Amphenol Management Discusses Q3 2012 Results - Earnings Call Transcript

Oct.17.12 | About: Amphenol Corporation (APH)

Amphenol (NYSE:APH)

Q3 2012 Earnings Call

October 17, 2012 1:00 pm ET

Executives

Diana G. Reardon - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

R. Adam Norwitt - Chief Executive Officer, President and Director

Analysts

Jim Suva - Citigroup Inc, Research Division

Amit Daryanani - RBC Capital Markets, LLC, Research Division

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

Wamsi Mohan - BofA Merrill Lynch, Research Division

Shawn M. Harrison - Longbow Research LLC

Sherri Scribner - Deutsche Bank AG, Research Division

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

Amitabh Passi - UBS Investment Bank, Research Division

Michael J. Wherley - Janney Montgomery Scott LLC, Research Division

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

Steven Bryant Fox - Cross Research LLC

Brian John White - Topeka Capital Markets Inc., Research Division

Operator

Hello, and welcome to the Third Quarter Earnings Conference Call for Amphenol Corporation. [Operator Instructions] 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, Ms. Diana Reardon. Ma'am, you may begin.

Diana G. Reardon

Thank you. My name is Diana Reardon, and I'm Amphenol's CFO. I'm here together with Adam Norwitt, our CEO, and we'd like to welcome everyone to our Third Quarter Call.

Q3 results were released this morning. I will provide some financial commentary on the quarter and Adam will give an overview of the business and current trends. We'll then have a question-and-answer session.

The company closed the third quarter achieving new records in both sales and earnings per share, with sales just over $1.1 billion and EPS of $0.90, meeting the high end of the company's guidance. Sales were up 7% in U.S. dollars and 9% in local currencies compared to Q3 of 2011.

From an organic standpoint, excluding both acquisitions and currency effects, sales in Q3 2012 were up 4% versus last year. Sequentially, sales were also up 4% in both U.S. dollars and organically from Q2 of 2012.

Breaking down sales into our 2 major components our cable business, which comprised 6% of our sales, was down 7% from both last year and last quarter due primarily to lower demand of specialty cable and international markets. The interconnect business, which comprised 94% of our sales, was up 8% from last year and 5% sequentially, and Adam will comment further on trends by market in a few minutes.

Operating income for the quarter was $216 million compared to prior year operating income, excluding onetime items of $199 million. Operating margin was 19.5% in Q3 2012 compared to 19.3% last year and 19.4% last quarter, a good conversion margin on incremental sales of approximately 22% sequentially and 24% from last year. Operating income is net of stock option expense of approximately $8 million or 0.7% of sales in both Q3 2012 and Q3 2011.

From a segment standpoint in our cable business, margins were 12.4%, down from 13.1% last year and 13.8% last quarter. The margin decline relates primarily to lower volume of somewhat less favorable pricing environment and some impact from product mix.

In the interconnect business, margins were 21.7%, up from 21.5% last year and 21.6% last quarter. The interconnect operating margin improvement primarily reflects the positive impact of higher volume and cost reduction actions.

We're very pleased with the company's operating margin achievement in the quarter. We continue to believe that the company's entrepreneurial operating structure and culture cost control allows us to continue to react in a fast and flexible manner, thereby constantly adjusting the business to maximize profitability in what clearly continues to be a very dynamic demand environment. To the deployment of these strategies, the management team has achieved sequential improvement in operating margins each quarter in 2012 and remains fully committed to driving future enhanced performance.

Interest expense in the quarter was $15 million compared to $10 million last year, reflecting higher average debt levels from the company's stock buyback program and the higher interest expense associated with the company's January senior note offering. Other income was $2.6 million in the quarter, up from $2.3 million last quarter primarily as a result of higher interest income on higher levels of cash and short-term cash investments.

In the third quarter, the company had an effective tax rate of 26.8%. This is approximately the same rate we had in the third quarter of 2011 and for the full year 2011, excluding the impact of onetime items, and we currently expect a similar rate in 2012.

Net income was approximately 13% of sales in Q3. And EPS grew 11% over last year, excluding onetime items from the prior year number; a very strong performance. Orders for the quarter were just under $1.1 billion, resulting in a book-to-bill ratio of approximately 0.99:1.

The company continues to be an excellent generator of cash and produced strong cash flow from operations of $176 million in the quarter. For the 9 months, operating cash flow stood at $468 million or approximately 112% of net income. The company continues to target cash flow from operations in excess of net income.

From a working capital standpoint, inventory was $712 million at the end of September, up 5% over the June quarter. From an inventory days perspective, excluding the impact of acquisitions, inventory days were 83 and were comparable to prior year levels. Accounts receivable was $903 million at the end of September. And days sales outstanding were 72 days, excluding the impact of acquisitions, also comparable to prior year levels. Accounts payable was $478 million at 9/30 and from a days perspective, was up about 1 day to 56 days at the end of the quarter.

Our strong cash flow from operations of $176 million, along with borrowings under the company's credit and receivables facilities of $63 million and proceeds in related tax benefits from option exercises of $46 million were used primarily to fund $33 million of capital expenditures, the purchase of 0.5 million shares of the company's common stock for $28 million, $97 million related to payment for the acquisitions of both Holland and Griffith in the quarter, dividend payments of $17 million and an $80 million increase in cash and cash investments in the quarter.

The company has approximately 2.5 million shares remaining under the 20 million-share buyback program that expires in January of 2014.

At the end of September, cash and short-term investments stood at $893 million, the majority of which is held outside the U.S. In addition, the company had availability under its revolving credit facilities of approximately $600 million at the end of the quarter.

Total debt at September 30 stood at $1.6 billion and net debt was approximately $712 million at the end of the quarter.

The company's leverage and interest coverage ratios remain very strong at 1.5x and 17x, respectively, and EBITDA in the quarter was $264 million. From a financial perspective, this was an excellent performance.

Adam will now provide an overview of the business and current trends.

R. Adam Norwitt

Well thank you very much, Diana. And I'd like to add my welcome to all of you on the phone today. I'm going to highlight some of our achievements in the third quarter, then I plan to discuss our trends and the progress in our various served markets. Finally, I'm going to make some comments on our outlook for the fourth quarter as well as for the full year of 2012.

With respect to the third quarter, we're extremely pleased that the company achieved our second consecutive quarter with record orders, sales and earnings, meeting the high end of guidance despite what are clearly rising levels of uncertainty in the global economy. Revenues in the quarter increased a strong 7% from prior year and 4% sequentially, reaching a new record of $1,103,000,000. As well, the company booked record orders of $1,098,000,000, representing a book-to-bill of just under 1:1. Our management team especially finds it rewarding that our continued focus on profitability has led to further expansion of our operating margins to 19.5%, a very strong level in any measure.

I remain extremely proud of our team. It is really in dynamic times like these when the true value of both the discipline and agility of our entrepreneurial organization is most clearly revealed as we have continued to capitalize on the many available opportunities for growth while still focusing to drive superior operating performance.

We made significant progress in our acquisition program in the third quarter, completing 2 strategic acquisitions in important areas of the interconnect market. In August, we completed the acquisition of Griffith Enterprises, a U.S.-based manufacturer of value-add interconnect assemblies for the commercial aerospace market, a company with annual sales of approximately $15 million. This excellent acquisition builds upon our leading offering of high technology interconnect products to this high-growth segment and establishes important new value-add capabilities for our commercial air customers, in particular in North America.

In September we acquired Holland Electronics, an approximately $60 million revenue, U.S.-based supplier of interconnect components to the broadband market. We're especially excited that Holland adds a wide range of high-technology interconnect products to our broadband cable offering while also expanding our market presence outside of the traditional cable MSOs towards the higher-growth telecom and satellite TV providers.

Both of these strategic acquisitions are consistent with our long-standing strategy to acquire complementary companies with strong management, leading technology and excellent market presence. As we welcome these 2 excellent new teams to Amphenol, we remain very confident that our acquisition program will continue to create significant value for Amphenol in the future.

Turning to the trends and progress in our served markets. I believe our results in the third quarter confirm once again that our balanced end market diversification is a tremendous value for Amphenol, especially given the increasing levels of uncertainty in the global economy.

Turning first to the Military market. That market represented 12% of our sales in the quarter. Sales were essentially flat to prior year as defense customers remained wary of extending commitments given the continuing budgetary uncertainties, in particular in many western countries. On a sequential basis, sales in the Military market declined by 5% on expected seasonality.

We expect demand to increase from these levels in the fourth quarter as we benefit from the effects of normal seasonality as well as from the ramp-ups of certain new military programs with high electronics content. While there clearly remains uncertainty in the defense budgets in many developed economies, we at Amphenol continue to make progress in creating new, high-technology solutions for advanced military electronics and we look forward to realizing further momentum from these efforts in the future.

The commercial aerospace market represented 5% of our sales in the quarter. Sales in that market increased a very strong 18% from prior year as we continue to capitalize on increased demand resulting from higher levels of jet liner production as well as from the launch of new airplane platforms. Sequentially, sales decreased, as expected, from the second quarter on normal seasonality.

The commercial air market continues to be exciting for Amphenol as we're taking advantage of a real revolution of electronics adoption in these planes. New planes are incorporating electronics to create enhanced passenger experience and comfort, new levels of fuel efficiency and ease of operation for the airlines. Looking forward, we expect sales to increase sequentially in the fourth quarter and continue to have a very positive long-term outlook for the commercial air market.

The industrial market represented 14% of our sales in the quarter and sales in that market increased also a very strong 23% from prior year. As we benefited from the contribution of our prior acquisition as well as from continued strong demand in the oil and gas, alternative energy and factory automation segments. Sales in the industrial market were down sequentially by 5%, again on normal seasonality.

We continue to make excellent progress broadening our interconnect product offering and increasing our penetration of the many exciting growth segments of the industrial market. It is a market in which the electronics revolution continues to accelerate. We expect that given the current level of economic uncertainties, sales in the industrial market will remain at or about these levels in the fourth quarter. But nevertheless, we look forward to continued long-term momentum in this important sector for Amphenol.

The automotive market represented 10% of our sales in the quarter, and sales increased a strong 36% from prior year and were down slightly from the second quarter on typical seasonality. We continue to benefit from an ongoing increase in vehicle production volumes as well as new electronics applications, together with the important technology contributions that have come from our recent automotive acquisitions. In particular, we continue to make progress broadening our position with our key automotive customers as we take advantage of this expanded technology offering for new electronics applications in the cars.

We have begun to see some indications of a moderation of automotive demand, in particular among European automakers, and thus we expect sales to remain at the current levels in the fourth quarter. Nevertheless, we look forward to continuing to expand our participation within the high-value applications in this important market.

The mobile devices market represented 22% of our sales in the quarter. Sales increased 2% from prior year on increased sales of products into new mobile computing platforms, which is partially offset by some degree of lower sales related to traditional and smartphones. We're especially pleased that our sales in this market increased a very strong 31% sequentially. This was driven by our participation in a diverse set of new program launches, in particular related to tablets and ultrabooks, what we call really mobile computing products.

Our diverse array of high-technology interconnect antenna and mechanism products, together with a highly reactive organization, has ensured that we strongly participate in a diverse range of new products. We expect further sequential growth in the mobile devices market in the fourth quarter, albeit at a more moderate pace, as we continue to participate in the ramp-ups of these new mobile computing products. And we remain very excited by the potential that these new platforms create for the company in the future.

The mobile networks market represented 10% of our sales in the quarter. While sales decreased 5% from prior year, we are very pleased that sales increased sequentially for the third consecutive quarter, growing 5% from Q2.

The overall investment environment in the wireless infrastructure market continues to be challenging. Nevertheless, we are encouraged by our expanding positions with both equipment makers and operators, in particular on their next-generation systems and network buildouts. Although we expect demand to moderate slightly in the fourth quarter on traditional end-of-the-year seasonality, we look forward to further long-term strength in the future driven by our broad designing positions on new equipment and platforms as well as by our strong presence with wireless operators around the world.

The information technology and Datacom market represented 20% of our sales in the quarter. Sales increased 5% year-over-year and, as expected, were flat from the second quarter as we saw the pace of IT-related investments moderate. Regardless of that moderation, we continue to benefit from a variety of releases of next-generation servers and data center equipment, all of which is incorporating a broad array of our leading high-speed and power interconnect technologies. As our customers continue to strive for new levels of equipment performance in order to handle the dramatic expansion of data traffic, our pipeline of new design opportunities with our next-generation products continues to strengthen.

We anticipate a further slight reduction in demand among customers in the IT market in the fourth quarter as customers continue to moderate their spending plans given continuing economic uncertainty. Nevertheless, we look forward to further long-term gains as our new high technology solutions are increasingly adopted into our customers' next-generation systems.

Finally, the broadband market represented 7% of our sales in the quarter. Sales decreased 3% from prior year and were down slightly on a sequential basis in what is generally a stable demand environment. We continued to broaden our technology offering with new interconnect products at the same time as we are strengthening our position outside of the company's traditional markets. In particular, we're very excited by our expanded interconnect product offering resulting from the Holland acquisition and look forward to realizing significant value from this new platform for expansion. We expect sales in the broadband market to grow in the fourth quarter sequentially as the typical fourth quarter seasonal slowdown in MSO spending is more than offset by the benefits from the addition of Holland.

We are extremely proud, in summary, of our dynamic organization as we have continued to execute very well in what is no doubt an increasing uncertain market environment. We're particularly pleased with the company's new records in sales and earnings as well as with the continued expansion of our already industry-leading margins. Amphenol's superior performance is a direct reflection of our distinct competitive advantages: our leading technology, our increasing position with customers in a diverse range of markets, our worldwide presence, a lean and flexible cost structure and most importantly, an agile entrepreneurial management team.

Now turning to the outlook. In recent months, there's been an increasing level of market uncertainty related to a range of fiscal and budgetary issues. Based on these considerations and assuming current currency exchange rates, we now expect the following results.

For the fourth quarter, we expect sales in the range of $1,095,000,000 to $1,115,000,000 and earnings per share in the range of $0.88 to $0.91. For the full year 2012, we expect sales in the range of $4,241,000,000 to $4,261,000,000 and EPS in the range of $3.41 to $3.44. For the full year, this guidance represents sales and EPS growth of roughly 8% and 12% to 13%, respectively.

Given the many uncertainties in the global economy, we are very encouraged by the strong outlook in sales and earnings, which reflects in particular the value of the diversification of the company as well as the discipline and agility of our management teams. Most importantly, the electronics revolution continues to create many opportunities for Amphenol. I remain extremely confident in the ability of our outstanding management team to continue to capitalize on these opportunities to both grow our market position and expand our profitability, and thereby to drive continued superior performance for Amphenol.

Operator, at this time, we'd be very happy to take any questions, if there might be.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Jim Suva with Citi.

Jim Suva - Citigroup Inc, Research Division

I have one question for Adam and one question for Diana. Adam, your success in mobile devices, can you help us understand, is it mostly tablets or cell phones that you're seeing success there? Because there's a lot of mixed things of what's going on in the industry, we've got some very big program builds. We're just trying to figure out if it's mostly tablets or cell phones. And then, Diana, you made some comments at the beginning of your prepared remarks about the lower demand in the specialty cable and the international markets. Is that more of an economic macro factor, or is there something structural going on, like wireless is picking up faster than coaxial cable? Or how should we think about your comment?

R. Adam Norwitt

Yes, Jim, thank you very much. With respect to your first question on mobile devices, I -- we have mentioned, I think this is the second quarter running, that we see tremendous opportunity in what we call mobile computing platforms. And when I talk about mobile computing devices, that obviously includes tablets and ultrabooks and all those related devices. I mean in many ways, defining these devices becomes increasingly difficult. Each one that comes out seems to have features that come from other parts of them. They become almost like a hybrid device. And that's -- those are really the devices where we have seen the growth. We continue to have a strong participation in the smartphone world, but that is not where the growth is being driven from because we have seen in smartphones that there has been a trend towards more reliance on software as opposed to hardware. Our goal in the mobile device market is to create high-technology interconnect antenna, mechanism solutions that have value to the end user and thereby have value to our customers who are thereby willing to pay us a certain price for them. And we can then make the returns that we'd like to make. And so as we've seen the real proliferation of a wide variety of these new platforms, we're very fortunate that we have in Amphenol a team that is so responsive to the needs of that market that they're able to capitalize on the growth wherever that may come. And that includes getting a broad position on a variety of different products that are being released and are now starting to ramp up.

Jim Suva - Citigroup Inc, Research Division

Diana?

Diana G. Reardon

Sure. I mean, I think that, Jim, we have some mix of product in our cable business. As you know, the preponderance of the product is going to the broadband market but in some of the international markets, we also offer products that go more broadly and are used, I would say, more in the communications infrastructure buildouts in places like South America and those kinds of markets. And I think there will -- we saw this quarter versus the demand we experienced last year's quarter and last quarter was -- just a lower consumption of those types of products. And these are the types of items we refer to when we use the "specialty" word. This is to distinguish it between the broadband products which make up the bigger part of the segment.

R. Adam Norwitt

I mean, you know and we have talked about in the past that we have -- over many years have been driving to diversify the technology portfolio of products that we have in our cable business, and that is something where we have been very successful. And I think, as Diana mentioned in her remarks, in this quarter, certainly there were some impacts on some of that product mix in the short term. But we still feel very optimistic about all those efforts, going forward, and we continue to create excellent new products. And when you combine that with now the Holland acquisition in the true broadband market, which not only gives us a broader range of complementary products but also allows us to expand what had been a more narrow range of traditional cable operator customers, we feel very, very good about that market going forward. And we think that the acquisition is going to create a great platform for us.

Operator

Our next question comes from Amit Daryanani with RBC Capital Markets.

Amit Daryanani - RBC Capital Markets, LLC, Research Division

I have a question and a follow-up as well. Maybe to start off on the inventory: It was up 5%. Can you just maybe talk about how much of that was due to acquisitions versus some of the other factors? And I'm sort of looking at the organic guide of revenue, if you may, being down 1.5% versus inventory up 5%. It kind of gives you -- it makes x [ph] acquisition. Or was there just some level of conservatism [ph] built into the guide, or did you actually have a slow finish to the September quarter?

Diana G. Reardon

All right, sure. Just starting off with the inventory question, I -- what -- the increase in inventory, without the acquisition impact, probably would have been more comparable to the sequential sales change, Amit. If you look at the turnover, which we compute without the acquisition impact, inventory days remained about the same level. I would also just add that the mobile device market, which as you know had a large sequential growth in the third quarter and will have some further sequential growth in the fourth quarter, tends to run fairly low from an inventory days perspective, so they do have to build inventory as they feed those higher sales levels. And I think those are the 2 things that have contributed to the inventory number in terms of the absolute amount you see on the balance sheet. From a guidance perspective in terms of the sequential change between Q3 and Q4, we're guiding to a slight increase in sales in terms from a U.S. dollar perspective. At the high end, it's probably about 1% down from an organic perspective, which I think is the change that you asked about. I think that Adam went through the individual markets. It's a relatively small change in guidance versus what was implied at the guidance we gave when we released earnings for the third quarter. And that change primarily is due to, I think, some softer demand in the communications equipments market, primarily in the IT Datacom market. But we feel that this is a very strong guidance particularly in kind of the mixed demand environment that we see here in Q4. So we feel that it's appropriate guidance, and it's based on the same process that we go through internally with all of our units each quarter.

Amit Daryanani - RBC Capital Markets, LLC, Research Division

That's really helpful. And maybe we'll just ask Adam a question: The M&A environment, in the case on all the deals you guys have been able to do this year, it's been an extremely good year for you guys. If you can maybe just step back and talk about what do you think was the driver for a better M&A year, at least so far in 2012? And do you think that's something that can sustain in the future, especially the U.S., if the risk of the taxes and capital gain taxes are going to go higher?

R. Adam Norwitt

Yes, thank you very much, Amit. It's excellent question. It has been a great year for us. I mean, we have completed so far this year 4 acquisitions. They've been in a wide variety of markets. They've bolstered our broadband market, commercial air, automotive, industrial markets. So these have been just outstanding acquisitions, and we're very proud of that track record this year as well as the long-term track record. The thing is, to say that it's been a great year is very true. We have always said that we've never been able to predict how many deals are going to close, when they're going to close, what the timing of that is going to be. And I continue to say the same thing. Yes, there are in the U.S. certain tax considerations, but that has not been the real driver for why we've been able to be successful this year. We have an outstanding organization around the world, really planting seeds of relationships and incubating these acquisitions over a very long time period. It just so happens that yes, we have 4 of them this year. We still have a very strong pipeline of acquisitions irregardless of what pages of the calendar turn and irregardless of what tax laws are going to change. And we still feel optimistic and hopeful that we'll continue to have strong contribution from our acquisitions, going forward. Acquisitions, we always have that goal, that they would represent roughly 1/3 of our growth in any given year. Obviously some years it is more, some years it is less. This year, they have to have a good contribution. And we believe that the track record for acquisitions that we have created over more than a decade has really allowed us to go to companies with a very consistent and credible story that they can join Amphenol, together with their organizations, and they will be able to flourish within Amphenol but not to disappear and not to be kind of absorbed into this sort of global entity, but rather to take the best of what they have and to create new platforms for growth with them. That is an extremely compelling story when you're talking to entrepreneurs in any geography, in any tax regime, with any president in office; that is a compelling story. So we believe that going forward, that will continue to be compelling and we'll continue to have a good acquisition pipeline.

Operator

Our next question comes from Matt Sheerin with Stifel, Nicolaus.

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

First question on margins, for Diana. Obviously, good operating margin in the quarter, but gross margin was down about 30 basis points. Was that primarily a function of mix? Or was there anything else, such as input costs or any pricing mix or pricing pressures?

Diana G. Reardon

Sure. Let me just first say that we were really pleased with the company's profitability achievement in the quarter to be able to get to 19.5% operating income margins. We're about 3 quarters of the way through the year and so far, we've got 3 consecutive quarters of margin expansion. And so I think that our operating team is really proud of being able to accomplish that. If we talk about the components of where that ROS expansion comes from, I think as we've described before, we really all manage the business to expand the operating profit line. And we think this approach is really necessary and it's the only way you get all of the team to focus on every cost that hits the P&L irrespective of what line it shows up on. If we look at SG&A specifically, we certainly do a very good job at controlling these costs and do try to limit the SG&A growth to about 1/2 sales growth. And if you look at SG&A on a year-over-year basis, our SG&A grew about 3% over last year on a 7% or so increase in sales. So the movement in SG&A was pretty consistent with this objective that we set for the company. If you look sequentially, I think you see what you describe, which is a reduction in SG&A and some reduction in margin which aggregates at the end of the day to the improvement in ROS that we saw. And I think this, from a quarter-to-quarter basis, there is some impact from mix to the extent that they -- really, all of that sequential sales growth came from our mobile device mark -- device market. And that business does carry a lower SG&A level and this is balanced against a somewhat lower gross margin level. Now this is a very competitive business, and in order to achieve the operating income that we target for the business, we're able to manage that SG&A down and therefore have no effect on operating income at the end of the day. And I think that that's what you see when you look sequentially. We do have quite a mix of between gross margin and SG&A depending on the particular market and the particular product. This current SG&A level of 11.7% of sales certainly reflects a very strong ongoing management of spending. But I think over the long term, we would still continue to expect SG&A to grow in a somewhat lower pace than sales. We've historically operated with a very efficient and low level of SG&A. We're still able to drive excellent new product development, technology expansion and sales growth. And we would expect this dynamic to continue in the future.

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

And Adam, just a bigger picture for you that ties into your commentary on M&A and the fact that you're continuing to operate on this entrepreneurial structure. As you continue to do acquisitions, I think you're looking at 60-plus operating units throughout the company. Is it getting more difficult to manage those operations, particularly that you don't have any integrated IT system? And are there any plans to look at any sort of changes into the way you control or manage the business as it gets bigger?

R. Adam Norwitt

Yes, Matt, thanks very much for the question. Let me answer a couple of very simple answers to you. Number one, does it get more difficult? No, it actually becomes more powerful in that our organizational structures such that I don't have 80 direct reports to me. It's 80, 85 operating units. Those report into group executives who run strategic portions of our business, and each of those general managers that come in as an acquisition or come in organically, they're reporting to one of those group executives. And they're driving aligned strategies around a product or around a market mission. And the management of those is not complicated when we bring them in. It's actually quite simple because at the core of Amphenol is that we vest the authority in these general managers, and we hold them accountable to run their business. And then we seek, through the group executives and through us here at headquarters, to find ways for them to collaborate. We call it collaborative entrepreneur. And that has been a tremendous, tremendous structure for us, and it's one that is inherently extremely scalable. Now relative to your question about IT, very simple, the answer is no. We have no intention to make a kind of an overall IT revamp of Amphenol. We actually feel extremely comfortable that each of our organizations is in a way tailor made to the market that they serve. So if you were running a company that is, say, a military operation, you need a very different system than one that is focused in the mobile market. The life cycles are different. The level of interaction and control is different. The level of tracking requirements is different. You name it. And to apply a kind of a one-size-fits-all blanket IT solution to the whole company is something that we would see as actually being detrimental to the growth prospects of Amphenol. And in a way as well, from a control standpoint, there's no greater level of control that we have as not having that sort of single point of failure within a system. And so we believe that, that organizational structure which is so core to the success of the company so far and has allowed the company to scale over the last decade by a factor of 4, has inherently tremendous more scalability built into it.

Operator

Our next question comes from Wamsi Mohan with Bank of America Merrill Lynch.

Wamsi Mohan - BofA Merrill Lynch, Research Division

Adam, you alluded to some ramp of new programs in the defense end market, and I was wondering are these programs geared towards international customers. And secondly, we started to see some of the defense companies start to bake in the impact of sequestration into their formal guidance. What are your thoughts and expectations around this? Do you think there is any chance of it getting implemented in its current form? And do you still see a path towards your own defense revenues of flat to up in such an environment?

R. Adam Norwitt

Yes. Thanks very much, Wamsi. I mean, relative to what we see in the near term, we continue to see and we have seen that the military and the contractors to the military are working on next-generation programs. And we have seen that some of those programs are beginning to ramp here in the fourth quarter, and those are really programs surrounding new avionic systems, new missile systems, radar systems where there are just the tremendous amount of new electronics and innovation that goes into those systems. And so the fact that we have really the broadest portfolio of products in the military, everything from the traditional harsh environment connectors to RF to fiber optics and you name it, means that we are participating very strongly wherever the military is implementing electronics. And so there is, to that extent, for us a great benefit, as some of those new programs ramp up with the new electronics. Relative to sequestration, look, I mean, we are not here to guess which way politicians are going to vote thumbs up or thumbs down on sequestration. I believe personally that it would be not the wisest thing for the government to allow sequestration to go through considering that there are a tremendous number of jobs related to the military market, and they are some of the best jobs that exist in the United States today. Is that baked into our guidance in the fourth quarter? Certainly, we have not assumed in the fourth quarter any massive drop-off in spending, and that's not where sequestration would be. If it comes, we'll deal with it. We have dealt with changes in the market environment in the past. What we know very clearly, though, is whether that is sequestration or not, there's going to be a demand by the military to still perform the mission that they got to perform. And one of the best ways that they see towards doing that is by implementing new electronics. And I think that some of these new programs that we've seen are in fact just doing that, bringing in electronics to save operating expenses for the military in the future. And I think to that extent that the military continues to face up to that mission, which I think they will do, there's no doubt about it. The electronics is going to have the potential for us to continue to support that market. It's not as our strongest growing market, but a market where we believe there's still further potential for expansion in the future.

Wamsi Mohan - BofA Merrill Lynch, Research Division

And, Diana, a quick follow-up to your comments on SG&A from before. On a sequential basis, SG&A was pretty flat despite a $40 million sort of increase quarter-over-quarter in revenues. As we look forward here, at what -- is there a revenue -- a certain revenue level that you can support with this current SG&A structure? And when should we sort of think of that increasing at a stronger pace than what we just saw this past quarter?

Diana G. Reardon

Yes, I mean, I think we don't have, Wamsi, really a specific consolidated revenue level that, that certain SG&A would support. I think as I said, we have a very cost structure by business depending on the market they serve, depending on the gross margins that the products are able to achieve and so forth. I think what we saw in the third quarter, as I said, all our sequential growth came in the mobile device market, which by its nature, it's competitive nature, it does have lower gross margins and lower SG&A. And so to support that sales growth, it's really not a lot of investment in SG&A that's required. So it really depends upon where that sales growth comes from. I think as a rule of thumb, the rule of thumb that we use on a consolidated basis is we expect -- we would expect SG&A to grow less than half of what sales growth is, and so I think from a modeling perspective, I think this rule of thumb is what I would use.

Operator

Our next question comes from Shawn Harrison with Longbow Research.

Shawn M. Harrison - Longbow Research LLC

Two questions, just first off, on the auto-related commentary being the market maybe easing a bit in Europe, is that just are you seeing actual production cuts from your customers? Or you're just seeing kind of a leveling off in the growth rate maybe in Europe and just automotive overall? And then the second question is, Diana, just commodities, we've seen a little bit of a rally here in both copper and gold prices. Are they getting to a point where they're becoming a bit cumbersome in terms of margins? Or are you at least able to manage through that right now?

R. Adam Norwitt

Very good, Shawn, thank you very much. I mean with respect to the automotive market, there's no secret that there are some economic challenges going on in Europe. And I think we -- you had seen or we had seen that some of the automakers had already started talking about an impact to that early on even in prior quarters. And we have just seen in general, across really the first tier, and that's where we generally operate. We're not always selling our product directly to vehicle manufacturers, but rather to the first tier, that there is a little bit more conservatism surrounding their production schedules in light of the fact that they believe that there is maybe more a leveling of the automotive production as opposed to necessarily a big drop-off. I don't know that there is any big drop-off of that, but it appears to just be some degree of moderation. Normally in the fourth quarter, we would have expected to have seasonally an increase on a sequential basis in automotive. And I think the fact that we see that market essentially being flat with the third quarter is a reflection of some degree of moderation at some level in the supply chain. I don't believe that, that is necessarily a permanent issue, a severe issue. How long that will be, how long it will take the supply chain to work that out, that remains to be seen. But it's something that I think from a standpoint of being prudent in our outlook, we are seeing some of those signs and have reflected that in the guidance.

Diana G. Reardon

From a margin perspective and the recent news in commodities, I mean they certainly have come up some this past quarter. Certainly, it is something that we keep a very close eye on. It does obviously put some pressure on costs. I think at current levels in the current quarter, we've been able to manage through this. I think we continue to devote a lot of engineering resources to reducing our dependence on certain of the commodities that just seem, over the last few years, to have become -- have sort of a volatility that doesn't necessarily relate purely to manufacturing demand, gold, probably being the one that comes most in line. And so we continue to try to be very thoughtful and devote resources to using less of them. And I think that this is an important action for us. We also obviously look to try to consider the movements of the commodities when we're making pricing decisions but pricing, as you know, is also influenced by competitive issues as well as cost trends. I think at this point, where commodities stay at the same level that they're at, I don't think we would be concerned about meeting the margin goals that you see us being able to achieve in the third quarter and being reflected in our Q4 guidance.

Operator

Our next question comes from Sherri Scribner with Deutsche Bank.

Sherri Scribner - Deutsche Bank AG, Research Division

Diana, I just wanted to dig into the operating margin. It looks like for the December quarter at midpoint of guidance suggests that operating margins decline a little bit despite a flat revenue guide. Is that primarily related to the mix? Is that some pricing pressures that the growth of the mobile devices segment? Just wanted to understand that a little bit.

Diana G. Reardon

Sure. I mean, I think the way that we look at the guidance that we would expect operating margins to be about flat. There is some slight increase in sales at the high end of guidance, but it's relatively small primarily from the acquisitions that we made during the third quarter, which in aggregate probably have a profitability little less slightly below what the average of the company would be. But I think we would see them, Sherri, more as flat than as down.

Sherri Scribner - Deutsche Bank AG, Research Division

Okay, that's helpful. And then, Adam, just thinking about the growth of the connector market overall, what do you see the growth of the connector market as being this year? And what are your expectations for the growth of the overall connector market next year? And do you still expect to be able to grow 2x that?

R. Adam Norwitt

Thanks very much, Sherri. That is as good as a guess by me as it is of anyone. I think we read the same reports that you all read. If you look at the kind of more credible connector market forecast for 2012, that would imply that this year will be a down year in the connector market. And I think if you look at our guidance for full year to be up essentially 8%, I would say that, that is clear outperformance in 2012 with respect to how the market has performed. What will it be in 2013? We're not giving guidance today to 2013. I don't know what the forecasts are for 2013. I mean when you look at all the uncertainties that is around today, the global economies and the various markets, I think at this point to talk about what the market increase will be in 2013 is really premature. Do we have confidence that we will outperform the market in 2013? Absolutely, and that has been a long track record for us for more than a dozen years, where we have been able to outperform the market on average by more than twice the rate of the growth. And this year is really no different than that. And we continue to believe that our unique combination of that entrepreneurial management structure that is so dynamic in all time periods, being able to react quickly in times of change, to capitalize on the available opportunities that are there because of this proliferation of electronics, combined with our high-technology and that just excellent position we have with customers around the world just creates for us a tremendous opportunity to outperform the industry in any economic environment. And look, it is today uncertain. It may be next year uncertain. But regardless of what that uncertainty is, one thing is for sure, which is that Amphenol is going to perform well.

Operator

Our next question comes from Anthony Kure with KeyBanc.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

Just 2 quick ones. First, could you just talk about by end market, which ones are more weighted toward China? And then along those lines, how the quarter may have progressed month-to-month within that region, if you saw any discernible pattern?

R. Adam Norwitt

Sure, thanks very much. It is not surprising that you can imagine that some of the markets which are in mobile devices, IT data com, wireless infrastructure, those tend to be more Chinese related because that's where our customers make a lot of their stuff. And so those tend to be where we are shipping the vast majority of products in those markets into Asia. Whether that is all China, obviously, China is the biggest manufacturing spot in Asia, so that would certainly be significant. In other markets, military in particular, obviously we have essentially no sales in that market, and industrial and aerospace also would be less. Relative to how the quarter progressed, not surprisingly with the European vacations that the end of the quarter was stronger than the beginning of the quarter in terms of sales. I think in China, this was probably about the same, if not a little more balanced. You have in China the October holidays, so I would anticipate that in Q4, the beginning of the fourth quarter in China would probably be a little bit lighter than the end of the fourth quarter.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

And then if you could just remind me how your automotive markets break down geographically? Is there particular waiting to one region?

R. Adam Norwitt

Yes. I mean our automotive market is just under 2/3 in Europe, so we have a higher preponderance of position with the high-end automakers in Europe.

Operator

Our next question comes from Amitabh Passi with UBS.

Amitabh Passi - UBS Investment Bank, Research Division

I had a question and a follow-up. Adam, we've heard a few more companies increasingly talk about higher levels of softness in the North American market. I'd be curious to see or hear what you're seeing or hearing from your customers there. And then as my follow-up, I just wanted to maybe dig in deeper into your wireless infrastructure segment. Wanted to see where the strength came from. Was it more related to your base station connector products? Was it antennas? And how you see the spending environment across geographies for that market?

R. Adam Norwitt

Sure, thank you very much, Amitabh. With respect to North America, we have read also many of the reports about the softening in North America. I can tell you actually in the third quarter on a year-over-year basis, North America was actually quite strong for us. It was one of our fastest growing -- it was actually our fastest-growing territory. From a sequential basis, it was as is usual in the third quarter. It was kind of flattish with -- compared to the second quarter. So I wouldn't say that we've necessarily seen such a dramatic slowdown in North America. Now with regard to wireless infrastructure, I mentioned that we're very pleased that we now have 3 quarters in a row of sequential growth. All that being said, it is still down on a year-over-year basis, albeit down by less than it has been over the prior quarters. And we look forward to the next quarter to having our first quarter in several where we'll actually grow quite significantly on a year-over-year basis. And the strength this quarter, on a sequential basis, probably came a bit more from our relationships with operators than it did with OEMs. But our position on both sides continues to strengthen. We continue to have a great position vis-à-vis the set of higher technology products that are going on the next-generation base stations. One thing that has happened to this market is the total structure of the base stations has completely changed over the course of the last 24 months. They've gone from the large-scale base stations to now these more remote access, small, up-the-tower kind of base stations. And as that happened, the type of interconnect technology that's required to be used to allow those products to survive in the harsh environment or to extend fiber optics or to have a different power structure has really dramatically changed. And our engineers have been working with the OEMs around the world to make sure that we take a leadership position on many of those technologies such that as those new base station platforms grow and as the new LTE rollouts happen on a worldwide basis, we will benefit from them. Similarly, we've done the same with our antenna business, where we put a lot of focus on developing next-generation products. You've seen some operators in certain geographies already launching these networks, and we're fortunate to be present with some of those operators, and that's part of what has helped us in this quarter from a sequential standpoint. But going forward, to the extent that the industry slowly figures out the difficult economics that allows them to make further investments and essentially allows them to charge their customers for data usage, we're in a very strong position to participate going forward.

Amitabh Passi - UBS Investment Bank, Research Division

Yes. Adam, just a quick follow-up, was the strength mainly skewed towards North America? Or are you starting to see geographies staring to participate, particularly Asia Pac and Europe?

R. Adam Norwitt

I think in the third quarter, it's probably a bit more North America. I mean that's -- it is where the buildouts are happening. And the most significant buildouts, Amitabh, are happening in next-gen networks so far in the U.S. And again, I'm hopeful that others are coming close behind. The U.S. has the luxury of having the highest average revenue per user essentially of any economy, and so they have a little bit more money to invest than some of their brethren in less developed parts of the world.

Operator

Our next question comes from Mike Wherley with Janney Capital Markets.

Michael J. Wherley - Janney Montgomery Scott LLC, Research Division

Adam, I just want to follow up on that market and just to ask if you think that there is any chance that there might be a bigger bump-up in the rollout of those wireless networks in 2013. Or do you think it'll just sort of be scraping along like this with caution?

R. Adam Norwitt

Yes. Look, I would not go out on a limb to say that there's going to be huge bump-ups in wireless infrastructure in 2013. Again, we're not giving guidance for 2013, and we're certainly -- as we get closer to that year, we'll reassess where we think the markets are going to go in that year. But this is a market that has gone through a lot of challenges. I mean you don't have to just look at us where we have 10% of our sales in that market. You look at the performance of the various OEMs in that market and you can tell. You have a situation where the operators are making lots of money, but the operators cannot justify making the real significant investments that all of us as consumers are dying for them to make. I mean you just drive around here in Connecticut or on the way to New York, and you all know how terrible is the coverage and how slow the data is even though we're talking about 4G. At least that's what it says on my phone is that it's 4G. And that need to make the investment is clearly there. Clearly there is a pent-up demand for that. But also what is clear is that the economics are not driving the operators to make those investments at the pace that they should be doing that. That's true here. That's true in Europe. That's true in Asia, in China. In particular it's true in places like India, where they're just not realizing the returns on their investments because of the low-level spending by individual users. So I think our strategy in this market continues to be to gain presence on both sides of the market, to gain it on the equipment, to gain it with the operators and to gain it in particular with high-technology products on next-generation system. Over time, that will work out. Is that going to be a spike in 2013 or 2014 or 2015? I think we'll know it when it comes.

Michael J. Wherley - Janney Montgomery Scott LLC, Research Division

Okay. And then just a follow-up in both the industrial and auto segments or end markets, you had boost from acquisitions. Did either of those end markets grow year-over-year on an organic basis?

R. Adam Norwitt

Yes, absolutely. Both of them did, actually. I mean industrial grew close to double digits on an organic basis, and automotive was sort of mid-single digits on an organic basis. So I think we're very, very pleased with the growth in both those markets consistently. Over the course of the last year, both have grown both by the additions of some excellent companies that we have acquired, but also through just tremendous organic efforts that our teams are making. I mean we have built, just to name a few in the industrial market, essentially the leading business in oil and gas and energy-related products. And we've done that certainly by making 1 or 2 acquisitions, but in particular, we've done that by spreading to customers around the world technologies that they need at the right time and in the right place. In automotive as well, we have capitalized organically on a real revolution of electronics and cars where things that used to be just mere electrical interconnect where there was not the value for us have become electronic, controlled with sensors and processors, whereby you have to put in the interconnect systems more functionality and place that in a harsher environment section of the car. And that's where you can create value. And so our organic efforts in automotive have been very focused around tapping into that revolution in higher value potential interconnect technologies. We've done that through bringing in some new companies, but we've done that also organically through our own efforts of people who have been with the company for many decades.

Operator

Our next question comes from Craig Hettenbach with Goldman Sachs.

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

Adam, if you exclude the impacts from acquisitions as well as the growth you're seeing in the mobile device segment, it still looks like you're performing really well relative to some of the data points through the supply chain and from an in-demand perspective. So any other things you can point at from an end market perspective or specific new products or designs would be helpful.

R. Adam Norwitt

Yes. Well, appreciate that, Craig, and we would agree with your analysis. I think I mentioned it early on in my prepared remarks. There is one asset that this company has which you should just never -- you should never minimize the importance of, and that is the diversification. We view diversification not just as something to make a pie chart to show to investors. It is really a way of going about our business on a day-to-day basis. When we sit with our operating units, we are constantly asking them the question, "You have that business. Why do you not have it with the competition? Why do not have the other connector on that application? Why do you not have that other application that is made also in that market?" And that constant drive to diversify the business in markets, in customers within those markets, in applications within those customers and in products within those applications, that has been an ongoing drive for more than a decade and a half. And the net result of that is that we have excellent positions across all the markets that we serve. And so when you look at our performance on a year-over-year basis, the strength that came in commercial aero growing 18% year-over-year, strength in industrial growing 23% or close to 10% organically, automotive strength, even IT & Datacom. We talked about the fact that there is -- we have seen a clear moderation of demand in IT & Datacom in the third quarter. On a year-over-year basis, we grew in that market by 5%, totally organic growth in a market where essentially none of the customers are growing by any rate at all. I mean, there have been recent earnings announcements just in recent hours, which confirm that growing 5% in that market means you are clearly taking more position in the market than just rising or falling with the tide. And that constant quest to drive diversification, to make sure we're bringing the greatest technologies to our customers in each of those markets, that in the end, which is what has allowed us to outperform the market in good times and in bad. And we feel very good about these results in the third quarter. We feel very good about the outlook that we have in the fourth quarter because it is a time of tremendous uncertainty. And I would tell you that during the course of the third quarter, that uncertainty, the level of that uncertainty at least appeared to us to increase. And that's – obviously, you read the papers enough. You feel very anxious every night when you go to bed. But the fact is even in that -- amidst that environment of increasing uncertainty, we still are able to grow. We're still able to grow in a wide variety of markets and still able to realize the value from that diversification that we spent so long to create.

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

If I can follow up just more specific to the mobile devices, can you talk about the type of visibility you have in that market? And then also touch on just the diversification of different devices would be helpful.

R. Adam Norwitt

Sure, I mean the visibility in that market is obviously much less than it is in some of the more longer cycle markets. I mean you can imagine we're not getting 16-week lead times or even 8-week lead times. I mean some of the things that we have to do in that market would really make you quite amazed at the things that our team has to do to react to that market because sometimes you're just getting an email or a phone call from a customer in the middle of the night saying, "I need you to double your capacity by next Friday." And these are not demands that you get that seem at all reasonable. And it's a question of can you do that. Can you exercise your organization in a real accordion-like fashion to capitalize on the upside that the customers bring and then to react when that goes down the other way? I mean that's something that our team has really developed a real expertise in doing. Relative to do we have visibility in that market going into the fourth quarter, we have given guidance here that we believe that, that market will still show some moderate sequential uptick, and just us we did last quarter, we based that guidance on what our customers tell us and our own assessment of that. And we feel comfortable with that guidance. Now where is it coming from? You asked some color on that. With -- obviously, I'm not going to get specific about individual customers or programs, but let's just let it be said that we have always had a strategy to gain position on as many products as we can and not try to go out and pick who's going to be the winner or the loser in the marketplace. And in this case we continue to do that, and we have a great position on a variety of what I term mobile computing devices going forward. And these can be tablets. They can be ultrabooks. You name it. There's a wide variety of these things that I mentioned earlier.

Operator

Our next question comes from Steven Fox with Cross Research.

Steven Bryant Fox - Cross Research LLC

Just a couple of questions. First, I guess the only market you haven't really covered in a little more detail is industrial. Adam, since you seemed to mention that the economy is impacting demand somewhat there, can you sort of parcel that out a little bit where you're seeing better growth and worse growth since there are so many different submarkets? And then just a clarification, Diana, can you just let us know exactly when the 2 acquisitions close? And is the Broadband acquisition, the Griffith acquisition -- or I'm sorry, the Holland acquisition, is that actually going into the cables segment that you report each quarter?

Diana G. Reardon

Sure, Steven. We got to start with that one because that's -- we closed the smaller of the 2 acquisitions in somewhere around mid-August and closed the larger, the Holland acquisition, at the very end of the quarter. And you are correct that, that the Holland acquisition will actually go into the cable segment from a reporting perspective because we will run certainly the 2 businesses from a strategic standpoint under the umbrella of the cable group in that broadband market. And I think Adam described why we're excited about that and what potential that will bring for the company for growth.

R. Adam Norwitt

And, Steve, just with respect to industrial market, I think I mentioned earlier on that the strength that we saw in the third quarter really came from the energy-related segments: oil and gas, alternative energy, as well as some degree of strength in the factory automation market. Going forward, where do we see that sort of macroeconomic impact that allowed -- that makes us think that maybe that market will be kind of more flat than what it would normally be, which is seasonally up in the fourth quarter? We have seen signs in Europe, for example, that there's some moderation among some of our customers in terms of what amount of product they want to pull, really more in the near-term. In addition, there also appears to be in some of the oil and gas markets that there is also some degree of seasonality in the fourth quarter that comes from not wanting to do certain things when it's extremely called out. So that's -- in general, we feel very, very good about that market going forward heading into next year. We continue to believe that the industrial market will be a market that will grow greater than the average of Amphenol over the near, medium and long term, as we just see so much electronics being pushed into new areas of the industrial market. I mean just to call it industrial is almost so general because there’s so many segments in there: rail mass transit, heavy equipment, medical, instrumentation, all the energy-related things that the automation, the machine tool lighting. You name it. I mean there's just so many exciting things happening across all of those markets. That gives us real great confidence in the future performance of the industrial market.

Operator

Our final question comes from Brian White with Topeka.

Brian John White - Topeka Capital Markets Inc., Research Division

When you look at the IT and data market in the December quarter, how can we parse out the computing portion of that storage and servers compared to the networking and expectations for the fourth quarter?

R. Adam Norwitt

Yes, I mean I think what I can tell you just relative to the third quarter first, Brian, is the strength that we saw in the third quarter on a year-over-year basis was more driven by servers than it was by networking. With respect to the fourth quarter, it's hard to get so granular about how that outlook is. I would just tell you that we see just more of a general moderation in terms of the willingness of end IT customers to spend as much money as they normally do. I mean people have talked in years past about this kind of "year-end budget flush" among IT managers, and at least, we have not seen clear signs that such a year-end budget flush is going to happen as significantly in 2012 given all the uncertainties that are around today. And I would think that that's equally true, whether you're talking about server, storage or networking. But look, there are many OEMs who are closer to it than we are that would be good to talk to.

Brian John White - Topeka Capital Markets Inc., Research Division

Do you see a lot of innovation in new products in these markets in IT and data? Or has that also stopped?

R. Adam Norwitt

No, I mean I would tell you that the innovation has accelerated. I mean this year, the number of new programs that we have been working on is really almost, I would say, unequaled in at least in recent memory. And that is all driven by just that simple fact that the networks just got to do more with less. They are cranking so much data out predominantly because of video that the -- our customers who are really competing neck and neck in the marketplace are trying to develop machines and equipment that has greater functionality to process all of this data, and so they're continuing just tremendous, tremendous initiatives that are ongoing. Some of these are extremely long-term initiatives. What you wouldn't say is going to support sales in the fourth quarter even in the first quarter, some of those are more near term. What is clear around all of them is there are 2 paramount concerns by our customers. One is they got to get more data through the system, and two is they got to use less power doing so. And our excellent products on both those fronts are really finding great reception by all the customers.

Brian John White - Topeka Capital Markets Inc., Research Division

And that is across both networking and the computing side of the IT and data?

R. Adam Norwitt

Yes. I mean it's really across the board. I mean we deal with the server, storage and networking, all of the above.

Well at this time, I think there are no further questions and once again, we’d like to thank all of you for your time and attention today. And since we won't have the chance to speak to you until next year, wish you a great year end and holiday season, and we'll talk to you in 2013. Thank you very much.

Diana G. Reardon

Thank you.

Operator

Thank you for joining today's conference. That does conclude the call at this time. All participants may disconnect.

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