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, 1996
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
August 1, 1996 was 219,518,030.
Includes an Exhibit Index.
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, 1996 and 1995, the Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995, and the Consolidated Balance
Sheets at June 30, 1996 and December 31, 1995, 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,
1996 1995(1)
----------- -----------
Net Sales .................... $ 1,365,487 $ 1,336,059
Cost of Sales ................ 947,697 887,718
----------- -----------
Gross income ............. 417,790 448,341
Selling, General and
Administrative Expenses ..... 243,250 286,598
----------- -----------
Income from operations ... 174,540 161,743
Interest Expense ............. (8,166) (10,326)
Other Income (Deductions), net 7,132 (3,926)
----------- -----------
Income before income taxes 173,506 147,491
Income Taxes ................. 57,885 49,973
----------- -----------
Net Income ................... $ 115,621 $ 97,518
=========== ===========
Per Share - Net income...... $.53 $.45
Cash dividends....... $.25 $.23
Weighted average number of shares.219,628,343 217,329,362
=========== ===========
(1) 1995 Selling, General and Administrative Expenses include $48.7 million
in expenses for the M/A-COM merger.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Six Months
Ended June 30,
1996 1995(1)
----------- -----------
Net Sales .................... $ 2,728,462 $ 2,631,828
Cost of Sales ................ 1,880,282 1,762,575
----------- -----------
Gross income ............. 848,180 869,253
Selling, General and
Administrative Expenses ..... 488,679 514,810
----------- -----------
Income from operations ... 359,501 354,443
Interest Expense ............. (16,148) (19,397)
Other Income (Deductions), net 10,693 (18,063)
----------- -----------
Income before income taxes 354,046 316,983
Income Taxes ................. 121,977 114,150
----------- -----------
Net Income ................... $ 232,069 $ 202,833
=========== ===========
Per Share - Net income...... $1.06 $.93
Cash dividends....... $ .50 $.46
Weighted average number of shares.219,138,549 217,248,797
=========== ===========
(1) 1995 Selling, General and Administrative Expenses include $48.7 million
in expenses for the M/A-COM merger.
AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and Unaudited)
(dollars in thousands)
For the Six Months
Ended June 30,
1996 1995
--------- ---------
Cash and Cash Equivalents at January 1 ............... $ 212,538 $ 244,568
Operating Activities:
Net Income ..................................... 232,069 202,833
Noncash adjustments -
Depreciation and amortization ............... 202,059 176,007
Changes in operating assets and liabilities . (128,304) (108,965)
Other, net ..................................... 50,587 52,178
--------- ---------
Cash provided by operating activities ....... 356,411 322,053
========= =========
Investing Activities:
Additions to property, plant and equipment ..... (293,754) (326,221)
Purchase of subsidiary -
Net of cash and cash equivalents acquired.... (35,971) ---
Other, net ..................................... (51,626) 25,466
--------- ---------
Cash used for investing activities .......... (381,351) (300,755)
--------- ---------
Financing Activities:
Changes in short-term debt ..................... 101,305 55,730
Additions to long-term debt .................... 4,179 13,976
Reductions of long-term debt ................... (18,612) (18,580)
Purchases of treasury stock .................... (172) (112)
Dividends paid ................................. (109,224) (96,449)
Other, net ..................................... --- 1,188
--------- ---------
Cash used for financing activities .......... (22,524) (44,247)
--------- ---------
Effect of Exchange Rate Changes on Cash .............. 1,294 5,001
--------- ---------
Cash and Cash Equivalents at June 30 ................. 166,368 226,620
========= =========
Changes in Operating Assets and Liabilities:
Receivables .................................... (89,629) (86,510)
Inventories .................................... (48,244) (63,764)
Other current assets ........................... (20,547) (29,692)
Payables, trade and other ...................... (11,819) (2,394)
Accrued payrolls and benefits .................. 23,921 36,440
Other accrued liabilities ...................... 18,014 36,955
--------- ---------
(128,304) (108,965)
========= =========
AMP Incorporated & Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Condensed)
(dollars in thousands)
June 30, December 31,
1996 1995
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents ......... $ 166,368 $ 212,538
Securities available for sale ..... 50,152 58,197
Receivables ....................... 1,084,311 1,011,460
Inventories---
Finished goods and work in
process ....................... 412,325 411,504
Purchased and manufactured parts 293,765 263,926
Raw materials ................... 98,149 87,373
---------- ----------
Total inventories ............. 804,239 762,803
Other current assets .............. 258,702 232,910
---------- ----------
Total current assets .......... 2,363,772 2,277,908
---------- ----------
Property, Plant and Equipment ....... 4,521,817 4,352,026
Less - Accumulated depreciation ... 2,510,668 2,413,760
---------- ----------
Property, plant and equipment,
net .......................... 2,011,149 1,938,266
---------- ----------
Investments and Other Assets ........ 345,245 288,565
---------- ----------
TOTAL ASSETS ........................ $ 4,720,166 $4,504,739
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt ................... $ 423,083 $ 318,169
Payables, trade and other ......... 427,448 460,892
Accrued liabilities ............... 526,241 487,032
---------- ----------
Total current liabilities ....... 1,376,772 1,266,093
Long-Term Debt ...................... 199,901 212,485
Other Liabilities and
Deferred Credits .................. 274,470 258,133
---------- ----------
Total liabilities ............... 1,851,143 1,736,711
Shareholders' Equity ................ 2,869,023 2,768,028
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................. $4,720,166 $4,504,739
========== ==========
AMP Incorporated & Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(June 30, 1996, 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,
1996.
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
HIGHLIGHTS
- ----------
SECOND QUARTER 1996
SALES -- Record $1.37 billion; up 2% from $1.34 billion in the year-earlier
quarter; up slightly from $1.36 billion in the prior quarter
EARNINGS -- 53 cents/share; up 18% from 45 cents/share in second quarter of
1995, which was after a reduction of 16 cents for the effects of our merger with
M/A-COM last June; flat with 53 cents/share in first quarter 1996
BOOKINGS --$1.33 billion; down from $1.41 billion in first quarter 1996
ORDER BACKLOG -- Down $37 million during quarter to $1.01 billion
DIVIDEND -- Regular quarterly dividend of 25 cents/share declared payable
September 3, 1996
SIX MONTHS 1996
SALES -- $2.73 billion, up 4% from $2.63 billion in first half 1995
EARNINGS -- $1.06/share, up 14% from 93 cents/share in first half 1995, which
was after a 16 cents reduction for the effects of the merger with M/A-COM last
June
CAPITAL EXPENDITURES -- $294 million in first half, total for year expected to
be lower than the $713 million in 1995
NEWS RELEASE
- ------------
A news release on current results and outlook was made Wednesday, July 24, 1996:
SALES AND EARNINGS
- ------------------
Sales rose 2% to a record $1.37 billion from $1.34 billion in the
year-earlier quarter, and up slightly from $1.36 billion in the prior quarter.
As in the first quarter, sales were lower than earlier expected -- continuing to
be affected by weak market demand in the U.S., slow economic growth in Europe,
the strengthening of the U.S. dollar, and product price erosion.
Earnings of 53 cents/share were up 18% from 45 cents in the year-earlier
quarter which was after a reduction of 16 cents/share for the effects of our
merger with M/A-COM last June, and were level with the 53 cents in the first
quarter of this year. This is in line with our outlook comments in a June 28,
1996 news release.
Changes in exchange rates reduced sales $65 million from the year-earlier
quarter and $11 million from the prior quarter. Exchange rates staying at
current levels the rest of the year would reduce third quarter sales by $43
million from the year-earlier quarter and $1 million from the prior quarter, and
reduce full year sales by over $150 million.
The U.S. (44% of the total) was up 10% in sales from the 1995 second
quarter due primarily to the continued good growth of our Global Interconnect
Systems Business group and M/A-COM subsidiary. Strongest sales growth by markets
was in automotive and industrial/commercial electronics.
European sales (32% of the worldwide total) were up 4% year-to-year in
local currencies and down 1% in U.S. dollars. Strongest growth by countries was
Spain and Italy, and by markets was automotive and networking. Slow economic
growth has reduced our growth rate in Europe from the strong pace of the prior
two years.
Asia/Pacific sales (19% of the worldwide total) were up 5% year-to-year in
local currencies, but down 10% in U.S. dollars due to the strengthening of the
U.S. dollar against the Japanese yen. We are now experiencing modest growth in
Japan because of better economic conditions. Strongest country growth was in
China and South Korea, strongest growth by market categories was in
communications and consumer goods. Price competition is most evident in the
personal computer market in this region.
The second quarter pretax profit margin held fairly steady with the first
quarter despite slow sales growth and further price erosion.
OUTLOOK
- -------
Although the near-term outlook has become more uncertain, we continue to be
optimistic about the prospects for growth in each region later this year and for
next year. Third quarter sales could be similar to the second quarter, with
continued growth in the Asia/Pacific region (helped by recovery in our Japanese
business) offsetting the usual seasonal softness in the U.S. and Europe. We
continue to expect higher sales in the fourth quarter. The inventory workdown
process in the U.S. personal computer and cellular phone markets may be nearing
an end and the U.S. manufacturing sector index is showing signs of a pickup;
however, this has not yet resulted in improvement in our U.S. connector order
rate. We continue to achieve good growth in our product/market diversification
business.
Assuming sufficiently favorable economic, market and currency conditions,
we continue to expect earnings to improve in the second half compared to the
first. This should result from the combination of cost reduction/productivity
improvement efforts, the diminishing losses in our Global Interconnect Systems
Business, and improving margins in our M/A-COM subsidiary.
In recent weeks the range of analyst earnings estimates has shifted
slightly to $2.20-2.30 from a $2.25-2.35 range. In view of the many
uncertainties in the outlook for the rest of the year, we would not disagree
with this change.
While reducing operating costs and expenses, cutting back the capital
spending level, and adjusting capacity to meet current conditions, we continue
to lay the foundation for good longer-term growth. We are doing this through
product/market diversification (20% of sales this year), expansion into new
geographic areas (several in the past year), acquisitions (four in the past
year), and a steady flow of new products from a high level of spending on
research, development and engineering ($600 million this year). To focus
resources more effectively, we are reorienting our worldwide organization
through creation of a number of product- and market-centered regional and global
businesses overlaid on our traditional geographic organization.
NEW DIRECTOR ADDED
- ------------------
Joseph M. Magliochetti, President, Dana Corporation, was elected an AMP
director on July 24, 1996. With 30 years experience in the automotive industry,
one of AMP's largest markets, he adds a significant new dimension to the AMP
board.
DIVIDEND ACTION
- ---------------
On Wednesday, July 24, 1996, the Board of Directors declared a regular
quarterly dividend of 25 cents per share, payable September 3, 1996 to holders
of record August 5, 1996. The current indicated annual rate of $1.00 per share
is up from 92 cents per share in 1995 and 84 cents in 1994 -- and is the 43rd
consecutive annual increase.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
- --------------------------------------------------------
Statements in this Report on Form 10-Q that are not strictly historical
facts are "forward-looking" statements which should be considered as subject to
uncertainties that exist in the Company's operations and business environment.
These uncertainties which include economic and currency conditions, market
demand and pricing, competitive and cost factors, and the like, are set forth in
the Company's Report on Form 10-K for the year ended December 31, 1995 filed
with the Securities and Exchange Commission on or about March 29, 1996.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits --
Exhibit
Number Description
------- -----------
27 - Financial Data Schedule
(B) Reports on Form 8-K --
There were no reports on Form 8-K for the three months ended June
30, 1996.
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 13, 1996 AMP INCORPORATED
(Registrant)
By: /s/ Robert Ripp
----------------------------------
Robert Ripp
Vice President and
Chief Financial Officer
By: /s/ W. S. Urkiel
----------------------------------
William S. Urkiel
Controller
**
EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S 1996
SECOND QUARTER 10Q AND IS
QUALIFIED BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 166,368
<SECURITIES> 50,152
<RECEIVABLES> 1,084,311
<ALLOWANCES> 0
<INVENTORY> 804,239
<CURRENT-ASSETS> 2,363,772
<PP&E> 4,521,817
<DEPRECIATION> 2,510,668
<TOTAL-ASSETS> 4,720,166
<CURRENT-LIABILITIES> 1,376,772
<BONDS> 0
<COMMON> 80,793
0
0
<OTHER-SE> 2,788,230
<TOTAL-LIABILITY-AND-EQUITY> 4,720,166
<SALES> 2,728,462
<TOTAL-REVENUES> 2,728,462
<CGS> 1,880,282
<TOTAL-COSTS> 1,880,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,148
<INCOME-PRETAX> 354,046
<INCOME-TAX> 121,977
<INCOME-CONTINUING> 232,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,069
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
