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. [Operator Instructions]. Until then all lines will remain in a listen-only mode. At the request of this 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, Ms. Diana Reardon. Ma'am, you may begin.

Thank you. Good afternoon. My name is Diana Reardon, and I am Amphenol's CFO. I am here together with Martin Loeffler, the CEO, and we would like to welcome everyone to our second quarter call. Second quarter results were released this morning. I will provide some financial commentary on the quarter, and Martin will give an overview of the business and current trends. We will then have a question-and-answer session. The company had a record second quarter, exceeding the high end of the company's guidance in both sales and earnings per share. Sales for the quarter were $689 million, up 14% in U.S. dollars and 11% in local currencies over the second quarter of 2006 and from a sequential standpoint, up 6%. Breaking down sales into our two major components, the interconnect business which comprised 90% of our sales in the quarter was up 14% compared to a year ago. Interconnect sales increased in most of the company's end-markets. Our cable business, which comprised 10% of our sales, was up 8% from last year, as a result of increases in broadband, cable television markets and the impact of price increases. Operating income for the quarter was strong at a $133 million compared to $108 million last year, excluding flood-related charges of $15 million from the prior year number. Operating margin on the same basis was 19.4% in '07 compared to 17.8% last year. The margin improvement relates to increased margins in both segments of the business. From a segment standpoint, in the cable segment, margins were 12.7%, up 80 basis points from last year and 70 basis points from Q1 of 2007. The increase in margin relates primarily to the impact of a higher mix of specialty products and increased production levels in low cost facilities. In the interconnect segment,…

Thank you very much Dianna and good afternoon. Welcome to our traditional conference call. As Dianna said, I will just provide some highlights of our second quarter achievements and then discuss very briefly, the trends and the progress Amphenol has made in its served markets, and in conclusion comments on the outlook of the third quarter and for the full year 2007. First some highlights, we are very pleased with the strong results of the second quarter. They were actually strong in all respects. We achieved new records in sales and earnings. And I am very pleased with the ability of our organization to continue our long-term trends on achieving industry leading growth and profitability. We clearly continue to strengthen our position in our served markets. And this provides us confidence for our continued positive outlook for the rest of this year and long term. A word to sales, the sales increased 14% over prior year and 6% sequentially. We are very pleased with this result as the demand in most markets continued to be generally moderate and mixed, though the demand was seasonally stronger. The growth was very broad based across most of our end markets and included all geographic regions. The growth was essentially achieved through purely organic expansion, and this will clearly reflect our broad competitive strength in each of the markets that we are serving. We continue to pursue the opportunities for our strategic acquisitions, the pipeline is encouraging. However, the realization is difficult to predict especially with the new regulations that we are facing in China. Profitability and cash flow remained very strong in the quarter as well. We are very pleased that we could expand our industry lead margins, operating income margins even further to 19.4%. This is an excellent achievement considering that the…

Thank you. [Operator Instructions]. Amit Daryanani, your line is open. Please state your company name.

Thanks, RBC Capital Markets. Good afternoon guys. Just a quick question on your operating margins. I mean you guys have done a pretty good job in boosting that might not essentially pre-TCS acquisition levels. Could you just talk on maybe, what are the long-term targets for interconnect margins at this point and what's going to drive the expansion from here? Is it more a revenue function or are there changes in manufacturing locations or procurement strategies that will help us get there?

Well thank you very much for this important question. We ask ourselves always that question, how can we further expand our margins and you know that this is... continues to be our goal. And we have opportunities on a broad basis to further expand margins. First of all we have the operating leverage with incremental sales. Second, we work very diligently in reducing our costs and getting... remaining very lean in the high cost areas and expanding direct and indirect expenses, if I may express it that way, in low cost areas, which in total keeps our costs lower and also prepares us for changing environments in the various market segments, makes us less vulnerable that way. We have design efforts going on relative to changing materials, so we can also reduce costs and so forth. So there is ample opportunity for further expanding margins, as we move forward. And obviously we have... we are close in average now to 20% and obviously that's our near-term goal. And we will see over what period of time they can be reached but certainly that is reachable.

And to 20% on a corporate level right?

Yes, that's 20% on the corporate level. We have 21.7% on the interconnect side, which is a very significant margin. But again it's 90% and all the items I just mentioned apply very much to the interconnect side. So there is margin expansion possible as well.

Andjust to follow up on the acquisition pipeline. Maybe you could talk a little bit about end-markets, would you look to target at this point? And you mentioned changing regulations in China. I guess it just infers that you potentially have some acquisitions in China that are getting held back due to regulatory issues. Could you flush that out a bit?

Well, obviously we have a very fine pipeline and we always look for expanding in low cost areas like India, China and others. And India is certainly included in that as well. But the regulatory situation there is nothing else that in certain instances, you have to go now through the Central Bureau rather than on a regional basis for approvals and that slows down the process. But we are looking for acquisitions essentially in all of our market segments. We have no particular intention to exclude one of the market segments there. In all of these segments, opportunities excess to further expand market share, and therefore we will search out those that make the most sense, continue to be accretive and bring us the management, as well as the product and the geographic presence that we are always looking for these supplementary and complementary acquisitions. Operator: Matt Sheerin, please state your company name and your line is open.

Thomas Weisel. Thanks, and good afternoon Martin and Diana.

Good afternoon.

So question Martin regarding your guidance, which generally is pretty positive particularly when you consider what some of your competitors and other suppliers out there are talking about in terms of a more muted demand picture. So are you seeing signs from customers that end demand in certain markets are picking up or are they just share issues that you continue to enjoy?

Well, I think it is a certain mix. Obviously we have a relatively healthy demand environment in the military and defense area. We see some good demand in the automotive side, as the car model changed and so forth. But in the areas especially in the enterprise area or let me say in the equipment area for IT equipment, we don't foresee as strong of a trend in the third and fourth quarter as we have seen it, for example last year. I mean, last year was exceptionally strong in the third quarter, picked up very much so, at that point in time. We don't see that demand and strength in that area this year. The mobile phone market will remain mixed. I mean, it's well published that some customers of ours have not as strong demand with their end customers as they used to have. And so we have to essentially compensate for these changes somewhere also. And we are compensating this through new products and that includes some share gain as well. Overall I think we have, as we continue to gain some market share in across our market segments.

Okay. And to just to follow regarding TCS, I know you don't break out specific numbers there. But I know early in the year you ran into some demand that were not demand issues but issues our customers, particularly large networking customer that was going through some supply chain initiatives. Are those initiatives largely behind you and are orders coming back there?

Well, it always takes somewhat longer than originally expected because it flushes out through the whole supply chain and it's a long chain if you want at the end. But obviously we have seen some signs that there is improvement and demand is certainly a much more visible at this point in time, and we expect that this is coming to an end. But all those may come along you never know. At this point in time with this particular customer that you are referring to, I think that seems to be coming to an end and we've certainly hoped that this will come through in the remainder of this year. By the way I want to tell you, Thomas Weisel is predominantly visible on TV almost everyday with the Discovery team carrying it on the Tour De France. So it's pretty impressive, Thomas Weisel to see at that big advertising.

Thomas Dinges, please take your company name. You may ask your question.

J. P. Morgan, good afternoon to both of you.

Good afternoon.

Hi.

Martin, wanted to follow up a bit on the margin question but ask it specifically on the cable product side and the broadband side, because that's obviously an area where you guys have been quite aggressive with your competitors at opportunistically going after price increases. You have been able to lift the margins considerably or not in that market even in the face of materials costs and we have seen materials costs start to move up, again here. And what is the expectation as you move into the next couple of quarters and opportunities for you guys to continue to move prices up to capture some of that material cost increase that you're potentially going to see? And then I have another quick follow-up for you.

Okay.Well this is a very important consideration that we always have. As in the cable business we have built lower margins than in the interconnect business and certainly one that we would to move up. I don't see in very near term the opportunity of further price increases except maybe some punctual areas but not on a broad basis. In addition, the aluminum prices have come down and went up a little. So it's a relatively stable you can say at this point in time. Plastic prices continue to be certainly a concern and... but we are continuing other areas to explore and to implement and that is to go to lower cost areas and find new sources of supply for the material that gives us lower costs and so forth. And that can help us and will help us in the future to move margin somewhat in an upward direction. But it's going to be more of a slow process rather than a rapid process.

Okay. And then a quick one for Diana on the cash cycle, if we look at it on a year-on-year comparative basis, did move up a probably few more days than I was expecting. And it looks like the DSO level is probably settling in a little bit higher than where it was for the most of last year. One, is this level that's probably to be expected as you look out going forward? And two, I am guessing and maybe just confirm this for me, is a major the reason for this just the shift of more products being shipped and manufactured in the lower cost regions where payment terms can sometimes be a little bit longer? Thanks.

We look at these... without the sale of the receivables and when we look at it, I mean it's within a day or so kind of the range that we've arrived. It does get impacted somewhat by how many, how much of the sales on the last month of the quarter and sometimes also get... and impacted by what date a month of quarter close occurs on. So, I guess, I don't see really a permanent sort of shift up in days. It's perhaps a day or so high but I do think that we'll stay within that range of 65 to 67 days and that's kind of where we ended on Q2. But we don't really see that as a significant shift from a cash standpoint.

Okay, thank you.

Steven Fox, please state your company name. You may ask your question.

Hi good afternoon, Merrill Lynch. Just getting back to the margin question. I was wondering Martin, if you could look at it differently, your businesses almost doubled over the last three years. And I was wondering given how the business has changed whether that has affected the conversion margin opportunity so that you maybe can get better conversion margins if we wanted to look at over the next couple of years helping margins, is there any way we can discuss that a little bit?

Well, thank you very much Steve. That's an interesting angle to look at in terms of margin. Obviously if you have a more condensed infrastructure you can leverage more. But the real leverage in our business comes not so much how much more you can absorb over fixed costs, because we keep our costs as variable as we can. But at the same time the margin improvement comes from providing value to the company... value to the customers and value in form of integrated solutions. And that is where the TCS and where at the combination of the TCS and our other businesses come to bear where we see design wins, where we bring a complete interconnect architecture to the customer. The same is in the military where we have backplanes, flex prints, rigid flexes as well as the assemblies that go along with backplane assemblies as well as all the I/O's. So some of our customers call us the mega supplier, because we are providing 80% of build-up material and that provides value. They don't have to go to somebody else and that is helping our margins. So both on the commercial side as well as on that industrial environmental side, we have that... developed that capability of this disintegrated solutions, which has the ability to cut out some of the margins that otherwise or the safety net so to speak if you have more suppliers, allows us to make higher margins and the customers to get higher value for a total lower cost.

Okay. That's very helpful. And then just a quick follow-up, you mentioned the next quarter for European auto demand would be weak. Is that... are you just talking about seasonality or is this something in end demand you are highlighting?

No, this is not end demand. It's just really seasonality. Thank you very much for clarifying that.

Okay, great. Thank you.

Thank you.

Carter Shoop, please state your company name and you may ask your question.

Yes, Deutsche Bank. Wanted to touch base on the competitive pricing environment. Can you discuss roughly what percentage your business competes directly against Molex or Tyco Electronics? And can you discuss the overall pricing dynamics with both of those competitors?

Well, thank you very much. An interesting question, and not very easy to answer. With... obviously with Tyco we are having a much broader interface in marketplace. If you want, then we have with Molex. Molex is much more complementary. And we have seen both of them very good in the marketplace in general, because both of these companies sell on values similar like we are doing. And obviously they are always bidding processes... where you asked about pricing in a way it is competitive, but in general there is a very good behavior in the marketplace. And that I think will continue unless demand drops very dramatically at which point in time more competitive situations will come up. As far as Molex is concerned, obviously we are competing in the backplane area with them. But again it's here to drive for the next generation products where we have certainly or... traditionally had a head-start which gives us already the early win positions and whenever you are in earlier you have a better position than if you have... if you come later on.

Okay, that sounds cool. As a follow-up, can we focus a little bit on TCS and discuss how far along we are in regards to both the cross-selling opportunities, kind of a strong inside and outside the box, and also in regards to reducing the cost structure there?

Well, we are actually not any more referring to TCS as a separate operating unit in that sense. But I can tell you that we have been moving along very well with providing TCS lower cost capability. Factories in China at lower cost areas have been very much in full swing, since some months now, and we are very pleased with that. They have new access to sourcing for tooling as well as material, which again helps improve margins. And as I mentioned earlier, TCS together with Amphenol, I/O side altogether which is included in a division which is the information technology and communications division of Amphenol, are now offering our customers this complete system... integrated system architectures, which I have referred to earlier that are thriving design wins in the future, especially in the high speed area. And that is a very successful undertaking, and we will see these successes turning into revenues in the next several quarters as design cycles takes six months to one year or even sometimes longer on the equipment side.

Shawn Harrison, please state your company name and you may ask your question.

Hi, Longbow Research. Good afternoon.

Good afternoon.

My first question has to deal with just any inventory corrective pressures maybe you are seeing in the supply chain, either through distribution at the EMS level or at the OEM level, if you could just comment on that.

As far as distribution is concerned, we very rarely talk about distribution because distribution represents only 15% of our sales. But as far as distribution is concerned, and which are relevant in certain markets that we serve in the industrial and military and defense markets especially. Inventories as far as our products are concerned are at good levels, healthy levels and supporting the growth that we enjoy in those markets. So, I don't see any correction in that area. As far as other market segments are concerned, obviously there's always a question with theses hubs and so forth, how much inventory is in those hubs. But we have a very close control over those and make sure that not too much close into these so called hubs for our customers so that we are not getting over inventoried. So as far as we look at these hubs today, they are healthy and shouldn't raise any concern of any decreases or any need for decreases in the near term.

Okay. My second question just has to deal with free cash flow usage. If my math is right, it looks like you will probably generate close to $200 million in free cash flow this year. I was just wondering, if maybe prioritized, how you'll look at spending of that free cash flow, whether it's debt reduction, accelerating share repurchases or is there some earmark for potential acquisitions?

I am so pleased that you mentioned all the options and we are certainly pursuing all the options. And the first one that we always look is, at new equipment, tooling and so forth to support the development of these new products. I mean these new products truly are driving growth. I mean I am very, very pleased, especially in this quarter to say, to have that stronger organic growth here, without any acquisition help and that is just a growth from within, with new products, with bringing to our customers new opportunities for themselves because we are providing them innovative solutions. And I think that is an important part of our investment and we'll continue very strongly. Obviously acquisitions is the other one that had good returns in the past and will have good returns in the future as we will conclude some of these acquisitions in the future. Another area obviously is always stock buybacks and we... Diana spoke about those and debt reduction certainly. But they don't have the same kind of returns there as the first two and certainly that's the ones that we are pursuing the most at this point in time.

Yuri Krapivin, your line is open. Please state your company name.

Lehman Brothers. Good afternoon everybody. One thing you mentioned application-specific products and systems several times during this call. Can you update us what percentage of your total sales, these application-specific products currently comprise?

Well this is, obviously always a question that is important to be answered. Application-specific products and new products we defined in a window of two years of the introduction. And especially this quarter we had in excess of 20% coming from these new products and we're very pleased with that continued effort in that area. Obviously over time these application-specific products will become more of a product that becomes a standard over time and then the cycle re-begins again to have the next generation of application-specific product so that in the mix you can have enjoy these higher margins. So to say today how much is purely application specific, how much is purely standard is always a kind of a moving situation but nevertheless in the mix with the margins that we have, we can certainly assume that a big majority of our products are in the category that are... putting value to our customers and thereby can be characterized as the application specific even if they are not just used by one customer.

Okay, thank you. And my second question is related to the new product development in two areas, in the handset of market and then in the automotive market. In the handset area, historically, your focus has been on the hinges and antennas and by the same token in the other automotive market, I believe historically, you focus on the safety applications. How are you broadening your product offering in those two end markets to address a new application?

Well this is certainly a very broad question. But if I look at just the mobile phone market our... certainly we are have been focusing on some of the new opportunities that include hinges and the other... and the corresponding electronic that goes along interconnect solutions, they go along with it and antennas as well. But if I look at the total business, they are not the... they are not making up the majority of the business. So, we are very broad in our product portfolio that, which includes connectors and other devices that go in mobile phones. And we continue to look on a broad basis because there is changes, continued changes in how mobile phones are being put together and what functionality requirements are which are always bringing up new demand of devices. And if we look at just certain connector devices of the past, a year ago, two years ago, even if it has the same applications it's a totally different product today in terms of its scalability, in terms of its size, in terms of its functionality and so forth. I mean we have developed products for one of the new entrants into this market that are based on some of our historical products but in essence are totally new. And so, we continue to focus on a very broad basis of products and very broad basis of customers in the mobile phone market, because only then, we can kind of go through with good performance through the very much up and downs in this market, relative to model changes, relative to customers' performance changes and so forth. Diversity in product, diversity in customers is key in this market for us. As far as the automotive market is concerned, obviously, we have been traditionally in the safety device market but we have branched out into new applications say in the communications area, navigations area as well as entertainment parts of the car where more and more electronic is being pulled in as well as in engines as you look at diesel engines and so forth. A lot is being developed in those areas, that hasn't been done before. If you just look at the distribution of diesel engines today compared to many years ago, I mean, alone in Europe 50% of just normal cars are equipped with diesel engines and not any more with traditional engines. So there is tremendous shift in opportunity and the same is in power applications in the car as well... as far as batteries is concerned and so forth, not much change there as well. So there is a continued opportunity for getting involved in the automotive business in on a much, much broader basis and that's what we are doing.

Sam Peters, please state your company name and you may ask your question.

Hi, hello, I am with American Century Investments.

Yes, good afternoon.

Hello. Hey I wanted to expand a little bit more on your automotive business because your commentary were you saw a good year-over-year growth. I think you said 24%. Is some of that growth coming as a result of current products on the new platforms and new platform wins? Is it domestic? Or is it some of the transplants? Is it overseas?

I think it's a combination of all of what you are saying. It has been certainly related to the generation of... to the introduction of new generation of interconnect for safety devices. But it has also been very much related to the utilization of more electronics and the new car models, especially the low-end car models where previously that electronic was not used. So you can say it is based on similar products that were used in the high ends of cars which are now proliferating on a much broader basis on the lower end of the cars as well. But it is also a host of new products that we have been able to introduce to the market that it has been driving that growth.

Do you think that you are increasing your share in automotive, space or just growing with an expanding market?

I think it is more growing with an expanding opportunity, because we are really not taking market share away from the traditional suppliers to the market. We are not trying to make me-too products to the more automotive market where there are entrants competition, high price competition and so forth. And that's certainly not what we are trying to do but we are trying to really participate in the expansion that is happening in the car.

Thank you very much.

Thank you.

Jim Suva, please take your company name. You may ask your question.

Great, thank you. This is Jim Suva of Citigroup, congratulations.

Thank you very much.

A quick question, this time of the year, it's always people start to wonder about the slowdown in Europe. And Martin I think earlier you mentioned that Europe is slowing for the automotive pretty normal as expected. Can you talk about in the other end markets, supposing Europe as well as broader base of how you see your kind of bookings and demand outlook?

Well, it is a very traditional situation that in Europe and also to some extent in North America the third quarter is a slower quarter. But we are very confident in... at this point in time that we can perform very well. Actually, as I mentioned earlier the guidance at the high end that would suggest a sequential increase and it is related to the strengths that we see in most of the other markets and offsetting opportunities that we have relative to the regional demand, seasonality that will definitely come. But the mobile phone market with the new products that we have has good opportunities as well as military and defense market has continued strong opportunities, industrial market as well. Less may be in the equipment market in the third the quarter, but still an improvement opportunity. So again, it is mostly across the markets and we have in certain ones, stronger opportunities to offset some of the seasonal slowing.

Great. And as my quick follow-up. When we talk about military and aerospace being about 20%, can you remind us about what the breakdown is between say the military versus the commercial aerospace? And with now both Boeing and Airbus doing new program ramps, could we see that potentially shift a little more to the commercial side?

Yes, well obviously those two are ramping and... but 2007 will not yet be that strong ramp but as we can see maybe it's 2008-2009 especially if you look at the 787 and so forth. We will see an increase there and a shift but obviously the defense side, we expect also demand to remain relatively strong. But there could be a few percent point shift within this and right now we have maybe a percentage which is about 70/30 in that marketplace, maybe 65/35 something in that range, between the two. And that could certainly that be a few percent point to shift but it's is not a radical shift that will happen in 2007. But as we go into 2010, there could be a more significant shift than we are well positioned for that.

Jeff Beach, please take your company name. You may ask your question. Jeffrey Beach - Stifel Nicolaus & Company, Inc.: Yes, Stifel Nicolaus. I was going to ask for you to expand a little bit on two markets. The one you just talked about military and aerospace to start with. In the last two quarters, you have seen a material pickup and growth occurring. I wondered if you could pinpoint where this very strong growth even adjusting for the flood last year is coming from? Sounds like it's military and if there is something specific. And then as the follow-up over in the mobile devices and mobile infrastructure, I'd like you to discuss you position in China. I know in the last couple of years you have talked about picking up and supplying a lot of Chinese local manufacturers and whether that is still gaining momentum and maybe give us a sense of how important this business is on the mobile side?

This is a very comprehensive question and let me start out with the military/aerospace side. Again obviously we have some military operations going on which certainly create some demand that may otherwise not be there but new programs are also supported. But a big portion of that growth is certainly gains in share relative to the ability of Amphenol to, for both and to provide complete integrated solutions that I mentioned earlier. Starting from the backplane, the assemblies, to the I/O connectors and all of this is giving us the opportunity to capture more of the build-up material. So a big portion of the growth is certainly related to share gains in that marketplace. As far as the mobile phone market is concerned, obviously, in order to have that level of business that we have today in Amphenol, you have to be strong with the leading manufacturers. And the leading manufacturers are today all the multinational whether they are Asian multinationals or North American, European multinational companies. That's' where the volume is, that's certainly were the growth opportunity is at this point in time. That doesn't mean that certain Chinese manufacturers remain important but there was a lot shift in the Chinese manufacturers as well. If I look it today with Lenovo and Huawei are building today more phones than the once Chinese manufacturers that built mobile phones just a few years back. So obviously we have adjusted ourselves and adapted to those who build the more phones in China today than they build, and they continue to be important but on a relative scale. On the relative scale they are still much smaller than these multinationals, and we are focusing on a broad basis because all of this is important for us. You never know where these companies end up in being... in acquisitions and mergers and so forth. Jeffrey Beach - Stifel Nicolaus & Company, Inc.: And how about a quick comment on the mobile infrastructure as well.

On the mobile infrastructure market, we had good opportunities, as we designed in products some time back to be on several platforms. Some have... not had a lot of success, others have a lot of success. And we put it on the ground the broad basis present than we are today on those who have really a strong success. And many of these platforms that have strong success today are the ones that have low costs. Because much deployment is going on in low cost areas, so let me say, it is going in developing countries where a low cost infrastructure is important because the country cannot afford it, whether that is in Africa, whether that is in India in those countries. Obviously the infrastructure build and the operators, they are looking for the lowest cost opportunity. We are very fortunate to be on such platforms that are being deployed in high volumes in those areas today and have a lot of success with it because we have a big portion of the build-up material. And that has allowed us to gain a position and share in that market. And we continue to develop and win new business in with new design wins in that infrastructure market, which give us good confidence for the future as well. I think we have time maybe for one more question in that point in time.

Thank you. Amit Daryanani, you may ask you question. Please state your company name.

RBC Capital. I just had a quick follow-up question for Diana. Maybe I missed this, but could you talk on what tax rates are you guys expecting for Q3 and remainder of 2007 in your guidance?

Sure. The guidance includes about 31% tax rate, slightly up from the 30.5% in Q2.

All right. Thank you.

All right.

Okay. With this we conclude our conference call on Amphenol today. We like to thank you very much for your interest and for all your questions and I am sure there will be follow-up questions. We will be happy to answer. Thank you very much for joining. Good bye.

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