SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the year ended December 31, 1995
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
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(Exact name of registrant as specified in its charter, and state of
incorporation)
Employer Identification No. 23-0332575
Harrisburg, Pennsylvania 17105-3608
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(Address of principal executive offices of registrant)
(717) 564-0100
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Exchange on which Registered
Common Stock (without Par Value) New York
(Outstanding at 3/08/96 - 219,313,134
shares)
Securities registered pursuant to Section 12(g) of the Act:
None
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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 [ ] .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 8, 1996: $9,104,311,834
(217,416,402 shares at $41.875 per share). For purposes of the
foregoing calculation, all directors and members of the Global
Strategic Planning Committee of the registrant have been deemed
to be affiliates, but such assumption should not be construed as
a determination by the registrant that all such individuals are
in fact affiliates of the registrant.
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Documents Incorporated by Reference:
1. Cited portions of the Annual Report to shareholders for
fiscal year ended December 31, 1995(Parts I, II, IV)
2. Cited portions of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting,
specifically excluding the Performance Graph and the
Compensation and Management Development Committee
Report on Executive Compensation (Part III)
10-K REPORT FOR YEAR ENDED DECEMBER 31, 1995
PART I.
ITEM 1. BUSINESS
NOTE: All financial amounts and per share data have been restated
to account for the pooling-of-interests with M/A-COM, Inc.
on June 30, 1995.
AMP Incorporated designs, manufactures and markets a broad
range of electronic, electrical and electro-optic connection
devices and an expanding number of interconnection systems and
connector-intensive assemblies. The Company's products have
potential uses wherever an electronic, electrical, computer or
telecommunications system is involved, and are becoming
increasingly critical to the performance of these systems as
voice, data and video communications converge. The Company's
customers are as diverse as the products themselves, and include
such differing types of accounts as original equipment
manufacturers (OEMs) and their subcontractors, utilities,
government agencies, distributors, value-added resellers, and
customers who install, maintain and repair equipment. The
industries covered by these accounts include Computer/Office,
Industrial/Commercial, Communications, Consumer Goods,
Transportation (including automotive)/Electrical, Aerospace/
Military, and Construction. The Company markets its products
worldwide primarily through its own direct sales force, but also
through distributors and value-added resellers to respond to
customer buying preferences. In 1995, 85 percent of product was
sold through direct channels to market and 15 percent through
distribution and co-op affiliate channels. Sales and/or
manufacturing operations have been established in 212 Company
facilities located in 43 countries to serve customers in the
current and emerging markets throughout the world. The Company
is positioning itself to be a market-driven, "GLOBE-ABLE"
organization.
The Company was incorporated in 1941 as a New Jersey
corporation under the name Aircraft-Marine Products, Inc. At
that time the focus of the Company's operations was the terminal
business. In 1952 the Company established its first
international operations, located in Canada and France. In 1956
the Company changed its name to AMP Incorporated and became
publicly owned. During the 1960s and 1970s the Company expanded
its focus to varying types of connectors, including those
required in the computer industry. The Company reincorporated in
Pennsylvania in 1989. The world leader in electronic/electrical
connection devices and associated application tools and machines,
the Company is now diversifying into total interconnection
systems, related components, and connector-intensive assemblies.
At the end of 1995 the Company employed approximately 40,800
people worldwide, up 6,800 from year-end 1994.
Markets
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The Company serves over 250,000 customer locations in over 104
countries, covering many diverse markets. Key financial measures
charting the development of the Company's business during the
past 5 years are set forth in the "Historical Data" table of the
Company's 1995 Annual Report to shareholders, and are also shown
in Item 6, entitled "Selected Financial Data", of this Report.
Sales to trade customers by each of the Company's geographic
segments and sales or transfers between the Company's various
geographic segments during 1993-1995, together with pre-tax
income and identifiable assets attributable to each
geographic segment for those years, are shown in Footnote No. 17
to the Consolidated Financial Statements, found on page 45 of the
Company's 1995 Annual Report to shareholders and incorporated
herein by reference. The Company's diversification of worldwide
sales is evidenced by the following table:
GEOGRAPHIC SEGMENTS 1995 1994 1993
(percent)
Americas 47 50 50
Europe/Middle East/Africa 33 30 30
Asia/Pacific 20 20 20
For 1995, the Company's sales were distributed across general
markets as follows:
MARKETS
(percent)
Aerospace/Military 5
Industrial/Commercial 13
Communications 21
Computer/Office 18
Consumer Goods 7
Transportation/Electrical 24
Distribution, Construction, etc. 12
The business in which the Company is engaged is highly
competitive. The number of competitors is estimated at over
1,500 worldwide, and in all products the Company is subject to
active direct and indirect competition. The markets available to
the Company have generally been growing as a whole, although the
10 years ending in 1993 saw slower growth due to recessions,
industry corrections and price erosion. Most of the Company's
products involve technical competence in their development and
manufacture. Generally speaking, the Company competes primarily
through offering high-quality, technical products and associated
application tooling, with an emphasis on product performance,
timely delivery and service, and only secondarily competes
on a price basis. The Company's broad range of products,
worldwide sales and marketing presence, and service
innovations such as the computer-equipped product information
and order handling departments, the automated fax service, the
use of computer disks to communicate engineering and drawing data,
an Internet product catalog, the expedited sample request
delivery system, global account management, and the EDI order
system have served to differentiate the Company from its
competitors and allowed the Company to become a supplier of
choice to many customers as they reduce their supplier lists
and seek global sourcing contracts.
The Company is also realigning its organizational structure
to free marketing and sales people from operational ties and
permit them to focus on customers and markets. This will make it
easier for sales people to choose the right products for their
customers from anywhere in the world, and will encourage
industry-driven product solutions and shared responsibility for
innovation across organizational boundaries, without jeopardizing
the established customer interface.
In addition, the Company has distinguished itself by its
development of new and improved products and technologies. The
Company has over 15,100 patents or utility models issued or
pending throughout the world. AMP ranks 20th among U.S.
corporations and 43rd among all patentees for U.S. patents
granted during 1995. The Company aggressively enforces its
patents to preserve its proprietary technological advantages.
The Company's backlog of unfilled orders increased in 1995
to $1 billion at year-end compared to $825 million at year-end
1994 as the result of the robust economic recovery that occurred
throughout the world during the first nine months of the year and
the Company's resulting good sales growth in each geographic
segment and virtually all market categories during that period.
A majority of these orders were for delivery within the next 90
days, and all were scheduled for delivery within 12 months.
The primary seasonal effect generally experienced by the
Company is in the 3rd quarter when there usually is a temporary
leveling off or modest drop in the rate of new orders and
shipments. This seasonal decline in new orders and shipments is
caused by the softening of customer demand in certain markets
such as appliances, automotive and home entertainment goods
arising from model year changeovers, plant vacations and
closedowns, and other traditional seasonal practices. This
effect is usually most evident in the Company's Europe/Middle
East/Africa and Asia/Pacific regions, compared against sales
results of the 2nd quarter. In the 1st quarter the Company
usually experiences some seasonal strengthening in domestic
sales and orders compared with the prior 4th quarter
performance as customers resume operations after the holidays
and replenish inventories following the year-end close.
In 1995 the Company's 2nd quarter earnings, before
including M/A-COM's results, of 61 cents per share set a new high
for the Company. However, as restated to account for the
pooling-of-interests with M/A-COM, the Company's 2nd quarter
earnings were 45 cents per share, reduced by the one-time
merger costs and the dilutive effect from issuing AMP shares
in exchange for all M/A-COM stock. The Company's 3rd quarter
earnings were 51 cents per share, having been negatively
impacted by the seasonal dip in sales, as well as currency
effects and a charge for consolidating our US military/
aerospace connector operations, inclusion of the full loss
of our AMP-AKZO printed circuit board business because
we acquired 100% control of the AMP-AKZO joint venture
and a higher effective tax rate. For the year, the
Company's earnings per share, accounting for the merger
special charge and dilutive effect, were a record $1.96
per share.
The Company's normal terms of sale are net 30 days, and the
average days outstanding for accounts receivable is typically 45
days in the U.S. and 72 days on a global basis. The Company
warrants most of its products against defects in materials and
workmanship under normal use for periods of up to 1 year. The
Company's warranty experience is generally favorable, with a low
rate of product return. An extensive distributor network,
together with the Company's own highly automated regional
distribution center system, is utilized to provide timely
delivery of products to the customers.
Products
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The Company manufactures and sells more than 100,000 types
and sizes of products, including terminals; fiber-optic, printed
circuit board and cable connectors and assemblies; connectorized
printed circuit boards; cable and cabling systems; sensors; wide
and local area network products and systems; and related
application tools and machines. These products represent over
500,000 active part numbers in over 430 global product lines.
Nearly 90% of the Company's business is in electronic/electrical
connection, switching and programming devices and associated
application tools and machines. Included within this product
area is a great variety of types and sizes. These product
families generally involve the same or very similar basic
technology, materials, production processes and marketing
approaches. The common manufacturing capabilities, which have
become core competencies of the Company, include connectivity
technology, high speed precision metal stamping, precision metal
plating, plastic molding, and automated assembly of small metal
and plastic parts. Over 50% of the Company's sales are of
products provided in strip form or on reels and applied by
customers with special application machines, and an additional
8% are of products that are applied with special tools. The
balance of sales is of pre-assembled devices and other products
that do not require application tools or machines. Over 90% of sales
are of products in just three Standard Industrial Classification (SIC)
4-digit codes: Electronic Connectors; Electronic Components -
NEC; and Current Carrying Wiring Devices.
Application tooling has been and remains an integral part of
the Company's sales strategy and growth. The Company has
provided over 50,000 machines to customers on either a lease
or purchase basis, and millions of manual and power tools have
been sold to customers, to apply the Company's products to wires,
cables, printed circuit boards, and flexible circuitry. In the
past decade the Company has introduced over 150 new types of
machines and tools, ranging from hand tools for maintenance and
repair to computer-controlled machines that make thousands of
connections per hour and continuously monitor the quality of the
connections as they are being made. The Company has always
marketed products on the basis of total installed cost -- not
product price alone -- and the Company's concentration on
providing fast and reliable application methods should give the
Company an advantage as concerns for productivity, quality and
system performance continue to rise. Hundreds of field
service engineers throughout the world install this
applicating equipment, train customer personnel to operate,
maintain and service it, and provide emergency service.
While the Company is seeking to widen its leadership in the
terminal and connector product area, it is also steadily
diversifying into total interconnection systems and higher value
assemblies. This is increasing the potential markets being
addressed by the Company from approximately $25 billion to around
$80 billion. Part of this new breadth of potential business will
come from cables, fiber-optic and signal conditioning products,
and flexible circuitry based connectors and sensors that expand
the Company's connector and interconnection technology. Another
source for expansion is into interconnection solutions, such as
cable and board assemblies, that are logically related to those
connector and interconnection competencies. The final thrust
toward new opportunities for growth addresses needs for home
automation, PC cards, microwave technologies, and
networking/premise wiring hardware, software and related
services.
The Company is accomplishing this growth by new product
development as well as numerous small, strategic acquisitions,
minority interest investments, joint ventures and other
strategic alliances. Acquisitions provide technologies that
are key to entering or enhancing the Company's participation
in the respective markets and will form a cornerstone for the
Company's expansion of its potential business. New products
(representing products introduced during the last 5 years)
continue to represent nearly 20% of current sales. In 1995
the Company added about 20 new product families and over 50,000
new part numbers, representing both new product part
numbers and part numbers for extensions of existing products.
Much of this growth, whether by new product development or
acquisitions and alliances, focuses on the fastest growing
sectors and major trends in the electronic and electrical
markets -- such as miniaturization, high speed circuitry,
networking, wireless transmission, electro-optics, conversion
to digital, software integration with hardware, and the
convergence of computer and communications technologies. On
June 30, 1995 a subsidiary of the Company merged into M/A-COM,
Inc., a Massachusetts corporation, which caused M/A-COM, Inc. to
become a wholly-owned subsidiary of the Company. M/A-COM, a
world leader in the design and manufacture of microwave,
millimeter wave, wireless telephone and radio frequency
interconnection components to the wireless data and
telecommunications industries, will enhance the Company's
strategic presence in the high-growth market for advanced
wireless components.
Operations
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While the Company's principal offices are located in
Harrisburg, Pennsylvania, the Company is realigning its
operations into a seamless global organization that lends
regional governance and support to horizontally interdependent
businesses that act locally but think globally. The regions
are identified as the Americas, Asia/Pacific and Europe/Middle
East/Africa (EMEA), and the current businesses are the terminal
and connector business and the Global Interconnect Systems
Business. The terminal and connector business constitutes the
Company's more traditional lines of products. The Global
Interconnect Systems Business embraces the Company's efforts
to broaden its market opportunities into subsystems, electro-
optic products and complete interconnection systems and services
for OEMs and end-use customers. During 1995 the Global
Interconnect Systems Business realigned regionally,
paralleling the global structure of the Company's terminal and
connector business and positioned itself to benefit by the regional
support organization.
The Company's efforts to integrate both regionally and
globally should allow it to capitalize on the regionalization of
the customers' production operations and trade that is being seen
to one degree or another in all three geographic regions.
Regional strategies within each business have been
developed to gain market share and improve profitability,
involving a decoupling of sales and marketing into a market-
driven function that profitably satisfies customers and
anticipates their needs, and a comprehensive integration of all
aspects of operations and business administration to better
support sales and marketing. At the same time the
organizational realignment should enable the Company to quickly
and effectively assimilate its geographic expansion into newly
emerging markets. The Company has been aggressively locating
manufacturing and sales operations where customers' operations
and local market opportunities coincide to make it a positive
investment climate. Since 1990 the Company has either
finalized plans for or actually started sales or manufacturing
operations in India, China, Hungary, the Philippines, Thailand,
the Czech Republic, Poland, Turkey, Ireland, Israel, South
Africa and Slovenia, and marketing activities have been extended
into Indonesia, Vietnam, Pakistan, Eastern Europe, South Africa
and the Middle East. Broadened capabilities are being developed
around the world for the personal computer, wireless products,
networking, telecommunications, power utility and transportation
markets to augment regional efforts to provide products that support
infrastructure advances in developing nations.
Acquisitions have become an integral part of the Company's
growth and diversification strategy. In 1995 the Company acquired
M/A-COM, Inc. and POWERFLOR, and acquired 100% control of the AMP-AKZO
joint venture in printed circuit boards. POWERFLOR's modular
flooring technology will facilitate installation of AMP
interconnection systems and networking/premises wiring in existing
solid floor buildings. In addition to these acquisitions, in
February 1996 the Company acquired Madison Cable Corporation, a
leader in high performance, engineered electronic cables, and Parm
Tool, which affords the Company greater capabilities in mold design
and mold making. Acquisitions enable the Company to enhance existing
capabilities and fill niches in our rapidly expanding range of
interconnection products.
The Company's Journey to Excellence is a comprehensive
program seeking continuous improvement in all phases of its
business. It uses techniques such as "process mapping," "value
analysis," "successfully demonstrated practices" and extensive
"benchmarking," and has become an integral part of the fabric of
the Company's operations. Goals include increased flexibility in
global programs to adapt to changing business dynamics, and the
program is being updated to incorporate growth and profitability
issues such as the anticipation of customer needs. This program
continues to raise the standard of performance in terms of
quality, productivity, delivery, service, engineering skills and
many other key aspects of the Company's business, and is being
tailored to fit into each region's strategies for the future.
Extensive efforts are also being undertaken to maximize the
utilization of the Company's human resources. Training,
development, education, empowerment through the delegation of
more authority and responsibility, employee teams, performance-
linked pay, centralized recruiting, and programs to encourage
recognition of outstanding achievements are being promoted to
increase the involvement and effectiveness of employees. A
broad-based program for improving leadership quality and
diversity includes succession planning and expatriate, executive
and organizational development programs. The employees also are
being provided with the computers, communication systems,
business machines and scientific/engineering equipment necessary
for them to realize their full potential. The Company is
implementing a global wide area network, expanding electronic
mail and video conferencing capabilities worldwide, and
instituting a business enterprise information system to support
global decision making. Regional training centers are in
the process of being established to facilitate the distribution
of these learning and awareness methods throughout the world.
For better leveraging of the Company's basic manufacturing
capabilities into all areas of production, certain business units
and subsidiaries have also been designated as "Regional Centers
of Competency" in specific product/market categories.
The Company is nearing the culmination of a 6-year effort to
certify its quality management systems to the rigorous
International Organization for Standardization (ISO) 9000
standard. Worldwide, the quality management systems of 36
business units and their associated facilities, representing
virtually all of the Company's operations, have either received
or have been recommended for ISO certification. Qualification to
this common standard should help ensure that the Company's
products and services will be of uniformly high quality wherever
they are manufactured, sold or provided throughout the world.
The Company is also aggressively pursuing the certification of
its locations to the more rigorous Manufacturing Requirements
Planning (MRP) II, Class A standards for manufacturing
requirements planning systems. Manufacturing employment
increased by over 9,000 in 1995 to more than 25,000 people.
Product standards are playing an increasingly important role
in the development and marketing of new products and the shaping
of new markets. The Company takes an active role in the
development of industry standards that affect its products and
development activities. A capable corporate group of standards
professionals and a global network of Company employees in over
500 industry associations and standards-setting bodies are
involved in laying the groundwork for the acceptance of the
Company's products under applicable standards. The Company has
developed a unique training course that has gained significant
customer and national recognition, and that is becoming the basis
for a national program by the American National Standards
Institute.
The Company has a corporate-wide program for managing
current and emerging environmental issues. Sound environmental
practices are promoted by adoption and implementation of strict
internal standards that meet or exceed known and anticipated
regulatory, industry and customer-driven environmental
requirements worldwide. These practices include compliance
audits and environmental assessments conducted for new and
existing properties, engineering support provided to operations
staff to minimize wastes and other regulatory impacts, training
programs, recycling programs, maintenance of a mainframe-based
computer data base, and resources to provide support to
operations staff in achieving environmental compliance generally.
In 1995 the Company formalized its global approach for managing
environmental matters through the recently created corporate
group known as Global Environmental Services, with staff in
Harrisburg, London and Singapore. Global Environmental Services
coordinates global environmental programs and works closely with
other units of the Company to further compliance with the
Companies environmental policies. The Company has positioned
itself to timely respond to possible customer requirements in
1996 for certification under the new ISO 14000 environmental
standard.
The Company is not aware of any material claims against its
assets relating to environmental matters, based on current
information. The costs to the Company of compliance with known
and anticipated legal, regulatory, industry and corporate
environmental requirements are not expected to have a
material effect on capital expenditures, earnings and the
competitive position of the Company. However, the Company is
potentially liable for investigative and environmental clean-up
costs at a number of sites the Company owns and at sites owned by
third parties. The Company has been identified as a Potentially
Responsible Party at 5 National Priorities List ("NPL")sites in the
U.S. owned by third parties pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). In addition, the
Company is identified as an alleged source of waste at 3 sites owned
by third parties at which a state has jurisdiction over the response
action. The Company has spent a total of approximately $500,000 to
date at these sites, and future costs could be in the range of $2.2
to $6.7 million or more.
The Company also is investigating potential liability at 22 of its
current or former facilities, including facilities associated with its
subsidiaries. One of these sites is listed on the NPL and is subject
to a corrective action consent order under the Resource Conservation
and Recovery Act. The Company has spent approximately $1.9 million
since 1984 to remediate this property. Cleanup has progressed to the
point where the Company filed a petition in 1995 to have the site
removed from the NPL. Future costs associated with this site are
expected to total approximately $1 million dollars over the next
5 years. Additionally, the Company has incurred approximately
$1.7 million in costs to remediate conditions at its current facility
in Williamstown, PA and an additional $2.8 million in costs are expected.
Two properties formerly occupied by M/A-COM in Sunnyvale, CA and New
Brunswick, NJ are also undergoing remediation, with expected future
costs of approximately $1.5 million. The Company has spent approximately
$12.2 million on the remaining 17 current or former properties since
1984 and future costs are anticipated to be $1 to $2 million annually
for the next several years. Several of these facilities are believed
to have been impacted by third parties and the Company is taking
appropriate legal action.
The Company believes it has adequate sources of supply and
does not expect the cost or availability of raw materials to have
a significant overall effect on its total current operations.
Availability of remittances to the parent Company by its
subsidiaries is subject to exchange controls and other
restrictions of the various countries in which the subsidiaries
are located. Presently, there are no foreign exchange or
currency restrictions in the various countries that would
significantly affect the remittance of funds to the Company. In
view of the significant portion of the Company's customer sales
that originate outside of the U.S. (approximately 60%),
fluctuations in the exchange value of the U.S. dollar have an
impact on sales and earnings.
Product Development
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The Company is committed to an ongoing program of new
product development and a continual expansion of its technical
capabilities. This broadening of products and capabilities is
made possible through both internal development efforts and
external strategic relationships such as acquisitions, minority
equity investment positions, joint ventures, alliances, research
contracts, teaming arrangements, licensing and the like with
dozens of customers, suppliers, consortiums, universities and
research institutes. In recent years advanced development
centers have been established in Europe and Japan in addition to
those already existing in the U.S. A new, more powerful
worldwide CAD/CAM computer workstation network system was
installed during 1995 to assist the nearly 5,600 engineers,
scientists and technicians employed by the Company.
Research and development expenditures for the creation and
application of new and improved products and processes were $351
million in 1995, $287 million in 1994, and $277 million in 1993.
Total spending on research, development and engineering (RD&E)
was $568 million, $478 million, and $425 million in 1995, 1994,
and 1993 respectively, representing 10.9%, 10.9% and 11.2%
respectively, of consolidated net sales. This strong financial
commitment to reinvestment into technology has resulted in a
steady stream of new products, patents and new product sales.
Cautionary Statements for Purposes of the "Safe Harbor"
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Statements made by AMP Incorporated in written or oral form
to various persons, including statements made in filings with the
SEC, that are not strictly historical facts are "forward-looking"
statements. Such statements should be considered as subject to
uncertainties that exist in the Company's operations and business
environment. The following includes some, but not all, of the
factors or uncertainties that could cause AMP to miss its
projections:
* The effects of extreme changes in monetary and fiscal
policies, in the U.S. and abroad. This would include extreme
currency fluctuations in the Yen and Mark, and unforeseen
inflationary pressure.
* The threat of a global economic slowdown in any one, or all,
of our market segments.
* Drastic and unforeseen price pressure throughout the
business. Currently the most noticeable pressure is in the
personal computer industry where the OEMs are passing the price
pressure on to their suppliers. Similar price pressure can also
be seen in the cellular/mobile phone industry.
* Increased difficulties in obtaining a consistent supply of
basic materials like copper, gold, or plastic resins at stable
pricing levels.
* Unpredictable difficulties or delays in the development of
key new product programs, particularly in some of our non-
traditional businesses.
* Rapid escalation of the cost of regulatory compliance and
litigation.
* Unexpected governmental policies and actions including, but
not limited to, growing protectionism, sourcing requirements, and
confiscation of assets.
* Unforeseen intergovernmental conflicts or actions, including
but not limited to, armed conflict and trade wars. For example,
the conflict between China and Taiwan could escalate and have a
substantial impact on our business in Asia/Pacific.
* During an unforeseen business downturn, underutilization of
AMP's factories and plants could become an issue.
* Unanticipated startup expenses and delays related to
bringing new plants on-line could impact our projections.
* The difficulties and unanticipated expense of assimilating
newly-acquired businesses into our business portfolio.
* Any difficulties in obtaining the human resource
competencies that AMP needs to achieve its business objectives;
includes skilled-labor shortages in the U.S. and abroad. This
also assumes that we will be able to retain key talent, both
managerial and technical.
* Risks associated with any disruptive changes in our
customer, supplier, and competitor relations as a consequence of
AMP's and others' movement along the vertical product chain.
* The risks associated with any technological shifts away form
AMP technologies or core competencies.
* The risk of not recovering research and development expenses
relating to a limited ability to enforce patents and copyright
laws in certain parts of the world.
* While AMP has traditionally been a leader in environmental
compliance, unforeseen and drastic changes to governmental
environmental policies and related government action could impact
our projections.
* Standardization, while often viewed as a positive for AMP,
could have a substantial impact on our business.
* Risks associated with market acceptance of our customers'
end-products. For example, new technological innovations in the
computer industry.
* Unforeseen interruptions to AMP business with our largest
customers, resulting from, but not limited to, strikes, financial
flow, or inventory problems at the account.
ITEM 2. PROPERTIES
The Company has approximately 14.6 million sq. ft. of
utilized floor space in 212 facilities located in the United
States and 42 other countries. Facilities were enlarged or
added in over a dozen countries in 1995, representing an
increase of approximately 2.6 million sq. ft. During 1995,
construction included a new 200,000 sq. ft. engineering building
and expansion of our global training and development center, both in
the Harrisburg, Pennsylvania area. International construction projects
included new production facilities or expansion of existing facilities
in France, the Czech Republic, Germany, Hungary, Italy, Scotland, Spain,
Switzerland, Malaysia and China. Facilities are being added in North
Carolina for greater production capacity in cable and cable assemblies,
and operations in Tower City and Williamstown, Pennsylvania will be
consolidated in a large manufacturing plant to be built northeast of
Harrisburg, Pennsylvania to support the Company's growth in the
consumer goods market. Also planned for 1996 are 3 new manufacturing
facilities.
Reflecting the Company's efforts to consolidate into more
efficient integrated production operations, total floor space in
terms of sq. ft. decreased slightly from 1985 to 1986 and remained
relatively constant until 1992. Since 1992 floor space has
increased to 11.4 million sq. ft. in 1993, 12.0 million sq. ft. in
1994, and 14.6 million sq. ft. in 1995. These increases are the result
of increased production to support higher sales, efforts to
insource work from outside vendors in order to lower cost
and improve delivery, and acquisitions. Increases in floor space
have been moderated, however, by a movement toward a maximization
of multi-shift operations where required and feasible and, more
recently, a closer regional management of the deployment of
manufacturing resources.
Worldwide, approximately 9.1 million sq. ft. of floor space
in 113 plants located in 22 countries is devoted to production
operations, and approximately an additional 2.9 million sq. ft. in
64 plants located in 18 countries is utilized for engineers,
scientists, technicians, researchers, and office support personnel.
U.S. manufacturing, warehousing and administrative facilities are
located in Pennsylvania (51), North Carolina (21), California (17),
Texas (6), Virginia (4), Florida (3), Massachusetts (2), Connecticut
(2), Oregon (2), Arizona (1), Delaware (1), Georgia (1), Illinois
(1) and New Jersey (1). Nearly half of these facilities are
manufacturing plants. The Company's operations in the 42
countries other than the U.S. involve 70 major facilities (5,000
sq. ft. or larger) located throughout the world, 36 of which perform
manufacturing functions and 34 of which have office/marketing/
engineering/research functions, and 10 which perform warehousing
functions.
The Company's facilities are generally modern, well
maintained and diversified geographically within regions, with
the typical size of major facilities in the 70,000 to 100,000 sq.
ft. range. No single facility is material to the Company's
business. The Company owns over 85% of its floor space, free of
encumbrances except as hereinafter described, and leases the
balance. The Company owns most of its major facilities. Most of
the leases on the other major manufacturing and administrative
facilities provide the right to renew or purchase.
In connection with construction of an engineering building
in the Harrisburg, Pennsylvania area, in 1995 the Company
received a low interest loan totaling approximately $2 million
from the Pennsylvania Industrial Development Authority (PIDA).
PIDA provides low interest loans to businesses in the Harrisburg
area for land and building acquisition and facility construction.
Capital expenditures were $713 million in 1995, up from $473
million in 1994 and $370 million in 1993. Capital expenditures for
1996 are expected to remain relatively consistent with the 1995
level as the Company continues to expand into new product areas
and geographic markets and to provide for additional production
capability to meet anticipated increased demand. Approximately
three quarters of the 1995 capital expenditures were for machinery,
equipment and systems to add capacity on many existing products,
tool up new products, and improve quality, productivity and
delivery. The current rate of capacity utilization is estimated at
70% in the Americas, 85-90% in EMEA and 80% in Asia/Pacific.
Increased manufacturing capacity has generally kept pace with
increased use of the available capacity, particularly in the
U.S., although greater use of multi-shift operations and
regionalized coordination of production resources has tended to
increase utilization in EMEA and Asia/Pacific.
ITEM 3. LEGAL PROCEEDINGS
In the opinion of management of the Company, there are no
material legal proceedings pending other than ordinary routine
litigation incident to the kind of business conducted by the
Company, and no such proceedings are known to be contemplated by
governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the executive officers of the Company and
their respective ages as of March 15, 1996 and positions held
with the Company. All executive officers are elected to serve in
their current office for one year or until their successors have
been duly elected and qualified. All such officers with the
exception of Messrs. Horowitz, Ripp and Urkiel have been employed
by the Company for more than 8 years. Messrs. Marley, Hudson,
Dalrymple, Goonrey, Guarneschelli, Gurski and Hassan have been
executive officers for more than the past 6 years.
Name Age Office
---- --- ------
James E. Marley *.......... 60 Chairman of the Board since 1993.
Mr. Marley was a divisional Vice
President and group director from
1970 to 1979, divisional Vice
President, Manufacturing Resource
Planning from 1979 to 1980,
divisional Vice President,
Manufacturing from 1980 to 1981,
Vice President, Manufacturing
from 1981 to 1983, Vice
President, Operations from 1983
to 1986, President from 1986 to
1990, and President and Chief
Operating Officer from 1990 to
1993.
William J. Hudson, Jr. *... 61 Chief Executive Officer and
President since 1993, and a
Director.
Mr. Hudson was divisional Vice
President, Connector and
Electronic Products in 1982,
divisional Vice President, Far
East Operations from 1983 to
1989, Vice President, Far East
Operations in 1989, Vice
President, Asia/Pacific
Operations from 1990 to 1991, and
Executive Vice President,
International from 1991 to 1993.
Robert Ripp .............. 54 Vice President and Chief
Financial Officer since 1994.
Mr. Ripp joined the Company in
1994 in the position of Vice
President, Finance.
Herbert M. Cole............ 59 President, Asia/Pacific and
Vice President since 1995.
Mr. Cole was divisional Vice
President, Communications and
Assemblies Group from 1984 to
1987, divisional Vice President,
Operations, Automotive/Consumer
Business Group from 1987 to 1988,
divisional Vice President, Group
Director, Integrated Circuit
Connector Group from 1988 to
1991, divisional Vice President,
Capital Goods Business Group from
1991 to 1994, Vice President,
Business Planning, Asia/Pacific
from 1994 to 1995, and Vice President
Asia/Pacific in 1995.
Ted L. Dalrymple........... 63 Vice President, Global Marketing
since 1987.
Mr. Dalrymple was divisional Vice
President, International Sales
from 1980 to 1987.
Charles W. Goonrey........ 59 Vice President, General Legal
Counsel since 1992.
Mr. Goonrey was Assistant
Secretary from 1983 to 1986,
Assistant Secretary and General
Legal Counsel from 1986 to 1989,
and divisional Vice President and
General Legal Counsel from 1989
to 1992.
Philip Guarneschelli...... 63 Vice President and Chief Human
Resource Officer since 1996.
Mr. Guarneschelli was divisional
Vice President, Industrial
Relations from 1980 to 1989, and
Vice President, Global Human
Resources from 1989 to 1996.
John E. Gurski............ 55 President, AMP EMEA (Europe,
Middle East, Africa) and Vice
President since 1995.
Mr. Gurski was divisional Vice
President, Connector &
Electronics Products Group from
1985 to 1987, divisional Vice
President, Interconnection and
Component Products Group in 1987,
divisional Vice President,
Operations from 1987 to 1989,
Vice President, Operations
in 1989, Vice President, Capital
Goods Sector from 1989 to 1992,
and Vice President, Business and
Operations Planning, International
from 1992 to 1993 and Vice President,
Europe from 1993-1995.
Javad K. Hassan........... 55 President, Global Interconnect Systems
Businesses and Vice President since 1995.
Mr. Hassan was divisional Vice
President, Technology from 1989
to 1992, Vice President, Technology
and Strategic Products in 1992, and
Vice President, Global Interconnect
Systems Business Group from 1992 to
1995.
Dennis Horowitz........... 49 President, Americas and Vice President
since 1995. Mr. Horowitz joined the
Company in 1994 in the position of Vice
President, Americas and served in that
position until 1995.
David F. Henschel......... 45 Corporate Secretary and Associate
General Legal Counsel since 1993.
Mr. Henschel was Associate
General Legal Counsel from 1990
to 1993.
Joseph C. Overbaugh....... 50 Treasurer since 1993.
Mr. Overbaugh was Assistant
Treasurer from 1987 to 1993.
William S. Urkiel......... 50 Controller since 1995 when
he first joined the Company.
* Member of the Executive Committee of the Board of Directors.
PART II.
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITYHOLDER MATTERS
The Company's common stock, no par value, is listed on the New
York Stock Exchange and is traded on the New York, Boston,
Cincinnati, Midwest, Pacific and Philadelphia Exchanges under the
symbol "AMP". Options in the Company's common stock are traded
on the Chicago Exchange. As of March 8, 1996 there were
approximately 13,860 holders of record of the Company's common
stock. Over 80% of the outstanding shares of the Company's
common stock are held by over 500 institutions.
The following table sets forth the high and low sales prices for
the Company's common stock for each full quarterly period during
the calendar years ended December 31, 1994 and 1995, as reported
on the New York Stock Exchange Composite Tape. In 1995 the
Company effected a 2-for-1 stock split and all sales prices are
adjusted to reflect such stock split.
For the Year Stock Price Range
------------ -----------------
1994 - First Quarter 32 3/4 - 29 5/8
- Second Quarter 34 3/4 - 28 13/16
- Third Quarter 39 1/8 - 34 3/8
- Fourth Quarter 39 11/16 - 33 11/16
1995 - First Quarter 38 - 35 3/16
- Second Quarter 45 - 36 1/2
- Third Quarter 44 - 37 7/8
- Fourth Quarter 40 7/8 - 37 1/8
Annual dividends, which are paid on a quarterly basis, have
increased for 42 consecutive years. The compound annual growth
rate for the Company's annual dividends for the 5-year period
ended December 31, 1995 is approximately 6.2%. Annual dividends on
a per share basis, taking into account the 2-for-1 stock split in
1995, were $.84 in 1994 and $.92 in 1995. The quarterly dividend
increased to $.23 on March 1, 1995 and $.25 on March 1, 1996. If
the March 1, 1996 dividend rate continues through 1996, it will
result in the 43rd consecutive increase in annual dividends.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is certain selected consolidated financial data
for the Company and its subsidiaries covering the five calendar
year period ended December 31, 1995. This summary should be read
in conjunction with the Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Financial
Statements and Supplementary Data provided in Items 7 and 8,
respectively, of this Report on Form 10-K. All financial amounts
and per share data have been restated to account for the pooling-
of-interests with M/A-COM, Inc. on June 30, 1995.
<TABLE>
<CAPTION>
AMP Incorporated and subsidiaries
Historical Data
(Dollars in millions except per 1995 1994 1993 1992 1991
share data)
For the Year <F5>
<S> <C> <C> <C> <C> <C>
Net Sales $5,227.2 $4,369.1 $3,790.5 $3,725.0 $3,486.3
Gross Income 1,687.5 1,484.9 1,248.7 1,244.2 1,149.3
Selling, General and
Administrative Expenses 969.5 824.9 744.1 692.1 661.7
Income from Operations 718.0 660.0 504.6 552.1 487.6
Operating Margin 13.7% 15.1% 13.3% 14.8% 14.0%
Interest Expense (36.8) (29.2) (28.0) (39.5) (47.5)
Other Deductions, net (13.4) (32.0) (15.4) (21.9) (2.2)
Income Before Income Taxes 667.7 598.8 461.2 490.7 437.8
Pretax Margin 12.8% 13.7% 12.2% 13.2% 12.6%
Income Taxes 240.4 225.0 176.9 191.4 167.8
Effective Tax Rate 36.0% 37.6% 38.4% 39.0% 38.3%
Income from Continuing Operations $427.3 $373.8 $284.4 $299.3 $270.0
Per Share <F1> $1.96 $1.72 $1.31 $1.38 $1.23
Discontinued Operations -- -- -- 3.1 20.9
Per Share <F1> -- -- -- $0.01 $0.10
Cumulative Effect of Changes
in Accounting -- -- 33.1 -- --
Per Share <F1> -- -- $0.15 -- --
Net Income 427.3 373.8 317.4 302.4 290.8
Per Share <F1> $1.96 $1.72 $1.46 $1.39 $1.33
Cash Dividends <F2> 196.5 176.2 167.8 160.4 152.4
Per Share <F1><F6> $0.92 $0.84 $0.80 $0.76 $0.72
Capital Expenditures 713.0 472.6 369.8 329.2 331.1
Depreciation and Amortization 361.4 324.5 306.4 315.0 280.8
Total Research, Development,
and Engineering Expense 567.7 477.7 425.4 408.6 385.5
At December 31 <F5>
Working Capital $1,011.8 $1,067.4 $937.6 $822.5 $806.7
Property, Plant and Equipment 1,938.3 1,574.7 1,351.8 1,271.6 1,292.8
Total Assets 4,504.7 4,092.6 3,448.9 3,332.4 3,364.2
% Return on Assets <F3> 9.9% 9.9% 8.4% 8.9% 8.1%
Long-Term Debt 212.5 278.8 199.3 112.0 135.4
Total Debt 530.7 461.2 389.7 428.3 473.0
Shareholders' Equity 2,768.0 2,495.8 2,206.5 2,071.1 2,029.2
% Return on Shareholders' Equity <F3> 16.2% 15.9% 13.4% 14.6% 13.8%
Book Value Per Share <F1> $12.71 $11.50 $10.19 $9.51 $9.28
Backlog $1,000.0 $825.0 $707.0 $719.0 $777.0
Number of Employees 40,800 34,000 30,800 29,500 29,900
Floor Space (sq. ft. in millions) 14.6 12.0 11.4 11.0 10.8
Weighted Average Shares
Outstanding <F1> (in millions) 217.7 217.0 216.6 217.7 218.7
Stock Price Range <F1>
First Quarter 38 -35 3/16 32 3/4 -29 5/8 30 11/16-27 5/16 34 3/8 -28 27 3/8-20 7/16
Second Quarter 45 -36 1/2 34 3/4 -28 13/16 31 15/16-29 9/16 31 3/4 -26 3/4 27 3/4-23 1/2
Third Quarter 44 -37 7/8 39 1/8 -34 3/8 33 5/8 -29 7/8 30 7/8 -26 5/16 27 7/8-25
Fourth Quarter 40 7/8-37 1/8 39 1/16-33 11/16 33 3/16 -28 1/2 32 15/16-27 5/16 30 -23 13/16
Stock Price/Earnings Ratio,
High-Low <F4> 23-18 23-17 26-21 25-19 24-17
<FN>
<F1> Share data has been adjusted for the 2-for-1 stock split in 1995.
<F2> On January 24, 1996, a regular quarterly dividend of 25 cents per share was declared - an indicated
annual rate of $1.00.
<F3> Computed based on income from continuing operations divided by average total assets or shareholders'
equity, as applicable, each year.
<F4> High and low stock price divided by reported income from continuing operations per share for the year.
<F5> For years 1991 to 1994, M/A-COM, Inc.'s fiscal year ended the Saturday closest to September 30th is
included with AMP Incorporated's calendar year end.
<F6> Cash dividends per share were not restated for the pooling-of-interests with M/A-COM, Inc.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information appearing under "Management's Discussion &
Analysis" on pages 26-29 of the Company's 1995 Annual Report to
shareholders is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and the related notes
thereto, together with the report thereon of Arthur Andersen LLP
dated February 16, 1996, appearing on pages 30-46 of the Annual
Report to shareholders for the year ended December 31, 1995 are
hereby incorporated by reference.
Financial Statement Schedules are filed under Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Executive Officers of the
Company, see "Executive Officers of the Registrant" at the end of
Part I of this Report. For information with respect to the
Directors of the Company, see "Election of Directors" on pages 2-5
of the Proxy Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting, which are hereby incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Pages 7-18 and pages 24-25 of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting are hereby
incorporated by reference. These pages set forth information on:
i) compensation for directors; ii) benefit and retirement oriented
plans for directors; iii) Board of Directors committees and meetings;
iv) compensation for named executive officers; v) option/SAR grants
in 1995; vi) options/SAR exercises in 1995 and fiscal year-end
values; vii) executive officers' retirement benefits; viii)
termination of employment and change of control arrangements; and
ix) certain other relationships and related transactions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Pages 5-7 and pages 18-19 of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting are hereby
incorporated by reference as to security ownership of executive
officers and directors.
Page 25 of the Proxy Statement for the AMP Incorporated 1996
Annual Shareholders' Meeting is hereby incorporated by reference
as to principal shareholders beneficially owning more than 5% of
the outstanding Common Stock of the Company as of March 8, 1996.
There are no arrangements known to the Company that may at a
subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Footnote (4) on page 7 and the section on page 25 entitled
"Certain Relationships and Related Transactions" of the
Proxy Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting are hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents Filed as a Part of the Form 10-K Report
1. Consolidated Statements of Income, Shareholders' Equity, and
Cash Flows, for the years ended December 31, 1995, 1994 and
1993; Consolidated Balance Sheets as of December 31, 1995
and 1994; the accompanying Notes to Consolidated Financial
Statements; and the Report of Independent Public Accountants
thereon, on pages 30-46 of the Annual Report to shareholders
for the year ended December 31, 1995, are hereby
incorporated by reference.
Statements of the Registrant - Separate financial statements
are omitted for AMP Incorporated since it is primarily an
operating company and all subsidiaries included in the
consolidated financial statements are wholly owned and their
restricted net assets are not material in relation to total
consolidated net assets at December 31, 1995.
2. Financial Statement Schedules:
Schedules Included:
II - Valuation and Qualifying Accounts and Reserves
Report of Company's Independent Public
Accountants with respect to the Financial
Statement Schedules
Schedules Omitted: Schedules I, III, IV, and V are omitted
as not applicable because the required matter or conditions
are not present.
3. EXHIBITS:
Exhibit
Number Description
------- -------------
3.(i) - Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.(i).B of the
Report on Form 8-K filed on January 31, 1995)
3.(ii) - Bylaws of the Company (incorporated by reference to
Exhibit 3.(ii) of the Report on Form 10-K for the year
ended December 31, 1994)
4.A - Shareholder Rights Plan adopted by the Company's Board
of Directors October 25, 1989 (incorporated by reference
to Exhibit 4.A of the Report on Form 10-K for the year
ended December 31, 1994)
4.B - Amendment Rights Agreement between the Company and
Chemical Bank, as Rights Agent for the Shareholder
Rights Plan, dated September 4, 1992 (incorporated by
reference to Exhibit 4-b of the Report on Form 10-K for
the year ended December 31, 1992)
4.C - Instruments defining the rights of holders of long-term
debt, including indentures. Upon request of the
Securities and Exchange Commission, the Company hereby
undertakes to furnish copies of the instruments with
respect to its long-term debt, none of which have
been registered or authorize securities in a total
amount that exceeds 10 percent of the total assets of
the Company and its subsidiaries on a consolidated basis
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)
10.B* - Executive Severance Agreements dated
October 27, 1983 and January 24, 1990 between the
Company and certain of the Company's Executive Officers
(also see the section entitled "Termination of
Employment and Change of Control Arrangements" on
Pages 24-25 of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting
incorporated by reference under Item 11, Part III of this
Report). (The 1983 Agreement is incorporated by reference
to Exhibit 10-b of the Report on Form 10-K for the year ended
December 31, 1990, and the 1990 Agreement is incorporated by
reference to Exhibit 10.B of the Report on Form 10-K for the
year ended December 31, 1993)
10.C* - AMP Incorporated Bonus Plan (Stock Plus Cash) (also see
footnote (1) on Pages 14-15 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10c of the Report on Form 10-K for the
year ended December 31, 1992)
10.D* - AMP Incorporated Pension Restoration Plan (January 1,
1995 Restatement), a supplemental employee retirement
plan (summarized on Page 16-17 of the Proxy Statement for
the AMP Incorporated 1996 Annual Shareholders' Meeting
incorporated by reference under Item 11, Part III of
this Report) (incorporated by reference to Exhibit 10.C
of the Report on Form 10-Q for the Quarter ended March
31, 1995)
10.E* - Executive life insurance plan (incorporated by reference
to Exhibit 10-e of the Report on Form 10-K for the year
ended December 31, 1990)
10.F* - Amendments dated March 1, 1995 to executive life insurance
agreements in the form dated October 1990 (incorporated by
reference to Exhibit 10.A of the Report on Form 10-Q
for the Quarter ended March 31, 1995)
10.G* - Executive split-dollar life insurance agreements in the form
dated January 1995 (incorporated by reference to Exhibit 10.B
of the Report on Form 10-Q for the Quarter ended March 31, 1995)
10.H* - AMP Incorporated Deferred Compensation Plan effective January
1, 1995 for selected management and highly compensated
employees (incorporated by reference to Exhibit 10.D of the
Report on Form 10-Q for the Quarter ended March 31, 1995)
10.I* - Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.F of the Report
on Form 10-K for the year ended December 31, 1994)
10.J* - Retirement plan for outside directors (also see the
section entitled "Retirement" on Pages 8-9 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10g of the 10-K Report for the year
ended December 31, 1990)
10.K* - Outside Directors Deferred Stock Accumulation Plan (see
also the section entitled "Retirement" on Pages 8-9 of the
Proxy Statement for the AMP Incorporated 1996 Annual
Shareholders' meeting incorporated by reference under
Item II, Part III of this Report).
10.L* - Consulting agreement between the Company and Mr. Harold
A. McInnes, Director and former Chairman of the Board
and Chief Executive Officer, dated December 21, 1992
(incorporated by reference to Exhibit 10-j of the Report
on Form 10-K for the year ended December 31, 1992)
10.M* - Amendment to the consulting agreement between the
Company and Mr. Harold A. McInnes, and dated November
8, 1995 (also see footnote (4) on Page 7 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item II, Part III of this Report).
10.N* - Management Incentive Plan (also see column (d) of the
Summary Compensation Table on Page 11 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10.A of the Report on Form 10-Q
for the Quarter ended September 30, 1995)
10.O* - Director and officer indemnification agreements
(incorporated by reference to Exhibit 10-j of the
Report on Form 10-K for the year ended December 31,
1991)
10.P* - AMP Incorporated 1993 Long-Term Equity Incentive Plan
(also see footnote (1) on Pages 13-14 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10.B the Report on Form 10-Q
for the Quarter ended September 30, 1995)
10.Q* - AMP Incorporated Stock Bonus Unit and Supplemental Cash
Bonus Agreement (incorporated by reference to Exhibit
10.B of the Report on Form 10-Q for the Quarter ended
September 30, 1993)
10.R* - AMP Incorporated Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.C of the
Report on Form 10-Q for the Quarter ended September
30, 1993)
10.S* - AMP Incorporated Incentive Stock Option Agreement
(incorporated by reference to Exhibit 10.D of the
Report on Form 10-Q for the Quarter ended September
30, 1993)
10.T* - AMP Incorporated Performance Restricted Share Agreement
(incorporated by reference to Exhibit 10.C of the
Report on Form 10-Q for the Quarter ended September
30, 1995)
10.U* - Restricted stock agreement between the Company and Mr.
Dennis Horowitz, Vice President, Americas, dated as of
September 12, 1994 (incorporated by reference
to Exhibit 10.Q of the Report on Form 10-K for the year
ended December 31, 1994)
10.V* - Restricted stock agreement between the Company and Mr.
Robert Ripp, Vice President and Chief Financial Officer,
dated as of August 15, 1994 (incorporated by reference
to Exhibit 10.R of the Report on Form 10-K for the year
ended December 31, 1994)
13 - Portions of the Annual Report to shareholders for the
year ended December 31, 1995 that are specifically
incorporated by reference into this Report
21 - List of Subsidiaries
23 - Consent of Independent Public Accountants
27 - Financial Data Schedule
- ----------------------
* A management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form pursuant to
the requirements of this 10-K Annual Report.
THE COMPANY WILL FURNISH ANY EXHIBIT LISTED ABOVE UPON REQUEST.
EXCEPT FOR THE ANNUAL REPORT TO SHAREHOLDERS, PAYMENT FOR THE
COST OF PROVIDING THE EXHIBIT MAY BE REQUIRED FOR VOLUMINOUS
EXHIBITS.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized, as of the 29th day of March 1996.
AMP Incorporated
/s/ Robert Ripp
By______________________________
Robert Ripp,
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this annual report has been signed by the following persons
on behalf of the registrant and in the capacities and as of the
dates indicated.
Signature Title Date
/s/ J. E. Marley
___________________ Chairman of the Board and a March 29, 1996
(J. E. Marley) Director
/s/ W. J. Hudson
___________________ Chief Executive Officer and March 29, 1996
(W. J. Hudson) President and a Director
/s/ Robert Ripp
___________________ Vice President and March 29, 1996
(R. Ripp) Chief Financial Officer
/s/ William S. Urkiel
___________________ Controller March 29, 1996
(W. S. Urkiel)
/s/ Dexter F. Baker
___________________ Director March 29, 1996
(D. F. Baker)
___________________ Director March __, 1996
(R. D. DeNunzio)
/s/ B. H. Franklin
___________________ Director March 29, 1996
(B. H. Franklin)
/s/ Joseph M. Hixon III
___________________ Director March 29, 1996
(J. M. Hixon III)
/s/ H. A. McInnes
___________________ Director March 29, 1996
(H. A. McInnes)
/s/ J. J. Meyer
___________________ Director March 29, 1996
(J. J. Meyer)
/s/ John C. Morley
___________________ Director March 29, 1996
(J. C. Morley)
/s/ W. F. Raab
___________________ Director March 29, 1996
(W. F. Raab)
___________________ Director March __, 1996
(P. G. Schloemer)
___________________ Director March __, 1996
(T. Shiina)
AMP INCORPORATED & SUBSIDIARIES
<TABLE>
Schedule II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Balance at Additions Deductions Balance at
Beginning Charged to from Translation End
Description of Year Expense Reserves<F1> Adjustments of Year
- ----------- ----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
RESERVE DEDUCTED IN THE
BALANCE SHEET FROM THE
ASSET TO WHICH IT APPLIES:
Reserve for doubtful accounts--
Year ended December 31, 1995 $22,701,000 $6,549,000 $(5,063,000) $ 352,000 $24,539,000
Year ended December 31, 1994 $15,532,000 $8,962,000 $(2,915,000) $1,122,000 $22,701,000
Year ended December 31, 1993 $13,125,000 $6,063,000 $(3,045,000) $(611,000) $15,532,000
__________
<FN>
<F1> Uncollectible accounts charged against the reserve, net of recoveries.
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMP Incorporated:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in AMP Incorporated's annual report to shareholders,
incorporated by reference in this Form 10-K, and have issued
our report thereon dated February 16, 1996. Our audits were
made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in Item 14-2 is the
responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a
whole.
Philadelphia, PA
February 16, 1996 /s/ Arthur Andersen LLP
----------------------------
Arthur Andersen LLP
APPENDIX
10-K Report for Year Ended December 31, 1995
1) Part III, Item 10, Directors and Executive Officers of the
Registrant. Page 2 of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting includes a
portrait photographs of the following directors and nominees
for director: Dexter F. Baker and Ralph D. DeNunzio. Page 3
of said Proxy Statement includes portrait photographs of the
following directors and nominees for director: Barbara Hackman
Franklin; Joseph M. Hixon III; William J. Hudson, Jr.; and
James E. Marley. Page 4 of said Proxy Statement includes
portrait photographs of the following directors and nominees
for director: Harold A. McInnes; Jerome J. Meyer; John C.
Morley; and Walter F. Raab. Page 5 of said Proxy Statement
includes portrait photographs of the following directors
and nominees for director: Paul G. Schloemer and Takeo Shiina.
EXHIBIT INDEX
Exhibit
Number Description
------- -------------
3.(i) - Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.(i).B of the
Report on Form 8-K filed on January 31, 1995)
3.(ii) - Bylaws of the Company (incorporated by reference to
Exhibit 3.(ii) of the Report on Form 10-K for the year
ended December 31, 1994)
4.A - Shareholder Rights Plan adopted by the Company's Board
of Directors October 25, 1989 (incorporated by reference
to Exhibit 4.A of the Report on Form 10-K for the year
ended December 31, 1994)
4.B - Amendment Rights Agreement between the Company and
Chemical Bank, as Rights Agent for the Shareholder
Rights Plan, dated September 4, 1992 (incorporated by
reference to Exhibit 4-b of the Report on Form 10-K for
the year ended December 31, 1992)
4.C - Instruments defining the rights of holders of long-term
debt, including indentures. Upon request of the
Securities and Exchange Commission, the Company hereby
undertakes to furnish copies of the instruments with
respect to its long-term debt, none of which have
been registered or authorize securities in a total
amount that exceeds 10 percent of the total assets of
the Company and its subsidiaries on a consolidated basis
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)
10.B* - Executive Severance Agreements dated
October 27, 1983 and January 24, 1990 between the
Company and certain of the Company's Executive Officers
(also see the section entitled "Termination of
Employment and Change of Control Arrangements" on
Pages 24-25 of the Proxy Statement for the AMP
Incorporated 1996 Annual Shareholders' Meeting
incorporated by reference under Item 11, Part III of this
Report). (The 1983 Agreement is incorporated by reference
to Exhibit 10-b of the Report on Form 10-K for the year ended
December 31, 1990, and the 1990 Agreement is incorporated by
reference to Exhibit 10.B of the Report on Form 10-K for the
year ended December 31, 1993)
10.C* - AMP Incorporated Bonus Plan (Stock Plus Cash) (also see
footnote (1) on Pages 14-15 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10c of the Report on Form 10-K for the
year ended December 31, 1992)
10.D* - AMP Incorporated Pension Restoration Plan (January 1,
1995 Restatement), a supplemental employee retirement
plan (summarized on Page 16-17 of the Proxy Statement for
the AMP Incorporated 1996 Annual Shareholders' Meeting
incorporated by reference under Item 11, Part III of
this Report) (incorporated by reference to Exhibit 10.C
of the Report on Form 10-Q for the Quarter ended March
31, 1995)
10.E* - Executive life insurance plan (incorporated by reference
to Exhibit 10-e of the Report on Form 10-K for the year
ended December 31, 1990)
10.F* - Amendments dated March 1, 1995 to executive life insurance
agreements in the form dated October 1990 (incorporated by
reference to Exhibit 10.A of the Report on Form 10-Q
for the Quarter ended March 31, 1995)
10.G* - Executive split-dollar life insurance agreements in the form
dated January 1995 (incorporated by reference to Exhibit 10.B
of the Report on Form 10-Q for the Quarter ended March 31, 1995)
10.H* - AMP Incorporated Deferred Compensation Plan effective January
1, 1995 for selected management and highly compensated
employees (incorporated by reference to Exhibit 10.D of the
Report on Form 10-Q for the Quarter ended March 31, 1995)
10.I* - Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.F of the Report
on Form 10-K for the year ended December 31, 1994)
10.J* - Retirement plan for outside directors (also see the
section entitled "Retirement" on Pages 8-9 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10g of the 10-K Report for the year
ended December 31, 1990)
10.K* - Outside Directors Deferred Stock Accumulation Plan (see
also the section entitled "Retirement" on Pages 8-9 of the
Proxy Statement for the AMP Incorporated 1996 Annual
Shareholders' meeting incorporated by reference under
Item II, Part III of this Report).
10.L* - Consulting agreement between the Company and Mr. Harold
A. McInnes, Director and former Chairman of the Board
and Chief Executive Officer, dated December 21, 1992
(incorporated by reference to Exhibit 10-j of the Report
on Form 10-K for the year ended December 31, 1992)
10.M* - Amendment to the consulting agreement between the
Company and Mr. Harold A. McInnes, and dated November
8, 1995 (also see footnote (4) on Page 7 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item II, Part III of this Report).
10.N* - Management Incentive Plan (also see column (d) of the
Summary Compensation Table on Page 11 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10.A of the Report on Form 10-Q
for the Quarter ended September 30, 1995)
10.O* - Director and officer indemnification agreements
(incorporated by reference to Exhibit 10-j of the
Report on Form 10-K for the year ended December 31,
1991)
10.P* - AMP Incorporated 1993 Long-Term Equity Incentive Plan
(also see footnote (1) on Pages 13-14 of the Proxy
Statement for the AMP Incorporated 1996 Annual
Shareholders' Meeting incorporated by reference under
Item 11, Part III of this Report). (Incorporated by
reference to Exhibit 10.B the Report on Form 10-Q
for the Quarter ended September 30, 1995)
10.Q* - AMP Incorporated Stock Bonus Unit and Supplemental Cash
Bonus Agreement (incorporated by reference to Exhibit
10.B of the Report on Form 10-Q for the Quarter ended
September 30, 1993)
10.R* - AMP Incorporated Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.C of the
Report on Form 10-Q for the Quarter ended September
30, 1993)
10.S* - AMP Incorporated Incentive Stock Option Agreement
(incorporated by reference to Exhibit 10.D of the
Report on Form 10-Q for the Quarter ended September
30, 1993)
10.T* - AMP Incorporated Performance Restricted Share Agreement
(incorporated by reference to Exhibit 10.C of the
Report on Form 10-Q for the Quarter ended September
30, 1995)
10.U* - Restricted stock agreement between the Company and Mr.
Dennis Horowitz, Vice President, Americas, dated as of
September 12, 1994 (incorporated by reference
to Exhibit 10.Q of the Report on Form 10-K for the year
ended December 31, 1994)
10.V* - Restricted stock agreement between the Company and Mr.
Robert Ripp, Vice President and Chief Financial Officer,
dated as of August 15, 1994 (incorporated by reference
to Exhibit 10.R of the Report on Form 10-K for the year
ended December 31, 1994)
13 - Portions of the Annual Report to shareholders for the
year ended December 31, 1995 that are specifically
incorporated by reference into this Report
21 - List of Subsidiaries
23 - Consent of Independent Public Accountants
27 - Financial Data Schedule
AMP INCORPORATED
DEFERRED STOCK ACCUMULATION PLAN FOR OUTSIDE DIRECTORS
AMP Incorporated (the "Corporation"), by action of
its Board of Directors taken effective as of January 1,
1996, adopted the AMP Incorporated Deferred Stock
Accumulation Plan for Outside Directors (the "Plan"),
pursuant to which eligible members of its Board of
Directors will receive phantom share credits to a
Deferred Stock Accumulation Account to be maintained
under the Plan. The Plan will be maintained and
administered by the Corporation under the terms and
conditions hereinafter set forth.
1. Effective Date. The Plan shall be effective as
of January 1, 1996.
2. Eligibility. Any member of the Board of
Directors of the Corporation who is not and has never
been an employee of the Corporation or of a subsidiary or
affiliate of the Corporation shall herein be referred to
as an Outside Director. Any Outside Director serving as
of December 31, 1995 shall be eligible to become a
Participant under the Plan by making the election to
participate described in Section 3 below. Except as
provided in Section 11 below, any Outside Director who
first becomes a director of the Corporation on or after
January 1, 1996 shall become a Participant hereunder as
of the date first elected to so serve.
3. Participation Election. Each Outside Director
serving as of December 31, 1995 will be required to make
a one time irrevocable election during the first calendar
quarter of 1996 either to become a Participant in the
Plan for the balance of his or her period of service as a
director of the Corporation or to continue during such
period as a participant in the AMP Incorporated
Retirement Plan for Outside Directors (the "Retirement
Plan"). Any such Outside Director who elects to become
a Plan Participant thereby waives any and all claim to
future benefit payments under the terms of the AMP
Incorporated Retirement Plan for Outside Directors, in
consideration for which the Outside Director shall
receive an opening credit to his or her Deferred Stock
Accumulation Account under the Plan determined in
accordance with Section 4(b) below.
4. Deferred Stock Accumulation Accounts. A
Deferred Stock Accumulation Account shall be established
and maintained under the Plan in the name of each
Participant as follows:
(a) An Outside Director first elected to the
Corporation's Board of Directors on or after January 1,
1996 shall have 300 phantom shares of Corporation common
stock credited to his or her Deferred Stock Accumulation
Account as of the date so elected. Thereafter, on each
subsequent January 1 occurring during the Outside
Director's continuing Board service, an additional 300
phantom shares of Corporation common stock shall be
credited to his or her Deferred Stock Accumulation
Account, subject to an overall limitation under the Plan
of ten 300-share allocations.
(b) An Outside Director serving as of December
31, 1995 who makes the Plan participation election
described in Section 3 above shall have an opening
phantom share balance in his or her Deferred Stock
Accumulation Account as of January 1, 1996 equal to 300
times the lesser of ten or the Outside Director's number
of full or partial prior calendar years of Board service
(including calendar year 1996). For example, an Outside
Director first elected in July 1992, would have an
opening balance of 300 times five, or 1500 shares, where
five results from counting 1992, 1993, 1994, 1995 and
1996 as full or partial prior calendar years of Board
service. An additional 300 phantom shares of Corporation
common stock shall be credited on January 1, 1997 and
each subsequent January 1 during the Outside Director's
continuing Board service, subject to the overall per
Participant limitation under the Plan of ten 300-share
allocations.
(c) Phantom shares in an Outside Director's
Deferred Stock Accumulation Account will have no voting
rights or other rights of a shareholder, except that such
phantom shares will be credited with dividends as further
described in Section 4(d) below.
(d) As of each of the Corporation's quarterly
dividend payment dates commencing with March 1, 1996, a
Participant shall be deemed entitled to a cash dividend
on each phantom share credited to his or her Deferred
Stock Accumulation Account on the related record date
equal to the per share cash dividend then payable to the
Corporation's shareholders. The aggregate amount of such
cash dividend equivalents shall be accounted for under
the Plan as having been reinvested by the Participant on
the dividend payment date in further phantom shares of
Corporation common stock, with the Participant's Deferred
Stock Accumulation Account being credited as of the
dividend payment date with the additional number of
phantom shares attributable to such reinvestment of the
dividend equivalents. For this purpose, the mean between
the high and the low prices at which Corporation common
stock traded on the New York Stock Exchange on the
dividend payment date (or, if such date is not a trading
date, the most recent prior trading date) shall be the
per share price at which the dividend equivalents are
reinvested in further phantom shares of Corporation
common stock.
(e) In the event of any change in the common
stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, or a rights
offering to purchase common stock at a price
substantially below fair market value, or of any similar
change affecting the common stock, the value and
attributes of each phantom share under the Plan shall be
appropriately adjusted consistent with such change to the
same extent as if such phantom shares were, instead,
issued and outstanding shares of common stock of the
Corporation.
5. Vesting. The value of a Participant's Deferred
Stock Accumulation Account shall be fully vested and
nonforfeitable upon the earliest of the date the
Participant has completed five years of continuous Board
service with the Corporation (i.e., on the fifth
anniversary of the original date of election as an
Outside Director), the date of the Participant's 72nd
birthday, or the date of the Participant's death while
serving on the Corporation's Board of Directors. The
entire value of a Participant's Deferred Stock Accumulation
Account shall be forfeited if the Participant terminates
Board service with the Corporation (other than on account
of death or retirement upon attainment of age 72) prior to
completion of five years of continuous Board service with the
Corporation.
6. Payment of Deferred Stock Accumulation Account.
(a) As of any date, the value of a
Participant's Deferred Stock Accumulation Account shall
be equal to the number of phantom shares then credited to
the account times the mean between the high and the low
prices at which Corporation common stock traded on the
New York Stock Exchange on the most recent prior trading
date. Upon the termination of a Participant's Board
service, the value of the Participant's Deferred Stock
Accumulation Account, if vested, shall be payable in cash
to the Participant either in a single lump sum or in up
to ten annual installments, as elected and placed on file
with the Corporation by the Participant at the time of
first becoming a Plan Participant. This election as to
form of payment may be changed by the Participant by
filing a new written election with the Corporation at any
time prior to a year and a day before the date of
termination of Board service.
(b) If a single lump sum payment is elected,
payment in cash of the vested value of the Deferred Stock
Accumulation Account as of the date of termination of
Board service shall be made within thirty days of the
termination date.
(c) If installment payments are elected, the
first annual installment payment will be made within 30
days of the date of termination of Board service, and
annual installments subsequent to the initial installment
shall be made in each succeeding January until completed.
The amount of the initial installment payment shall be
equal to the value of the account on the date of
termination of Board service divided by the number of
years in the installment payment period. The amount of
each subsequent installment payment shall be equal to the
value of the account on the first day of January of the
distribution year divided by the then-remaining number of
years in the installment payment period. Pending
distribution of the second through final installments of
any installment distribution, the undistributed balance
of the Participant's Deferred Stock Accumulation Account
shall continue to be deemed invested in phantom shares of
the Corporation's common stock, with quarterly dividends
continuing to be reinvested in further phantom shares as
during the Participant's active period of Board service.
7. Change in Control.
(a) In the event of a "Change in Control" of
the Corporation followed by an Outside Director's
cessation of service to the Corporation, the entire
balance of the Deferred Stock Accumulation Account of the
Outside Director under the Plan shall be immediately due
and payable to the Outside Director in a single lump sum,
notwithstanding the vesting requirements in Section 5
above and form of payment specified pursuant to Section 6
above.
(b) The term "Change in Control" shall mean:
(i) the acquisition of beneficial
ownership (other than from the Corporation) by any
person, entity or "group", within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), excluding,
for this purpose, the Corporation or its subsidiaries, or
any employee benefit plan of the Corporation or its
subsidiaries that acquires beneficial ownership of voting
securities of the Corporation (within the meaning of Rule
13d-3 promulgated under the Exchange Act), of 30% or more
of either the then outstanding shares of common stock of
the Corporation or the combined voting power of the
Corporation's then outstanding voting securities entitled
to vote generally in the election of Directors; or
(ii) a change in the persons constituting
the Board of Directors of the Corporation as it existed
in the immediately preceding calendar year (the
"Incumbent Board") such that the Directors of the
Incumbent Board no longer constitute a majority of the
Board of Directors; provided that any person becoming a
Director in a subsequent year whose election, or
nomination for election, by the Corporation's
shareholders was approved by a vote of at least a
majority of the Directors then comprising the Incumbent
Board (other than an election or nomination of an
individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the Directors of the
Corporation, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall
be, for purposes of the Plan, considered as though such
person were a member of the Incumbent Board; or
(iii) approval by the shareholders of
the Corporation of a reorganization, merger or
consolidation, in each case with respect to which persons
who were the shareholders of the Corporation immediately
prior to such reorganization, merger or consolidation do
not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the
election of Directors of the reorganized, merged or
consolidated corporation's then outstanding voting
securities; or
(iv) a liquidation or dissolution of the
Corporation or the sale of all or substantially all of
the assets of the Corporation.
8. Designation of Beneficiary. If an Outside
Director dies prior to receiving the entire balance of
his or her Deferred Stock Accumulation Account under the
Plan, any balance remaining in his or her account shall
be paid in a lump sum as soon as practicable to the
Outside Director's designated beneficiary or, if the
Outside Director has not designated a beneficiary in
writing to the Corporation, to his estate. Any
designation of beneficiary may be revoked or modified at
any time by the Outside Director.
9. Unsecured Obligation of Company. The
Corporation's obligations to establish and maintain
accounts for each eligible Outside Director and to make
payments to him or her under this Plan shall be general
unsecured obligations of the Corporation, and the Outside
Directors with an account under the Plan shall at all
times be general unsecured creditors of the Corporation.
The Corporation shall be under no obligation to establish
any separate fund, purchase any annuity contract, or in
any other way make special provision or specifically
earmark any funds for the payment of any amounts called
for under this Plan, nor shall this Plan or any actions
taken under or pursuant to this Plan be construed to
create a trust of any kind, or a fiduciary relationship
between the Corporation and any eligible Outside
Director, his designated beneficiary, executors or
administrators, or any other person or entity. It is the
intention of the Corporation that at all times the Plan
be unfunded for income tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of
1974, as amended. If the Corporation chooses to
establish a fund or make any other arrangement to provide
for the payment of any amounts called for under this
Plan, such fund or arrangement shall conform to the terms
of the model trust described in Revenue Procedure 92-64
(1992-33 IRB 16).
10. Withholding of Taxes. The rights of an Outside
Director to payments under this Plan shall be subject to
the Corporation's obligations at any time to withhold
income or other taxes from such payments.
11. Designation of Alternate Plan. If, at the time
an Outside Director is first elected to serve as a
director of the Corporation, he or she requests to be
designated a participant in the Retirement Plan rather
than the Plan, the Nominating and Governance Committee in
its sole and absolute discretion may so designate the
requesting Outside Director as a participant in the
Retirement Plan. Under such circumstances, the Outside
Director will not become a Participant hereunder.
12. Assignability. No portion of an Outside
Director's account, right or benefit under the Plan is
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or attachment
or garnishment by creditors of the Outside Director,
except by will or the laws of descent and distribution or
by such other means as the Committee may approve from
time to time.
13. Administration. The Plan shall be a
administered by the Nominating and Governance Committee
of the Corporation's Board of Directors. The Committee
shall have full and final authority in its sole and
absolute discretion to: (i) interpret the provisions of
the Plan and to decide all questions of fact arising in
its application, and its interpretation and decisions
shall be in all respects final, conclusive and binding;
(ii) impose such conditions on the payment of Plan
benefits as it deems appropriate; and (iii) make all
other determinations, rules and regulations necessary or
advisable for the administration of the Plan. No member
of the Committee shall be personally liable for any
action taken or determination made in respect to the
administration of the Plan if made in good faith.
14. Amendments and Termination. This Plan may be
amended or terminated at any time by the Board of
Directors. No amendment or termination shall affect an
Outside Director's Deferred Stock Accumulation Account
existing on the date such amendment or termination
occurs.
15. Governing Law. The Plan shall be construed in
accordance with and governed by the laws of Pennsylvania.
To evidence the adoption of the Plan, the
Corporation has caused its authorized officers to execute
this Plan document this 28th day of March 1996.
AMP Incorporated
/s/ D. F. Henschel /s/ J. E. Marley
Attest: _____________________ By: ______________________
Its: Chairman of the Board
director\stkaccplan
March 27, 1996
Page 2
November 8, 1995
Harold A. McInnes
260 Winding Way
Camp Hill, PA 17011
Dear Hal:
The Consulting Agreement dated December 21, 1992, by and
between AMP Incorporated ("AMP") and you (the "Agreement")
will expire on December 31, 1995. Pursuant to Section 10 of
the Agreement, AMP desires to extend the Agreement on the
same terms and conditions as are therein contained for an
additional period of two (2) years beginning January 1, 1996
and ending December 31, 1997.
If you agree to this extension, please sign this letter and
the enclosed copy at the line below the word "Agreed".
Please return a signed copy in the enclosed, self-addressed,
stamped envelope and file a signed copy with your copy of
the Agreement.
Very truly yours,
AMP Incorporated Agreed:
/s/ W. J. Hudson /s/ H. A McInnes
By: ________________________ By: ______________________________
William J. Hudson Harold A. McInnes
Chief Executive Officer SS# ###-##-####
and President
agreement/noncomhmc
FINANCIAL REVIEW EX.13
TABLE OF CONTENTS
----------------------------------
26 Management's Discussion and Analysis
30 Consolidated Statements of Income
31 Consolidated Balance Sheets
32 Consolidated Statements of Shareholders' Equity
33 Consolidated Statements of Cash Flows
34 Notes to Consolidated Financial Statements
46 Statement of Management Responsibility
46 Report of Independent Public Accountants
25
FINANCIAL REVIEW
Management's Discussion & Analysis
AMP merged with M/A-COM, Inc. ("M/A-COM") on June 30, 1995 in an
acquisition accounted for as a pooling-of-interests. As a result, all
financial amounts and per share data have been restated to include M/A-
COM in periods prior to that date.
Results of Operations -- 1995 Compared with 1994
Sales for the year were $5.23 billion, increasing 19.6% from $4.37 billion
in 1994. The significant increase is attributable to good economic growth
in the major countries in which AMP operates throughout the world, with
the exception of Japan, as well as increased market share resulting from
greater acceptance of AMP products globally. The weakening of the U.S.
dollar throughout the year, particularly against the Japanese yen and the
German mark, increased 1995 sales by $198 million. Economic growth was
more accelerated in the first half of 1995. The more modest growth
experienced in the latter part of the year is expected to continue in the
first half of 1996; however, faster growth should occur in the second half
if, as generally expected, the economies of the U.S., Japan and Europe
improve.
Net income increased 14% in 1995 to $1.96 per share from $1.72 per
share in 1994. Net income without the negative impact of the one-time
charges and share dilution associated with the merger with M/A-COM was
$2.15 per share in 1995. Exchange rate movements did not have a
significant impact on earnings per share. Weighted average shares
outstanding increased slightly due to the exercise of stock options
resulting from the merger with M/A-COM on June 30, 1995.
During 1995, the Company improved its return-on-equity to 16.2% from
15.9% in 1994. Return-on-assets remained consistent with 1994's 9.9%.
However, 1995's return-on-equity and return-on-assets excluding the
effects of the one-time costs associated with the merger with M/A-COM were
17.3% and 10.6%, respectively.
Gross income decreased to 32.3% of sales in 1995 from 34% in the
prior year. Most of this decline was due to product mix, principally as a
result of the more rapid growth of the Company's newer technology
businesses (Global Interconnect Systems Business, "GISB"). Gross margins
are lower for GISB businesses since they are in the development stage and
have not yet achieved the commercial volumes and efficiencies associated
with the Company's mature businesses. Improvements in the gross margin of
GISB were achieved in 1995 and further improvements are projected for
1996. Also contributing to the gross margin decline were the AMP-AKZO
operating results for the second half of the year, which were included in
the consolidated income statement in full due to AMP assuming 100% control
on June 30, 1995 of this former 50% joint venture.
Selling, General and Administrative Expenses declined as a percentage
of sales in 1995 to 18.6% from 18.9% in 1994 due to increases in sales
volume without commensurate increases in operating expenses. Offsetting
this decline were the one-time charges of $48.7 million (approximately 1%
of sales) associated with the M/A-COM merger. Research, Development and
Engineering (RD&E) expenditures reached $568 million in 1995, up 18.8%
from 1994's $478 million. With this growth, RD&E remained at the
historical rate of approximately 11% of revenue. Of the $568 million
expended this year, $351 million qualifies for the creation and
application of new and improved products and processes as defined by
Statement of Financial Accounting Standards No. 2, "Accounting for
Research and Development Costs."
Other Deductions, net, decreased by $18.6 million in 1995 to $13.4
million primarily as a result of gains on the sales of securities and real
property realized in 1995, lower amortization of intangible assets related
to acquisitions and the consolidation of AMP-AKZO, previously a 50% joint
venture.
Interest expense increased by $7.7 million due to higher levels of
debt in France, Great Britain, Japan and Korea, as well as debt assumed
in the acquisition of Simel in late 1994. Offsetting these increases was
a decrease in interest expense incurred by M/A-COM due to the redemption
of $66 million in debentures in August of 1995.
The effective tax rate decreased to 36% in 1995 from 37.6% in 1994
as a result of the reduction of certain state rates and the change in the
overall level and mix of income and dividends from the international
companies.
Significant sales growth occurred in each of the geographic segments
in 1995, a year when, based on the Company's estimates, the connector
industry grew approximately 7%. The Americas, which includes the
Terminal/Connector, GISB and Wireless business units in the United States
and other countries in the Americas, had sales to trade customers of
$2.47 billion, reflecting a 13.9% increase over the prior year. The
strongest growth was in the automotive, communications, and
industrial/commercial equipment markets, along with very robust growth
associated with the GISB products. Americas sales were 47.2% of the
worldwide total, down from 49.6% in 1994.
European segment sales to trade customers increased 18.7% in local
currencies and 29.8% in U.S. dollars in 1995. Sales growth was strongest
in Germany, Great Britain, The Netherlands, Scandinavia and Spain.
Significant industry growth was experienced in the communications,
commercial/industrial equipment and, until later in the year, automotive
markets. European sales represented 32.5% of the worldwide total in 1995
as compared to 30% in 1994.
26
Asia/Pacific segment sales to trade customers grew 10.5% in local
currencies and 18.7% in U.S. dollars. The continued slow economic
recovery in Japan resulted in only modest sales growth in that country.
Sales in Japan account for over half of the sales in the region. Strong
broad-based sales growth continued in the rest of the segment because of
economic expansion and further migration of manufacturing activities to
the Asia/Pacific region. Markets with the strongest growth were
commercial/industrial equipment, computers, and networking equipment and
systems.
Results of Operations -- 1994 Compared with 1993
Sales for the year reached $4.37 billion, increasing 15% over 1993's $3.79
billion. Improving economic conditions in Europe and Japan contributed to
broad-based sales growth throughout the world. In the United States, the
Company increased sales in every major market category it serves with the
exception of M/A-COM's planned decrease in U.S. Department of Defense
related sales, which was more than offset by increased sales in the
commercial markets M/A-COM serves. Changes in exchange rates increased
sales by $62.7 million as the U.S. dollar weakened throughout the year
against the Japanese yen and in the second half against the currencies of
Western Europe.
Net income increased 31.5% in 1994 to $1.72 per share from $1.31 per
share in 1993 before the cumulative effect of 15 cents per share from the
adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", in 1993. Exchange rate movements that
increased sales in 1994 added a few cents per share to net income.
Average shares outstanding were slightly lower during 1994 as a result of
the Company's share repurchase plan.
During 1994, the Company improved its return-on-equity to 15.9% from
13.4% in 1993 while also improving its return-on-assets to 9.9% from 8.4%
in 1993 (1993 return computed before cumulative effect of accounting
change).
Gross income as a percent of sales was 34% in 1994 compared with
32.9% in 1993. This increase is the result of productivity gains and
improved utilization of manufacturing capacity. Cost reduction programs
and product stratification strategies helped offset the negative impact of
new business startups and pricing pressures.
Selling, General and Administrative Expenses were 18.9% of sales in
1994 down from 19.6% of sales in 1993. The Company increased its
investment in future-oriented SG&A infrastructure and new business
startups during 1994 which served to increase expenses. However, this was
more than offset by the $26.3 million decrease in M/A-COM's SG&A expense.
This decrease was primarily attributable to restructuring charges of $27.5
million recorded in 1993, which were reduced by non-recurring gains
resulting from the sale of a product line and insurance recoveries of $5.8
million recognized in the same period. This restructuring was the result
of a continued decline in M/A-COM's defense business which in 1994
accounted for 50% of its customer orders. The remaining decrease in SG&A
attributable to M/A-COM is mainly the result of efficiencies realized from
consolidation and downsizing initiatives over the last two years.
Research, Development and Engineering expenditures reached $478 million in
1994, up 12% from 1993's $425 million. Of the $478 million expended this
year, $287 million qualifies for the creation and application of new and
improved products and processes as defined by Statement of Financial
Accounting Standards No. 2, "Accounting for Research and Development
Costs."
Other Deductions, net, increased $16.6 million in 1994 to $31.9
million. Major changes were non-recurring investment portfolio gains in
1993, write-down of the carrying value of two of the Company's minority-
interest investments, continued accelerated amortization of certain
intangible assets related to acquisitions and decreased interest income.
Interest expense was $29 million, up $1 million from 1993 due to M/A-
COM's increased borrowings and higher interest rates.
The income tax rate on pretax income declined from 38.4% in 1993 to
37.6% in 1994 reflecting changes in the geographic mix of taxable income.
Significant sales growth over 1993 occurred in each of the geographic
segments. In 1994, the Company believes the worldwide connector industry
grew at an annual rate of 8%. During the same period, the Company
increased sales 15%, exceeding the Company's objective of growing 1.5
times the industry growth rate.
Sales to trade customers in the Americas, which includes the
Terminal/Connector, GISB and Wireless business units in the United States
and other countries in the Americas, increased 13.4% in 1994 to $2.17
billion. The strongest growth was in the automotive, communications
equipment, industrial/commercial equipment and GISB markets. Sales
increased every quarter in the United States in 1994 as the domestic
economy continued to perform well. Americas sales were 49.6% of the
worldwide total, down from 50.5% in 1993.
European segment sales to trade customers increased 15% in local
currencies and 17% in U.S. dollars as economic recovery continued
throughout the year. Sales growth was broad-based and was strongest in
the automotive, computer/business equipment, telecommunications and
industrial machinery markets. Geographically, France, Great Britain,
Italy and Spain were the leaders. European sales in 1994 were 30% of the
worldwide total, unchanged from 1993.
27
Asia/Pacific segment sales to trade customers grew 10% in local
currencies and 17% in U.S. dollars. Economic growth outside of Japan
continued to be strong as markets expanded and outsourcing of
manufacturing from Japan increased. The Company experienced improving
business conditions within Japan in 1994 as the recovery continued to
slowly gather strength. Strongest market growth in the region was in
consumer electronics, computers and communication equipment.
Price and Cost Trends
The primary raw materials used in the Company's products include
industrial metals, such as copper, gold and zinc, as well as plastics.
The costs of these materials early in this decade were relatively stable
to declining; however, over the last two years prices have increased
significantly. Copper prices on average increased 26% in both 1994 and
1995 from $.85 per pound in 1993 to $1.07 in 1994 and $1.35 in 1995. Gold
prices stabilized in 1995 at $384 per troy ounce after increasing 7% in
1994. The cost of zinc has been relatively stable, increasing by less
than 4% in both 1994 and 1995. Plastic raw materials prices have held
relatively steady in 1995 after increasing significantly in 1994 and early
1995. The impact of plastic price increases on the Company was limited to
2% to 4% in 1995 primarily through contractual arrangements with suppliers.
The Company's ability to manage the costs of its raw materials is largely
dependent on more efficient material usage, and with respect to plastics,
its size advantage and volume purchasing capability. The use of
protective hedging is a small component of the overall cost containment
strategy.
Labor and service cost increases were again moderate in 1995,
continuing a trend evident since 1990. Wage rate increases were modest
and continued to parallel industry, regional and national averages in the
countries in which the Company operates.
Offsetting both pricing pressures and the negative impact of product
mix on margins are productivity improvements and the reduction of the
amount of raw materials, particularly metals, used to manufacture
products. The marketplace has experienced price declines of about 2% to
3% per annum since 1990. The Company believes the availability of the
materials and labor skills it requires should remain adequate during 1996
and for the next several years.
Financial Position and Liquidity
The Company has over $1 billion of working capital at December 31, 1995.
Cash and short-term investments decreased $130 million from the prior
year-end as a result of significantly increased capital expenditures, the
redemption of $66 million of M/A-COM convertible debentures, and increased
accounts receivable and inventory associated with strong sales growth and
expansion. Cash provided by operations for 1995 was $747 million, an
increase of 9% from the prior year, in spite of the significant increases
in both accounts receivable and inventory without offsetting increases in
accrued liabilities. Accounts receivable increased $103 million or 11%
due to the higher level of sales in the fourth quarter of 1995 as compared
to the same period in the prior year. The average number of days sales
outstanding in trade accounts receivable at December 31, 1995 held
generally steady with the prior year. Inventories increased $121 million
to $763 million at December 31, 1995 from $642 million at December 31,
1994. Inventory turns increased only slightly.
Approximately half of the Company's operating cash flows are
generated overseas. There are currently no material restrictions on the
transfer of these funds within the Company; however, certain business
decisions result in the permanent investment of a portion of these funds
in the international companies. These permanent investments have no
significant impact on the Company's ability to fund its cash requirements.
In the fourth quarter of 1995, AMP signed an agreement for a $150
million five-year revolving credit facility with a group of U.S. banks
primarily to support a $200 million commercial paper program, also
established in the fourth quarter. This formal, syndicated credit
facility replaced certain existing uncommitted short-term facilities. The
commercial paper program has received the highest ratings from Standard &
Poor's Ratings Group, Moody's Investors Service, Inc. and Duff & Phelps
Credit Rating Co. Neither of these funding sources has been used as of
December 31, 1995. In 1996, AMP plans to fund the majority of its
working capital needs, dividends and capital expansion using cash flow
from operations and, to a lesser extent, investing activities. However,
these external sources of funding can be drawn upon if necessary to
finance additional growth requirements. AMP's low debt-to-equity ratio of
19.2% affords it considerable leverage for future expansion.
Capital Expenditures
Because of the Company's need for additional capacity as well as
significant expansion into new product areas and geographic markets in
1995, capital expenditures increased to $713 million from $473 million in
1994 and $370 million in 1993. Approximately 75% of this spending was for
machinery and equipment for capacity additions,
28
productivity improvements and tooling for new products. The balance of
the expenditures was for additional floor space, including new production
facilities and/or expansion of existing facilities in France, the Czech
Republic, Hungary, Scotland, Switzerland, Malaysia, China and Colorado,
USA. In addition, an engineering facility and human resources development
center were added in Harrisburg, PA. Capital expenditures for 1996 should
remain relatively consistent with the 1995 level.
Environmental Matters
The Company continued to implement and enhance its corporate-wide program
for managing environmental matters. This program, which was established
more than ten years ago, has evolved into a truly global effort in
response to Company initiatives and worldwide business and regulatory
forces. A global approach is necessary as regional and worldwide
environmental initiatives gain momentum through our customers,
organizations such as the European Union, the Organization for Economic
Cooperation and Development (OECD), the International Organization for
Standards (ISO), NAFTA and the Company's own strict global standards. The
Company also continued to implement various environmental management
programs to provide an infrastructure that better ensures environmental
compliance on a global basis and to be positioned for timely response to
possible customer requirements in 1996 for certification under the new ISO
14000 environmental standard. Led by Global Environmental Services, a
corporate governance group with staff in Harrisburg, London and Singapore,
the global environmental program involves the efforts of Company employees
from a variety of functions and locations, including but not limited to
executive management on the Environmental Oversight Committee, a cadre of
environmental coordinators in the various Company business units, staff
from the Global Engineering and Manufacturing Assurance, Global Products
Standards, Government Relations and Materials Engineering groups, and
operations staff in connection with the integration of the Company's
environmental policies into newly acquired businesses and expanding
operations around the world.
Despite these proactive efforts in recent years, potential
liabilities for investigative and remedial costs are known to exist
related to activities conducted in earlier periods. In 1995, as a result
of Company site investigations, including those related to the planned
closure of the Matrix Science operations in California, and the
acquisition of M/A-COM, the Company's environmental contingencies
increased. However, the Company continues to expect that the costs
associated with such environmental sites will not have a material impact
on the Company's financial position, liquidity and capital resources, or
competitive position in the next several years.
Specifically, the Company has potential liabilities at five National
Priorities List (NPL) sites in the U.S. under the U.S. Environmental
Protection Agency (EPA) Superfund program as a "generator" of wastes. At
one site, the Company faces potential liability for wastes sent to a
former municipal landfill. Expenditures to date amount to approximately
$360,000, with costs in the $1.5 to $6 million range possible over the
next two years. At the four other NPL sites owned by third parties and
where the Company allegedly sent wastes in prior years, as well as three
other sites in the U.S. that are under state jurisdiction, expenditures to
date have not exceeded $150,000 and are not expected to exceed $750,000 in
the future.
In addition, the Company has also identified potential liabilities at
22 of its current or former facilities, including those of its
subsidiaries. Investigations or remediation are ongoing at these
properties as required by government regulations or as part of the
Company's property management policy. One such site, an NPL site under
the EPA Superfund program, is also subject to a corrective action consent
order under the Resource Conservation and Recovery Act. The Company has
spent approximately $1.9 million since 1984 to remediate this property and
cleanup progressed sufficiently enough in 1995 for the Company to petition
to have the site removed from the NPL. Future costs associated with this
property are expected to total $1 million over the next five years. At
the Matrix Science facilities in California, the Company has spent
approximately $1.1 million for investigations, remediation and legal
expenses since the merger in 1988, and could possibly spend up to $10
million over the next five years based on current information.
Additionally, the Company has incurred approximately $1.7 million in costs
to remediate conditions at its current facility in Williamstown, PA; an
additional $2.8 million in costs are expected. Two properties formerly
occupied by M/A-COM in Sunnyvale, CA and New Brunswick, NJ are also
undergoing remediation, with expected future costs of approximately $1.5
million. The Company has spent approximately $12.2 million on the
remaining 17 current or former properties since 1984 and future costs are
anticipated to be $1 to $2 million annually for the next several years.
Several of these facilities are believed to have been impacted by third
parties and the Company is taking appropriate legal action. At one such
site, local citizens have filed a notice of intent to bring a claim
against the Company; however, based on current information the Company
believes it will not incur additional liability.
The Company's accounting policy with respect to environmental costs
in general is described in Note 1 to the Consolidated Financial
Statements.
29
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------------------------------------------
(dollars in thousands except per share data) Year Ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Net Sales $5,227,226 $4,369,067 $3,790,476
Cost of Sales 3,539,715 2,884,185 2,541,801
-----------------------------------------------------------------------------------------------
Gross income 1,687,511 1,484,882 1,248,675
Selling, General and Administrative Expenses 969,512 824,945 744,131
-----------------------------------------------------------------------------------------------
Income from operations 717,999 659,937 504,544
Interest Expense (36,847) (29,153) (27,961)
Other Deductions, net (13,418) (31,972) (15,360)
-----------------------------------------------------------------------------------------------
Income before income taxes and
cumulative effect of change
in accounting principle 667,734 598,812 461,223
Income Taxes 240,400 225,022 176,874
-----------------------------------------------------------------------------------------------
Income before cumulative effect of
change in accounting principle 427,334 373,790 284,349
Cumulative effect of change in
accounting principle (Note 16) -- -- 33,100
-----------------------------------------------------------------------------------------------
Net Income $427,334 $373,790 $317,449
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Income per share before cumulative effect
of change in accounting principle $ 1.96 $ 1.72 $ 1.31
Cumulative effect of change in
accounting principle per share -- -- .15
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Net Income Per Share $ 1.96 $ 1.72 $ 1.46
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
30
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(dollars in thousands) 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 212,538 $ 244,568
Securities available for sale 58,197 156,708
Receivables 1,011,460 908,390
Inventories 762,803 641,953
Deferred income taxes 137,043 135,498
Other current assets 95,867 87,183
- -----------------------------------------------------------------------------------------------
Total current assets 2,277,908 2,174,300
- -----------------------------------------------------------------------------------------------
Property, Plant and Equipment 4,352,026 3,713,660
Less - Accumulated depreciation 2,413,760 2,138,978
- -----------------------------------------------------------------------------------------------
Property, plant and equipment, net 1,938,266 1,574,682
- -----------------------------------------------------------------------------------------------
Investments and other assets 288,565 343,564
- -----------------------------------------------------------------------------------------------
Total Assets $ 4,504,739 $4,092,546
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity
<S> <C> <C>
Current Liabilities:
Short-term debt $ 318,169 $ 182,338
Payables, trade and other 460,892 403,947
Accrued payrolls and employee benefits 168,667 156,322
Accrued income taxes 196,417 247,997
Other accrued liabilities 121,948 116,318
- -----------------------------------------------------------------------------------------------
Total current liabilities 1,266,093 1,106,922
- -----------------------------------------------------------------------------------------------
Long-Term Debt 212,485 278,843
Deferred Income Taxes 45,768 34,249
Other Liabilities 212,365 176,777
- -----------------------------------------------------------------------------------------------
Total liabilities 1,736,711 1,596,791
- -----------------------------------------------------------------------------------------------
Shareholders' Equity:
Common stock, without par value-
Authorized 700,000,000 shares,
issued 232,491,889 shares 79,580 70,135
Other capital 83,454 80,105
Deferred compensation (2,489) (4,568)
Cumulative translation adjustments 156,837 129,612
Net unrealized investment gains 19,423 21,585
Retained earnings 2,667,755 2,442,317
Treasury stock, at cost (236,532) (243,431)
- -----------------------------------------------------------------------------------------------
Total shareholders' equity 2,768,028 2,495,755
- -----------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 4,504,739 $4,092,546
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
31
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Net
Cumulative Unrealized
Common Other Deferred Translation Investment Retained Treasury Stock
(amounts in thousands) Stock Capital Compensation Adjustments Gains, net Earnings Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $62,003 $78,992 $(5,806) $ 81,804 $ -- $2,090,132 (14,781) $(235,988)
Net income 317,449
Cash dividends-80 cents per share (167,838)
Purchases of treasury stock (135) (3,771)
Distributions of treasury
stock under bonus plans 134 88 2,431
Issuance of common stock under
bonus plans 3,403 (1,822)
Amortization of deferred
compensation 2,026
Translation adjustments (16,587)
Other (32)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 65,406 79,126 (5,602) 65,217 -- 2,239,711 (14,828) (237,328)
Net income 373,790
Cash dividends - 84 cents per share (176,177)
Change in subsidiaries' year-ends 5,034
Purchases of treasury stock (336) (10,800)
Distributions of treasury
stock under bonus plans 979 160 4,697
Issuance of common stock under
bonus plans 4,729 (606)
Amortization of deferred
compensation 1,640
Translation adjustments 64,395
Net unrealized investment gains 21,585
Other (41)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 70,135 80,105 (4,568) 129,612 21,585 2,442,317 (15,004) (243,431)
Net income 427,334
Cash dividends - 92 cents per share (196,521)
Change in subsidiary's year-end (5,375)
Purchases of treasury stock (87) (3,439)
Distributions of treasury
stock under bonus plans 1,075 (3,734) 209 7,228
Issuance of common stock under
bonus plans 9,445
Amortization of deferred
compensation 5,813
Translation adjustments 27,225
Net unrealized investment losses (2,162)
ESOP termination 2,274
Acquisition of business 83 3,110
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $79,580 $83,454 $(2,489) $156,837 $19,423 $2,667,755 (14,799) $(236,532)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
32
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1995 1994 1993
---------------------------------------------------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS at January 1 $ 244,568 $ 267,702 $ 406,889
- -------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income 427,334 373,790 317,449
Noncash adjustments-
Depreciation and amortization 361,394 324,509 306,435
Deferred income taxes 35,460 (43,565) (64,911)
Increase to other liabilities 41,688 17,334 18,554
Other, net 42,292 43,693 35,773
Changes in operating assets and liabilities
net of effects of acquisitions of businesses (164,356) (25,777) (63,393)
Change in subsidiaries' year-ends 3,164 (4,568) --
- ---------------------------------------------------------------------------------------------------------
Cash provided by operating activities 746,976 685,416 549,907
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (712,976) (472,612) (369,819)
Decrease (increase) in securities
available for sale 97,545 24,323 (43,843)
Acquisitions of businesses, less cash acquired (299) (56,377) (16,230)
Increase in investments (71,423) (47,619) (37,059)
Other, net 28,626 (3,813) 13,698
- ---------------------------------------------------------------------------------------------------------
Cash used for investing activities (658,527) (556,098) (453,253)
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Changes in short-term debt 139,968 (37,515) (137,177)
Proceeds from long-term debt 36,773 71,343 107,265
Repayments of long-term debt (99,748) (13,347) (23,120)
Purchases of treasury stock (3,439) (10,800) (3,771)
Dividends paid (196,521) (176,177) (167,838)
Other, net 1,188 1,333 (1,490)
- ---------------------------------------------------------------------------------------------------------
Cash used for financing activities (121,779) (165,163) (226,131)
- ---------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,300 12,711 (9,710)
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS at December 31 $ 212,538 $ 244,568 $267,702
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Receivables $ (78,348) $(117,789) $(57,851)
Inventories (103,359) (70,125) (23,857)
Other current assets 19,818 5,577 (18,923)
Payables, trade and other 14,460 59,547 (5,302)
Accrued payrolls and employee benefits 14,138 30,142 13,626
Other accrued liabilities (31,065) 66,871 28,914
- ---------------------------------------------------------------------------------------------------------
$(164,356) $ (25,777) $(63,393)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries.
Investments representing ownership of 20% to 50% in affiliates and joint
ventures are accounted for using the equity method.
The Company's M/A-COM, Inc. subsidiary (See Note 4) changed its
fiscal year-end in 1995 from the Saturday nearest September 30 to December
31 in order to be consistent with the rest of the companies' year-ends.
In 1994, the Company's Asia/Pacific and Americas subsidiaries changed
their fiscal year-ends from November 30 to December 31 for the same
purpose. In accordance with guidelines of the Securities and Exchange
Commission, only twelve months of income and expense for the affected
companies were included in the Consolidated Statements of Income for 1995
and 1994. Results of operations associated with the additional months
were recorded directly to retained earnings in each year and cash flow
activity for these same periods was reflected as a single line item in the
operating activities section of the Consolidated Statements of Cash Flows.
Cash and Cash Equivalents--Cash and cash equivalents are comprised of
cash in banks, time deposits, repurchase agreements and investments with
original maturities of 91 days or less on their acquisition date.
Investments--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. Unrealized market
value gains and losses are charged to earnings if the securities are
traded for short-term profit. Otherwise, such unrealized 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 earnings.
Management determines the proper classifications of investments in
obligations with fixed maturities and marketable equity securities at the
time of purchase and reevaluates such designations as of each balance
sheet date. At December 31, 1995 and 1994, all securities covered by SFAS
No. 115 were designated as available for sale. Accordingly, these
securities are stated at fair value, with unrealized gains and losses
reported in a separate component of shareholders' equity. Realized gains
and losses on sales of investments, as determined on a specific
identification basis, are included in the Consolidated Statements of
Income.
Inventories--Inventories, consisting of material, labor and overhead,
are stated at the lower of first-in, first-out ("FIFO") cost or market.
Property, Plant and Equipment and Depreciation--Property, plant and
equipment is stated at cost, adjusted to current exchange rates where
applicable. Depreciation is computed by applying principally the
straight-line method to individual items. Depreciation rate ranges are
substantially as follows:
Buildings.................................5%
Leasehold improvements....................Life of lease
Machinery and equipment...................7 1/2% to 33 1/3%
Machines and tools with customers.........20% to 33 1/3%
Where different depreciation methods or lives are used for tax purposes,
deferred income taxes are recorded.
Maintenance and repairs are charged to expense as incurred. Major
repairs and improvements which extend the lives of the related assets are
capitalized and depreciated at applicable straight-line rates.
The cost and accumulated depreciation of items of plant and equipment
retired or otherwise disposed of are removed from the related accounts,
and any residual values are charged or credited to operating income.
Other Assets--The excess of cost over the fair value of assets
acquired is amortized over periods not exceeding 15 years. In assessing
the recoverability of goodwill, impairment is measured against the
emergence and success of competing technologies. When factors indicate
that goodwill should be evaluated for possible impairment, the Company
uses an estimate of the related business's undiscounted cash flows over
the remaining life of the goodwill to assess recoverability.
Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
34
Environmental Costs--Environmental expenditures which relate to
current operations are capitalized or charged to expense as appropriate.
Future remedial expenses are accrued without regard to possible recoveries
from third parties when their outcome appears probable and their potential
liability can be reasonably estimated.
Per Share Amounts--Per share amounts have been calculated using the
weighted average number of shares outstanding during each period, adjusted
for the impact of common stock equivalents using the Treasury Stock
Method when the effect is dilutive. The weighted average number of shares
outstanding used to compute per share data was 217,716,093 in 1995,
217,012,611 in 1994 and 216,628,525 in 1993.
Future Accounting Changes--In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" (SFAS No. 121). This statement requires
recognition of impairment losses for long-lived assets whenever events or
changes in circumstances result in the carrying amount of the assets
exceeding the sum of the expected future cash flows associated with such
assets. The measurement of the impairment losses to be recognized is to be
based on the difference between the fair values and the carrying amounts
of the assets. The statement also requires that long-lived assets held
for sale be reported at the lower of carrying amount or fair value less
cost to sell. SFAS No. 121 must be adopted by the Company in 1996 and such
adoption is not expected to have a material effect on the financial
position or results of operations of the Company.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") was issued in October 1995.
This statement establishes a fair value based method of accounting for
grants of equity instruments to employees or suppliers in return for goods
or services. With respect to stock-based employee compensation
arrangements, SFAS No. 123 permits entities to continue to apply the
current accounting methods prescribed by APB Opinion No. 25; however, if
the effect is significant, proforma disclosures of net income and earnings
per share, determined as if the fair value based method had been applied
in measuring compensation cost, are to be provided in the footnotes to the
1996 financial statements. The provisions of the new statement are not
anticipated to have any material effect since the accounting for stock-
based compensation arrangements will not be changed.
2. STOCK SPLIT
On January 25, 1995, the Board of Directors authorized a two-for-one stock
split that was distributed on March 2, 1995, to shareholders of record on
February 6, 1995. In addition, authorized shares were increased from
350,000,000 to 700,000,000. All references in the financial statements to
number of shares, per share amounts and market prices of the Company's
common stock have been retroactively restated to reflect the increased
number of common shares outstanding.
3. PROPERTY, PLANT AND EQUIPMENT
At December 31, property, plant and equipment was comprised of the
following:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994
-------------------------------------------------------------------------
<S> <C> <C>
Land $ 81,565 $ 66,135
Buildings and leasehold improvements 898,362 747,996
Machinery and equipment 3,003,591 2,546,700
Machines and tools with customers 368,508 352,829
-------------------------------------------------------------------------
$4,352,026 $3,713,660
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Depreciation expense was $348,216,000, $293,245,000 and $284,609,000 in
1995, 1994 and 1993, respectively.
</TABLE>
4. MERGER WITH M/A-COM, INC.
On June 30, 1995, M/A-COM, Inc. (M/A-COM) was merged with and into the
Company through the issuance of 7.6 million shares of AMP common stock
which were exchanged for all of the outstanding common shares of M/A-COM.
The merger qualifies as a tax-free reorganization and was accounted for as
a pooling-of-interests. Accordingly, the Company's financial statements
have been restated to include the results of M/A-COM for all periods
presented.
As discussed in Note 1, prior to the merger, M/A-COM used a fiscal
year ending on the Saturday nearest September 30. Accordingly, the
restated financial statements combine the October 1, 1994 and October 2,
1993 financial statements of M/A-COM with the December 31, 1994 and 1993
financial statements of AMP, respectively. Net sales and the net loss of
M/A-COM for the three-month period ended December 31, 1994 were $81.6
million and $5.4 million, respectively, with the net loss reflected as an
adjustment to retained earnings effective January 1, 1995.
Combined and separate results of AMP and M/A-COM during the periods
preceding the merger were as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Six Months Ended
June 30, 1995 (unaudited) AMP M/A-COM Adjustment Combined
- ---------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Sales $2,440 $192 $ -- $2,632
Net income (loss) 233 1 (31) 203
Fiscal Year 1994
- ----------------
Sales $4,027 $342 $ -- $4,369
Net income (loss) before
cumulative effect of change in
accounting principle 369 4 1 374
Cumulative effect of change in
accounting principle -- 3 (3) --
- ----------------------------------------------------------------------------------------
Net income (loss) $ 369 $ 7 $ (2) $ 374
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Fiscal Year 1993
- ----------------
Sales $3,450 $340 $ -- $3,790
Net income (loss) before
discontinued operations and
cumulative effect of change in
accounting principle 297 (23) 10 284
Discontinued operations, less
income taxes -- 1 (1) --
Cumulative effect of change in
accounting principle -- -- 33 33
- ----------------------------------------------------------------------------------------
Net income (loss) $ 297 $(22) $ 42 $ 317
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
The combined financial results presented above include adjustments
made to conform the accounting policies of the two companies, as well as
transaction fees and one-time expenses associated with the merger. The
primary adjustment affecting income was the restatement of M/A-COM's
adoption of SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109")
due to the reduction of the valuation allowance for deferred tax assets
that were not expected to be realized by M/A-COM operating separately.
M/A-COM adopted this accounting principle originally at the beginning of
its fiscal year 1994; however, the timing of this adoption was changed to
the beginning of fiscal year 1993 in order to conform with the timing of
AMP's adoption. The effect of this adjustment is reflected as income from
the cumulative effect of a change in accounting principle of $35 million
and a $7 million reduction in the tax provision in fiscal year 1993 and
a $1 million reduction in the tax provision in fiscal year 1994. Prior
to the restatement for the M/A-COM merger, AMP's effect of adopting SFAS
No. 109, a $2 million charge, was included in net income from operations.
No intercompany transactions existed between the two companies during the
periods presented.
Transaction costs and one-time charges resulting from the merger of
$48.7 million ($31 million net-of-tax) include expenses for investment
banker and professional fees, severance related costs and charges to
standardize the accounting practices of the companies.
36
5. SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross
Unrealized Unrealized
Holding Holding Market
(dollars in thousands) Cost Gains Losses Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State and Municipal Securities--
Maturing in 1 year or less $ 2,800 $ 1 $ -- $ 2,801
Common Stock 23,027 32,369 -- 55,396
- -----------------------------------------------------------------------------------
$ 25,827 $32,370 $ -- $58,197
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 Gross Gross
Unrealized Unrealized
Holding Holding Market
(dollars in thousands) Cost Gains Losses Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Government Securities--
Maturing in 1 year or less $ 1,987 $ -- $ -- $ 1,987
Maturing between 1 and 5 years 54,724 -- 1,777 52,947
State and Municipal Securities--
Maturing in 1 year or less 20,340 -- 1 20,339
Maturing between 1 and 5 years 8,475 -- 199 8,276
Commercial Paper 12,358 -- 329 12,029
Common Stock 21,595 39,535 -- 61,130
- -----------------------------------------------------------------------------------
$119,479 $39,535 $2,306 $156,708
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
Differences between cost and market of $32,370,000 (less deferred
taxes of $12,896,000) and $37,229,000 (less deferred taxes of $15,644,000)
were credited to a separate component of shareholders' equity called "Net
Unrealized Investment Gains" as of December 31, 1995 and 1994,
respectively.
Proceeds from sales of securities available for sale were
approximately $127,186,000 and $249,098,000 for the years ended December
31, 1995 and 1994, respectively. Gross gains and gross losses on such
sales were not significant. At December 31, 1995 and 1994, approximately
$89,994,000 and $42,000,000 of securities available for sale with original
maturities of 91 days or less were included in cash and cash equivalents.
The market values of these securities approximate cost.
6. INVENTORIES
At December 31, inventories were comprised of the following:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
Finished goods and work in process $411,504 $373,094
Purchased and manufactured parts 263,926 199,493
Raw materials 87,373 69,366
- -----------------------------------------------------------------------
$762,803 $641,953
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
7. LEASE COMMITMENTS
The Company leases certain buildings and transportation and other
equipment. Capital leases are not significant.
Total rental expense under operating leases for the year ended
December 31 was $79,978,000 in 1995, $67,564,000 in 1994 and
$62,606,000 in 1993. Minimum rental commitments at December 31,
1995 under leases with initial terms in excess of one year were:
1996 -- $43,665,000 1999 -- $14,901,000
1997 -- $34,257,000 2000 -- $10,847,000
1988 -- $23,000,000 2001 and beyond -- $70,392,000
8. FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are
used to manage well-defined commodity price and foreign currency
risks.
Commodities swap agreements are utilized to hedge anticipated
purchases of certain metals used in the Company's manufacturing
operations. Under these swap agreements, payments are made or received
based on the differential between a specified price and the actual price
of the metals. These contracts generally cover a one-year period and are
accounted for as hedges, with all gains and losses recognized in cost of
sales when the commodities are consumed. At December 31, 1995 and 1994,
commodity contracts involving notional amounts of $1,400,000 and
$52,000,000, respectively, were outstanding. These notional amounts do
not represent amounts exchanged by the parties; rather, they are used as
the basis to calculate the amounts due under the agreements.
From time to time the Company and its subsidiaries utilize forward
foreign currency exchange contracts to minimize the impact of currency
movements, principally on intercompany royalties, inventory purchases and
dividends denominated in currencies other than their functional
currencies. The terms of these contracts are generally less than one year
and they also are hedges of anticipated transactions. Gains and losses
related to these agreements are recorded when the related transaction
occurs. The purpose of the Company's hedging is to protect it from the
risk that the eventual functional currency inflows resulting from the
intercompany payments will be adversely affected by changes in exchange
rates. The major currency exposures hedged by the Company include the
German mark, the Japanese yen, the British pound, the Singapore dollar and
the Mexican peso. At December 31, 1995 and 1994, the Company and its
subsidiaries had forward foreign currency exchange contracts with
aggregate contract amounts of approximately $66,000,000 and $95,000,000,
respectively.
On March 11, 1994, the Company entered into a foreign currency swap
with a AAA-rated counterparty to hedge a portion of its net investment in
its Japanese subsidiary. Under terms of the agreement, the Company will
swap 15.9 billion yen for U.S. $150 million in ten years based on the
exchange rate on the day the contract became effective. In addition, the
contract provides for the Company to make semi-annual interest payments of
4.61% on the 15.9 billion yen, while receiving semi-annual interest
payments of 6.71% on the U.S. $150 million. The Company has the
unilateral right to unwind the swap early. Due to the fact that this
contract is an effective hedge of an investment in a foreign entity, any
gain or loss on the contract is recorded directly to cumulative
translation adjustments.
While it is not the Company's intention to terminate any of the above
financial instruments, the fair values were estimated by obtaining quotes
from brokers which represented the amounts that the Company would receive
or pay if the agreements were terminated at the balance sheet dates.
These fair values indicated that termination of the commodities swap
agreements, the forward foreign currency exchange contracts and the
foreign currency swap agreement at December 31, 1995 would have resulted
in an $11,000 gain, a $4,900,000 gain and a $12,100,000 loss,
respectively. Termination of these agreements at December 31, 1994 would
have resulted in a $23,000,000 gain on the commodities contracts, a
$3,900,000 gain on the forward foreign currency exchange contracts and a
$21,300,000 loss on the foreign currency swap agreement. Due to the
volatility of currency exchange rates and commodity prices, these
estimated results may or may not be realized.
9. INTEREST
The Company capitalizes interest costs associated with the construction of
certain assets. These costs are not significant. Interest paid during
the periods was approximately equal to amounts charged to expense.
Interest income for the year ended December 31 was $17,204,000 in 1995,
$18,097,000 in 1994 and $19,594,000 in 1993.
10. RESEARCH AND DEVELOPMENT
Research and development expenditures for the creation and application of
new and improved products and processes for the year ended December 31
were $351,000,000 in 1995, $287,000,000 in 1994 and $277,000,000 in 1993.
38
11. DEBT
At December 31, debt was comprised of the following:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------------
Due Due
Long Within Long Within
(dollars in thousands) Term One Year Term One Year
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International bank loans, 5.4% weighted
interest rate (1994--5.3%), repayable
in varying amounts through 2013 $206,575 $ 26,715 $202,744 $ 15,666
Convertible subordinated debentures, 9.25%
M/A-COM debt redeemed August 14, 1995 -- -- 65,836 --
Mortgages and other indebtedness, 7.0%
weighted interest rate (1994--8.6%),
repayable through 2010 5,910 15,156 10,263 9,956
International overdrafts and demand loans,
5.9% weighted interest rate
(1994--6.5%) -- 276,298 -- 156,716
- --------------------------------------------------------------------------------------------
$212,485 $318,169 $278,843 $182,338
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, the payment schedule of debt due after one year
is as follows: $26,784,000 in 1997, $44,801,000 in 1998, $21,032,000 in
1999, $39,272,000 in 2000 and $80,596,000 in 2001 and beyond.
In the fourth quarter of 1995, the Company established a commercial
paper program for maximum borrowing of $200,000,000. In addition, an
agreement for a $150,000,000 five-year revolving credit facility was
signed with a group of U.S. banks primarily to back-up the commercial
paper program. The facility fee is 6.25 basis points annually and interest
rate options on the facility include: (1) the higher of the Federal funds
rate plus 1/2 of 1% or the prime commercial lending rate of the lead bank,
(2) LIBOR, or (3) rates determined as part of a competitive bidding
process. This formal syndicated credit facility replaced certain existing
uncommitted short-term facilities and has a minimum shareholders' equity
requirement of approximately $2 billion. Neither of these funding sources
has been used as of December 31, 1995.
At December 31, 1995 and 1994, the fair values of the Company's
short-term and long-term debt were not significantly different from the
respective carrying values.
12. SHAREHOLDER RIGHTS PLAN
On October 25, 1989, the Board of Directors adopted a Shareholder Rights
Plan and declared a dividend of one Common Stock Purchase Right (a
"Right") for each outstanding share of Common Stock. Such Rights only
become exercisable, or transferable apart from the Common Stock, ten
business days after a person or group (an "Acquiring Person") acquires
beneficial ownership of, or commences a tender or exchange offer for, 20%
or more of the Company's Common Stock.
Each Right then may be exercised to acquire one share of the
Company's Common Stock at an exercise price of $87.50, subject to
adjustment. Thereafter, upon the occurrence of certain events (for
example, if the Company is the surviving corporation of a merger with an
Acquiring Person), the Rights entitle holders other than the Acquiring
Person to acquire Common Stock having a value of twice the exercise price
of the Rights. Alternatively, upon the occurrence of certain other events
(for example, if the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving
corporation), the Rights would entitle holders other than the Acquiring
Person to acquire Common Stock of the Acquiring Person having a value
twice the exercise price of the Rights.
The Rights may be redeemed by the Company at a redemption price of
1/2 cent per Right at any time until the tenth business day following
public announcement that a 20% position has been acquired or ten business
days after commencement of a tender or exchange offer. The Rights will
expire on November 6, 1999.
39
13. EMPLOYEE RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS
Defined Benefit Plans--The Company has defined benefit pension plans for
substantially all U.S. employees, excluding M/A-COM. Pension benefits are
based on years of service and earnings near retirement. Assets of the
plans are comprised principally of equity securities and fixed income
investments. The U.S. plans include provisions to increase benefit
obligations in the event of a change in control of the Company, as
defined. It is the Company's policy to fund at least the minimum amounts
required by Federal law and regulation.
Certain international subsidiaries also have pension plans. In most
cases, the plans are defined benefit in nature. Assets of the plans are
comprised of insurance contracts and equity securities--or book reserves
are maintained. Benefit formulas are similar to those used by the U.S.
plans. It is the policy of these subsidiaries to fund at least the
minimum amounts required by local law and regulation.
Defined Contribution Plans--The Company also provides retirement
benefits to U.S. employees through defined contribution plans. Employees
working for AMP and certain other U.S. subsidiaries may elect to
participate in the "Employee Savings and Thrift Plan," a defined
contribution 401(k) plan, which has been established as a supplemental
retirement program. Under this program the Company contributes 60 cents
for each dollar contributed by an employee up to 4% of an employee's base
pay. U.S. employees of M/A-COM may elect to participate in the "MERIT
Plan of Benefits," a defined contribution 401(k) plan. Under this plan,
M/A-COM contributes a certain percentage based on the employee's years of
service (50%-100%) of each dollar contributed by an employee up to 6% of an
employee's cash compensation. Assets of the defined contribution plans
consist primarily of various mutual funds, a fixed income fund and AMP
stock. Amounts charged to expense for contributions to these plans were
$15,330,000, $13,641,000 and $13,103,000 for 1995, 1994 and 1993,
respectively.
Retiree Medical Benefits--In addition to providing pension and 401(k)
benefits, the Company also provides health care coverage continuation for
qualifying U.S. retirees from date of retirement to age 65.
M/A-COM, Inc. Employee Stock Ownership Plan--M/A-COM had an Employee
Stock Ownership Plan (ESOP) which enabled employees to accumulate shares
of stock to supplement their retirement benefits. The discretionary
contributions of the ESOP were made entirely by M/A-COM and ESOP share
purchases were financed by a loan from the Company. On December 15, 1995,
M/A-COM terminated the ESOP and made a final contribution in the amount of
the outstanding loan balance of $2,274,000. All shares were allocated to
the participants at December 31, 1995.
Key economic assumptions used for defined benefit plans were:
<TABLE>
<CAPTION>
U. S. Plans International Plans
- ------------------------------------------------------------------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Settlement rate--
January 1 8.50% 7.00% 5.75% 6.25%
December 31 7.00% 8.50% 5.25% 5.75%
Rate of increase in compensation levels 4.50% 4.00% 3.25% 4.00%
Expected long-term rate of return 9.50% 9.50% 5.75% 6.25%
</TABLE>
Components of net periodic pension cost for the year ended
December 31 were:
<TABLE>
<CAPTION>
U. S. Plans International Plans
- -------------------------------------------------------------------------------------------------
(dollars in thousands) 1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost - benefits
earned during the period $ 23,539 $ 22,297 $ 17,787 $ 14,044 $ 13,980 $ 12,988
Interest cost on projected
benefit obligation 42,188 38,580 35,058 14,922 12,765 13,293
Actual return on plan assets (126,967) 8,213 (69,507) (23,541) (10,126) (15,457)
Net amortization and deferral 74,918 (55,187) 23,198 8,221 (3,308) 3,339
- -------------------------------------------------------------------------------------------------
Net periodic pension cost $ 13,678 $ 13,903 $ 6,536 $ 13,646 $ 13,311 $ 14,163
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
41
The funded status of these plans at December 31 was:
<TABLE>
<CAPTION>
U. S. Plans International Plans
- ------------------------------------------------------------------------------------------
(dollars in thousands) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $617,103 $501,305 $265,258 $237,778
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Actuarial present value of
benefit obligations:
Vested benefits 494,089 354,380 192,981 173,070
Nonvested benefits 51,946 44,666 35,039 29,391
- -----------------------------------------------------------------------------------------
Accumulated benefit obligation 546,035 399,046 228,020 202,461
Additional benefits based on
projected future salary increases 108,579 110,437 34,533 26,990
- ------------------------------------------------------------------------------------------
Projected benefit obligation $654,614 $509,483 $262,553 $229,451
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Plan assets greater (less) than
projected benefit obligation $(37,511) $ (8,178) $ 2,705 $ 8,327
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Accrued liability at year-end (76,745) (69,408) (13,973) (11,601)
Unrecognized net gain 28,726 59,528 30,219 33,261
Unrecognized prior service cost (9,326) (14,429) (1,514) (88)
Unrecognized transition amount,
net of amortization 19,834 16,131 (12,027) (13,245)
- ------------------------------------------------------------------------------------------
Plan assets greater (less) than
projected benefit obligation $(37,511) $ (8,178) $ 2,705 $ 8,327
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
Components of net periodic retiree medical cost for the year ended
December 31 were:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $1,595 $2,417 $1,957
Interest cost on accumulated
postretirement benefit obligation 1,882 2,266 2,245
Net amortization and deferral 615 1,071 1,071
- ------------------------------------------------------------------------
Net periodic postretirement benefit $4,092 $5,754 $5,273
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
The funded status of these retiree medical plans at December 31 was:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value $ -- $ --
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Actuarial present value of
benefit obligations:
Retirees $ 8,748 $ 11,261
Employees eligible to retire 4,771 4,378
Employees not eligible to retire 12,989 14,551
- ---------------------------------------------------------------------------
Accumulated postretirement benefit obligation $ 26,508 $ 30,190
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Plan assets less than accumulated
postretirement benefit obligation $(26,508) $(30,190)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Accrued liability at year-end $(17,284) $(12,116)
Unrecognized net gain 8,982 1,203
Unrecognized transition amount,
net of amortization (18,206) (19,277)
- ---------------------------------------------------------------------------
Plan assets less than accumulated
postretirement benefit obligation $(26,508) $(30,190)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
For disclosure purposes, the transition asset associated with the
retiree medical benefits has been netted against the related accrued
liability.
Retiree medical benefits expense was computed using a medical cost
trend rate of 11% graded to 5.5% in year 2002 and later. For each
increase of 1% in the medical cost trend rate the benefit obligation
would increase approximately $1,140,000 and annual expense would increase
approximately $250,000. The settlement rate used to compute the
obligation was 7.00% and 8.50% at December 31, 1995 and 1994, respectively.
14. STOCK AWARD PLANS
Long-Term Equity Incentive Plans--In April 1993, the shareholders approved
AMP's 1993 Long-Term Equity Incentive Plan (the "AMP Plan"). The AMP
Plan, as amended in April 1995, provides that Stock Bonus Units ("SARs"),
Incentive Stock Options ("ISOs"), Non-Qualified Stock Options ("NQSOs")
and/or restricted stock may be issued to key employees. Awards of up to
10,000,000 shares of the Company's Common Stock may be made under this
plan. The M/A-COM Long-Term Incentive Plan (the "M/A-COM Plan"), adopted
in 1990, authorized 336,000 shares for the granting of ISOs, NQSOs,
outside Directors' options, SARs and restricted stock. The M/A-COM Plan
replaced all existing stock award plans but the awards outstanding under
such existing plans were not affected. Subsequent to June 30, 1995, no
awards will be made under the M/A-COM Plan.
Stock Options--The Board of Directors determines the terms and
conditions applicable to each Stock Option award. The option price per
share of Common Stock will not be less than 100% of the fair value of the
stock on the award date. Options expire no later than ten years from date
of grant and may not be exercised earlier than twelve months from such
date. Generally, options granted under the AMP Plan since inception become
exercisable on the third anniversary of the grant date. Currently, no
options granted under the AMP Plan are exercisable until July 27, 1996.
Options granted under the M/A-COM Plan become exercisable over a
four-year period with 138,317 and 532,000 exercisable at December 31, 1995
and 1994, respectively. SARs, with an option price of $20.33, were issued
in tandem with 294,000 of the stock options outstanding under the M/A-COM
Plan at December 31, 1994. Based on past experience, the expressed intent
of the two holders not to elect the SAR option, and the underlying
economics to the holders, it was management's opinion that SARs would not
be exercised, and therefore, no compensation expense had been recognized
through December 31, 1994. However, as a result of the merger with and
into AMP on June 30, 1995, the holders elected the SAR option for 196,729
of the tandem shares and exercised 97,271 options. The SAR elections were
made primarily to pay personal income taxes resulting from the exercises,
as well as the exercise price on the stock options. Compensation expense
equal to the difference between the market price at June 30, 1995 and the
exercise price amounting to $6,557,600 was recorded as part of the merger
expenses.
A summary of the status of the Company's stock option plans follows:
<TABLE>
<CAPTION>
ISO's Average NQSO's Average
Number Price Number Price
of Shares Per Share of Shares Per Share
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at 12/31/92 -- $ -- 780,321 $ 20.04
- -----------------------------------------------------------------------------
Granted 122,400 30.25 532,080 30.15
Exercised -- -- (92,082) 19.50
Cancelled -- -- (60,262) 20.46
- -----------------------------------------------------------------------------
Outstanding at 12/31/93 122,400 $30.25 1,160,057 $ 24.72
- -----------------------------------------------------------------------------
Granted 263,800 35.71 634,560 35.47
Exercised -- -- (69,264) 19.64
Cancelled (11,600) 34.19 (29,040) 28.84
- -----------------------------------------------------------------------------
Outstanding at 12/31/94 374,600 $33.98 1,696,313 $ 28.87
- -----------------------------------------------------------------------------
Granted 377,300 42.85 633,180 42.63
Exercised -- -- (282,846) 20.44
Cancelled (16,400) 37.87 (242,628) 21.57
- -----------------------------------------------------------------------------
Outstanding at 12/31/95 735,500 $38.44 1,804,019 $ 35.77
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
Stock Bonus Units--Stock Bonus Units awarded under the AMP Plan may
be granted to participants with or without a Supplemental Cash Bonus, at
the discretion of the Board of Directors. The designated value of each
Stock Bonus Unit may not be less than 95% of the average fair value of the
stock over the 10 days preceding the award date. Awards are computed by
multiplying vested Bonus Units by the excess of the market price of the
Company's Common Stock over the designated value of the Stock Bonus Unit.
Approximately 159,500 shares would be distributed in the years 1996
through 2000 for Stock Bonus Units granted before and outstanding at
December 31, 1995, based on the market price at that date. Stock Bonus
Units awarded under the M/A-COM Plan of 56,000 were issued and outstanding
at December 31, 1994. All of these units converted to shares during 1995
on a one-for-one basis upon the lapsing of certain restrictions.
Currently, it is the Company's intention that no future grants of Stock
Bonus Units will be made under either the AMP or the M/A-COM Plan.
42
Cash (or Stock) Plan--Key employees, designated by the Board of
Directors, participate in the Cash (or Stock) Plan. Compensation under
the plan is related to the achievement of specified performance
objectives. Payments are made in cash or in shares of the Company's
Common Stock, at the election of the participant.
Restricted Stock Plan--In April 1995, the Company's shareholders
approved an amendment to the AMP Plan which provides for a restricted
stock feature. This feature represents a fourth type of award under the
AMP Plan which is available to key executives and is performance-based,
linking vesting to attainment by the Company of pre-set average annual
earnings growth targets. As of December 31, 1995, 87,100 shares have been
awarded under the plan.
Charges to income before income taxes for current and future
distributions under the aforementioned plans for the year ended December
31 totaled $21,272,600 in 1995, $17,998,000 in 1994 and $12,194,000 in
1993.
The M/A-COM, Inc. 1990 Restricted Treasury Stock Plan--This Plan
reserved 560,000 shares of common stock for granting share allocations as
an incentive to officers and key employees of M/A-COM. After receiving an
allocation of restricted shares, a participant was awarded specified
percentages of such share allocation on subsequent dates based on the
achievement of performance targets. Vesting of the restricted shares
awarded occurred over a three-year period with all granted share
allocations ultimately awarded and vested at September 19, 2000, if the
participant was still employed. However, due to the merger, all share
allocations and restricted shares were awarded and/or vested on June 30,
1995. Deferred compensation had been recorded as a component of equity
when the share allocations were granted based on the market price of the
stock at that date, with deferred compensation amortized over the periods
to be benefited. Upon the vesting of all share allocations outstanding and
restricted stock awards, amounting to 405,160 shares at June 30, 1995,
deferred compensation of $3,622,000 was expensed entirely. Deferred
compensation amortization was $4,568,000, $1,640,000 and $2,026,000 in
1995, 1994 and 1993, respectively. No future grants will be made under
this Plan.
15. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands For the 3 Months Ended
except per share data)
- ---------------------------------------------------------------------------
March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------
1995
- --------------------
<S> <C> <C> <C> <C>
Net sales $1,295,769 $1,336,059 $1,297,413 $1,297,985
Gross income 420,912 448,341 413,285 404,973
Net income 105,315 97,518 110,722 113,779
Net income per share 48 cents 45 cents 51 cents 52 cents
1994
- --------------------
Net sales $ 985,243 $1,087,836 $1,105,175 $1,190,813
Gross income 329,556 373,687 378,383 403,256
Net income 80,620 96,396 95,144 101,630
Net income per share 37 cents 44 cents 44 cents 47 cents
</TABLE>
The first quarter of 1995 and the year 1994 have been restated to
reflect the merger with M/A-COM treated as a pooling-of-interests. Per
share data for 1994 has been restated to reflect the 2-for-1 stock
split on March 2, 1995. The second quarter of 1995 includes expenses
associated with the merger with M/A-COM of $31 million net-of-tax,
which reduced net income per share by 15 cents.
16. INCOME TAXES
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting For Income Taxes" ("SFAS No. 109"). The
cumulative effect of adopting SFAS No. 109 was $33,100,000 of income.
This amount is reflected in the Consolidated Statement of Income for 1993
as the cumulative effect of a change in accounting principle.
Provisions are made for estimated U.S. and foreign income taxes, less
available tax credits and deductions, which may be incurred on the
remittance of the Company's share of subsidiaries' undistributed earnings
not deemed to be indefinitely invested. Taxes have not been provided on
international subsidiaries' earnings of approximately $265 million at both
December 31, 1995 and 1994. These earnings are deemed to be indefinitely
reinvested.
43
Components of income tax expense for the year ended December 31 were:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal:
Taxes currently payable $107,698 $129,236 $ 95,913
Deferred taxes 8,243 (36,760) (21,386)
Foreign:
Taxes currently payable 105,657 121,414 87,958
Deferred taxes 2,102 (2,968) (2,166)
Other:
Taxes currently payable 17,082 17,744 21,130
Deferred taxes (382) (3,644) (4,575)
- ---------------------------------------------------------------------------
$240,400 $225,022 $176,874
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
At December 31, gross deferred tax assets and liabilities were:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Gross deferred tax assets:
Inventories $ 91,924 $ 92,008
Pensions 23,979 22,357
Bonus plans 16,461 15,794
Medical benefits 13,181 10,402
Accruals 31,301 31,174
NOL carryovers 44,619 32,448
Other 29,005 23,661
- ---------------------------------------------------------------------------
$250,470 $227,844
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Gross deferred tax liabilities:
Depreciation $ 66,195 $ 69,831
Undistributed earnings of subsidiaries 53,200 21,600
Unrealized investment gains 12,896 15,644
Other 26,904 19,520
- ---------------------------------------------------------------------------
$159,195 $126,595
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The valuation allowances for deferred tax assets were not
significant at December 31, 1995 and 1994.
The Company's effective tax rate varied from the U.S. Federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 1.6 2.3 2.6
Foreign income taxes 0.6 1.5 2.7
Other items not individually significant (1.2) (1.2) (1.9)
- ---------------------------------------------------------------------------
Effective tax rate 36.0% 37.6% 38.4%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The Company has U.S. Federal net operating loss carryforwards
related to the recently acquired M/A-COM and AMP-AKZO businesses
amounting to approximatley $100 million at December 31, 1995. The
net operating loss carryforwards expire primarily in 2004 to 2010.
For the year ended December 31, income before income taxes,
after allocation of eliminations, is as follows:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
United States operations $395,126 $285,616 $253,343
International operations 272,608 313,196 207,880
- ---------------------------------------------------------------------------
Worldwide income before income taxes $667,734 $598,812 $461,223
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
Income tax payments were $243,500,000 in 1995, $190,025,000 in
1994, and $176,090,000 in 1993.
44
17. BUSINESS SEGMENTS
AMP develops, manufactures and markets electrical, electronic and electro-
optic connection products, interconnection systems and connector-
intensive assemblies. The Company's customers include original equipment
manufacturers and their subcontractors, utilities, government agencies,
distributors and value-added resellers. Business is concentrated in one
product area--electrical and electronic components.
The operations of the Company are worldwide and can be grouped into
several geographic segments. Operations outside the United States are
conducted through wholly-owned subsidiary companies that function within
assigned, principally national, markets. The subsidiaries manufacture
locally where required by market conditions and/or customer demands, and
where permitted by economies of scale. Most are also self-financed.
However, while they operate fairly autonomously, there are substantial
intersegment and intrasegment sales.
Pertinent financial data by major geographic segments for the year
ended December 31 are:
<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to trade customers:
United States $2,238,594 $1,955,329 $1,747,294
Europe 1,698,407 1,308,604 1,117,884
Asia/Pacific 1,059,095 892,085 759,822
Americas 231,130 213,049 165,476
- ------------------------------------------------------------------------
Total $5,227,226 $4,369,067 $3,790,476
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Intersegment sales:
United States $ 482,962 $ 399,968 $ 346,601
Europe 64,688 49,274 37,105
Asia/Pacific 95,443 73,706 44,767
Americas 11,222 15,301 9,206
Eliminations (654,315) (538,249) (437,679)
- ------------------------------------------------------------------------
Total $ -- $ -- $ --
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Pretax income:
United States $ 398,826 $ 300,173 $ 283,731
Europe 192,807 184,666 130,910
Asia/Pacific 74,305 112,302 75,224
Americas 11,096 21,797 2,126
Eliminations (9,300) (20,126) (30,768)
- ------------------------------------------------------------------------
Total $ 667,734 $ 598,812 $ 461,223
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Identifiable assets:
United States $ 2,676,394 $2,495,379 $2,235,201
Europe 1,135,606 956,351 703,448
Asia/Pacific 1,022,667 905,289 763,843
Americas 121,489 107,874 87,152
Eliminations (451,417) (372,347) (344,022)
- ------------------------------------------------------------------------
Total $ 4,504,739 $4,092,546 $3,445,622
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
Transfers between geographic segments are generally priced at
"large quantity customer prices less a discount" for items not
requiring further manufacture and at "cost plus a percentage" for
items subject to further processing.
Availability of remittances to the parent company is subject
to exchange controls and other restrictions of the various countries.
Foreign currency transaction net losses, after adjustment for
income taxes to the extent appropriate, decreased net income by
$5,525,000 in 1995, $4,452,000 in 1994, and $2,665,000 in 1993.
45
STATEMENT OF MANAGEMENT RESPONSIBILITY
The financial statements and other financial information contained in this
Annual Report are the responsibility of management. They have been
prepared in accordance with generally accepted accounting principles
applied on a materially consistent basis and are deemed to present fairly
the consolidated financial position of AMP Incorporated and subsidiaries,
and the consolidated results of their operations. Where necessary,
management has made informed judgments and estimates of the outcome of
events and transactions, with due consideration given to materiality.
As a means of fulfilling its responsibility for the integrity of
financial information included in this Annual Report, management relies on
the Company's system of internal controls. This system has been
established to ensure, within reasonable limits, that assets are
safeguarded, that transactions are properly recorded and executed in
accordance with management's authorization and that the accounting records
provide a solid foundation from which to prepare the financial statements.
It is recognized that no system of internal controls can detect and
prevent all errors and irregularities. Management believes that the
established system provides an acceptable balance between benefits to be
gained and their related costs.
It has always been the policy and practice of the Company to conduct
its affairs ethically and in a socially responsible manner. Employee
awareness of these objectives is achieved through regular and continuing
key written policy statements. Management maintains a systematic program
to ensure compliance with these policies.
As part of their audit of the financial statements, the Company's
independent public accountants review and assess the effectiveness of
selected internal accounting controls to establish a basis for reliance
thereon in determining the nature, timing and extent of audit tests to be
applied. In addition, the Company maintains a staff of internal auditors
who work with the independent public accountants to ensure adequate
auditing coverage of the Company and who conduct operational audits of
their own design. Management emphasizes the need for constructive
recommendations as part of the auditing process and implements a high
proportion of their suggestions.
The Audit Committee of the Board of Directors meets with the
independent public accountants, internal auditors and management
periodically to review their respective activities and the discharge of
each of their responsibilities. Both the independent public accountants
and the internal auditors have free access to the Audit Committee, with or
without management, to discuss the scope of their audits and the adequacy
of the system of internal controls.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of AMP Incorporated:
We have audited the accompanying consolidated balance sheets of
AMP Incorporated (a Pennsylvania Corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
AMP Incorporated and subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As explained in Note 16 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for income
taxes to conform with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Philadelphia, PA
February 16, 1996 Arthur Andersen LLP
46
AMP Incorporated and subsidiaries
EX.21
SUBSIDIARIES AND BRANCHES OF AMP INCORPORATED
(all wholly owned and included in consolidated results)
AMP Cable Assembly Systems, Inc.
Wilmington, Delaware
AMP Investments, Inc.
Wilmington, Delaware
Connectware, Inc.
Richardson, Texas
(Delaware, U.S.A.)
M/A-COM, Inc.
Lowell, Massachusetts
The Whitaker Corporation
Wilmington, Delaware
AMP-AKZO Company
Greenville, South Carolina
(New York, U.S.A.)
AMP-AKZO Corporation
Newark, Delaware
AMP of Canada, Ltd.
Toronto, Canada
(Delaware, U.S.A.)
AMP S. A. Argentina C.I.Y.F.
Buenos Aires, Argentina
AMP do Brasil Ltda.
Sao Paulo, Brazil
AMP de Mexico, S.A.
Mexico City, D.F. Mexico
AMP Amermex S.A. de C.V.
Hermosillo, Mexico
AMP Osterreich Handelsgesellschaft m.b.H.
Vienna, Austria
AMP Belgium
Brussels, Belgium
(Branch of AMP-Holland B.V.)
AMP Czech s.r.o.
Brno, Czech Republic
AMP Danmark
Viby, Denmark
(Branch of AMP-Holland B.V.)
AMP Estonia AS
Tallinn, Estonia
AMP Finland Oy
Helsinki, Finland
AMP de France S.A.
Paris, France
SIMEL S.A.
Gevrey-Chambertin, France
AMP Export S.A.R.L.
Pontoise, France
AMP Deutschland G.m.b.H.
Frankfurt, Germany
Jitex Elektrovertr. G.m.b.H.
Wuppertal, Germany
AMP of Great Britain Limited
London, England
SIMEL (UK) Limited
Chencester, Glos., England
AMP Hungary Manufacturing Co. Ltd.
Esztergom, Hungary
AMP Hungary Trading Co. Ltd.
Budapest, Hungary
AMP Ireland Limited
Dublin, Ireland
AMP Interconnection Products Israel, Ltd.
Haifa, Israel
AMP Italia S.p.A.
Torino, Italy
AMP Italia Products S.p.A.
San Salvo, Italy
AMP-Holland B.V.
's-Hertogenbosch, The Netherlands
AMP Norge A/S
Oslo, Norway
AMP Polska Sp.z.o.o.
Warsaw, Poland
AMP Portugal, Lda.
Lisbon, Portugal
AMP Slovenia Trading and Manufacturing Ltd.
Ljubljana, Slovenia
AMP Espanola, S.A.
Barcelona, Spain
SIMEL Iberica, S.A.
Vizcaya, Spain
AMP Products South Africa (Proprietary) Limited
Johannesburg, South Africa
AMP Svenska AB
Stockholm, Sweden
AMP (Schweiz) A.G.
Steinach, Switzerland
AMP (Schweiz) Produktions A.G.
Steinach, Switzerland
Decolletage S.A. St.-Maurice
St.-Maurice, Switzerland
AMP Shunde Connector, Ltd.
Shunde, People's Republic of China
Australian AMP Pty. Ltd.
Sydney, Australia
AMP Products Pacific Ltd.
Hong Kong
AMP India Private Limited
Bangalore, India
AMP Tools (India) Pvt. Ltd.
Cochin, India
AMP (Japan), Ltd.
Tokyo, Japan
AMP Technology Japan Ltd.
Tokyo, Japan
Carroll Touch International, Ltd.
Tokyo, Japan
(Delaware, U.S.A.)
Businessland Japan Company, Ltd.
Tokyo, Japan
AMP Korea Limited
Seoul, South Korea
AMP Manufacturing Korea, Ltd.
Seoul, South Korea
AMP Products (Malaysia) Sdn. Bhd.
Kuala Lumpur, Malaysia
New Zealand AMP Ltd.
Auckland, New Zealand
AMP Philippines, Inc.
Manila, Philippines
AMP Singapore Pte. Ltd.
Singapore
AMP Manufacturing Singapore Pte., Ltd.
Singapore
AMP Taiwan B.V.
Taipei, Taiwan
(The Netherlands)
AMP Manufacturing Taiwan, Ltd.
Taipei, Taiwan
AMP (Thailand) Limited
Bangkok, Thailand
AMP Elektrik-Elektronik Baglanti Sistemleri
Ticaret Limited Sirketi
Istanbul, Turkey
JOINT VENTURES
AMP Shanghai Ltd.
Shanghai, Peoples Republic of China
Building Technology Associates
Wilmington, Delaware
AMP-AKZO LinLam vof
Arnhem, The Netherlands
(Dutch vof partnership)
Note: Subsidiaries and joint ventures are incorporated in the
country/state of location except where indicated
otherwise.
EX.23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMP Incorporated:
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 16, 1996 included
in or incorporated by reference in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statements,
Registration Nos. 33-22676, 33-55318, 33-65048 and 33-54277.
/s/ Arthur Andersen LLP
------------------------
Arthur Andersen LLP
Philadelphia, PA
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S 1995
ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 212,538
<SECURITIES> 58,197
<RECEIVABLES> 1,011,460
<ALLOWANCES> 0
<INVENTORY> 762,803
<CURRENT-ASSETS> 2,277,908
<PP&E> 4,352,026
<DEPRECIATION> 2,413,760
<TOTAL-ASSETS> 4,504,739
<CURRENT-LIABILITIES> 1,266,093
<BONDS> 0
<COMMON> 79,580
0
0
<OTHER-SE> 2,688,448
<TOTAL-LIABILITY-AND-EQUITY> 4,504,739
<SALES> 5,227,226
<TOTAL-REVENUES> 5,227,226
<CGS> 3,539,715
<TOTAL-COSTS> 3,539,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,847
<INCOME-PRETAX> 667,734
<INCOME-TAX> 240,400
<INCOME-CONTINUING> 427,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,334
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
</TABLE>
