SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
[XX] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
********************************
Commission File No. 1-4235
AMP INCORPORATED
a Pennsylvania corporation
(Exact name of registrant as specified in charter,
and state of incorporation)
********************************
Employer Identification No. 23-0332575
Harrisburg, Pennsylvania 17105-3608
(Address of principal executive offices of registrant)
(717) 564-0100
(Registrant's telephone number, including area code)
********************************
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X]. NO [ ].
The number of shares of AMP Common Stock (without Par Value)
outstanding at November 7, 1994 was 104,885,682.
Includes an Exhibit Index.
<PAGE>
AMP Incorporated & Subsidiaries
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Consolidated Statements of Income for the three months and the
nine months ended September 30, 1994 and 1993, the Consolidated Statements of
Cash Flows for the nine months ended September 30, 1994 and 1993, and the
Consolidated Balance Sheets at September 30, 1994 and December 31, 1993, are
presented below. See the notes to these condensed consolidated financial
statements at the end thereof.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Three Months
Ended September 30,
1994 1993
----------- -----------
Net Sales.......................... $ 1,019,963 $ 857,439
Cost of Sales...................... 672,900 570,803
----------- -----------
Gross income................... 347,063 286,636
Selling, General and
Administrative Expenses........... 186,977 149,056
----------- -----------
Income from operations......... 160,086 137,580
Interest Expense................... (4,893) (4,408)
Other Income (Deductions), net..... (6,087) (5,030)
----------- -----------
Income before income taxes..... 149,106 128,142
Income Taxes....................... 55,940 50,740
----------- -----------
Net Income......................... $ 93,166 $ 77,402
=========== ===========
Per Share - Net income............. $.89 $.74
Cash dividends.......... $.42 $.40
Weighted average number of shares... 104,840,445 104,893,544
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Nine Months
Ended September 30,
1994 1993
----------- -----------
Net Sales.......................... $ 2,930,071 $ 2,578,132
Cost of Sales...................... 1,936,370 1,716,520
----------- -----------
Gross income................... 993,701 861,612
Selling, General and
Administrative Expenses........... 526,337 460,576
----------- -----------
Income from operations......... 467,364 401,036
Interest Expense................... (14,126) (14,992)
Other Income (Deductions), net..... (20,328) (13,691)
----------- -----------
Income before income taxes..... 432,910 372,353
Income Taxes....................... 164,370 146,690
----------- -----------
Net Income......................... $ 268,540 $ 225,663
=========== ===========
Per Share - Net income............. $2.56 $2.15
Cash dividends.......... $1.26 $1.20
Weighted average number of shares... 104,869,769 104,895,816
=========== ===========
<PAGE>
AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and Unaudited)
(dollars in thousands)
For the Nine Months
Ended September 30,
1994 1993
--------- ---------
Cash and Cash
Equivalents at January 1.................. $ 257,678 $ 370,753
Operating Activities:
Net income................................ 268,540 225,663
Noncash adjustments -
Depreciation and amortization........... 210,502 211,402
Changes in operating assets
and liabilities........................ (65,711) (132,494)
Other, net.............................. 17,627 13,947
--------- ---------
Cash provided by operating
activities........................... 430,958 318,518
--------- ---------
Investing Activities:
Additions to property, plant
and equipment............................ (300,176) (220,356)
Other, net................................ (37,287) (63,158)
--------- ---------
Cash used for investing
activities........................... (337,463) (283,514)
--------- ---------
Financing Activities:
Changes in short-term debt................ (64,971) (171,620)
Additions to long-term debt............... 62,170 101,081
Reductions of long-term debt.............. (8,640) (9,074)
Purchases of treasury stock............... (5,914) (3,771)
Dividends paid............................ (132,125) (125,875)
--------- ---------
Cash used for financing
activities........................... (149,480) (209,259)
--------- ----------
Effect of Exchange Rate Changes
on Cash.................................... 8,108 (6,638)
--------- ----------
Cash and Cash Equivalents at September 30... $ 209,801 $ 189,860
========= ==========
Changes in Operating Assets and Liabilities:
Receivables............................... $(117,455) $(110,957)
Inventories............................... (70,879) (47,136)
Other current assets...................... 2,105 (22,631)
Payables, trade and other................. 40,099 21,416
Accrued payrolls and benefits............. 33,865 23,494
Other accrued liabilities................. 46,554 3,320
--------- ---------
$ (65,711) $(132,494)
========= =========
Income tax payments......................... $ 147,837 $ 157,311
Interest paid during the periods was approximately equal to amounts charged
to expense.
<PAGE>
AMP Incorporated & Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Condensed)
(dollars in thousands)
September 30, December 31,
1994 1993
------------- ------------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents.......... $ 209,801 $ 257,678
Marketable securities.............. 126,576 149,317
Receivables........................ 832,711 625,180
Inventories---
Finished goods and work in
process........................ 317,517 255,472
Purchased and manufactured parts. 173,765 153,643
Raw materials.................... 61,850 50,187
----------- -----------
Total inventories.............. 553,132 459,302
Other current assets............... 169,854 152,881
----------- -----------
Total current assets........... 1,892,074 1,644,358
----------- -----------
Property, Plant and Equipment........ 3,311,141 2,954,936
Less - Accumulated depreciation.... 1,929,559 1,709,811
----------- -----------
Property, plant and equipment,
net........................... 1,381,582 1,245,125
----------- -----------
Investments and Other Assets......... 310,504 228,436
----------- -----------
TOTAL ASSETS......................... $ 3,584,160 $ 3,117,919
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt.................... $ 128,804 $ 183,625
Payables, trade and other.......... 340,237 236,697
Accrued liabilities................ 423,644 332,041
----------- -----------
Total current liabilities........ 892,685 752,363
Long-Term Debt....................... 201,155 130,982
Other Liabilities and
Deferred Credits................... 225,334 178,219
----------- -----------
Total liabilities................ 1,319,174 1,061,564
Shareholders' Equity................. 2,264,986 2,056,355
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.............................. $ 3,584,160 $ 3,117,919
=========== ===========
<PAGE>
AMP Incorporated & Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(September 30, 1994, Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report and Form 10-K,
and Form 10-Q as of and for the three months ended March 31, 1994.
The information furnished reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIRD QUARTER 1994
Sales -- Record $1.020 billion, up 19% from year-earlier $857 million, up
slightly from $1.004 billion in second quarter
Earnings Per Share -- 89 cents/share, up 20% from year-earlier 74 cents/share
and just below record 91 cents in second quarter
Order Backlog -- Up $10 million during quarter to record $635 million compared
to $493 million at year-end 1993 and $528 million one year ago
Employment -- Up 800 during quarter to 29,000
NINE MONTHS
Sales -- Record $2.93 billion, up 14% from $2.58 billion in year-earlier
period
Earnings per Share -- Record $2.56/share, up 19% from $2.15/share in year-
earlier period
Capital Expenditures -- Record $300 million; $400-425 million expected for
full year, up from $330 million in 1993
- -----------------------------------------------------------------------------
1994 results continue to come in better than we had earlier expected, but
closely in line with current analyst consensus estimates. Third quarter sales
set a new high of $1.020 billion -- up 19% from $857 million in the third
quarter of 1993, slightly above the prior high of $1.004 billion in the second
quarter, and well above the $906 million in the first quarter of this year.
Usually third quarter sales are down modestly because of seasonal summer
softness. But that effect was offset this year by the further weakening of
the U.S. dollar during the third quarter, which added $26 million to sales,
and by the broadening economic recovery in the Western Hemisphere, Europe, and
Japan. This permitted earnings to continue at the near-record level of
89 cents/share -- very close to the record 91 cents set in the second quarter
this year and up 20% from 74 cents in the third quarter of 1993.
Nine months sales and earnings set new highs of $2.93 billion and $2.56/share
- -- up 14% and 19% respectively from $2.58 billion and $2.15/share in the
year-earlier period. Changes in exchange rates from the prior year had no
significant overall effect on nine months 1994 sales. Currency rates remaining
constant at current levels during the rest of the fourth quarter would have a
modest positive effect versus both the year-earlier and prior quarters.
The good growth in sales this year reflects the broadening economic recovery
throughout the world. For the first nine months, U.S. sales were up 13%;
Europe up 14% in local currencies and 13% in U.S. dollars; Asia/Pacific up 8%
in local currencies and 15% in U.S. dollars; and Western Hemisphere outside
the U.S. up 24% in U.S. dollars. Sales growth is broad based, with gains in
virtually every market category in each region. In the U.S. our strongest
sales growth is in the automotive market. In Europe nearly every country is
showing growth over the prior year and our largest market, automotive,
continues to lead the widening economic recovery there. In the Asia/Pacific
region our largest company, AMP Japan, has recently resumed sales growth as
the Japanese economic recovery gets underway. Sales growth throughout the rest
of the region continues at a very strong pace -- reflecting the high rate of
economic growth in many of those countries.
This good sales growth in each region, combined with continued productivity
improvement and cost reduction, has enabled us to improve profit margins over
the prior year.
OUTLOOK
The outlook continues to improve. We expect new highs in sales and earnings
in the fourth quarter and continued good growth next year. Our planning
scenario assumes that we are in a period of broadening recovery which will
lead to modest sustainable economic growth in many countries for several
years. In this favorable economic climate, the electrical/electronic markets
we serve should continue to expand at two to three times Gross Domestic
Product growth rates. As the leader in the connector industry (20% share in a
$20 billion market), we have an increasingly broad participation in that
market growth. In addition, through our diversification program we are now
addressing other fast growing related markets totaling $40-60 billion. We
continue to emphasize a broadening of our role in the rapidly developing
information superhighway and offering a wider range of products to meet the
strong demand arising in many countries as they build or modernize their
basic infrastructure in such sectors as power, communications, transportation,
and housing.
ORGANIZATIONAL CHANGES
In September we announced the election of Dennis Horowitz to the newly created
position of corporate vice president-Americas (all Western Hemisphere terminal/
connector operations). He joins AMP from North American Philips where he was
president and CEO of Philips Technologies. Dan Wilkie was appointed to the
newly created position of divisional vice president--Components and Subsystems
Group, reporting to Jay Hassan, corporate vice president, Global
Interconnection Systems Businesses. He held CEO and vice president positions
at several electronic equipment manufacturers, most recently at Conner
Peripherals. Dean Hooper, formerly head of AMP's Utility, Networking &
Communications Products Group, with AMP 17 years, has been appointed to the
newly created position of divisional vice president--U.S. Sales and Marketing.
Jack Leung, general manager and area director--Asia/Pacific Central, has been
appointed a divisional vice president. He has been with AMP 11 years. Robert
Ripp, former IBM treasurer who was elected AMP's corporate vice president--
Finance in July, has been elected corporate vice president--Chief Financial
Officer effective January 1, 1995. He succeeds Benjamin Savidge who is
retiring as an officer and director at age 65 at year-end after 35 years of
service.
Takeo Shiina, chairman of IBM Japan, Ltd., was elected an AMP director
effective January 1, 1995. He adds a new dimension to the AMP board because
of his lengthy electronics industry experience, as well as international
expertise and prestige. He has mechanical engineering degrees from Keio and
Bucknell Universities and 41 years service with IBM Japan. He received the
Blue Ribbon Medal Award from the Japanese government because of his
outstanding leadership contributions to government, industry, and educational
organizations.
EXPANSION
Expansion continues throughout the world as we add new capabilities and enter
new markets. In the U.S. earlier this year we started up new facilities for
production of automotive connectors, panel assemblies, cable and cable
assemblies. A 180,000 sq. ft. engineering building is under construction in
the Harrisburg area. To support our growth in the consumer goods market, we
will be building a large manufacturing plant in Lickdale, PA, northeast of
Harrisburg, and consolidating operations from nearby smaller plants in Tower
City and Williamstown into the new facility. We recently held dedication
ceremonies at our Hungarian plant, our first Eastern European facility, which
began operation early this year. A new facility near Dublin, Ireland, will
begin production of connector panel assemblies for the European market next
spring. In the Asia/Pacific region we started production at our second
facility in South Korea, primarily to serve a rapidly growing automotive
market; began operations in Bangalore, India (our second plant in India); and
are progressing on plans for a second plant in China.
Reflecting our growing optimism, capital spending estimates for 1994 have
risen from $350-375 million early this year to $400-425 million -- up
significantly from $330 million last year. The majority of this spending is
for equipment that broadens and improves our capabilities, and includes much
production tooling for the many new products we are introducing. Similarly,
we continue to carefully increase employment as we add new facilities, create
and expand business units, diversify into new technologies and markets, and
make acquisitions. Employment is up 2,100 to 29,000 so far this year after
rising 1,700 last year. Both capital spending and employment are expected to
continue rising in 1995.
ALLIANCES/ACQUISITIONS
As announced in September, AMP made a minority equity investment in Ocean Power
Technologies, Inc. (Princeton, NJ) -- a small company concentrating on
electric power generation systems using ocean waves to actuate piezoelectric
polymer film and thus directly generate electricity. The piezoelectric polymers
will be supplied by our Advanced Sensors and Interconnection System Division.
AMP also acquired the technology of ACCU-SCAN, Inc. (Fort Walton Beach, FL), a
small company providing power diagnostic information systems and services --
including grounding current monitors.
AWARDS/RECOGNITION
AMP has just received the prestigious Award of Excellence from the
International Customer Service Association presented each year to the
manufacturing company with the consistently best customer service. AMP business
units won five of the seven top awards presented at the First Annual
Pennsylvania Quality Leadership program modeled after the national Malcolm
Baldrige program. (In 1993 AMP was one of only four Malcolm Baldrige
manufacturing company site visit finalists.) An AMP business unit also won the
most recent top quality award for manufacturing in North Carolina.
AMP's Director of Global Product Standards, Henry Line, was one of only two
speakers representing the U.S. electronics industry in congressional testimony
on the importance of product standards in world trade and U.S. competitiveness.
DIVIDEND ACTION
On October 26, 1994 the Board of Directors declared a regular quarterly
dividend of 42 cents/share payable December 1, 1994, to shareholders of
record November 7, 1994. The total 1994 dividend of $1.68 per share is up from
$1.60 in 1993, $1.52 in 1992, and $1.44 in 1991 -- the 41st consecutive annual
increase.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits --
Exhibit Number Description
-------------- -----------
EX-10.A AMP Incorporated Stock Option Plan for Outside
Directors (incorporated by reference to
Exhibit 4.A of Registration No. 33-54277 on
Form S-8 as filed with the Securities Exchange
Commission on June 24, 1994)
EX-27 Financial Data Schedule
(B) Reports on Form 8-K --
There were no reports on Form 8-K filed for the three months
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: November 11, 1994 AMP INCORPORATED
(Registrant)
By: /s/ B. Savidge
__________________________________
B. Savidge
Executive Vice President,
Chief Financial Officer
By: /s/ David C. Cornelius
__________________________________
David C. Cornelius
Controller
<PAGE>
Exhibit Index
-------------
Exhibit Number Description
-------------- -----------
EX-10.A AMP Incorporated Stock Option Plan for Outside
Directors (incorporated by reference to
Exhibit 4.A of Registration No. 33-54277 on
Form S-8 as filed with the Securities Exchange
Commission on June 24, 1994)
EX-27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 209,801
<SECURITIES> 126,576
<RECEIVABLES> 832,711
<ALLOWANCES> 0
<INVENTORY> 553,132
<CURRENT-ASSETS> 1,892,074
<PP&E> 3,311,141
<DEPRECIATION> 1,929,559
<TOTAL-ASSETS> 3,584,160
<CURRENT-LIABILITIES> 892,685
<BONDS> 0
<COMMON> 12,480
0
0
<OTHER-SE> 2,252,506
<TOTAL-LIABILITY-AND-EQUITY> 3,584,160
<SALES> 2,930,071
<TOTAL-REVENUES> 2,930,071
<CGS> 1,936,370
<TOTAL-COSTS> 1,936,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,126
<INCOME-PRETAX> 432,910
<INCOME-TAX> 164,370
<INCOME-CONTINUING> 268,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 268,540
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.56
</TABLE>
