receivable. The Company services, administers and collects the receivables on behalf of the purchaser. The agreement includes certain covenants and provides for various events of termination. The agreement expires in May 2007. At December 31, 2004, approximately $80.0 million ($73.8 million at December 31, 2003) of receivables were sold under the agreement and are therefore not reflected in the accounts receivable balance in the accompanying Consolidated Balance Sheets. 

## Environmental Matters 

Subsequent to the acquisition of Amphenol from Allied Signal Corporation in 1987 (Allied Signal merged with Honeywell International Inc. (“Honeywell”) in December 1999, Amphenol and Honeywell have been named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Honeywell have jointly consented to perform certain investigations and remedial and monitoring activities at two sites and they have been jointly ordered to perform work at another site. The costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement entered into in connection with the acquisition in 1987. For sites covered by this agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, Honeywell is obligated to reimburse Amphenol 100% of such costs. Honeywell representatives work closely with the Company in addressing the most significant environmental liabilities covered by the Agreement. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company’s financial condition or results of operations. The environmental investigation, remedial and monitoring activities identified by the Company, including those referred to above, are 

covered under the Honeywell Agreement. 

## Inflation and Costs 

The cost of the Company's products is influenced by the cost of a wide variety of raw materials, including precious met- als such as gold and silver used in plat- ing; aluminum, copper, brass and steel used for contacts, shells and cable; and plastic materials used in molding connec- tor bodies, inserts and cable. In general, increases in the cost of raw materials, la- bor and services have been offset by price increases, productivity improve- ments and cost saving programs. 

## Risk Management 

The Company has to a significant degree mitigated its exposure to currency risk in its business operations by manu- facturing and procuring its products in the same country or region in which the products are sold so that costs reflect lo- cal economic conditions. In other cases involving U.S. export sales, raw materials are a significant component of product costs for the majority of such sales and raw material costs are generally dollar based on a worldwide scale, such as basic metals and petroleum-derived materials. 

## Stock Split 

On January 21, 2004, the Company announced a 2-for-1 stock split that was effective for shareholders of record as of March 17, 2004. The additional shares were distributed on March 29, 2004. The share information included herein reflects the effect of such stock split. 

## Recent Accounting Changes 

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard, No. 123R (“FAS 123R”) “Share-based payment”. FAS 123R applies to all transactions involving the issuance, by a company, of its own equity (stock, stock options, or other equity instruments) in exchange for goods or services, including employee services. 

FAS 123R requires entities to recognize the cost of employee services received in exchange for the stock-based compensation using the fair value of those stocks on the grant-date (with limited exceptions). This statement is effective for the first interim reporting period beginning after June 15, 2005. The Company is currently assessing the impact that this statement will have on the Company’s Consolidated Financial Statements, but does not anticipate the impact to be more than $2 million per quarter based on the options outstanding as of December 31, 2004. 

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the “Act”) was enacted. The Act introduced a new prescription drug benefit under Medicare (“Medicare Part D”), as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at a minimum actuarially equivalent to Medicare Part D. FASB Staff Position (“FSP”), 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003,” was provided by the FASB to offer guidance on accounting and disclosure requirements for the Act. The Company does not believe the new Act will have a material impact on the Company’s Consolidated Financial Statements. 

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard, No. 151 (“FAS 151”), “Inventory Costs – an amendment of ARB No. 43, Chapter 4,” in an effort to conform U.S. accounting standards for inventories to International Accounting Standards. FAS 151 requires idle facility expenses, freight, handling costs and wasted material (spoilage) costs to be recognized as current period charges. It also requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the relevant production facilities. FAS 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the 

