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 March 31, 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 May 10, 1994 was 104,831,650.
<PAGE>
AMP Incorporated & Subsidiaries
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Consolidated Statements of Income and the Consolidated Statements of
Cash Flows for the three months ended March 31, 1994 and 1993, and the
Consolidated Balance Sheets at March 31, 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 March 31,
1994 1993
----------- -----------
Net Sales.......................... $ 906,123 $ 837,956
Cost of Sales...................... 603,967 559,810
----------- -----------
Gross income................... 302,156 278,146
Selling, General and
Administrative Expenses........... 162,173 151,125
----------- -----------
Income from operations......... 139,983 127,021
Interest Expense................... (4,247) (5,382)
Other Income (Deductions), net..... (6,516) (2,756)
----------- -----------
Income before income taxes..... 129,220 118,883
Income Taxes....................... 49,670 46,360
----------- -----------
Net Income......................... $ 79,550 $ 72,523
=========== ===========
Per Share - Net income............. $.76 $.69
Cash dividends.......... $.42 $.40
Weighted average number of shares... 104,916,352 104,899,606
=========== ===========
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AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and Unaudited)
(dollars in thousands)
For the Three Months
Ended March 31,
1994 1993
--------- ---------
Cash and Cash
Equivalents at January 1.................. $ 257,678 $ 370,753
Operating Activities:
Net income................................ 79,550 72,523
Noncash adjustments -
Depreciation and amortization........... 67,900 69,810
Changes in operating assets
and liabilities........................ (57,739) (62,400)
Other, net.............................. (7,779) (5,159)
--------- ---------
Cash provided by operating
activities........................... 81,932 74,774
--------- ---------
Investing Activities:
Additions to property, plant
and equipment............................ (88,104) (61,894)
Other, net................................ 9,844 (17,061)
--------- ---------
Cash used for investing
activities........................... (78,260) (78,955)
--------- ---------
Financing Activities:
Changes in short-term debt................ (33,473) (55,367)
Additions to long-term debt............... 37,974 604
Reductions of long-term debt.............. (359) (839)
Purchases of treasury stock............... -- (3,771)
Dividends paid............................ (44,065) (41,961)
--------- ---------
Cash used for financing
activities........................... (39,923) (101,334)
--------- ----------
Effect of Exchange Rate Changes
on Cash.................................... 4,239 (1,594)
--------- ----------
Cash and Cash Equivalents at March 31....... $ 225,666 $ 263,644
========= ==========
Changes in Operating Assets and Liabilities:
Receivables............................... $ (98,250) $ (81,159)
Inventories............................... (7,140) (6,976)
Other current assets...................... (27,366) (33,108)
Payables, trade and other................. 35,226 15,817
Accrued payrolls and benefits............. 9,735 4,124
Other accrued liabilities................. 30,056 38,902
--------- ---------
$ (57,739) $ (62,400)
========= =========
Income tax payments......................... $ 30,679 $ 24,954
Interest paid during the periods was approximately equal to amounts charged
to expense.
<PAGE>
AMP Incorporated & Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Condensed)
(dollars in thousands)
March 31, December 31,
1994 1993
----------- -----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents.......... $ 225,666 $ 257,678
Marketable securities.............. 125,490 149,317
Receivables........................ 742,565 625,180
Inventories---
Finished goods and work in
process........................ 266,297 255,472
Purchased and manufactured parts. 154,742 153,643
Raw materials.................... 52,618 50,187
----------- -----------
Total inventories.............. 473,657 459,302
Other current assets............... 184,392 152,881
----------- -----------
Total current assets........... 1,751,770 1,644,358
----------- -----------
Property, Plant and Equipment........ 3,053,029 2,954,936
Less - Accumulated depreciation.... 1,774,647 1,709,811
----------- -----------
Property, plant and equipment,
net........................... 1,278,382 1,245,125
----------- -----------
Investments and Other Assets......... 267,325 228,436
----------- -----------
TOTAL ASSETS......................... $ 3,297,477 $ 3,117,919
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt.................... $ 154,639 $ 183,625
Payables, trade and other.......... 281,425 236,697
Accrued liabilities................ 375,483 332,041
----------- -----------
Total current liabilities........ 811,547 752,363
Long-Term Debt....................... 176,104 130,982
Other Liabilities and
Deferred Credits................... 181,237 178,219
----------- -----------
Total liabilities................ 1,168,888 1,061,564
Shareholders' Equity................. 2,128,589 2,056,355
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.............................. $ 3,297,477 $ 3,117,919
=========== ===========
<PAGE>
AMP Incorporated & Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(March 31, 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.
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.
2. DEBT AND EQUITY SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting For Certain Investments in Debt
and Equity Securities" (SFAS No. 115). This standard requires that certain
debt and equity securities be adjusted to market value at the end of each
accounting period. Market value gains and losses are charged to earnings
if the securities are traded for short-term profit. Otherwise, such gains
and losses are charged or credited to a separate component of Shareholders'
Equity. SFAS No. 115 was adopted prospectively, and had no impact on first
quarter earnings.
The following tables set forth the position of the Company's
securities at March 31, 1994:
(dollars in thousands)
Included in Balance Sheet Caption:
Cash Marketable Investments &
Equivalents Securities Other Assets
----------- ---------- -------------
COST BY CATEGORY:
U. S. Government Securities--
Maturity less than 1 year........ $ -- $ 3,020 $ --
Maturity 1-5 years............... -- 41,560 --
State and Municipal Securities--
Maturity less than 1 year........ 35,550 25,973 --
Maturity 1-5 years............... -- 5,544 --
Commercial Paper................... 2,000 6,529 --
Mutual and Money Market Funds...... 62,518 -- --
Repurchase Agreements.............. 33,598 -- --
Common Stock....................... -- -- 15,666
-------- ------- -------
$133,666 $82,626 $15,666
======== ======= =======
MARKET VALUE BY CATEGORY:
U. S. Government Securities--
Maturity less than 1 year........ $ -- $ 3,021 $ --
Maturity 1-5 years............... -- 40,948 --
State and Municipal Securities--
Maturity less than 1 year........ 35,550 25,967 --
Maturity 1-5 years .............. -- 5,538 --
Commercial Paper................... 2,000 6,515 --
Mutual and Money Market Funds...... 62,617 -- --
Repurchase Agreements.............. 33,598 -- --
Common Stock....................... -- -- 38,277
________ _______ _______
$133,765 $81,989 $38,277
======== ======= =======
<PAGE>
All securities held by the Company at March 31, 1994, and covered by
SFAS No. 115, are considered to be "available for sale". Accordingly,
differences between cost and market of $22,073,000 (less deferred taxes of
$8,400,000) were credited to a separate component of Shareholders' Equity.
Nearly all of these gains related to the Company's common stock holdings.
In addition, the Company holds $82,050,000 of securities which are not
covered by SFAS No. 115 as they do not have sales prices or bid-and-asked
quotations on a securities exchange registered with the Securities and
Exchange Commission. These securities are included in Balance Sheet
captions "Cash Equivalents" and "Marketable Securities", but have been
omitted from the tabular data above.
Proceeds from sales of "available for sale" securities were
approximately $63,000,000 during the quarter ended March 31, 1994. Gross
gains and gross losses on such sales were not significant.
3. POSTEMPLOYMENT BENEFITS
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits". SFAS No. 112 requires use of the accrual method for benefits
such as salary continuation, severance pay and health care continuation
provided during the period after employment and before normal retirement
age. Adoption of SFAS No. 112 did not have a significant impact on first
quarter 1994 net income as the most significant benefit provided by the
Company (Workers'Compensation Insurance) had been previously accounted for
using the accrual method.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST QUARTER 1994
Sales -- Record $906 million, up 8% from $838 million in first quarter
1993, up 4% from $872 million in fourth quarter 1993
Earnings -- 76 cents per share, up 10% from 69 cents in first quarter 1993
and 12% from 68 cents in fourth quarter 1993
Bookings -- Record $985 million, up 13% from $874 million in first quarter
1993 and up 18% from $838 million in fourth quarter 1993
Order Backlog -- Up $79 million to record $572 million compared to $493
million at year-end 1993 and $542 million a year ago
Employment -- Up 300 during quarter to 27,200
Capital Expenditures -- $88 million in first quarter, $350-375 million
expected for entire year
<PAGE>
SALES AND EARNINGS
First quarter results were a little better than expected. While sales were
close to expectations, bookings were quite strong, operating margins improved
over the prior and year-earlier quarters, and we are anticipating a slightly
lower effective tax rate this year. The record sales of $906 million reflect
good growth in the U.S. and good international growth in local currencies over
the prior year. U.S. sales, 46% of total worldwide sales, were up 11%, with
sales growth in all market categories. Strongest growth was in automotive and
networking/premises wiring. International sales were up 7% in local currencies
and 6% in U.S. dollars. Exchange rate changes did not have a significant
overall effect on sales from fourth quarter to first quarter or year-to-year.
European sales were up 8% year-to-year in local currencies and 2% in U.S.
dollars, with strongest growth in the computer/office equipment and
transportation markets. Asia/Pacific sales were up 1% in local currencies
and 10% in U.S. dollars. Strongest markets were communications and consumer
goods. In the Americas (Canada and Latin America) sales were up 21%.
Earnings of 76 cents per share are the third highest in our history --
approaching the 78 cents and 79 cents reached in the second and fourth
quarters of 1988. Productivity improvements and cost reductions continue to
largely offset the price erosion we are experiencing in many of our markets.
OUTLOOK
The outlook continues to improve. The strong increase in the order backlog
during the first quarter bodes well for continued sales growth. Typically
during a period of rising demand, assuming significant capacity constraints
do not arise, the order level in the first quarter ($985 million) is an
indication of the second quarter sales level. With the economic outlook
brightening in Europe and prospects for economic recovery in Japan
beginning to improve, we think our sales growth can continue in the second
half and in 1995.
Better sales growth should lead to some improvement in profit margins. Our
Plan For Excellence continuous improvement program is yielding steady
progress in performance on quality, delivery, service, and technology
support. Thus incremental operating margins have the potential for
improvement with volume increases in Europe and Japan as we get back to
more normal growth rates there. Assuming present trends continue and
exchange rates are steady, prospects look good for sales and earnings to
set new highs in the second quarter and for the entire year -- exceeding
the $2.83 per share in 1993 and the record $2.96 per share in 1988.
We believe we are entering a period where we will see the payoff from the
many actions we have taken in recent years to gain market share in our core
connector business, diversify into related components and assemblies,
expand into new geographic markets, and integrate our activities regionally
and globally. Total spending for research, development, and engineering
has been maintained at a high level ($406 million -- nearly 12% of 1993
sales) and has increased each of the last ten years. Capital spending has
also been maintained at a high level as we modernize existing facilities to
improve quality and productivity, and start up new plants to produce new
products and serve new markets. With over $350 million expected this year,
capital expenditures could approach $1.7 billion in the first half of the
1990s. During this period we will have formed over a dozen new
subsidiaries and added well over a million square feet of floor space. AMP
has a very strong balance sheet, good cash flow, a manufacturing/engineering/
marketing base of 175 facilities in 36 countries, and a formidable technical
position. We have the resources to pursue what we believe is a very well
defined two-fold strategy of increasing our leadership position in a good
growth industry (connectors), while adding tens of billions of dollars of new
market potential by diversifying into such closely related areas as cables,
printed circuit boards, cable and panel assemblies, electro-optic devices,
networking/premises wiring units and assemblies, and sensors. Our basic goal
is to steadily build long term value for shareholders -- to achieve a superior
total return in the coming years.
ORGANIZATIONAL CHANGE
Herbert M. Cole was elected corporate vice president-Operations Planning,
Asia/Pacific. Age 57, he has been with AMP for 28 years -- the last ten as
a divisional vice president.
<PAGE>
EXPANSION
Last year we added 600,000 square feet of floor space as we completed
facilities in Argentina, China, and Singapore. During first quarter 1994 we
started up a new plant in Hungary. In the coming months new plants will
begin operation in North Carolina, Texas, and South Korea. Within the next
year or so new facilities should come on stream in the Harrisburg area,
North Carolina, China, India, and Japan.
ACQUISITIONS/ALLIANCES
Last year we acquired or took a minority equity position in nearly a dozen
small companies to speed our entry into new technologies and markets. This
activity continues in 1994. Recently our Carroll Touch subsidiary, the
leader in scanning infrared touch screen data entry units, announced the
acquisition of guided wave touch screen technology from Exzec, Inc.,
Evanston, IL, and the acquisition of Emerald Computers, Inc., Portland, OR.
With these acquisitions Carroll Touch now has the technological
alternatives necessary to fully address the needs of the touch screen
marketplace, and broaden its role significantly by providing not only the
touch screens, but also complete customized systems providing human/machine
interface solutions.
DIVIDEND ACTION
On Tuesday, April 26, 1994, the Board of Directors declared a regular
quarterly dividend of 42 cents per share payable June 1, 1994 to
shareholders of record May 9, 1994. The current rate indicates an annual
dividend of $1.68 per share for 1994 compared to $1.60 in 1993, $1.52 in
1992, and $1.44 in 1991 -- the 41st consecutive annual increase.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Annual Meeting of Shareholders of AMP Incorporated was held on Wednesday,
April 27, 1994 beginning at 10:30 a.m., local time, at the Sheraton Inn
Harrisburg in Harrisburg, Pennsylvania. As of the record date (March 11,
1994) for the Annual Meeting, 104,926,021 shares of Common Stock were
outstanding and entitled to vote. 87,285,756 shares, representing over 83%
of the outstanding Common Stock eligible to vote, were represented at the
Annual Meeting either in person or by proxy.
* All of the directors of the Company, thirteen in number, were elected
at the Annual Meeting, each by an affirmative vote of at least 99%
of the votes cast. The results of the vote tabulation for each
director are as follows:
Director Votes For Votes Withheld
-------- --------- --------------
Dexter F. Baker 86,908,562 377,194
Jeffrey J. Burdge 86,898,383 387,373
William E. Dearden 86,854,324 431,432
Ralph D. DeNunzio 86,803,191 482,565
Barbara H. Franklin 86,903,842 381,914
Joseph M. Hixon III 86,913,817 371,939
William J. Hudson, Jr. 86,919,911 365,845
James E. Marley 86,917,787 367,969
Harold A. McInnes 86,617,583 668,173
John C. Morley 86,900,502 385,254
Walter F. Raab 86,587,059 698,697
Benjamin Savidge 86,903,097 382,659
Paul G. Schloemer 86,893,724 392,032
* The proposal for shareholder approval of the Company's Stock Option
Plan for Outside Directors, under which the Company will automatically
grant 1000 options in the Company's Common Stock to each outside
director (that is, a director who is not a current or former employee
of the Company) of the Company in each year that said participant serves
as an active director during the 10-year period ending October 27, 2003,
was passed by an affirmative vote of nearly 93% of the shares of Common
Stock entitled to vote and either present in person or represented by
proxy. On this matter, which was deemed a routine proposal under the
rules of the New York Stock Exchange, 81,028,702 votes were for the
proposal, 5,775,371 votes were against, and 481,683 votes abstained.
Abstentions are counted in determining the total number of shares
present in person or represented by proxy and entitled to vote.
* The shareholder proposal submitted by The Dominican Sisters of Adrian,
Michigan and seeking action by the Company's Board of Directors to
i) publicly commit to a policy of greater diversity in senior
management and Board positions; ii) develop a plan to effect such
diversity and periodically report on progress in the implementation of
the plan; and iii) establish a Nominating Committee to further the
first two objectives, did not pass, receiving only 7,422,852 votes, or
approximately 10%, of the votes cast. On this matter, which was
deemed non-routine under the rules of the New York Stock Exchange,
68,361,018 votes were against the proposal, 5,772,612 votes abstained,
and 5,729,273 votes were broker non-votes. Abstentions and broker
non-votes are not counted as votes cast.
* The shareholder proposal submitted by the Benedictine Sisters, of
San Antonio, Texas, and seeking a report by the Company on or before
September, 1994 that sets forth prescribed information on equal
employment opportunity and affirmative action with regard to the
Company's employment of women and minorities and the Company's use
of minority- and female-owned suppliers, also did not pass, receiving
only 7,271,316 votes, or approximately 10%, of the votes cast. On
this matter, which was deemed non-routine under the rules of the New
York Stock Exchange, 68,135,322 votes were against the proposal,
6,149,444 votes abstained, and 5,729,673 votes were broker non-votes.
Abstentions and broker non-votes are not counted as votes cast.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits --
None.
(B) Reports on Form 8-K --
There were no reports on Form 8-K filed for the three months
ended March 31, 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: May 13, 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
