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 June 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 _________
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Commission File No. 1-4235
AMP INCORPORATED
a Pennsylvania corporation
(Exact name of registrant as specified in charter,
and state of incorporation)
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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 August 10, 1994 was 104,835,185.
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AMP Incorporated & Subsidiaries
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Consolidated Statements of Income for the three months and the
six months ended June 30, 1994 and 1993, the Consolidated Statements of
Cash Flows for the six months ended June 30, 1994 and 1993, and the
Consolidated Balance Sheets at June 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 June 30,
1994 1993
----------- -----------
Net Sales.......................... $ 1,003,985 $ 882,737
Cost of Sales...................... 659,503 585,907
----------- -----------
Gross income................... 344,482 296,830
Selling, General and
Administrative Expenses........... 177,187 160,395
----------- -----------
Income from operations......... 167,295 136,435
Interest Expense................... (4,986) (5,202)
Other Income (Deductions), net..... (7,725) (5,905)
----------- -----------
Income before income taxes..... 154,584 125,328
Income Taxes....................... 58,760 49,590
----------- -----------
Net Income......................... $ 95,824 $ 75,738
=========== ===========
Per Share - Net income............. $.91 $.72
Cash dividends.......... $.42 $.40
Weighted average number of shares... 104,857,158 104,891,889
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Six Months
Ended June 30,
1994 1993
----------- -----------
Net Sales.......................... $ 1,910,108 $ 1,720,693
Cost of Sales...................... 1,263,470 1,145,717
----------- -----------
Gross income................... 646,638 574,976
Selling, General and
Administrative Expenses........... 339,360 311,520
----------- -----------
Income from operations......... 307,278 263,456
Interest Expense................... (9,233) (10,584)
Other Income (Deductions), net..... (14,241) (8,661)
----------- -----------
Income before income taxes..... 283,804 244,211
Income Taxes....................... 108,430 95,950
----------- -----------
Net Income......................... $ 175,374 $ 148,261
=========== ===========
Per Share - Net income............. $1.67 $1.41
Cash dividends.......... $ .84 $ .80
Weighted average number of shares... 104,881,145 104,896,690
=========== ===========
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AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and Unaudited)
(dollars in thousands)
For the Six Months
Ended June 30,
1994 1993
--------- ---------
Cash and Cash
Equivalents at January 1.................. $ 257,678 $ 370,753
Operating Activities:
Net income................................ 175,374 148,261
Noncash adjustments -
Depreciation and amortization........... 138,601 146,296
Changes in operating assets
and liabilities........................ (56,397) (120,341)
Other, net.............................. 12,894 7,583
--------- ---------
Cash provided by operating
activities........................... 270,472 181,799
--------- ---------
Investing Activities:
Additions to property, plant
and equipment............................ (189,965) (136,313)
Other, net................................ (8,375) (18,438)
--------- ---------
Cash used for investing
activities........................... (198,340) (154,751)
--------- ---------
Financing Activities:
Changes in short-term debt................ (68,550) (136,829)
Additions to long-term debt............... 61,950 75,387
Reductions of long-term debt.............. (3,738) (4,256)
Purchases of treasury stock............... (5,914) (3,771)
Dividends paid............................ (88,095) (83,919)
--------- ---------
Cash used for financing
activities........................... (104,347) (153,388)
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Effect of Exchange Rate Changes
on Cash.................................... 5,141 (8,248)
--------- ----------
Cash and Cash Equivalents at June 30........ $ 230,604 $ 236,165
========= ==========
Changes in Operating Assets and Liabilities:
Receivables............................... $(124,153) $(125,296)
Inventories............................... (27,656) (23,435)
Other current assets...................... (11,343) (23,884)
Payables, trade and other................. 37,116 14,807
Accrued payrolls and benefits............. 29,716 18,137
Other accrued liabilities................. 39,923 19,330
--------- ---------
$ (56,397) $(120,341)
========= =========
Income tax payments......................... $ 83,892 $ 93,278
Interest paid during the periods was approximately equal to amounts charged
to expense.
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AMP Incorporated & Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Condensed)
(dollars in thousands)
June 30, December 31,
1994 1993
----------- -----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents.......... $ 230,604 $ 257,678
Marketable securities.............. 120,817 149,317
Receivables........................ 804,184 625,180
Inventories---
Finished goods and work in
process........................ 275,094 255,472
Purchased and manufactured parts. 164,533 153,643
Raw materials.................... 60,364 50,187
----------- -----------
Total inventories.............. 499,991 459,302
Other current assets............... 172,439 152,881
----------- -----------
Total current assets........... 1,828,035 1,644,358
----------- -----------
Property, Plant and Equipment........ 3,162,843 2,954,936
Less - Accumulated depreciation.... 1,842,725 1,709,811
----------- -----------
Property, plant and equipment,
net........................... 1,320,118 1,245,125
----------- -----------
Investments and Other Assets......... 276,846 228,436
----------- -----------
TOTAL ASSETS......................... $ 3,424,999 $ 3,117,919
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt.................... $ 121,317 $ 183,625
Payables, trade and other.......... 312,767 236,697
Accrued liabilities................ 408,308 332,041
----------- -----------
Total current liabilities........ 842,392 752,363
Long-Term Debt....................... 196,771 130,982
Other Liabilities and
Deferred Credits................... 197,405 178,219
----------- -----------
Total liabilities................ 1,236,568 1,061,564
Shareholders' Equity................. 2,188,431 2,056,355
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.............................. $ 3,424,999 $ 3,117,919
=========== ===========
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AMP Incorporated & Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(June 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
Second Quarter and First Half 1994 Set New Highs in Orders, Sales, and Earnings
SECOND QUARTER 1994
Sales -- $1.004 billion, up 14% from $883 million in second quarter 1993, up
11% from $906 million in the first quarter of 1994
Earnings Per Share -- 91 cents/share, up 26% from 72 cents in the year-earlier
quarter and 20% from 76 cents in first quarter 1994
Order Backlog -- Up $53 million during quarter to $625 million compared to $493
million at year-end 1993 and $559 million a year ago
Employment -- Up 1,000 during quarter to record 28,200
SIX MONTHS
Sales -- $1.91 billion, up 11% from $1.72 billion in first half 1993
Earnings per Share -- $1.67/share, up 18% from $1.41 in first half 1993
Capital Expenditures -- Record $190 million in first half; $375-400 million
expected for entire year
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As with the first quarter, second quarter results were a little better than
earlier expected. For the second quarter and first half, sales, margins, and
profits increased in all regions over the year-earlier periods. We passed a
historic one billion dollar milestone, with second quarter sales reaching
$1.004 billion, up 14% over $883 million in the year-earlier quarter and up
11% over $906 million in the first quarter. An earlier sales milestone was
reached in 1979 when ANNUAL sales set a new high of $1.013 billion.
The new highs reflect the broadening economic recovery, the leverage in our
basic terminal and connector business, the introduction of many new products,
increased market share, and continued diversification into related product
areas and relatively new geographic markets. We are now reaping the benefits
of our extensive efforts in recent years to reduce costs, improve productivity
and service, continue the steady flow of new products, diversify into value-
added assemblies and related components, and expand into newly emerging
geographic markets on a timely basis.
Compared to the year-earlier period, second quarter sales were up 12% in the
U.S., and up 16% in both local currencies and in U.S. dollars internationally.
The weakening of the U.S. dollar from the first quarter to the second quarter
increased second quarter sales by $17 million. If currency rates were to remain
constant during the rest of 1994, the effect on international sales would be
positive when compared to the year-earlier period and to the first half of this
year.
First half sales in the U.S. were up 11% -- with growth strongest in the
automotive and communications markets. International sales were up 11% in
both local currencies and U.S. dollars. European sales were up 12% in local
currencies and 6% in U.S. dollars. Strongest markets were automotive and
industrial/commercial electronics. Asia/Pacific sales were up 6% in local
currencies and 14% in U.S. dollars. While Japanese sales were down very
slightly for the entire six months, good growth was achieved in the second
quarter over both the year-earlier and prior quarters. Strong, broad-based
growth continued in the rest of the region. In the Americas (Canada and Latin
America) sales were up 30%.
The record second quarter earnings of 91 cents/share reflect the effects of
both good sales gains and improved margins over the year-earlier
(72 cents/share) and prior quarter (76 cents/share).
OUTLOOK
The outlook continues to improve. Because of the usual summer seasonal effects,
sales and earnings will probably be slightly lower in the third quarter, and
then could set new highs in the fourth quarter. AMP is fully participating in
the broadening economic recovery in North America, Latin America, Europe, and
Asia/Pacific. Economic recovery is underway in Europe and is just beginning in
Japan. We expect our sales to grow this year in local currency terms between
10-15% in the U.S. (up 10% in 1993); about 10% in Europe (up 1% in 1993);
5-10% in the Asia/Pacific region (up 2% in 1993); and about 20% in the
Americas (up 15% in 1993). Unless there is a significant change in economic
conditions or currency rates, second half sales and earnings should be better
than the record first half results.
We are optimistic about growth prospects for the next few years. We believe we
are entering a period of sustainable, low-inflation economic growth in most of
the industrialized world, and continued rapid growth in world trade. The
electrical/electronic markets we serve should continue to grow two to three
times the Gross Domestic Product growth rate in most countries. Connectors
and interconnection assemblies will play an increasingly critical role in the
performance of electrical and electronic systems. We believe our goals are
realistic; our strategies sound. Our growth goal is to increase sales better
than 1 1/2 times the 6-9% annual rate expected for the connector industry
under favorable economic conditions. Our profitability goals, given a
reasonably good business environment, are 18-20% pretax margins and 20%
return on shareholders' equity.
Our strategies include maintaining our leadership in connectors; increasing
the proportion of our business in total interconnection systems, value-added
assemblies, and related electrical/electronic components; making more
acquisitions and strategic alliances; and aggressively expanding into new
geographic markets.
ORGANIZATIONAL CHANGE
New Financial Officer Added
Robert M. Ripp, former Corporate Vice President and Treasurer of IBM, was
elected Corporate Vice President-Finance. Mr. Ripp, age 53, held various
operating and financial management positions during his 29 years with IBM.
He will report to Benjamin Savidge, Executive Vice President and Chief
Financial Officer.
EXPANSION
We continue to expand our facilities. In the U.S., construction has started on
a new 180,000 sq. ft. engineering building in the Harrisburg, PA area;
operations have begun in a 200,000 sq. ft. manufacturing plant in Greensboro,
NC, to serve the U.S. automotive market, where we are experiencing rapid
growth, and in a new panel assembly plant in Austin, TX; and facilities are
being added in North Carolina for greater production capacity in cable and
cable assemblies. Internationally, construction of a second plant in Korea is
nearing completion and plans are progressing for additional plants in China
and India and additional space in Japan. The immediate need for additional
floor space is being moderated by closer regional management of the deployment
of manufacturing resources, and by continuing progress toward maximization of
multi-shift operations in many of our facilities where required and feasible.
Over two-thirds of the record $375-400 million capital expenditures we expect
this year will be for machinery, equipment, and systems to not only add
capacity on many existing products, but also to tool up new products and
improve quality, productivity, and delivery.
ACQUISITIONS/ALLIANCES
We continue to make acquisitions and alliances to speed our entry into new
product and market areas and leverage our resources. In the past year we have
made over a dozen acquisitions and minority equity interest investments.
During the second quarter we announced four more minority equity position
investments.
ADFlex Solutions Inc. (Chandler, AZ), formerly part of Rogers Corp, is the
leading U.S. provider of flexible circuits and flex-based assemblies. Sales
are over $60 million; employment is 1900.
Smartflex Systems, Inc. (Tustin, CA) is a leading supplier of intelligent
electronic subsystems for OEMs, emphasizing surface mount technology and
flexible circuit substrates--particularly for the hard disk and portable
computer markets--and has pioneered the Chip-on-Flex technology. Sales exceed
$70 million; employment is over 600.
Intellon Corporation (Ocala, FL; 30 employees) is a leader in home automation
control systems. Its Spread Spectrum Carrier technology implements the
Electronic Industry Association's CEBus (Consumer Electronics Bus) technology
standards on power line and radio frequency products.
Powerflor, Inc. (Charlotte, NC; 20 employees) provides an innovative,
low-profile, raised-floor cable management system that integrates modular
carpeted floor panels with power and communications cabling and outlets for a
total floor wiring system.
AMP JOINS RECYCLING PARTNERSHIP
AMP is a charter member of "Waste Wi$e," a voluntary partnership of 280 U.S.
firms with the EPA aimed at reduction in the generation of solid waste,
collection of recyclables, and buying of recycled goods. In 1993, AMP's U.S.
operations recycled 3,500 tons of paper, cardboard, pallets, and skids.
DIVIDEND ACTION
On July 27, 1994 the Board of Directors declared a regular quarterly dividend
of 42 cents/share payable September 1, 1994 to shareholders of record August 8,
1994. The current rate indicates an annual dividend of $1.68/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 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 June 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: August 12, 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
