments relating to the completion of the audits of certain of the Company’s prior year tax returns. Excluding these impacts as well as the net impact of the acquisition-related expenses, the Company’s effective tax rate for 2014 and 2013 was 26.5% and 26.3%, respectively.

The Company operates in the U.S. and numerous foreign taxable 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 2011 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, 2014, the amount of the liability for unrecognized tax benefits, which if recognized would impact the effective tax rate, was $19.2 the majority of which is included in Accrued pension benefit obligations and 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 $3.3.

2013 Compared to 2012

Net sales were $4,614.7 for the year ended December 31, 2013 compared to $4,292.1 for the year ended December 31, 2012, an increase of 8% in U.S. dollars, 7% in local currencies and 4% organically (excluding both currency and acquisition impacts). Sales in the Interconnect Products and Assemblies segment (approximately 93% of net sales) increased 7% in 2013 in U.S. dollars and in local currencies and 4% organically compared to 2012 ($4,269.0 in 2013 versus $3,987.3 in 2012). The sales growth was driven by increases in nearly all of our served markets with contributions from both organic growth and the Company’s acquisition program. Sales to the automotive market increased (approximately $104.0), driven primarily by participation in new programs, higher vehicle volumes and acquisitions. Sales to the IT and data communications equipment market increased (approximately $57.7), primarily due to broad-based strength in servers, storage and network hardware. Sales to the commercial aerospace market increased (approximately $54.0) due to increased demand driven by higher levels of airplane production and new airplane platforms and acquisitions. Industrial market sales increased (approximately $42.9), primarily reflecting the impact of acquisitions. Sales to the mobile networks market increased (approximately $23.0), primarily due to an increase in worldwide network build-outs with particular strength in North America and Europe. Sales to the mobile devices market increased slightly (approximately $4.6). This was partially offset by reductions in sales to the military market (approximately $9.8), primarily due to reductions in procurement by defense contractors related to budget uncertainties. Sales in the Cable Products and Solutions segment (approximately 7% of net sales) increased 13% in 2013 in U.S. dollars and 14% in local currencies and were down 3% organically compared to 2012 ($345.7 in 2013 versus $304.8 in 2012). Increased sales levels were due to a 2012 acquisition which was partially offset by overall lower spending at cable operators. Cable Products and Solutions sales are primarily in the broadband communications market.

Geographically, sales in the U.S. in 2013 increased approximately 4% ($1,430.6 in 2013 versus $1,379.7 in 2012) compared to 2012. International sales for 2013 increased approximately 9% in U.S. dollars and in local currencies ($3,184.1 in 2013 versus $2,912.4 in 2012) compared to 2012 with particular strength in Europe. The comparatively weaker U.S. dollar in 2013 had the effect of increasing net sales by approximately $15.4 when compared to foreign currency translation rates in 2012.

The gross profit margin as a percentage of net sales was 31.5% in 2013 compared to 31.3% in 2012. The increase in gross profit margin as a percentage of sales relates primarily to higher margins in the Interconnect Products and Assemblies segment due primarily to increased volume and cost reduction actions. Operating margin in the Interconnect Products and Assemblies segment was 21.8% and 21.5% of sales in 2013 and 2012, respectively. Operating margin in the Cable Products and Solutions segment decreased to 13.4% in 2013 from 13.5% of sales in 2012, primarily as a result of market pricing and product mix. On a consolidated basis, operating income margin was 19.4%, up 10 basis points from 2012, which included the impact of acquisition-related expenses discussed below.

As separately presented in the Consolidated Statements of Income, the Company incurred $6.0 and $2.0 of acquisition-related expenses in 2013 and 2012, respectively, in connection with acquisitions made during each of these respective years. These expenses include professional fees, transaction-related fees and other external expenses incurred in connection with acquisitions. For the years ended December 31, 2013 and 2012, these expenses had an impact on net income of $4.6, or $0.01 per share, and $2.0, or $0.01 per share, respectively. Excluding the effect of these expenses, operating income margin was 19.6% in 2013 compared to 19.3% in 2012.

Selling, general and administrative expenses were $548.1 and $512.9 in 2013 and 2012 and represented approximately 11.9% of net sales for 2013 and 2012, respectively. Administrative expenses increased approximately $9.9 in 2013 primarily related to increases in employee related benefits, stock-based compensation expense and amortization of acquisition-related identified intangible assets and represented approximately 4.6% and 4.7% of net sales in 2013 and 2012, respectively. Research and development expenses increased approximately $11.0 in 2013 reflecting increases in expenses for new product development and represented approximately 2.2% of net sales for both 2013 and 2012. Selling and marketing expenses increased approximately $14.3 in 2013 primarily related to the increase in sales volume and represented approximately 5.1% of net sales for both 2013 and 2012.

Interest expense was $63.6 for 2013 compared to $59.6 for 2012. The increase is primarily attributed to higher average debt levels from the Company’s acquisitions and stock repurchase programs.

Other income, net, was $13.4 for 2013 compared to $10.1 for 2012, primarily related to interest income on higher levels of cash, cash equivalents and short-term investments.

The provision for income taxes was at an effective rate of 24.6% in 2013 and 28.2% in 2012. The 2013 tax rate reflects a decrease in tax expense and the 2012 tax rate reflects an increase in tax expense of $11.3, or $0.03 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 benefit to the Company of $11.3 relating to the 2012 tax year was 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 2013 tax rate also reflects a reduction in tax expense of $3.6 for tax reserve adjustments relating to the completion of the audits of certain of the Company’s prior year tax returns. Excluding these impacts as well as the net impact of the acquisition-related expenses, the Company’s effective tax rate for 2013 and 2012 was 26.3% and 26.7%, respectively.

Liquidity and Capital Resources

Cash flow provided by operating activities was $880.9 for 2014 compared to $769.1 for 2013. The increase in cash flow provided by operating activities for 2014 compared to 2013 is primarily due to an increase in net income and a lower increase in the net components of working capital. Cash flow provided by operating activities was $769.1 for 2013 compared to $674.7 for 2012. The increase in cash flow provided by operating activities for 2013 compared to 2012 is primarily due to an increase in net income and a net decrease in other long-term assets partially offset by a higher increase in components of working capital.

The components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $18.9 in 2014 due primarily to increases in accounts receivable, inventory, and other current assets of $111.5, $51.6 and $10.0, respectively, offset by increases in accounts payable and accrued liabilities of $66.8 and $87.3, respectively. The components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $26.3 in 2013 due primarily to increases in accounts receivable, inventory, and other current assets of $37.1, $8.0 and $18.4, respectively, offset by increases in accounts payable and accrued liabilities of $6.9 and $30.2, respectively. The components of working capital as presented on the accompanying Consolidated Statements of Cash Flow increased $8.9 in 2012 due primarily to increases in inventory and accounts receivable of $45.9 and $123.9, respectively, offset by increases in accounts payable and accrued liabilities of $99.4 and $61.5, respectively.

The following represents the significant changes in the amounts as presented on the accompanying Consolidated Balance Sheets in 2014 compared to 2013. Accounts receivable increased $122.7, to $1,123.7 resulting from higher sales levels, the impact of acquisitions of $37.4, offset by the effect of translation from exchange rate changes at December 31, 2014 compared to December 31, 2013 (“Translation”). Days sales outstanding at December 31, 2014 and 2013 were 71 and 70, respectively. Inventories increased $73.0, to $865.6, primarily due to the impact of higher sales activity and the impact of acquisitions of $32.8 offset by Translation. Inventory days at December 31, 2014 and 2013 were 79 and 80, respectively. Other current assets increased $13.4 to $185.2, primarily due to increases in deferred tax assets of $14.0 and the impact of acquisitions. Land and depreciable assets, net, increased $58.3 to $590.7 reflecting capital expenditures of $209.1 and net fixed assets from acquisitions of $8.6, partially offset by depreciation of $126.7, disposals of $7.6 and Translation. Goodwill increased $327.6 to $2,616.7 primarily as a result of two acquisitions in the Interconnect Products and Assemblies segment completed during 2014 offset by Translation. Intangibles and other long-term assets increased $126.6 primarily due to an increase in identifiable intangible assets resulting from acquisitions in 2014. Accounts payable increased $68.5, to $618.4, primarily as a result of an increase in purchasing activity during the year related to higher sales levels, the impact of acquisitions of $24.4 offset by Translation. Payable days at December 31, 2014 and 2013 were 57 and 56, respectively. Total accrued expenses increased $28.4 to $386.9, primarily due to increases in accrued salaries, accrued interest and the impact of acquisitions of $16.0 offset by Translation. Accrued pension benefit obligations and other long-term liabilities increased $124.6 to $371.2 due primarily to an increase in the projected benefit obligation relating to the Company’s pension plans as a result of a change in discount rate and mortality assumptions and an increase in deferred tax liabilities.

In 2014, cash flow provided by operating activities of $880.9, net borrowings of $528.9 and proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $130.1 were used to fund purchases of treasury stock of $539.4, acquisition related payments of $518.2, net capital expenditures of $203.5, dividend payments of $101.9, net purchases of short-term investments of $60.2 and payments to shareholders of noncontrolling interests of $3.6, which resulted in an increase in cash and cash equivalents of $113.1. Translation had the impact of decreasing cash and cash equivalents by $31.0 in 2014.

In 2013, cash flow provided by operating activities of $769.1, net borrowings of $418.2, proceeds from the exercise of stock options including excess tax benefits from stock-based payment arrangements of $116.2, and proceeds from the disposal of fixed assets of $3.7, were used to fund acquisition related payments of $484.9, purchases of treasury stock of

$324.7, capital expenditures of $158.4, dividend payments of $96.8, net purchases of short-term investments of $53.7 and payments to shareholders of noncontrolling interests of $4.4, which resulted in an increase in cash and cash equivalents including the impact of Translation of $184.3. Translation had the impact of increasing cash and cash equivalents by $11.7 in 2013.

At December 31, 2014 and 2013, the Company had cash, cash equivalents and short-term investments of $1,329.6 and $1,192.2, respectively. The majority of these amounts are located outside of the U.S. The Company does not currently intend to repatriate these funds. However, any repatriation of funds would result in the need to accrue and pay income taxes.

The ability to generate cash from operating activities is one of the Company’s fundamental financial strengths. As a result, the Company has significant flexibility to meet its financial commitments. The Company uses debt financing to lower the overall cost of capital and increase return on stockholders’ equity. The Company has a history of borrowing funds domestically and continues to have the ability to borrow funds domestically at reasonable interest rates. The Company’s debt financing includes the use of a commercial paper program, revolving credit facilities and senior notes as part of its overall cash management strategy. 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, 2014, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

In 2014, the Company issued $750.0 principal amount of unsecured 2.55% senior notes due January 2019, $375.0 principal amount of unsecured 1.55% senior notes due September 2017 and $375.0 principal amount of unsecured 3.125% senior notes due September 2021. The issuances of these senior notes were used to repay the $600.0 4.75% senior notes which matured during the year and to repay borrowings under the Company’s revolving credit facilities. In September 2014, the Company entered into a commercial paper program pursuant to which the Company issues short-term unsecured commercial paper notes in one or more private placements. Amounts available under the commercial paper program are borrowed, repaid and re-borrowed from time to time. The commercial paper program was rated A-2 by Standard & Poor’s and P-2 by Moody’s and is backstopped by the Revolving Credit Facility. The maximum aggregate principal amount of the commercial paper notes that may be outstanding under the commercial paper program at any time is $1,500.0 and commercial paper notes outstanding as of December 31, 2014 was $671.0. The Company incurred fees and expenses related to the issuance of the commercial paper and senior notes of $11.1, which are capitalized and will be amortized to interest expense over the respective terms of the debt. The Company reviews its optimal mix of short-term and long-term debt regularly and may replace certain amounts of commercial paper, short-term debt and current maturities of long-term debt with new issuances of long-term debt in the future. Refer to Note 2 of the Consolidated Financial Statements for further information related to the Company’s debt.

The Company’s primary sources of liquidity are internally generated cash flow, the Company’s commercial paper program, credit facilities, and cash, cash equivalents and short-term investments. The Company expects that ongoing cash requirements will be funded from these sources; however, the Company’s sources of liquidity could be adversely affected by, among other things, a decrease in demand for the Company’s products or a deterioration in certain of the Company’s financial ratios. However, management believes that the Company’s cash, cash equivalents and short-term investment position, ability to generate strong cash flow from operations, and availability under its credit facilities will allow it to meet its obligations for the next twelve months.

The Company’s primary ongoing cash requirements will be for operating and capital expenditures, product development activities, repurchase of its common stock, funding of pension obligations, dividends and debt service. The Company may also use cash to fund all or part of the cost of acquisitions. The Company expects that capital expenditures in 2015 will be approximately $180.0 to $200.0. Contingent upon declaration by the Board of Directors, the Company generally pays a quarterly dividend on its common stock. In July 2013, the Board of Directors approved an increase in the quarterly dividend rate from $0.0525 to $0.10 per share effective with the third quarter 2013 dividend and in July 2014 approved a further increase in the quarterly dividend rate from $0.10 to $0.125 per share effective with the third quarter 2014 dividend. Total dividends declared during 2014, 2013 and 2012 were $140.6, $96.8 and $67.8, respectively. Total dividends paid in 2014, 2013 and 2012 were $101.9, $96.8 and $70.1, respectively, including those declared in the prior year and paid in the current year. The Company’s debt service requirements consist primarily of principal and interest on the senior notes, the revolving credit facilities, and commercial paper program.

In January 2013, the Board of Directors authorized a stock repurchase program under which the Company could repurchase up to 20 million shares of its common stock during the two year period ending January 31, 2015 (the “2013 Stock Repurchase Program”). During the twelve months ended December 31, 2014, the Company repurchased 11.4 million shares of its common stock for $539.4. These treasury shares have been retired by the Company and common stock and retained

earnings were reduced accordingly. At December 31, 2014, the Company had repurchased all shares authorized under the 2013 Stock Repurchase Program.

In January 2015, the Board of Directors authorized a stock repurchase program under which the Company may repurchase up to 10 million shares of common stock during the two year period ending January 20, 2017 (the “2015 Stock Repurchase Program”). The price and timing of any such purchases under the 2015 Stock Repurchase 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.

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.

Inflation and Costs

The cost of the Company’s products is influenced by the cost of a wide variety of raw materials, including precious metals such as gold and silver used in plating; aluminum, copper, titanium and steel used for contacts, shells and cable; certain rare earth metals used in sensors; and plastic materials used in molding connector bodies, inserts and cable. The Company strives to offset the impact of increases in the cost of raw materials, labor and services through price increases, productivity improvements and cost saving programs. However, in certain markets, particularly in the communications related markets, this can be difficult and there is no guarantee that the Company will be successful.

Foreign Exchange

The Company conducts business in many international currencies through its worldwide operations, and as a result is subject to foreign exchange exposure due to changes in exchange rates of the various currencies. Changes in exchange rates can positively or negatively affect the Company’s sales, gross margins and equity. The Company attempts to minimize currency exposure risk in a number of ways including producing its products in the same country or region in which the products are sold, thereby generating revenues and incurring expenses in the same currency, cost reduction and pricing actions, and working capital management. However, there can be no assurance that these actions will be fully effective in managing currency risk, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Company’s worldwide operations.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods or services. To achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract(s); (3) determine the transaction price(s); (4) allocate the transaction price(s) to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also requires advanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016 with early adoption not permitted. The amendments may be applied retrospectively to each period presented or with the cumulative effect recognized as of the date of initial application. The Company is currently evaluating ASU 2014-09.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), amending FASB Accounting Standards Subtopic 205-40 to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, the amendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that financial statements are

issued. ASU 2014-15 is effective for fiscal years ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating ASU 2014-15 and does not anticipate a material impact on its consolidated financial statements.

Pensions

The Company and certain of its domestic subsidiaries have defined benefit pension plans (“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 also have defined benefit plans covering their employees (the “International Plans”). The pension expense for the U.S. Plans and International Plans (the “Plans”) approximated $22.4, $30.1 and $25.2 in 2014, 2013 and 2012, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, including a weighted-average discount rate, mortality projections, rate increase of 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 discount rate for the U.S. Plans on this basis was 3.75% at December 31, 2014 and 4.60% at December 31, 2013. The mortality assumptions used by the Company reflect commonly used mortality tables and improvement scales for each plan. In 2014, the Company considered the updated mortality tables and improvement scales recently issued by the Society of Actuaries along with other mortality information available to develop updated mortality assumptions for the U.S. Plans. These updated mortality assumptions reflected increased life expectancies for plan participants. The decrease in the discount rate and the updated mortality assumptions resulted in an increase in the accrued benefit obligation for the U.S. Plans of approximately $80.0 at December 31,2014.

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. 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%). 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, 2014 and 2013 is 8.00%.

The Company made cash contributions to the Plans of $23.8, $23.3 and $21.8 in 2014, 2013 and 2012, respectively. The total liability for accrued pension and post-employment benefit obligations under the Company’s pension and post-retirement benefit plans increased in 2014 to $279.3 ($5.0 of which is included in other accrued expenses primarily representing required contributions to be made during 2015 for unfunded foreign plans) from $179.5 in 2013 primarily due to a decrease in the discount rate and update in mortality projections. The Company estimates that, based on current actuarial calculations, it will make a cash contribution to the Plans in 2015 of approximately $22.0, most of which is related to the U.S. Plans. Cash contributions in subsequent years will depend on a number of factors including the investment performance of the respective Plans’ assets.

The Company offers various defined contribution plans for U.S. and foreign employees. Participation in these plans is based on certain eligibility requirements. The Company matches the majority of employee contributions to the U.S. defined contribution plans with cash contributions up to a maximum of 5% of eligible compensation. The Company provided matching contributions of approximately $3.8, $3.0 and $2.7 in 2014, 2013 and 2012, respectively.

Critical Accounting Policies and 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. Actual results could differ from those estimates. Estimates are adjusted as new information becomes available. The Company’s critical accounting policies and estimates are set forth below.

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 shipping point. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns. These estimates and 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 7% of net sales in 2014), 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.

Inventories - Inventories are stated at the lower of standard cost, which approximates average cost, or market. Provisions for slow-moving and obsolete inventory are made based on historical experience and product demand. Should future product demand change, existing inventory could become slow-moving or obsolete, and provisions would be increased accordingly.

Depreciable Assets - Property, plant and equipment are carried at cost less accumulated depreciation. The appropriateness and the recoverability of the carrying value of such assets are periodically reviewed taking into consideration current and expected business conditions. The Company has not recorded any significant impairments.

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 and Solutions”, as the components of these reportable business segments have similar economic characteristics. In 2014, 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 applicable guidance, 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, 2014, the Company has determined that it is more likely than not that the fair value of its reporting units is greater than their carrying amounts. The Company has not recognized any goodwill impairment in 2014, 2013 or 2012 in connection with its annual impairment test.

Defined Benefit Plan Obligation - The defined benefit plan obligation is based on significant assumptions such as mortality rates, discount rates and plan asset rates of return as determined by the Company in consultation with the respective benefit plan actuaries and investment advisors (Note 7).

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, 2014, the cumulative amount of undistributed earnings of foreign affiliated companies was approximately $3.3 billion. 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 numerous 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 and entities 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.

The significant accounting policies are more fully described in Note 1 to the Company’s Consolidated Financial Statements.

Disclosures about contractual obligations and commitments

The following table summarizes the Company’s known obligations to make future payments pursuant to certain contracts as of December 31, 2014, as well as an estimate of the timing in which such obligations are expected to be satisfied.

		Payment Due By Period
Contractual Obligations (dollars in millions)		Total			Less than 1 year			1-3 years			3-5 years			More than 5 years
Debt (1)		$	2,673.9		$	1.6		$	375.5		$	1,421.8		$	875.0
Interest related to senior notes		337.4			56.6			113.3			84.1			83.4
Operating leases		99.6			35.5			40.4			17.0			6.7
Purchase obligations		247.9			219.7			27.1			1.1			—
Accrued pension and post-employment benefit obligations (2)		48.9			15.3			8.5			8.4			16.7
Total (3)		$	3,407.7		$	328.7		$	564.8		$	1,532.4		$	981.8

(1) The Company has excluded expected interest payments on the Revolving Credit Facility, Credit Agreement and commercial paper program from the above table, as this calculation is largely dependent on average debt levels the Company expects to have during each of the years presented. The actual interest payments made related to the Company’s Revolving Credit Facility, Credit Agreement and commercial paper program in 2014 were $7.5. Expected debt levels, and therefore expected interest payments, are difficult to predict, as they are significantly impacted by such items as future acquisitions, repurchases of treasury stock, dividend payments as well as payments or additional borrowing made to reduce or increase the underlying revolver balance.

(2) Included in this table are estimated benefit payments expected to be made under the Company’s unfunded pension and post-retirement benefit plans. The Company also maintains several funded pension and post-retirement benefit plans, the most significant of which covers its U.S. employees. Over the past several years, there has been no minimum requirement for Company contributions to the U.S. Plans due to prior contributions made in excess of minimum requirements, however, the Company did make a voluntary contribution of approximately $15.0 in 2014. An anticipated minimum required contribution of approximately $9.7 was included in the above table related to the U.S. Plans for 2015. It is not possible to reasonably estimate expected required contributions in the above table after 2015 since several assumptions are required to calculate minimum required contributions, such as the discount rate and expected returns on pension assets.

(3) As of December 31, 2014, the Company has non-current liabilities of approximately $19.2 recognized in accordance with the Income Taxes topic of the Accounting Standards Codification. These liabilities have been excluded from the above table due to the high degree of uncertainty regarding the timing of potential future cash flows; it is difficult to make a reasonably reliable estimate of the amount and period in which all of these liabilities might be paid.