Amphenol - Q2 2015

Transcript

Operator (participant)

Hello, and welcome to the second quarter earnings conference call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. Until then, all lines will remain in a listen-only mode. At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Adam Norwitt. Sir, you may begin.

Adam Norwitt (CEO)

Well, thank you very much, and I'd like to offer my greetings to everybody on the call here today. Thank you very much for joining us for our second quarter earnings call. I'm Adam Norwitt, CEO of the company, and I'm here together today on a very special day with Craig Lampo, who is here for his first earnings call as our newly appointed Chief Financial Officer. Our earnings were released this morning, and in a moment, Craig is going to provide some financial commentary on the quarter, and then I'll follow up with an overview of the business and current trends. Certainly, at the end, we'll have a question-and-answer session as well. But before going into the results, I'd like to first introduce Craig Lampo, who has been formally appointed as Amphenol's Chief Financial Officer, effective yesterday, July 21st.

This has followed a very smooth transition period, working together with Diana Reardon. I'd like to take this opportunity to express my deepest gratitude to Diana, who has stepped down as CFO after more than 10 years in the role. During that time, as well as during her more than 27 years so far with the company, Diana has made tremendous contributions to the performance of Amphenol. It has been such a pleasure to work with her as CFO, and I'm especially pleased that Diana will remain strongly connected to Amphenol, both as a senior advisor to me and now as a member of our board of directors, to which she was appointed yesterday. Craig Lampo assumes the role of CFO after serving also more than 10 years as our vice president and corporate controller.

During that time, Craig has worked hand-in-hand with Diana and me to drive the performance of the company and thereby has gained an intimate appreciation of our strategy, operations, and the financial management of the company. But most importantly, Craig is a true Amphenolian, steeped deeply in the unique culture of this fine company. I personally look forward to continuing to work even more closely with Craig in his new role, and I'm excited for the long-term positive impact that he will no doubt have on Amphenol's performance. I'd like to please ask you to join me in extending my congratulations, both to Diana as our newest board member and to Craig Lampo as our new Chief Financial Officer. With that, let me turn it over to Craig for his financial review of the second quarter. Craig, please.

Craig Lampo (CFO)

Thank you, Adam. It's my pleasure to be on the call for the first time and to provide some financial commentary on the quarter. The company closed the second quarter with sales of $1,351,000,000, and EPS of $0.58, excluding one-time items, meeting the high end of the company's guidance. Sales were up 3% in U.S. dollars and 7% in local currencies compared to the second quarter of 2014. From an organic standpoint, excluding both acquisitions and currency, sales in the quarter were up 1%. Sequentially, sales were up 2% in U.S. dollars and 1% organically from the first quarter.

Breaking down sales into our two major components, our cable business, which comprised 6% of our sales, was down 10% from last year, primarily due to a slowdown in spending by cable operators, as well as the effect of translation. The interconnect business, which comprised 94% of our sales, was up 4% from last year, reflecting the benefits of both good organic growth and the company's acquisition program, partially offset by translation. Adam will comment further on the trends by market in a few minutes. Operating income increased $266 million, excluding one-time items in the second quarter. Operating margin, excluding one-time items, increased to 19.7% compared to 19.5% last year, a strong year-over-year conversion margin on incremental sales of 29%.

The increase of 20 basis points in operating margins over the prior year resulted from an increase in operating margins in the interconnect business. From a segment standpoint, in the cable segment, margins were 11.8% compared to 12.7% last year, primarily as a result of lower volumes. In the interconnect segment, margins were 21.9%, up 30 basis points from 21.6% last year. The improvement in ROS reflects excellent operating execution, both organically and from our acquisitions, in addition to aggressive cost management. We are very pleased with the company's operating margin achievement.

This excellent performance is a direct result of the strength and commitment of the company's entrepreneurial management team, which continues to foster a high-performance, action-oriented culture in which each individual operating unit is able to appropriately adjust to market conditions and thereby maximize both growth and profitability in what clearly continues to be a very dynamic environment. Through the careful fostering of such a culture and the deployment of these strategies, the management team has achieved industry-leading operating margins and remains fully committed to driving enhanced performance. The company has recorded acquisitions-related costs in the quarter of approximately $6 million or $0.02 per share. The costs include professional fees and other external expenses related to the acquisition closed and announced in the quarter.

In accordance with the current accounting rules, these costs are expensed as incurred. In addition, we do anticipate additional one-time acquisition-related charges in the second half of 2015, related to the previously announced FCI acquisition. These one-time charges will be separately disclosed, as is our practice, and are not included in our guidance. Interest expense for the quarter was $17 million compared to $20 million last year, reflecting the benefit of a lower average effective interest rate in the quarter, in the current quarter, more than offsetting the impact of higher average debt levels resulting from the company's acquisition and stock buyback programs. The lower average rate is a result of the new note issuance in September 2014, replacing a higher cost note maturity in November 2014, and the implementation of a new commercial paper program.

Other income was $4 million in the second quarter, equal to last year, and consists primarily of interest income on cash and short-term cash investments. The company's effective tax rate, excluding one-time items, was 26.5% in both the second quarter of 2015, as well as the second quarter of 2014. On an as-reported basis, the company's effective tax rate was 27.1% in the second quarter of 2015. Excluding one-time items, net income was approximately 14% of sales in the quarter, and EPS increased 7%, an excellent performance. On an as-reported basis, the company achieved EPS of $0.56, which included approximately $6 million or $0.02 of acquisition-related transaction costs, as I just discussed.

Orders for the quarter were $1,362,000,000 up 3% last year, resulting in a book-to-bill ratio of 1.01 to 1. The company continues to be an excellent generator of cash. Cash flow from operations was $235 million in the quarter, or approximately 130% of net income. The company continues to target cash flow from operations in excess of net income, and for the six months ended June 30th, operating cash flow was $423 million, or 117% of net income. From a working capital standpoint, inventory was $893 million at the end of June, up approximately 2% from March. Inventory days were 87, excluding acquisition impacts, which was flat from March levels and at the higher end of our normal range.

The higher inventory level supports future step-ups in certain parts of our business, and we expect inventory days to decline in the second half of the year. Accounts receivable was approximately $1.1 billion at the end of June, consistent with March levels. Day sales outstanding was 72 days, excluding acquisition impacts, down 3 days from March levels and within our normal range. Accounts payable was $560 million at the end of June, down approximately 4% from March levels. Payable days were 55 days, down 3 days compared to March levels.

The cash flow from operations of $235 million, along with proceeds from stock option exercises of $30 million, were used primarily to purchase approximately $81 million of the company's stock, to fund net capital expenditures of $43 million, and to fund acquisition payments of $96 million related to the Procom and Docharm acquisitions. During the quarter, the company repurchased 1.4 million shares under its January 2015 10 million share stock repurchase program. 7.5 million shares remain available under the program through January 2017. And as mentioned in the earnings release, the company's board of directors has approved an increase in the quarterly dividend on the company's common stock from $0.125 to $0.14 per share, increasing the yield to just over 1%. This increase is effective for payments beginning in October.

At June 30th, cash and short-term investments were $1.4 billion, the majority of which is held outside the U.S. Total debt at June 30th was $2.8 billion, and net debt was approximately $1.4 billion. At quarter end, the company had issued $758 million under its $1.5 billion commercial paper program, and second quarter 2015 EBITDA was approximately $313 million. From a financial perspective, this is certainly an excellent performance. Adam will now provide an overview of the business and current trends.

Adam Norwitt (CEO)

Thank you very much, Craig. It is a pleasure again to be here, and I will give some discussion around our second quarter achievements. In particular, I plan to discuss the trends and progress in our served markets. I'm also gonna make some comments at the end about our third quarter and our full-year guidance. With respect to the second quarter, Craig has certainly given a very comprehensive overview, but I just wanted to reiterate how pleased I am that we've reported such strong performance in sales and EPS, despite what is a continued to be a very challenging economic environment. We achieved sales of $1,351,000,000 3% increase from prior year in US dollars, and 7% in local currencies.

As Craig mentioned, our book-to-bill was 1.01 to 1, with the orders of $1,362,000,000. We're really pleased with the profitability of the company in the quarter, which continued to be very strong at 19.7% operating margins, and pleased, in addition, that our EPS reached the high end of guidance at $0.58, growing 7% or twice the rate of our, of our sales growth. Craig also mentioned the increase in the dividend, and just to reiterate, the 12% increase in the company's dividend to $0.56 per year is really just another great confirmation of the financial strength of Amphenol.

I can just say how proud I am of our organization, who, despite the many challenges and dynamics in the marketplace, was again able to react quickly and capitalize on opportunities across the diverse array of markets that we serve, all while continuing to exercise the discipline and drive necessary to achieve excellent operating performance. It is just yet again a demonstration of the clear strength of Amphenol's entrepreneurial management culture. In the second quarter, our small headquarters acquisition team put a lot of work in, really made tremendous progress in the last quarter as we announced the signing of the largest transaction in the company's history, while also acquiring, at the end of the quarter, two outstanding smaller companies.

First, as you all know, we announced on June 29th that we had entered into exclusive negotiations to acquire FCI for $1,275000,000, subject to closing adjustments. We are very pleased that as of the end of last week, we now have signed a definitive purchase agreement for FCI, the completion of which is subject only to certain regulatory approvals. FCI, which expects sales this year of approximately $600 million, with an EBITDA margin of 20%, is a real global leader in interconnect solutions for the telecom, datacom, wireless communications, and industrial markets, with a broad and complementary array of high-speed, power, input/output, and miniaturized interconnect products. We are particularly excited to add FCI's highly talented team of more than 7,000 employees worldwide to the Amphenol family, and I tell you, this acquisition is just gonna be excellent for Amphenol.

We're now going to be able to offer a much wider range of high-technology interconnect solutions to our respective customers across a broad array of end markets, while also driving even stronger operating performance. We anticipate closing the acquisition of FCI by the end of this year once we work our way through the various regulatory approvals. Also very pleased in the quarter to have completed the acquisitions of Procom and Docharm, both right at the tail end of the second quarter. Procom is a Denmark-based manufacturer of harsh environment, high-technology antennas, primarily for the industrial market, with annual sales of approximately $20 million.

Procom is just an outstanding complement to our very successful global antenna business in the wireless communications markets, and it further strengthens our position as a global leader in RF interconnect and antenna technology, while at the same time broadening our product offering for the worldwide industrial market. Docharm is a China-based manufacturer of highly engineered interconnect assemblies for the China automotive industry, with annual sales of approximately $50 million. In particular, Docharm is a leader in China in the supply of interconnect assemblies for automotive lighting applications and will be an excellent complement to our already successful position in that segment in the Americas and Europe. As we welcome these outstanding new teams to Amphenol, we remain very confident that our successful acquisition program will continue to create great value for the company.

It is really our ability to identify and execute upon acquisition opportunities while successfully bringing those companies into the Amphenol family, that remains a core competitive advantage for the company. Well, turning to the quarter and our trends and progress across our various served markets, I would just point out that once again, our balanced and broad end market diversification supported our strong performance in the second quarter, and no single market represented in the quarter more than 19% of our total sales. Turning first to the military market, that market represented 11% of our sales in the quarter. Sales increased from prior year by 2% in U.S. dollars and 5% in local currencies due to increases in military helicopter, communications, and ordinance-related products. On a sequential basis, sales were up 2%, primarily with the contribution from the Invotec acquisition.

Looking ahead to the third quarter, we expect sales to continue to increase moderately from these levels, and we remain confident in achieving full-year growth in the military market in 2015. While there's no question that overall military spending is not expanding, our technology leadership and broad program participation have enabled us to realize the growth we experienced here in the second quarter. And as adoption of electronics grows across a wide range of military technologies and as spending increases in certain emerging geographies, Amphenol remains extremely well-positioned for the long term in the military market.

The commercial aerospace market represented 6% of our sales in the quarter, and sales in this market were down slightly in local currency and down by about 7% in U.S. dollars on a moderation of demand related in particular to small and business jets, and commercial helicopters, as well as some impact from aviation subsystems. This was not totally offset by what we did see as stronger performance of our sales to the major airline producers. Sequentially, our sales increased, as we had expected, by 3%. While we remain confident that our commercial air sales will grow in the third quarter from these second quarter levels, due to the anticipated second half ramp-up of several new airplane platforms, we expect the overall market to be up, slightly in local currencies for the full year.

We continue to be extremely well-positioned on the latest generation of airliners with our interconnect, value-add cable, and printed circuit assemblies, as well as cable management products, and that strong and broad position creates an exciting long-term expansion opportunity for Amphenol. The industrial market represented 17% of our sales in the quarter. Our sales grew 4% in U.S. dollars and 7% in local currency versus prior year, and 2% in local currency sequentially. This sales increase was driven by a very robust performance in the heavy equipment, instrumentation and alternative energy segments, as well as by contributions from the Goldstar acquisition completed at the end of last year. This growth was offset in part by further declines in the oil and gas segment, as well as by some moderation of sales to rail mass transit customers.

Looking ahead, we expect sales in the industrial market to increase from these levels in the third quarter, and we do continue to anticipate double-digit sales growth in local currencies for the full year of 2015. Long-term, we look forward to realizing the benefits of our broad industrial interconnect and sensor product offerings, together with the newly acquired antenna products of Procom. The automotive market represented 19% of our sales in the quarter, and our sales really increased significantly from prior year. They grew 33% in U.S. dollars, 45% in local currency, and a very strong 16% organically. In fact, we grew organically in all geographies.

This extremely strong performance reflected the ongoing benefits of the Casco acquisition made last year, as well as continued growth of our sales of complex interconnect products used in a wide variety of applications, including telematics, safety devices, emissions management, as well as drivetrain control applications. Sales in the automotive market increased sequentially also by a strong 5% from the first quarter. We're very pleased to be continuing to outgrow the overall automotive market as we capitalize on a broadened suite of interconnect and sensor technologies, which are being incorporated into a wide array of new advanced vehicle electronics. With the recent addition of Docharm that I already discussed, we've further strengthened our interconnect position in the China market, while also clearly establishing ourselves as the global leader in automotive lighting interconnect.

Together with other acquisitions made during the last 5 years, we now have a broad range of high-technology interconnect and sensor products that support a wide array of new electronics applications in cars. In addition, we've become a preferred supplier to a broad range of automobile manufacturers around the world. Looking towards the third quarter, we expect sales in the automotive market to increase further from these levels, and we continue to look forward to an excellent 2015 and beyond for this exciting business. The mobile devices market represented 16% of our sales in the quarter, and sales increased by 5% from prior year and by a greater than expected 7% sequentially. That was driven really by higher demand across a range of customers and programs.

We continue to expect a significant increase of sales in the second half, and that includes a sequential increase of approximately 40% in the third quarter, as we anticipate a significant increase of sales of our products in support of certain new programs. For the full year, we continue to anticipate growth to be in the mid- to high-single digits. And we remain confident that despite the ever-changing landscape, as well as the certainly unique dynamics of the mobile devices market, our leading technology, preferred supplier relationships with a broad range of device makers, and most importantly, the excellent execution of our outstanding agile organization, positions us strongly for the future in the mobile devices market.

The mobile networks market represented 8% of our sales in the quarter, and sales in this market were weaker than expected, declining by 27% in US dollars and 23% organically from prior year and by 7% sequentially, as demand further moderated from operators essentially in all regions. While we still expect a second half recovery in spending in the mobile networks market, it now appears that the speed and significance of that recovery may be more muted than we had originally expected. Accordingly, we now expect a high teens percentage decline in our full-year sales in the mobile networks market.

So I wanna say that regardless of these moderated sales expectations, we continue to be extremely well-positioned in the mobile networks market, and thus remain very confident that with our industry-leading breadth of interconnect and antenna products, we will continue to participate broadly in ongoing next-generation mobile network deployments, wherever they happen around the world. The information technology and data communications market represented 17% of our sales in the quarter. Sales in this market increased by 3% from prior year and declined slightly on a sequential basis on lower than expected sales of storage-related products. Compared to last year, our robust sales into servers were offset in part by a weaker performance in networking and storage.

Looking ahead towards the third quarter, while we expect sales to remain essentially at these levels in the third quarter, we continue to remain confident to achieve full-year growth in the mid-single digits in the IT datacom market. As data consumption and processing requirements continue to accelerate, the IT datacom market is undergoing a real rapid transformation, and that transformation is in particular around the cloud and web service providers who are driving just accelerated innovations across the entire architecture of data centers around the world. It is really in just such a dynamic environment that our industry-leading products, high technology as they are, our preferred relationships with leading equipment suppliers, as well as our very strong focus on service provider and data center customers directly, have created an excellent platform for Amphenol to outperform in the IT datacom market.

The broadband market represented 6% of our sales in the quarter, and our performance in this space was a bit softer than expected, as U.S. and Latin America cable operators constrained their spending, and with sales declining about 7% from prior year and remaining essentially flat to the first quarter. While we expect an increase in demand in the third quarter, we expect for the full year, relatively flat performance now for the broadband market. There continues to remain a heightened level of uncertainty in the capital spending plans of many of the multi-service operators, satellite and telco customers in the broadband space. That's in particular, given the several high-profile industry mergers, which are still pending, as well as the significance of currency devaluations that have occurred in Latin America.

Nevertheless, and despite these market dynamics, we remain confident that we will realize long-term success in this market due to our proven capability to create innovative solutions for our customers to support the rapid growth in high-speed data delivery. And as we drive further efforts to create these enabling technologies, we look forward to maintaining our leadership position in the broadband market. So just to summarize the second quarter, I, I just can only say how proud I am of our organization, as once again, our team executed extremely well in what has become a somewhat more challenging and dynamic market environment. Our continued strong performance in 2015 is a clear reflection of the company's distinct competitive advantages, our leading technology, our increasing position with customers across a diverse range of markets, our worldwide presence, and our lean and flexible cost structure.

Above all these strengths, though, our greatest asset remains Amphenol's agile, entrepreneurial management team, who reinforces that high-performance culture every day. Now, turning to our outlook, the global marketplace remains a highly uncertain environment. Based on a continuation of these current economic conditions, and assuming that exchange rates remain stable at their current levels, we now expect in the third quarter and for the full year of 2015, the following: For the third quarter, we expect sales in the range of $1,435,000,000-$1,475,000,000, and EPS in the range of $0.64-$0.66, respectively. This represents a sales increase of 6%-9% in US dollars and 10%-13% in local currency, as well as an EPS increase of 10%-14% in the quarter.

For the full year of 2015, we expect sales in the range of $5,540,000,000-$5,620,000,000, an increase of 4%-5% in US dollars, 7%-9% in local currencies, and 3%-4% organically. For EPS, we expect for 2015, $2.43-$2.47, an increase of 8%-10% over 2014, excluding one-time items. We're very encouraged by the company's continued strong outlook in sales and earnings, especially given those many uncertainties that are still around the global marketplace. Clear that the ongoing revolution in electronics continues to create tremendous opportunities for Amphenol.

I'm very confident in the ability of our outstanding management team to continue to capitalize on these opportunities, both to grow our market position and expand our profitability, and thereby to drive continued superior performance for Amphenol in 2015 and beyond. And operator, at this time, we'd be very happy to take any questions that there may be.

Operator (participant)

The question-and-answer period will now begin. Our first question came from the line of Amit Daryanani of RBC. Your line is now open.

Amit Daryanani (Managing Director and Equity Analyst)

Perfect. Thanks a lot. Good afternoon, guys. I have a question and a follow-up. On mobile devices, Adam, you're looking for 40% sequential growth in September. That's probably stronger growth than you've seen for the last several years in September. Can you talk about, is it units that you think are going up, or is it content for you guys that's driving this much conviction that you can do that? And based on your full year numbers, how do you think December plays out in mobile devices?

Adam Norwitt (CEO)

Yeah, well, thank you. Thank you very much, Amit, for that question. I think it is very strong performance. As you know, over the last several years, there are some years where the third quarter is very strong and other years where the fourth quarter is very strong. But no doubt about it, the second half is usually very strong in the mobile device segment. I think this year is no different. As we look towards the third quarter, we see really a variety of levers of growth here, and that includes units, that includes content, that includes really expansion of the various products that we're offering into the market.

You know, we sell such a broad suite of products in that market, everything from antennas and interconnect to mechanisms and even products that go onto the devices, as well as products that go to support our customers in their production processes. So there's just a real wide array of products that we're selling onto a wide array of applications with a diverse range of customers. Relative to the December quarter, I think you can do the math that we would anticipate at this point that the December quarter would be sequentially down a bit from the third quarter... Again, there are some years where the third quarter is stronger than the fourth and other years where the fourth quarter is stronger than the third.

It's not a market that I would ever want to give long-term predictions on the various seasonality and cadence of that market. But this year, we're very happy to still be in a very strong position. And I would just one more time emphasize, you know, if you look at our performance in this space over the last several quarters, we had a very strong fourth quarter and a very strong second half last year. We had also a very strong reduction in sales in the first quarter. If I recall correctly, it was nearly 30% from the fourth quarter to the first quarter. We grew 7% sequentially last quarter, and now we're gonna grow 40% into the third quarter. That is not an easy business to run.

I just give so much credit to our organization being able to flex in such an environment. At the end of the day, that is one of the greatest competitive advantages that we have in this space. So few can flex at that level in real time with the needs of the customers. I think ultimately, that allows us to get maybe a little bit more than our fair share of the market opportunity.

Amit Daryanani (Managing Director and Equity Analyst)

Perfect. Thank you. And then if I could just follow up on FCI. Just talk about what's the historical growth rate been for the company for the last few years? And as you integrate this once it closes, is it reasonable to say the aspiration would be get closer to the interconnect margins for Amphenol versus the corporate levels for FCI?

Adam Norwitt (CEO)

Yeah, no, it's an excellent question, and we're again, we're just very excited about FCI. I mean, FCI has just an outstanding business, and, you know, I, I wouldn't necessarily talk about specific growth rates, but I would just tell you that they've had good growth over the recent years. It is a company with a very long legacy. It, it comes, you know, for many, many decades over certain iterations and ownerships. And the business today that we are buying is really the core electronics commercial business of, of FCI. And that is a business that just has done an outstanding job in gaining position across a wide array of products and markets.

I mentioned, you know, everything from high speed to power, input, output connectors, miniaturized connectors, and has done a great job on a regional basis as well, with customers where we don't necessarily have necessarily that strength. And so as we think about their future, certainly our aspiration for FCI would be for them to perform at or above the levels of Amphenol. Otherwise, we would not have bought the company. And as we think about operating performance, today, the company clearly does not perform at the levels of Amphenol. As we talked about in the press release, they have EBITDA margins of around 20%, but their operating margins would be more in the low- to mid-teens.

We certainly see great opportunities for FCI over a time period, certainly, a medium to long time period, to bring themselves up to Amphenol level margins. That has been a recipe that we have applied for many years. In fact, we're coming up to the 10th anniversary of the Teradyne Connection Systems, or TCS, acquisition. Believe it or not, that was 10 years ago, December, that we acquired TCS. And at the time, you know, that was a company that didn't perform at the levels that Amphenol aspired to and was able to achieve. And certainly, over the years, that organization was able, through being part of Amphenol, to really reach towards much higher levels of profitability. And we would certainly have that long-term aspiration for FCI and long-term goals.

Operator (participant)

Thank you. Our next question came from the line of Amitabh Passi of UBS. Your line is now open.

Amitabh Passi (Senior Technology Equity Research Analyst)

Hi, guys, and congratulations to both Craig and Diana. Adam, I just had a couple of questions for you. On just FCI, are there any cross-licensing agreements or potential revenue dys-synergies that we need to be thinking about? Just maybe an overarching comment there.

Adam Norwitt (CEO)

Sure. No, it's a very good question. There are a couple of licensing arrangements that we have, like we have with many other companies in the industry. But we don't really view that as really revenue dis-synergies. Those licensing arrangements tend to be relatively, the second source arrangements tend to have relatively small proportions, and we don't see that as any material impact to the business. I mean, what we see much more is benefits when we think about the products and the complementary aspect of those products, as well as the complementary access to customers, where there are certain customers where they've done much better and others where we've done much better.

I think being able to bring that full suite of technologies between both those sets of customers is really something that will far outweigh any, you know, immaterial revenue, kind of, dys-synergies, as you, as you term it, from cross-licensing.

Amitabh Passi (Senior Technology Equity Research Analyst)

Excellent. And just a quick follow-up. You know, we've heard from a few other companies in the supply chain, including semiconductor companies, of increasing levels of caution as the quarter progressed. I'm just curious how things potentially trended for you during the quarter. Did you see a slowing in the quarter and, you know, essentially how you would characterize the environment today?

Adam Norwitt (CEO)

I think I would characterize the environment as as throughout the course of the quarter, the macro environment, I would say, felt a little worse at the end of the quarter than it felt at the beginning. That didn't necessarily translate into the results of the company, I would say. I think our team did a fabulous job, and we had what I would term a pretty normal cadence throughout the quarter in terms of, you know, you tend to have a pretty strong June in the second quarter, and that was no different in this quarter. But it was a bit more of a fight, I will tell you that.

And I think that the overall market environment continues to have a relatively high degree of uncertainty around it, and probably throughout the course of the quarter, was a bit higher.

Amitabh Passi (Senior Technology Equity Research Analyst)

... Any specific geographies, or was that sort of a broad?

Adam Norwitt (CEO)

No, I would say that it's more broad. I mean, look, I wouldn't. We're not necessarily a canary in the coal mine for every market and every geography here. But I just think that there's a general sense that there was uncertainty. You know, you have to fight sometimes a little bit harder for the last order.

Operator (participant)

Thank you. Our next question came from the line of Mark Delaney of Goldman Sachs. Your line is now open.

Mark Delaney (VP of Investment Research)

Yeah, good afternoon, and thanks very much for taking the questions, and congratulations on the good quarter. I was hoping first, Adam, maybe you could elaborate a little bit more on the strength that you're seeing in the mobile devices end market. You know, I know you talked about how it can be volatile from quarter to quarter, but you mentioned specifically that you're participating in things, you know, some exactly, directly involved in the manufacturing process. And I'm just wondering, is there a one-time nature to some of those, some of those sales, or is this something that you'd have an opportunity to participate in, in future years?

Adam Norwitt (CEO)

Yeah, no, look, I think we don't see that as a one-time thing. What I would say is that we in the mobile devices market, the demand tends to have certain quarters where it's much higher than others. And I don't think that will be any different, regardless of whether you're participating on the product side or working with them in the production. I mean, there tend to be ramp-ups of products, there tend to be ramp-ups of production processes, and there tend to be then, you know, some digestion of those ramp-ups. And I think you see that really in the ongoing results of the company, you know, over many years, where quarter-to-quarter, you have certain quarters that are much stronger in the mobile devices space. They tend to be more towards the second half of the year. Not always.

I mean, we have had in other years, where actually the first quarter was not such a bad quarter because there was a certain, you know, set of product releases. The, you know, the cadence of when the activity gets hot and not hot in the mobile devices is something, again, that, that doesn't, that is not entirely predictable in any year, in, in any year, year in and year out. And, and we don't see that that's a very different, dynamic, regardless of whether you're selling products that go onto the device or, or helping to make the device or supporting accessories, where we have also a, you know, a very strong business related to accessories and devices.

I think all of those tend to be relatively lumpy, and you've got to be in a position where you can strike while the iron is hot, while the opportunity is there, and the better you can be at striking with a real agile organization at that time, you know, the more success you can have over the long term.

Mark Delaney (VP of Investment Research)

Okay, that's helpful. I appreciate that. And then a second, a follow-up question, if you could just help us to contextualize the FCI acquisition versus the broader M&A program at the company. I mean, some of the deals the companies have done in recent years, maybe GE, Casco and FCI have been larger. I mean, I think, you know, to get to deals of this size, you have to go back to the Teradyne Connection Systems business you mentioned, which was 10 years ago. So there's been a noticeable increase in the size of the M&A.

I'm just wondering if you could talk about what other opportunities are there of this sort of deal size, you know, hundreds of millions or billion-dollar type acquisitions, and is that the type of, of size we should expect the company to be looking to execute upon going forward?

Adam Norwitt (CEO)

Sure. Look, I think I've said for many years that we have some very strong criteria for acquisitions, and that's first and foremost, technology, and we want companies with very, very strong technology. And in addition, equally, equal billing with technology is we want outstanding people, and then we want that to be complementary to the company. And the criteria that we have never had is size. And I think that while it's true that the FCI acquisition is the largest acquisition we've made in the history of the company, in absolute dollars, from a proportional size, the TCS acquisition was actually substantially bigger. I think at the time, it had sales of close to a third of the size of Amphenol.

So I think that we are a bigger company, and so we certainly have the capacity to do deals of a wide variety of sizes. In terms of what's out there, and what's available and what will be available, you know, it, it's very hard to say. I mean, there are plenty of companies out there of a certain size. Will they ultimately one day be for sale? There are some that we certainly hope they will be. We're very patient, though. I can tell you that even with an FCI, I mean, that has been a process of, you know, onwards, close to a decade, where we have been knowing that company, having dialogue, and that's very similar to many of the acquisitions that we've made, where we develop a very long-term dialogue with those companies.

And eventually, there comes an inflection point where the owner of the company, be that the owner-operator, or in this case, the financial owner, decides that, you know, they're ready to, to consider selling that. And I think that there are, there are large companies that are out there. Will those be in the near term or even medium term, actionable from an acquisition standpoint? That's very hard to say. So it doesn't mean that we won't do acquisitions also of smaller size. As you saw in the quarter, we, we made, two other acquisitions, $20 million in size, $50 million in size. We will continue to pursue a very broad range of acquisition targets all around those criteria of having strong technology, outstanding people, and complementary market position.

Operator (participant)

Thank you. Our next question came from the line of Mr. Mike Wood of Macquarie. Your line is now open, sir.

Mike Wood (Associate Director)

Hi, thanks for taking my question. Regarding industrial and just local consumption-oriented markets in China, there are two markets where some industrial companies have been reporting softness. Can you just speak to what Amphenol is seeing there? And, you know, regarding those trends, has there been any destocking or you think maybe, you know, sell-in is underperforming sell-through?

Adam Norwitt (CEO)

... Yeah, so when you talk about industrial and certain of these geographies, I wouldn't necessarily say that, you know, the performance of our industrial business in this case, was really geographically focused. I mean, there was nothing really of note geographically in our performance. I think I mentioned that we saw a continued and relatively significant decline in our sales to oil and gas market. That's not geographical. I mean, there's oil and gas business in Asia, and Europe, and in North America. We also saw, you know, some declines in rail mass transit as well. I think rail mass transit, you know, maybe there was a little bit more of that decline in Asia, but not so material to the impact.

So I wouldn't necessarily characterize the performance of our industrial business on a geographical basis. The strength that we saw in places like heavy equipment and instrumentation, again, just on an organic basis, were not necessarily geographically focused either. I think those were in, you know, new areas where we have new technologies, and in particular, where we've seen just this increasing prevalence of adoption of new electronics onto industrial equipment.

And that is something we see in particular in the heavy equipment and, you know, the sort of agriculture and mining and those type of, you know, large equipment areas, very harsh environment, large equipment areas of the industrial market, where there seems to be actually quite an acceleration of the adoption of electronics as companies fight to embed more functionality in their devices and in their equipment in order to compete in a marketplace which is maybe not so favorable.

Mike Wood (Associate Director)

Great. As a follow-up, can you just speak to your capacity? You mentioned your M&A pipeline, but just in terms of the leverage, which I roughly calculate around 2x EBITDA after FCI would be closed. Do you feel at all constrained by additional deals this year or by an operational capacity?

Craig Lampo (CFO)

Sure, I'll take that one. I think at the end of the quarter, I mean, the answer is no. At the end of the quarter, the company has, you know, in excess of $2.1 billion of capacity between our cash and revolver availability, not to mention certainly our strong operating cash flow that the company continues to generate. You know, as we previously disclosed, we've earmarked about $1.3 billion of that capacity for acquisition of FCI, you know, the majority of which will be funded, you know, with our international cash. And certainly, while this is a somewhat bigger deal than we've done in the past, as Adam just mentioned, relative to the size of Amphenol, you know, certainly it's not our largest deal.

You know, certainly is well within the company's capital and leverage, you know, capacity, and given full and appropriate consideration to certainly the importance of our ratings. You know, in the future, we'll certainly continue to have a thoughtful and balanced approach to deploying our, you know, capital and financial strength, you know, giving appropriate consideration and priority of certainly first to our acquisition program and then to our dividend program, and probably lastly, to our stock buyback program. So in the near term, depending on future acquisition activity, including FCI, you know, that weighting may be a little bit more skewed towards our acquisition program. But as a management team, we believe this certainly provides the best long-term return to our shareholders.

Operator (participant)

Thank you. Our next question came from the line of Shawn Harrison of Longbow Research. Your line is now open.

Shawn Harrison (VP, Senior Research Analyst, and Associate Director of Research)

Hi, good afternoon. Congrats on the results, and, Craig, congrats on the official appointment.

Adam Norwitt (CEO)

Thanks, Shawn.

Shawn Harrison (VP, Senior Research Analyst, and Associate Director of Research)

Wanted to dig in a little bit more on just mobile infrastructure in terms of where you're seeing the incremental weakness by geography, if you could help us out with that. The weakness that you're seeing in the back half, does that mean that you're seeing projects spill into 2016, or is this stuff just that, that's not going to be built out?

Adam Norwitt (CEO)

Yeah, no, I, I think it's actually pretty interesting. When you look at it on a year-over-year basis in local currencies, essentially all geographies are down by the same amount. And so, you know, the amount that by which we were down, that kind of 23% in local currencies, that was spot on, you know, in each geography, really, kind of the same number. And while that's a coincidence, of course, because there's not necessarily a correlation, I think it is indicative of one thing, and that is that you had a very significant build-out cycle last year. No doubt about it. And there is always some digestion. But in addition to that digestion, there is a little bit of what I would call indigestion that comes from a few happening.

One of those is just broadly in the carrier space, there's a lot of activity, corporate activity, mergers, discussions, acquisitions, you know, regulatory things that are happening. That's one. And then, you know, you see, that's more in the West, in North America in particular, and then a little bit in Europe. But you have also in China, you know, some government-related actions that are happening that are also keeping a damper on the mobile infrastructure spending in the first half. I think as we look towards the second half, we do anticipate the second half being stronger than the first half, just not at the level that we had or originally come into the year, talking about.

I mean, if you remember, Shawn, very well, last quarter, we also had to adopt a bit more negative view of this market, and we incrementally feel a little more negative this time, and that, you know, that doesn't feel so great in that wireless infrastructure market. But it just appears that the, you know, the spending is being extended a little bit, and in the end, the overall levels for the full year will be less. Does that mean that that is kind of permanently lost? I don't think so whatsoever. At the end of the day, the data rates, the consumption, the expansion of devices is still going unabated. I saw just a statistic, which I'm sure many of you saw this week.

I mean, overall, mobile data usage up 51% year-over-year in the second quarter on a global basis. I mean, those are numbers that have tremendous ultimate impact on the requirements to invest in next-generation networks. And we see still an amazing amount of activity around designing the next generation. You know, you talk about 3G, then to 4G, LTE, then to 5G. I'm sure one day we're all gonna be sitting around here, you know, I'll have a full head of gray hair, and we'll be talking about 10G. But, there is just this sort of immutable march forward in the demands of mobile data that ultimately does drive the investment cycle. And as I've said for years past, you know, that goes in these cycles.

We never relax our efforts to gain strong position across a wide array of OEMs and service providers because we know that ultimately, pent-up demand has to get satisfied. We saw that last year, and we're very confident that over the coming years, we will continue to see strong needs of capital investment and equipment upgrades and technology advances in the wireless infrastructure market.

Shawn Harrison (VP, Senior Research Analyst, and Associate Director of Research)

That's very helpful, Adam. Then just as a follow-up on FCI, I guess one of the concerns I've received is that FCI being owned by private equity for a number of years now, almost 10, you know, maybe Bain has squeezed a lot of blood from the stone. How do you generate the margins and push margins higher in that business? Is it revenue synergies? Is it ways to sprinkle the Amphenol dust on the business and bring it into the fold, and there's opportunities there. Is there something else? Because I guess the general concern is that Bain was running it pretty lean. What opportunities does Amphenol have to improve the cost structure and margin profile?

Adam Norwitt (CEO)

Sure. No, it's an excellent question, and it's true, Bain owned it for nine years. And I think, you know, by owning it for so long, by the way, they were not able to kind of starve the business either. They had to, and they did continue to invest very strongly in the business over many years. As we look towards the operating improvements, I think you mentioned a number of things, and I'm not going to claim that we have pixie dust in Amphenol, but we certainly have an approach in the company towards expansion of operating profitability and really alignment of accountability such that you achieve that operating profitability. And that's something that we will work very hard with the FCI team, who's very excited, by the way, to be a part of that entrepreneurial culture.

And we think that in and of itself has tremendous impacts on the profitability of the company. That was something we saw at the time with TCS. That is something that we've seen with the GE Sensors business. I mean, time and again, when you bring a company in that has come maybe from a slightly different approach, and you bring them in to that, the decentralized, accountable model of Amphenol, you have really some fabulous impact that comes from that. Obviously, you know, from a revenue and a technology, I mean, there are a lot of great, great opportunities to leverage the unique technologies that each of us have, where collectively, we can create better solutions for our customer, either better cost solutions or better technology solutions.

I mean, FCI has just certain really fantastic innovations across the company, where we will seek to apply some of those innovations more broadly across Amphenol and vice versa. I think that, you know, that can also have a great impact on the overall operating results of the company.

Operator (participant)

Thank you. Our next question came from the line of Sherri Scribner of Deutsche Bank. Your line is now open.

Sherri Scribner (Director and Senior Sell-side Equity Research Analyst)

Hi, thank you. Adam, I was hoping you could help us think through the guidance. It looks like you took the full-year guidance up at the low end, but kept the high end the same. But the third quarter numbers look better than most people's expectations. So that implies that the fourth quarter was a bit lower than people's expectations. It seems to me that that's probably related to the seasonality of the mobile devices segment this quarter, but was hoping you could give us some thoughts on that seasonality this year and the fact that the guidance didn't really change that much.

Adam Norwitt (CEO)

Sure. No, I think you have answered your own question, Sherri, as far as I'm concerned. You, as usual, you do the analysis perfectly. It is very true that we have raised, you know... I mean, we never gave third quarter guidance, first of all. So I think we've always given, you know, a full-year guidance, and we're very happy to be able to sustain that full-year guidance. I think we feel that the third quarter is strong in mobile, and I think I already mentioned that we would anticipate in the December quarter to see a little bit of a sequential moderation in our sales into the mobile devices market. I think relative to that full year guidance, we have, obviously, the benefit of the two acquisitions.

I mentioned as well that, you know, from an organic standpoint, we see our range at really a 3%-4% organic growth range, and that is a slight tick down from what we'd seen before, all for the reasons that I discussed in the various markets, and in particular, across those carrier markets. So I think that, you know, the uncertainty, in particular, in those carrier-based markets, the mobile infrastructure and broadband markets, with all that's going on in that space, that injects maybe a little bit more dose of conservatism into our outlook.

But net-net, we're extremely pleased and to have that guidance really holding at, at the high end, bring that up at, at the low end, and with a real strong sense of confidence, given the market environment that we think has, you know, incrementally gotten a little bit more challenging throughout the course of the quarter.

Sherri Scribner (Director and Senior Sell-side Equity Research Analyst)

Okay, that's helpful, and it actually feeds into my follow-up, which was, you know, in the press release, you noted an increased level of uncertainty globally. In your answer now, you just suggested maybe that's just related to the carrier segment, but wanted to get a sense of where you're seeing the uncertainty. Is it generally pretty broad? Is it some segments like carrier, or is it, some other segments, too? Thank you.

Adam Norwitt (CEO)

... Yeah, thank you. No, I think when I talked about the carrier, that's really the specific impact to our outlook. I think the general comment about uncertainty in the marketplace is really more of a general one. As I mentioned, I think early on, it just as the quarter went on, it was a little bit more of a fight to get the orders. I think our team is really up to the task, and they did a fantastic job given that environment, and we are confident that we'll continue to do an excellent job, given that environment going forward.

Operator (participant)

Thank you. Our next question came from the line of William Stein of SunTrust. Your line is now open.

William Stein (Managing Director and Senior Analyst)

Thanks for taking my questions, and congratulations on the good outlook relative to what we're seeing elsewhere. That's really what I'd like to focus on. One of the areas that some other component and semiconductor companies have talked about is channel inventory adjustments denting their Q3 outlooks. I'm wondering if you're seeing anything in this regard, if you're seeing any actions by either end customers or the channel in reducing inventory?

Adam Norwitt (CEO)

Yeah, look, in the channel as it is distribution, you know, distribution represents under 13% of our sales in the quarter. And I don't know that we've seen anything, you know, really market in terms of a massive inventory reduction or changes. I wouldn't say that the distribution channel has been very frothy in the quarter, and, you know, when we talk about it, you know, being a little bit more of a fight, you know, maybe there's some component of that that is related to distribution. But again, it hasn't been that there was like a pivot in the behavior of our distributors or in the behavior of the sell-through with our distributors.

I think that it is just a little bit, you know, more sometimes of a challenge and maybe a little bit more of a conservatism on their part, but we don't see big inventory reductions, pullbacks, you know, massive corrections coming out of that channel right now.

William Stein (Managing Director and Senior Analyst)

That's helpful. And one follow-up, if I can. I'm wondering if you might give us an update on the progress of the sensor business. You've done a couple of acquisitions there in the last year or two, and I know that you highlighted some design wins, in particular in automotive, I think. Maybe you could just kind of give us an update on how that part of the business is progressing.

Adam Norwitt (CEO)

Sure. No, look, we continue to be really excited about our sensor business. It's coming up, believe it or not, on, you know, a year and a half. We passed the year-and-a-half mark of owning the GE Sensors business. End of this year, it'll already be two years. Time flies. Casco was acquired nearly a year ago. I would just reiterate, as I've said on the last several calls, that we feel really excited about that, and we continue to get great affirmation from customers that us owning a sensor business is a really good thing for the company, a good thing for our customers, and a good thing for the technology solutions that we can provide.

You know, we are working very hard on a very collaborative basis across the company to uncover and to pursue opportunities where we can really bring in a sensor and an interconnect together with, you know, maybe our industrial business or automotive business. And I would say that we've had good wins in that area. I wouldn't point to anything that is really material to the outlook of the company as yet, but I think the long-term prognosis for our sensor business is excellent, as is the long-term prognosis for the opportunity of having that sensor and interconnect solution. The ability to package the sensor together with a, you know, a harsh environment or otherwise interconnect solution is something that is very special, and it's something that our customers appear to have a great desire to engage with us on.

Operator (participant)

Thank you. Our next question came from the line of Craig Hettenbach of Morgan Stanley. Your line is now open.

Craig Hettenbach (Executive Director)

Yes, thank you for taking the question. I guess it's not pixie dust. Maybe it's the word is Amphenolian. But just on the automotive business, that's come quite a far way in the last couple of years through a mix of the organic as well as acquisitions. Can you talk about where you are from a penetration standpoint and how much you have to gain from that versus just the overriding increasing content theme?

Adam Norwitt (CEO)

Sure. I mean, look, we're still small on a relative basis compared to some of the major participants in this space, but we're a little bit less small than we were five years ago. That is no doubt about it. And we've made outstanding acquisitions over those five, six years company, and we've continued to do that here in the quarter, at the end of the second quarter with Docharm. And I think when I look at that business today, and I compare that business to, you know, circa 2009, you know, a couple of things. Number one is a much broader offering of products across a broader range of applications. That's number one.

Number two is we now have kind of, at a minimum, a foot in the door, sometimes a leg and sometimes even the whole body, but at a minimum, a foot in the door with the vast majority of major automotive OEMs in most geographies. I think with the exception of Japan, where we have never had a strong position, and I wouldn't say that we've necessarily gained that strong position, even if with some of the Japanese OEMs outside of Japan, we have actually gained strong position. And then, the third is just regionally, where our automotive business would have been, six years ago, two-thirds or three-quarters European. Today, that automotive business is actually quite balanced on a regional basis. Europe is still marginally the largest territory, but really, it is marginal as compared to North America and Asia.

And with the acquisition that we've just made, you know, that will bring even a stronger position with us in China, both with the international as well as the indigenous participants in China. And, you know, look, we certainly read the papers and hear everybody talking about, you know, is there a downturn in China and all of this? I mean, the reality is, we have still such a small position and still so much to gain across the range of electronics in those cars, that we still feel a great sense of confidence in our automotive business. And I think ultimately, that has translated into the strong performance we had this quarter, 16% organic growth in the quarter, and our continued outlook, where we anticipate still for the year to have, you know, kind of mid-teens organic growth in the automotive market.

And that is clearly not reflective of just rising with the tide in overall unit sales. So there is a lot of gaining of position on new applications with new products from us that is really driving that growth.

Craig Hettenbach (Executive Director)

Got it. I appreciate the color. Just as a quick follow-up, you mentioned just some of the change occurring in the data center, and, you know, that has been another area of potential concern in terms of, is there any slowing on the hyperscale side? Any insight in terms of kind of what you're seeing from, you know, data center growth into the back half?

Adam Norwitt (CEO)

Sure. I think I did talk about the fact that, you know, we had a good quarter in IT datacom compared to the overall market. We still anticipate a kind of a mid-single digit growth in the IT datacom market for the year. There's no question, this transformation that is happening in the IT datacom market, the real shifting of the balance of power from traditional OEMs, building and building boxes and putting them in boxes and shipping them, to, you know, this more sort of Web 2.0, cloud, web service, I mean, there's so many different names you can call it. That transformation continues unabated, and I think that shifting of the balance of power is a very dangerous time in the market for someone who is caught unawares.

And I think our team has just done an outstanding job, and we've made a lot of real significant organizational moves. Let me say, taking people who were really strong people, focused on certain areas and saying, "I'm cutting the cord with you there and putting you into something totally new," it's hard for them because now they got to go from wearing a tie to wearing shorts and Birkenstocks when they go to the customers. But ultimately, that transformation of our people and then the tailoring of the technology to what the needs of the web service companies, that's something that we think is going to bear fruit long term. You got to chase where the money is in a space like this, and I think that we, we've done so far a great job of that.

But it is not a space without its peril when you see the dramatic change that's happening in that area.

Operator (participant)

Thank you. Our next question came from the line of Jim Suva of Citi. Your line is now open.

Jim Suva (Managing Director)

Thank you, and congratulations. To make up for my lack of smartness, I'll just ask one question with no follow-ups. Can you just help us understand, FCI's been around for a very long time with a long history, although the company has gone through a lot of international restructuring challenges, and you announced that you're acquiring the FCI Asia. Can you help us better understand, you know, what, what does that all include, geographic reach? You know, a lot of their businesses over the past decade or 15 years have kind of been divested or slowed or closed down or things like that. Are you acquiring all that's left in FCI? And if so, is there still much heavy lifting to do to get it integrated?

Or, you know, in the past, their cost structure has been very, French and Spanish and, you know, kind of Western Europe, high-cost basis. If you just help us understand kind of what you're all buying here and what type of effort it's gonna take? Thank you.

Adam Norwitt (CEO)

Thank you, Jim. Actually, this was much more than one question, so you're still very smart. Let me just clarify, relative to FCI Asia, as it's called, that's the legal name of the company. FCI is a global company. It happens to be headquartered in Singapore. It has a long history, and it was originally, well, let me say, on an interim basis, it was a French company. Long ago, Berg Electronics, you know, which is one of the predecessor companies, was certainly an American company. But FCI, as a global business, is really around the world. They moved the headquarters to Asia a couple of years ago.

It's true that FCI used to have several other businesses, which over a certain number of years, Bain took the approach to divest them kind of one by one. They had an automotive business. I'm sure everybody's familiar with that. They had a power business, a real high voltage business that was divested a number of years back. They had also this, what was called microelectronics business, which was a very specialized business that was also divested. And this is - we are buying really the totality of what Bain owns today, which is what was originally known as FCI Electronics, which was the commercial electronics interconnect business of FCI. And that was always the piece of FCI that we had our eye on for this nearly a decade.

And in terms of the heavy lifting that has been done, I mean, the company has a great performance, and it has performed better than maybe it did in the past, but we still see excellent opportunities in the future to improve operating performance of the business. And I think I already discussed a number of the different levers that we intend to exercise as we look towards improving the performance of FCI.

Operator (participant)

Thank you. Our next question came from the line of Mr. Steven Fox of Cross Research. Your line is now open.

Steven Fox (Managing Director)

Thanks. Just a couple of quick ones around some of the comments you made, Adam, on acquisitions. On the two acquisitions announced today, I was wondering if you could just provide a little bit, a couple of examples around what where some of their the European deals, you said they have RF interconnect exposure into the industrial markets. Could you give us some examples of that? And similarly, for the Chinese business, where you said automotive lighting that complements some other deals you've done, can you just give us a couple examples of that? And then I had a quick follow-up.

Adam Norwitt (CEO)

Sure. Thank you very much, Steve. So first with Procom. Procom is actually an antenna company, so sorry if I misspoke. It's it expands our RF interconnect and antenna offering, but it is really focused antenna company in the industrial market, and really predominantly in the industrial market. It's a very special business in that they make antennas that get used in very harsh environments. I mean, take, for example, on a freighter ship where you have, you know, a very complex wireless communications that have to happen on a freighter in the middle of the ocean, you know, they would make those type of antennas. They make antennas that are used in emergency radio systems for police and fire departments.

They make, you know, just a real wide variety of antennas that are used across a range of applications where we today don't participate. And that's what's so exciting about Procom. It's obviously a small company, you know, just over $20 million in sales, but it is a company with a unique technology. Then we would look to expand, you know, their presence to other geographies, where today they're a very European-focused company. And together with our strong presence on industrial interconnect and with industrial customers, we see here a great opportunity to leverage that antenna business into a new market area beyond just the wireless communications of mobile devices and mobile infrastructure, where today we have a very strong position.

Relative to Docharm, I did mention that Docharm has a, you know, one of their main specialties is around complex interconnect assemblies that go into automotive lighting applications. You may recall that a number of years ago, we acquired a company called Cemm Thome, and Cemm Thome was really one of the leaders in automotive lighting in Europe and North America, and that business has just done fantastic with us since we acquired it. What we really like about that business is twofold. One is, you know, in the lighting, that tends to be a very important application. Lights have to work in a car, and it also tends to be a little bit more of a harsher environment part of the car because it tends to be a little bit closer to the air and rain and moisture.

And so it allows you to really embed certain technology into that product for a product that really has to work, it has a safety element to it, in addition, and it has to work in a slightly tougher environment. And in addition, it is an area where lighting tends to change at a somewhat different and faster cadence than overall model changes. You have what are called in cars, facelifts now, and those facelifts are sort of mid-platform changes in the car, where they don't change the drivetrain, they don't change the underlying architecture of the car, but they do things to the car to make it look a little better, to upgrade a little bit the electronics.

Those facelifts and mid-cycle upgrades have started to become a real positive aspect of the automotive market, whereby you used to really, if you didn't get on something, you had to wait three to five years to get onto the next one. Today, with that mid-cycle upgrade and those facelifts, it allows you to have a little bit different velocity to winning business, and that's something that we really like about this lighting business.

I think the last thing I would say about Docharm is, you know, because it is a real indigenous Chinese company founded by a fabulous entrepreneur, very successful in his space, you know, it gives us a different level of position in the Chinese indigenous market, and we're very happy that the entire management team is very committed to staying with Amphenol, you know, and they have great role models of companies in China who have been acquired by Amphenol, but whereby the owner has stayed with the company for many, many years. We have one where, you know, the owner has been with us still for 12 years after the fact, and I think that, that, that continuity of the management, together with the strength, the presence with the local customers, is something that has a lot of value.

Steven Fox (Managing Director)

Great. That's really helpful. Just really quickly, you during your prepared remarks, you mentioned that Goldstar and Casco were helping organic growth, and I just was wondering if you can clarify whether that was sales synergies with existing businesses or bringing their business into your customers, or were you just referring to their own growth on a standalone basis? Thanks.

Adam Norwitt (CEO)

Yeah. Sorry again, if I misspoke, Steve, I apologize, but I did not mean that they were helping our organic growth. I meant that our overall growth was aided by the additions of Goldstar and Casco.

Operator (participant)

Thank you. Our next question came from the line of Wamsi Mohan of Bank of America Merrill Lynch. Your line is now open.

Wamsi Mohan (Senior Equity Research Analyst)

Yes, thank you. Adam, relative to most of your recent acquisitions, FCI appears to be very different in that you need to do a lot more heavy lifting with integrations, whereas in many of your other acquisitions, you tended to acquire entities that just leverage your scale, reach and technology, but you don't have to sort of do much in terms of integration. So two questions. One, what are you expecting in terms of integration costs for this acquisition? Will you be including that in your non-GAAP earnings as you refer to accretion? And secondly, should we expect to see more acquisitions from Amphenol, given the relative size that you are now as a company, that you would need to go after targets where you would have to, on an ongoing basis, be more involved in integration? Thanks.

Adam Norwitt (CEO)

Sure. No, thank you very much for the question. I think it's true that FCI is a larger company, and that it has, you know, maybe some work to be done as it joins with Amphenol in terms of aligning it appropriately in the business. But let's not forget that, you know, the core thing that we look to do in companies like that is to just instill the culture of Amphenol. I think we talked about at the time when we acquired GE Sensors, that that was a very different culture. It was a very different organization, and there was maybe a little bit more work that we had to do in that case to align the company towards an Amphenol-like measure of accountability and operating discipline, and really to bring that sort of cultural change into the company.

That comes down to essentially making sure that you've got direct line management, general managers who run businesses to which they're held accountable and for which they have authority. I think that's the main thing that we would make sure is the case here with FCI. I think we have really the wherewithal to make sure that that is the case. We have a great playbook to apply, and ultimately, it doesn't mean that we're going in and mucking around with the whole thing, but rather, we're making sure that there are, you know, the appropriate accountabilities for the focused businesses within FCI. By the way, that is something that the current and soon-to-be prior owners were already heading towards with FCI.

As they migrated the business, as they drove that towards more accountability, you know, they were, in many respects, looking to emulate Amphenol already. And so I think we can just accelerate that emulation a little bit as it joins with us. And maybe I'll let Craig comment a little bit on just, you know, how we would view, you know, costs related to the acquisition.

Craig Lampo (CFO)

Sure. I mean, we would expect, you know, some similar charges, to those we've had in the past for things like transaction-related fees, expenses, and purchase accounting-related items, like inventory and backlog, valuations that would be amortized early in the first year. But these, you know, and these items certainly would be one-time in nature, and we would call these out. In addition, certainly given the size of the deal, it is possible that there could be some other non-recurring charges. You know, if so, we would certainly call them out.

Wamsi Mohan (Senior Equity Research Analyst)

Thank you.

Adam Norwitt (CEO)

Thank you, Wamsi.

Operator (participant)

Thank you. At this point, we don't have any more questions over the phone.

Adam Norwitt (CEO)

That's very good. Well, thank you again, everybody, for your attention today. I know it's a busy day for all of you, and we truly appreciate your time, and I hope it's not too late to wish you all a very enjoyable and pleasant summer. Hopefully, you'll get, after this busy earnings season, a little bit of time to have some vacation with your families. Thanks again, and we'll talk to you all in about 90 days.

Craig Lampo (CFO)

Thank you.

Operator (participant)

Thank you for attending today's conference, and have a nice day.