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.  covered under the Honeywell Agreement. 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.  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. 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.  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  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. 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.  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.  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  32  Recent Accounting Changes  Stock Split  Risk Management  Environmental Matters  Inflation and Costs  A M P H E N O L C O R P O R A T I O N 2 0 0 4 A N N U A L R E P O R T 