) reported phenomenal fourth quarter 2013 results with record
revenues and recurring earnings per share. Net income for the
reported quarter came in at $167.9 million or $1.04 per share
compared with $140.4 million or 86 cents in the year-ago quarter.
Excluding a one penny charge for acquisition-related transaction
costs, recurring earnings for the reported quarter touched an
all-time high of $1.05 per share. Recurring earnings comfortably
beat the Zacks Consensus Estimate by 7 cents.
Impressive bottom-line growth in the quarter was primarily
attributable to Amphenol's technology leadership and market and
geographic diversification. It further reflected the company's
balanced organic and inorganic growth model. This was achieved on
the back of a lean and flexible cost structure and an agile and
entrepreneurial management team.
For full year 2013, net income came in at $635.7 million or $3.92
per share compared with $555.3 million or $3.39 in the
year-earlier period. Recurring earnings for 2013 were $3.85 per
share compared with $3.47 per share in 2012. Recurring earnings
for full year 2013 well exceeded the Zacks Consensus Estimate of
Quarterly sales hit a record high of $1,245.7 million in fourth
quarter 2013 versus $1,146.0 million in the year-earlier quarter.
The top line exceeded the Zacks Consensus Estimate of $1,166.0
million. For full year 2013, sales were $4.615 billion, up 7.5%
from $4.292 billion in 2012. The year-over-year growth was led by
strength across diversified markets served by the company, which
include commercial aerospace, automotive, broadband, industrial
and information technology and data communications markets.
Amphenol received orders worth $1.237 billion in the reported
quarter, representing a book-to-bill ratio of 0.99 to 1. For full
year 2013, orders aggregated $4.679 billion, resulting in a
book-to-bill ratio of 1.01 to 1. Operating margins (excluding
one-time items) improved 20 basis points and 30 basis points year
over year to 19.7% and 19.6% respectively for the reported
quarter and full year.
business sales represented 7% of total sales in fourth quarter
2013 and were down 5% year over year due to adverse market
pricing and a negative impact from product mix. Sales from the
business, which accounted for 93% of total sales, were up 10%
year over year driven by accretive acquisitions and healthy
demand. Margins in the cable business were 12.2% in the reported
quarter, down from 13.2% in the prior-year period, while
Interconnect business margins were 21.8%, up from 21.7% in fourth
In terms of end markets, revenues from
Information Technology and Data Communication
accounted for 19% of total sales in the reported quarter, up 10%
year over year, primarily due to robust contributions from
servers and storage equipment.
Sales from this end market accounted for 11% of total sales in
fourth quarter 2013, down slightly year over year due to reduced
purchasing activity from defense equipment manufacturers.
Aerospace market comprised 6% of total sales in the reported
quarter and increased 30% year over year due to an increase in
production volumes of existing and next-generation commercial
Sales from this end market declined marginally year over year and
accounted for 22% of total sales. The decrease in sales was
attributable to three factors - a shift toward lower content
white-box tablets, a faster-than-expected shift toward Wi-Fi only
devices and lower unit sales of higher content new programs.
Sales accounted for 14% of the total revenue in fourth
quarter 2013, up 21% year over year due to growth in
instrumentation, rail mass transit, heavy equipment and accretive
Sales were down slightly on a year-over-year basis, accounting
for 7% of the quarterly revenues. The year-over-year decrease was
blamed on traditional seasonality as build-out activity slowed
Sales from this end market accounted for 12% of total sales in
the quarter and jumped 40% year over year primarily driven by an
increase in production volumes along with growth related to new
electronics applications and acquisitions.
Sales from this end market declined marginally year over year in
the reported quarter and accounted for 9% of the total revenue.
The year-over-year decrease was primarily due to a moderation in
sales to equipment manufacturers.
Amphenol aims to focus on its market and geographic
diversification strategy and develop enabling technologies for
its customers in all markets through both organic and inorganic
means. In accordance with this strategy, the company acquired
four companies for a sum of $455 million.
These included the acquisitions of the Advanced Sensors business
) for approximately $318 million. Advanced Sensors unit is a
supplier of highly engineered sensors and sensor-based
instruments. The sensor and sensor-based product offerings
complement Amphenol's core interconnects offering and is expected
to deliver long-term expansion opportunity.
Amphenol also acquired Ionix Aerospace Ltd, a U.K.-based high
technology cable assembly company focused primarily on the
commercial aerospace market. In addition, the company purchased
Tecvox LLC, a U.S.-based provider of value-added components and
assemblies to the automotive infotainment connectivity market,
along with Hangzhou Jet Interconnect Technology Co., a
China-based manufacturer and supplier specializing in high
precision and fine pitch mechanical components and tooling.
The acquired companies are a strategic fit and are consistent
with Amphenol's ongoing strategy to acquire complementary
companies with strong management, leading technology, and solid
market presence. The company is optimistic on these purchases,
which it believes will create significant shareholder value going
Balance Sheet & Cash Flow
During the quarter, Amphenol purchased 329,000 shares for $28
million and currently has 5.7 million shares remaining under the
10 million share buyback program, scheduled to expire in Jan
2015. Cash and cash equivalents stood at $886.8 million at
year-end 2013 compared with $690.9 million at year-end 2012.
Long-term debt aggregated $1.43 billion at year-end 2013 compared
with $1.61 billion in the year-ago period.
At quarter-end, Amphenol had $573 million available under its
$1.5 billion revolving credit facility with $927 million in
borrowings. Leverage and interest coverage ratios remained very
strong at 1.9x and 18x. Cash flow from operations for the year
aggregated $769.1 million, equating to 120% of net income.
Despite the uncertainties prevailing in the global economy,
Amphenol is bullish about its revenue and earnings expectations.
The ongoing revolution in electronics enables the company to
capitalize on these opportunities and strengthen its position in
Amphenol projects sales between $1.180 billion and $1.210 billion
in first quarter 2014 and recurring earnings per share between 93
cents and 96 cents. For full year 2014, management projects
revenues between $5.0 billion and $5.12 billion. Recurring
earnings per share for 2014 is pegged in a band of $4.15 to
Amphenol currently has a Zacks Rank #2 (Buy). Some other players
in the industry worth reckoning include
IEC Electronics Corp.
Universal Display Corp.
), both of which carry a comparable Zacks Rank #2 (Buy).
AMPHENOL CORP-A (APH): Free Stock Analysis
GENL ELECTRIC (GE): Free Stock Analysis
IEC ELECTRS NEW (IEC): Free Stock Analysis
UNIVL DISPLAY (OLED): Free Stock Analysis
To read this article on Zacks.com click here.