AMPHENOL CORP /DE/, 10-K405/A, 1997-03-31

AMPHENOL CORP /DE/
10-K405/A, 1997-03-31
ELECTRONIC CONNECTORS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K/A
AMENDMENT NO. 1

(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to

Commission file number 1-10879

AMPHENOL CORPORATION
(Exact name of Registrant as specified in its Charter)

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<S> <C>
DELAWARE 22-2785165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

358 HALL AVENUE, WALLINGFORD, CONNECTICUT 06492
203-265-8900
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

CLASS A COMMON STOCK, $.001 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
(Title of each Class) (Name of each Exchange
on which Registered)

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/

The aggregate market value of Amphenol Corporation Common Stock, $.001 Par
Value, held by non-affiliates was approximately $833 million based on the
reported last sale price of such stock on the New York Stock Exchange on
February 28, 1997.

As of February 28, 1997 the total number of shares outstanding of Class A
Common Stock was 44,720,954. There are no shares outstanding of Class B Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement which is expected to
be filed within 120 days following the end of the fiscal year covered by this
report, are incorporated by reference into Part III hereof.

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INDEX

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PAGE
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<S> <C> <C> <C>
PART I........................................................................................................ 3
ITEM 1. BUSINESS............................................................................... 3
General.............................................................................. 3
Product Development.................................................................. 4
Product Groups....................................................................... 5
International Operations............................................................. 7
Customers............................................................................ 7
Manufacturing........................................................................ 8
Research and Development............................................................. 8
Trademarks and Patents............................................................... 8
Competition.......................................................................... 9
Backlog.............................................................................. 9
Employees............................................................................ 9
Cautionary Statements for Purposes of Forward Looking Information.................... 10
ITEM 2. PROPERTIES............................................................................. 11
ITEM 3. LEGAL PROCEEDINGS...................................................................... 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.................................... 14
ITEM 4.1 EXECUTIVE OFFICERS..................................................................... 14

PART II....................................................................................................... 15
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS............... 15
ITEM 6. SELECTED FINANCIAL DATA................................................................ 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................ 22
Report of Management................................................................. 22
Report of Independent Accountants.................................................... 22
Consolidated Statement of Income..................................................... 23
Consolidated Balance Sheet........................................................... 24
Consolidated Statement of Changes in Shareholders' Equity............................ 25
Consolidated Statement of Cash Flow.................................................. 26
Notes to Consolidated Financial Statements........................................... 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE........................................................................... 42

PART III...................................................................................................... 42
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................... 42
ITEM 11. EXECUTIVE COMPENSATION................................................................. 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................... 42

PART IV....................................................................................................... 43
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................ 43
Signature of the Registrant.......................................................... 46
Signatures of the Directors.......................................................... 46
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PART I

ITEM 1. BUSINESS

GENERAL

Amphenol Corporation ("Amphenol" or the "Company") is a leading designer,
manufacturer and marketer of electrical, electronic and fiber optic connectors,
interconnect systems and coaxial and flat-ribbon cable. The primary end markets
for the Company's products are telephone, wireless and data communications
systems; cable television systems; commercial and military aerospace
electronics; automotive and mass transportation applications; and industrial
factory automation equipment. For the year ended December 31, 1996,
approximately 52% of the Company's net sales were to the worldwide
communications market (including 23% for the cable television market), 26% were
for commercial and military aerospace and other military electronics
applications and 22% were for industrial, transportation and other applications.
The Company focuses on optimizing its mix of higher margin application-specific
products in its product offerings and has enhanced the cost controls in its
operations. As a result of these initiatives, the Company's operating profit
margin has increased from 13.5% in fiscal year 1993 to 17.8% in fiscal year
1996.

The Company designs and manufactures connectors and interconnect systems,
which are used primarily to conduct electrical and optical signals for a wide
range of sophisticated electronic applications. The Company believes, based
primarily on published market research, that it is one of the largest connector
manufacturers in the world and the leading supplier of high performance
environmental connectors that require superior performance and reliability under
conditions of stress and in hostile environments. Such conditions are frequently
encountered in commercial and military aerospace applications and other
demanding industrial applications such as natural resource exploration, medical
instrumentation and off-road construction . In addition, the Company has
developed a broad range of interconnect products to serve the rapidly growing
markets of wireless communications including cellular and personal communication
networks and fiber optic networks; electronic commerce including smart cards and
electronic purse applications; and automotive safety products including airbags,
pretensioner seatbelts and anti-lock braking systems. The Company is also one of
the leaders in developing interconnect products for factory automation and
machine tools and develops interconnect products for mass transportation
applications. The Company believes that the worldwide industry for interconnect
products and systems is highly fragmented with over 1,000 producers of
connectors worldwide, of which the 10 largest accounted for a combined market
share of approximately 36% in 1996. The Company estimates that the total sales
for the industry were approximately $27 billion in 1996.

The Company's Times Fiber subsidiary is the world's second largest producer
of coaxial cable for the cable television market. The Company believes that
Times Fiber is one of the lowest cost producers of coaxial cable for the cable
television market, and that it is one of the technological leaders in increasing
the bandwidth of coaxial cable products to accommodate increased channel
capacity for full service cable television/telecommunication systems. In
addition, the Company is beginning to supply the developing market for high
bandwidth coaxial cable and related interconnect products used in full service
cable television/ telecommunication systems being installed by cable operators
and telecommunication companies. The Company has also become a major supplier of
coaxial cable to the emerging international cable television markets. The
Company estimates that the total sales for the worldwide market for coaxial
cable for cable television were approximately $800 million in 1996.

The Company is a global manufacturer employing advanced manufacturing
processes. The Company's products are manufactured and assembled at facilities
in the United States, Canada, Mexico, Germany, France, the United Kingdom, the
Czech Republic, Hong Kong, Taiwan, Japan, India and the People's Republic of
China. The Company's connector products are sold through its global sales force
and

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independent manufacturers' representatives to thousands of original equipment
manufacturers ("OEMs") in 52 countries throughout the world as well as through a
global network of electronics distributors. The Company's coaxial cable products
are primarily sold to cable television operators and to telecommunication
companies who have entered the broadband communications market. In 1996,
approximately 55% of the Company's net sales were in North America, 33% were in
Europe and 12% were in Asia and other countries.

PRODUCT DEVELOPMENT

The Company's product development strategy is to offer a broad range of
products to meet the specific interconnect requirements of its customers in its
target markets. The Company's market focus is primarily in interconnect products
for the: (1) wireless, telecom and data communications market; (2) broadband
communications, primarily cable television and the developing markets for full
service television, telephone and data communication broadband networks; (3)
commercial and military aerospace markets; (4) industrial markets, primarily
factory automation and mass transportation; and (5) automotive electronics,
primarily automotive safety devices such as airbags, pretensioner seatbelts and
anti-lock braking systems. The Company implements its product development
strategy through product design teams and collaboration arrangements with
customers which result in obtaining approved vendor status for the customer's
new products and programs. The Company further seeks to have its products become
widely accepted within the industry for similar applications and products
manufactured by other potential customers, thereby providing additional sources
of future revenue. The development of application-specific products has
decreased the significance of standard products which generally experience
greater pricing pressure. In addition to product design teams and customer
collaboration arrangements, the Company uses key account managers to manage
customer relationships on a global basis such that the Company can bring to bear
its total resources to meet the worldwide needs of its multinational customers.
The Company is also focused on making strategic acquisitions in certain markets
to further broaden and enhance its product offerings and expand its global
capabilities.

The following examples illustrate the Company's market and product
development strategy:

- The use of fiber optics in communications systems has been increasing in
recent years, including fiber optic applications in long distance
telephone systems and local area networks. The Company has developed a
broad line of fiber optic interconnect components for fiber optic systems
including sophisticated narrowband wavelength division multiplexers, which
permit greater transmission capability, and fiber optic management
systems, which facilitate the organizing and management of a fiber optic
network.

- Radio frequency/microwave electronics technology has been characterized by
developments that expand circuit capacity with increasingly smaller
electronic devices. These technologies have expanded into the growing
markets of cellular and personal communication networks. The Company has
developed a broad line of interconnect products and systems used in base
stations for such wireless communication systems.

- Smart cards, where data is stored in a chip on a plastic card, are
increasingly being used in banking systems (including electronic purses),
telephone credit cards, security systems and other applications. The
Company is one of the leaders in developing acceptor devices used in
readers that transmit the information stored on smart cards or as
components of the electronic purse.

- Performance, reliability and ability to withstand harsh environments are
essential to products and systems for the commercial and military
aerospace market. The Company, in conjunction with a significant OEM
customer, has developed a sophisticated interconnect coupler technology
for advanced commercial aircraft flight control systems. The Company also
performed certain research and development studies and is now producing a
family of connectors comprising approximately 1,000 stock keeping units
("SKU's") for use in the international space station program.

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- The use of electronics and sensing devices in automobiles has been
increasing for the past several years. The Company, in conjunction with
major European automobile manufacturers, has developed a broad line of
interconnect products used in automotive airbags and pretensioner
seatbelts. Such products, which were originally used primarily in European
luxury cars, have evolved in technology and availability to standard
European car models and are being used in a wider array of applications
such as passenger side and side impact protection.

- The Company has been one of the technology leaders in expanding the
bandwidth characteristics of coaxial cable for cable television. The
Company produces 1 gigahertz coaxial cable which is used in hybrid fiber
coaxial cable ("HFC") full service networks for offering video, voice and
data services. In addition, in 1995 the Company developed and is now
producing a broad line of radio frequency coaxial connectors for the cable
television industry.

- The Company also seeks to expand its product offering and global presence
in its chosen markets through strategic acquisitions. In 1996, for
example, the Company acquired The Sine Companies, Inc., one of the leading
suppliers of interconnect products and assemblies for the factory
automation market. This acquisition complemented the Company's existing
line of industrial interconnect products and further positioned the
Company for growth in factory motion control equipment. The Company also
acquired a 51% interest in Kai-Jack Industrial Co., Ltd. one of the
leading Taiwanese radio frequency connector manufacturers. The acquisition
strengthens the Company's manufacturing capabilities and worldwide
sourcing of radio frequency products as well as expanding the Company's
presence in the growing Asian markets.

PRODUCT GROUPS

The following table sets forth the dollar amounts of the Company's net sales
for each major product group. For a discussion of factors affecting changes in
sales by product category, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

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1996 1995 1994
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(DOLLARS IN THOUSANDS)
Net sales by product group:
Commercial, radio frequency and industrial interconnect products, cable
assemblies and flat-ribbon cable........................................... $ 388,941 $ 370,619 $ 321,511
High performance environmental connectors.................................... 208,071 174,329 156,995
Coaxial cable................................................................ 179,209 238,285 214,145
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$ 776,221 $ 783,233 $ 692,651
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Net sales by geographic area:
United States operations..................................................... $ 397,023 $ 394,563 $ 381,016
International operations(1).................................................. 379,198 388,670 311,635
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$ 776,221 $ 783,233 $ 692,651
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(1) Includes international coaxial cable sales, which are primarily export
sales.

COMMERCIAL, RADIO FREQUENCY AND INDUSTRIAL INTERCONNECT PRODUCTS, CABLE
ASSEMBLIES AND FLAT-RIBBON CABLE. The Company produces a broad range of
commercial and industrial interconnect products. Such products include: fiber
optic interconnect products and systems used in fiber optic networks for voice,
video and data communications; chip card acceptor interconnect devices and
readers used in conjunction with smart cards and electronic purses (a system for
cashless monetary transactions); industrial interconnect products used in a
variety of applications such as factory automation equipment, mass
transportation applications including railroads and marine transportation; and
automotive safety products including

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interconnect devices and systems used in automotive airbags, pretensioner
seatbelts and anti-lock braking systems. The Company designs and produces a
broad range of radio frequency connector products used in telecommunications,
computer and office equipment, instrumentation equipment, local area networks,
aerospace and military electronic applications. The Company's radio frequency
connectors are used in base stations, hand held sets and other components of
cellular and personal communications networks. The Company has also developed a
broad line of radio frequency connectors for coaxial cable for full service
cable television/telecommunication networks. The Company also designs and
produces highly-engineered cable assemblies. Such assemblies are specially
designed by the Company in conjunction with OEM customers for specific
applications, primarily for computer, communications and office equipment
systems. The cable assemblies utilize the Company's connector and cable products
as well as components purchased from others. The Company is also a leading
producer of flat-ribbon cable, a cable made of wires assembled side by side such
that the finished cable is flat. Flat-ribbon cable is used to connect internal
components in systems with space and component configuration limitations. The
product is used in computer and office equipment components as well as in a
variety of telecommunications applications.

HIGH PERFORMANCE ENVIRONMENTAL CONNECTORS. The Company believes, based
primarily on published market research, that it is the largest supplier of
circular, military-specification connectors; such connectors require superior
performance and reliability under conditions of stress and in hostile
environments. Such connectors are generally used to interconnect electronic and
fiber optic systems in sophisticated aerospace, military, commercial and
industrial equipment. These applications present demanding technological
requirements in that such connectors are subject to rapid and severe temperature
changes, vibration, humidity or nuclear radiation. Frequent applications of
these connectors include aircraft, guided missiles, radar, military vehicles,
equipment for spacecraft, energy and geophysical applications and off-road
construction equipment. Specially designed high performance environmental
connectors, which include fiber optic, filtered, nonmetallic, diode and
breakaway connectors, are manufactured to specific customer input/output
configurations.

COAXIAL CABLE. The Company designs, manufactures and markets coaxial cable
primarily for use in the cable television industry. The Company manufactures two
primary types of coaxial cable: semi-flexible, which has an aluminum tubular
shield, and flexible, which has one or more braided metallic shields. Semi-
flexible coaxial cable is used in the trunk and feeder distribution portion of
cable television systems, and flexible cable (also known as drop cable) is used
primarily for hookups from the feeder cable to the cable television subscriber's
residence. Flexible cable is also used in other communications applications.

The rapid developments in fiber optic technologies, digital compression
(which allows several channels to be transmitted within the same bandwidth that
a single analog channel currently requires) and other communication
technologies, including the Company's development of higher capacity coaxial
cable, have resulted in technologies which are expected to give cable television
systems channel capacity in excess of 500 channels. Such expanded channel
capacity, along with other component additions, will permit cable operators to
offer full service networks with a variety of capabilities including near
video-on-demand, pay-per-view special events, home shopping networks,
interactive entertainment and education services, telephone services and
high-speed access to data resources such as the Internet. With respect to
expanded channel capacity systems, cable operators have generally adopted, and
the Company believes that for the foreseeable future will continue to adopt, a
cable system using both fiber optic cable and coaxial cable. Such systems
combine the advantages of fiber optic cable in transmitting clear signals over a
long distance without amplification, with the advantages of coaxial cable in
ease of installation, low cost and compatibility with the receiving components
of the customer's communications devices. The Company believes that while system
operators are likely to increase their use of fiber optic cable for the trunk
and feeder portions of the cable systems, there will be an ongoing need for high
capacity coaxial cable for the local distribution and street-to-the-home
portions of the cable system.

U.S. cable system designs are increasingly being employed in international
markets where cable television penetration is low. For example, it is estimated
that in 1996 only 25% of the television

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households in Western Europe subscribed to some form of multichannel television
service as compared to an estimated subscription rate of 64% in the U.S. The
estimated subscription rates in the Asian and Latin American markets were even
lower at approximately 15% and 11%, respectively. In terms of television
households, it is estimated that there were 178 million television households in
Western Europe, 398 million in Asia and 81 million in Latin America. This
compares to an estimated 97 million television households in the U.S. In 1996,
the Company had sales of coaxial cable in approximately 40 countries, and the
Company believes the development of cable television systems in international
markets presents a significant opportunity to increase sales of its coaxial
cable products.

INTERNATIONAL OPERATIONS

The Company believes that its global presence is an important competitive
advantage as it allows the Company to provide quality products on a timely and
worldwide basis to its multinational customers. Approximately 49% of the
Company's sales for the year ended December 31, 1996 were outside the United
States. Approximately 68% of such international sales were in Europe. The
Company has manufacturing facilities in the United Kingdom, Germany, France, the
Czech Republic and sales offices in most other European markets. The European
operations generally have strong positions in their respective local markets.
Local operations coordinate product design and manufacturing responsibility with
the Company's other operations around the world. The balance of the Company's
international activities are located primarily in Canada, Mexico and the Far
East, which includes manufacturing facilities in Hong Kong, Taiwan, India, Japan
and the People's Republic of China. The Hong Kong, Taiwan, Indian, People's
Republic of China and Mexican facilities generally serve the respective local
markets as well as provide low cost manufacturing and assembly sources for world
markets.

CUSTOMERS

The Company's products are used in a wide variety of applications by
numerous customers, none of whom accounted for more than 5% of the Company's
sales for 1996 (except for sales under contract with the U.S. Government and its
subcontractors, which accounted for 8% of 1996 sales). The Company's
participation across a broad spectrum of defense programs is such that the
Company believes that no one military program accounted for more than 1% of 1996
net sales. The Company's products are sold both directly to OEMs, cable system
operators, telecommunication companies and through distributors. There has been
a trend on the part of OEM customers to consolidate their lists of qualified
suppliers to companies that have a global presence, can meet quality and
delivery standards, have a broad product portfolio and design capability, and
have competitive prices. The Company has focused its global resources to
position itself to compete effectively in this environment. The Company has
concentrated its efforts on service and productivity improvements including
advanced computer aided design and manufacturing systems, statistical process
controls and just-in-time inventory programs to increase product quality and
shorten product delivery schedules. The Company's strategy is to provide a broad
selection of products in the areas in which it competes. The Company has
achieved a preferred supplier designation from many of its OEM customers.

Cable television services in the U.S. are provided primarily by multiple
system operators ("MSOs"). It is estimated that in 1996 the twenty largest MSOs
served 85% of the estimated 62 million cable television subscribers in the U.S.
The major MSOs include such companies as Tele-Communications, Inc., Time Warner
Companies Inc., Continental Cablevision, Inc., Comcast Corporation and
Cablevision Systems Corporation. Many of the major MSOs are customers of the
Company, including those listed above.

The Company's sales to distributors represented approximately 26% of the
Company's 1996 sales. The Company's recognized brand names including "Amphenol,"
"Times Fiber," "Pyle-National," "Spectra-Strip," "Sine," "Tuchel" and "Socapex,"
together with the Company's strong connector design-in position (products that
are specified in the plans and qualified by the OEM), enhance its ability to
reach the secondary market through its network of distributors. The Company's
products are sold by 8 of the 10

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largest electronics distributors in the United States, based on sales, and the
Company believes that its distributor network represents a competitive
advantage.

MANUFACTURING

The Company employs advanced manufacturing processes including molding,
stamping, plating, turning, extruding, die casting and assembly operations as
well as proprietary process technology for flat-ribbon and coaxial cable
production. The Company's manufacturing facilities are generally vertically
integrated operations from the initial design stage through final design and
manufacturing. Outsourcing of certain fabrication processes is used when
cost-effective. Substantially all of the Company's manufacturing facilities are
certified to the ISO9000 series of quality standards.

The Company employs a global manufacturing strategy to lower its production
costs and to improve service to customers. The Company sources its products on a
worldwide basis with manufacturing and assembly operations in the United States,
Canada, Mexico, the United Kingdom, France, Germany, the Czech Republic, Hong
Kong, Taiwan, India, Japan and the People's Republic of China. To better serve
high volume OEM customers, the Company has established just-in-time facilities
near major customers.

The Company's policy is to maintain strong cost controls in its
manufacturing and assembly operations. The Company has undertaken programs to
rationalize its production facilities, reduce plant and corporate overhead
expense and maximize the return on capital expenditures. The programs to improve
productivity are ongoing.

The Company purchases a wide variety of raw materials for the manufacture of
its products, including precious metals such as gold and silver used in plating;
brass, copper, aluminum and steel used for cable, contacts and connector shells;
and plastic materials used for cable and connector bodies and inserts. All such
raw materials are readily available throughout the world and are purchased
locally from a variety of suppliers. The Company is not dependent upon any one
source for raw materials or if one source is used, alternate sources of supply
are available.

RESEARCH AND DEVELOPMENT

The Company's research, development and engineering expenditures for the
creation and application of new and improved products and processes were $14.6
million, $15.7 million and $14.3 million (excluding customer sponsored programs
representing expenditures of $0.9 million, $1.3 million and $0.8 million) for
1996, 1995 and 1994, respectively. The Company's research and development
activities focus on selected product areas and are performed by individual
operating divisions. Generally, the operating divisions work closely with OEM
customers to develop highly engineered products that meet the customer's needs.
The Company continues to focus its research and development efforts primarily on
those product areas that it believes have the potential for broad market
applications and significant sales within a one-to-three year period.

TRADEMARKS AND PATENTS

The Company owns a number of active patents worldwide. While the Company
considers its patents to be valuable assets, the Company does not believe that
its competitive position is dependent on patent protection or that its
operations are dependent on any individual patent.

Allied Corporation has granted to the Company a worldwide non-exclusive
license to use all trademarks, service marks, trade names and corporate names
relating to "Bendix" which the Company has used in its sales and marketing of
high performance environmental connectors. The license will expire on June 2,
1997. The Company has been increasing its use of other trade names in its
marketing of high performance connectors, and accordingly does not believe that
its operations will be materially adversely affected by the expiration of this
license.

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The Company regards its trademarks "Amphenol," "Pyle-National," "Tuchel,"
"Socapex," "Spectra-Strip," "Sine," and "Times Fiber" to be of value in its
businesses. The Company has exclusive rights in all its major markets to use
these registered trademarks.

COMPETITION

The Company encounters competition in substantially all areas of its
business. The Company competes primarily on the basis of product quality, price,
engineering, customer service and delivery time. Competitors include large,
diversified companies, some of which have substantially greater assets and
financial resources than the Company, as well as medium to small companies. In
the area of coaxial cable for cable television, the Company believes that it and
CommScope, a division of General Instrument Corporation, are the primary
providers of such cable; however, CommScope is larger than the Company in this
market. In addition, the Company faces competition from smaller companies that
have concentrated their efforts in one or more areas of the coaxial cable
market.

BACKLOG

The Company estimates that its backlog of unfilled orders was $207.4 million
and $203.4 million at December 31, 1996 and 1995, respectively. Orders typically
fluctuate from quarter to quarter based on customer demands and general business
conditions. Unfilled orders may be cancelled prior to shipment of goods;
however, such cancellations historically have not been material. It is expected
that all or a substantial portion of the backlog will be filled within the next
12 months. However, significant elements of the Company's business, such as
sales to the cable television industry, distributors, the computer industry, and
other commercial customers, generally have short lead times. Therefore, backlog
may not be indicative of future demand.

EMPLOYEES

As of December 31, 1996, the Company had approximately 6,200 full-time
employees worldwide. Of these employees, approximately 4,500 were hourly
employees, of which approximately 2,300 were represented by labor unions, and
the remainder were salaried. Beginning on October 21, 1995, the Company
experienced a seven day work stoppage at its plant in Sidney, New York when
approximately 1,000 hourly employees represented by the International
Association of Machinists and Aerospace Workers rejected a Company proposal and
voted to strike upon the expiration of their then current collective bargaining
contract. A new three year contract was approved and the work stoppage ended on
October 28, 1995. The Sidney, New York plant manufactures interconnect products
used primarily in the aerospace industry and other commercial and industrial
markets. The one week work stoppage did not involve any other operation of the
Company. The Company has not had any other work stoppages in the past ten years.
In 1996, the United Steelworkers International Union, AFL-CIO attempted to
organize approximately 500 employees of the Company's plant in Chatham,
Virginia, the Company's primary plant for the production of coaxial cable. The
union organizing effort was defeated by a vote of the hourly employees. A
Regional Director of the National Labor Relations Board subsequently found that
unfair labor practices had been committed by the Company prior to the election
and ordered that a new election be held. The Company's appeal of such finding
and order was denied by the National Labor Relations Board on March 19, 1997.
The Company expects that a new election will be held at the Chatham, Virginia
plant prior to May 30, 1997. If the union is certified, the Company would be
required to bargain in good faith with the union, and its operations at such
facility could be subject to the risks associated with unionized employees
generally, including the risk of work stoppages. The Company believes that it
has a good relationship with its unionized and non-unionized employees.

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CAUTIONARY STATEMENTS FOR PURPOSES OF FORWARD LOOKING INFORMATION

Statements made by the Company 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 the Company to fail to conform with
expectations and predictions:

- A global economic slowdown in any one, or all, of the Company's market
segments.

- The effects of extreme changes in monetary and fiscal policies in the U.S.
and abroad including extreme currency fluctuations and unforeseen
inflationary pressures.

- Drastic and unforeseen price pressure on the Company's products or
significant cost increases that cannot be recovered through price
increases or productivity improvements.

- Increased difficulties in obtaining a consistent supply of basic materials
like steel, aluminum, copper, gold or plastic resins at stable pricing
levels.

- Unpredictable difficulties or delays in the development of new product
programs.

- Significant changes in interest rates or in the availability of financing
for the Company or certain of its customers.

- Rapid escalation of the cost of regulatory compliance and litigation.

- Unexpected government policies and regulations effecting the Company or
its significant customers.

- Unforeseen intergovernmental conflicts or actions, including but not
limited to armed conflict and trade wars.

- Difficulties and unanticipated expense of assimilating newly-acquired
businesses.

- Any difficulties in obtaining or retaining the management and other human
resource competencies that the Company needs to achieve its business
objectives.

- The risks associated with any technological shifts away from the Company's
technologies and core competencies. For example, a technological shift
away from the use of coaxial cable in cable television/ telecommunication
systems could have a substantial impact on the Company's coaxial cable
business.

- Unforeseen interruptions to the Company's business with its largest
customers and distributors resulting from, but not limited to, strikes,
financial instabilities or inventory excesses.

10
<PAGE>
ITEM 2. PROPERTIES

The table below presents the location, size and function of the Company's
principal manufacturing and assembly facilities as of January 31, 1997. The
Company's principal executive offices are located in Wallingford, Connecticut.

<TABLE>
<CAPTION>
SQUARE
LOCATION FEET FUNCTION
- ----------------------------------- --------- --------------------------------------------------------------
<S> <C> <C>

UNITED STATES:

Chatham, VA 175,000 coaxial cable manufacturing

Chatham, VA (1) 100,000 coaxial cable warehousing

Chatham, VA (1) 40,000 coaxial cable manufacturing and warehousing

Chicago, IL 270,000 industrial connector manufacturing and assembly

Danbury, CT (1) 170,000 RF connector manufacturing

Danville, VA (1) 80,000 coaxial cable warehousing

Endicott, NY 125,000 cable assembly

Hamden, CT 60,000 cable manufacturing

Hamden, CT (1) 25,000 cable warehousing

Lisle, IL (1) 28,000 fiber optic connector manufacturing

Mt. Clemens, MI (1) 71,360 industrial connector manufacturing and assembly

Nogales, AZ (1) 20,250 connector warehousing and assembly

Parsippany, NJ (1) 32,500 RF connector manufacturing

Phoenix, AZ (1) 12,000 coaxial cable warehousing

Sidney, NY 685,000 high performance environmental connector manufacturing and
assembly

Wallingford, CT (1) 28,800 Executive offices

CANADA:

Renfrew, Ontario (1) 26,000 coaxial cable manufacturing

Scarborough, Ontario (1) 88,000 high performance connector manufacturing

MEXICO:

Nogales (1) 27,558 connector assembly

Nogales (1) 12,700 connector assembly

Nogales (1) 57,884 connector assembly
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET FUNCTION
- ----------------------------------- --------- --------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM:

Greenock, Scotland (1) 10,000 connector manufacturing and cable assembly

Nottingham, England (1) 11,000 high performance environmental connector manufacturing and
cable assembly

Romsey, England (1) 24,000 cable manufacturing and cable assembly

Whitstable, England 135,000 connector manufacturing, cable assembly and coaxial cable
warehousing

GERMANY:

Heilbronn 130,000 connector manufacturing and cable assembly

CZECH REPUBLIC:

Klucouska 16,300 connector assembly

FRANCE:

Dole 121,000 connector manufacturing

Thyez 125,000 connector manufacturing

HONG KONG:

Fotan Shatin (1) 70,000 cable manufacturing and assembly

TAIWAN

Taoyuan Hsien (1) 15,700 cable assembly

Tainan (1) 64,600 RF connector manufacturing and assembly

JAPAN:

Ritto-cho, Shiga (1) 15,700 assembly, warehousing

INDIA:

Pune (2) 53,400 connector manufacturing and assembly

Bangalore 12,200 connector manufacturing and assembly

CHINA:

Changzhou 65,000 coaxial cable manufacturing and warehousing
</TABLE>

- ------------------------

(1) These facilities are leased. Such leases expire at various times through
2007.

(2) This facility is owned but is situated on property subject to a long term
lease arrangement, expiring in 2065.

The Company estimates that during 1996 its principal manufacturing
facilities operated at between 70% and 95% of capacity.

12
<PAGE>
In addition to the facilities described above, the Company leases various
warehouses and sales and administrative offices.

ITEM 3. LEGAL PROCEEDINGS

On January 23, 1997 the Board of Directors approved, subject to shareholder
approval and certain other closing conditions, and the Company entered into an
agreement and plan of merger (the "Merger Agreement"), with NXS Acquisition
Corp., a wholly owned subsidiary of KKR 1996 Fund L.P., a limited partnership
formed at the direction of Kohlberg Kravis Roberts & Co. L.P. The Merger
Agreement contemplates that approximately 90% of the Company's Class A common
stock will be converted into $26.00 in cash and approximately 10% of such shares
will be retained by the stockholders. The proposed transaction was announced to
the public on January 23, 1997 and on that same date the Company and its
directors (four of whom are also executive officers of the Company) were named
as defendants in a complaint filed in the Court of Chancery in the State of
Delaware by two persons claiming to be stockholders of the Company, individually
and purportedly as a class action on behalf of all stockholders of the Company.
In general, the complaint alleges that the Company's directors have breached
their fiduciary duties by, among other things, resolving to approve the Merger
Agreement at an allegedly inadequate price and by allegedly failing to take
adequate steps to enhance the value of the Company and/or its attractiveness as
a merger or acquisition candidate, including failing to conduct an auction. The
complaint seeks injunctive relief prohibiting the Company from, among other
things, consummating the Merger Agreement. The complaint also seeks unspecified
damages, attorney's fees and other relief. The Company believes that the
allegations contained in the complaint are without merit and intends to contest
the action vigorously, on behalf of itself and its directors, if the plaintiffs
elect to proceed with their action.

The Company and its subsidiaries have been named as defendants in several
other legal actions in which various amounts are claimed arising from normal
business activities. Although the amount of any ultimate liability with respect
to such matters cannot currently be precisely determined, in the opinion of
management, such matters are not expected to have a material effect on the
Company's financial condition or results of operations.

Certain operations of the Company are subject to federal, state and local
environmental laws and regulations which govern the discharge of pollutants into
the air and water, as well as the handling and disposal of solid and hazardous
wastes. The Company believes that its operations are currently in substantial
compliance with all applicable environmental laws and regulations and that the
costs of continuing compliance will not be material to the Company's financial
condition or results of operations.

Subsequent to the acquisition of Amphenol from Allied Signal Corporation
("Allied") in 1987, Amphenol and Allied have been named jointly and severally
liable as potentially responsible parties in relation to several environmental
cleanup sites. Amphenol and Allied have jointly consented to perform certain
investigations and remedial and monitoring activities at two sites and they have
been jointly ordered to perform work at another site. The reponsibility for
costs incurred relating to these sites is apportioned between Amphenol and
Allied based on an agreement entered into in connection with the acquisition.
For sites covered by this agreement, to the extent that conditions or
circumstances occurred or existed at the time of or prior to the acquisition,
the first $13.0 million of costs are borne by Amphenol and have been incurred as
of December 31, 1996. Allied is obligated to pay 80% of the excess over $13
million and 100% of the excess over $30 million. Allied representatives are
presently working closely with the Company in addressing the most significant
potential environmental liabilities including Sidney Center Landfill and the
Richardson Hill landfill projects, as described below.

Owners and occupiers of sites containing hazardous substances, as well as
generators of hazardous substances, are subject to broad liability under various
federal and state environmental laws and regulations, including expenditures for
cleanup costs and damages arising out of past disposal activities. Such
liability in many cases may be imposed regardless of fault or the legality of
the original disposal activity.

13
<PAGE>
The Company is currently performing investigative and monitoring activities at
its manufacturing site in Sidney, New York. In addition, the Company is
currently voluntarily performing monitoring, investigation, design and cleanup
activities at two local, public off-site disposal sites previously utilized by
the Sidney facility and others. The Company is also performing proposed remedial
design activities and currently is negotiating with respect to a third site. The
Company and Allied have entered into an administrative consent order with the
United States Environmental Protection Agency (the "EPA") and are presently
determining necessary and appropriate remedial measures for one such site (the
"Richardson Hill" landfill) used by Amphenol and other companies, which has been
designated a "Superfund" site on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
With respect to the second site, (the "Route 8" landfill), used exclusively by
Amphenol, the Company initiated a remediation program pursuant to a Consent
Order with the New York Department of Environmental Protection and is continuing
to monitor the results of those remediation efforts. In December 1995 the
Company and Allied received a letter from the EPA demanding that the Company and
Allied accept responsibility for the investigation and cleanup of the Sidney
Center Landfill, another Superfund Site. The Sidney Center Landfill was a
municipal landfill site utilized by the Company's Sidney facility and other
local towns and businesses. The Company has acknowledged that it sent general
plant refuse but no hazardous waste to the Sidney Center Landfill site. Allied
and the Company offered to prepare a remedial design and to assist the EPA in
identifying other potentially responsible parties for the Sidney Center Landfill
site. In July 1996 the Company and Allied received a unilateral order from the
EPA directing the Company and Allied to perform certain investigation, design
and cleanup activities at the Sidney Center Landfill site. The Company and
Allied responded to the unilateral order by agreeing to undertake certain
remedial design activities. To date the Company and Allied have not accepted any
responsibility for the cleanup of the Sidney Center Landfill site. The Company
also is engaged in remediating or monitoring environmental conditions at several
of its other manufacturing facilities and has been named as a potentially
responsible party for cleanup costs at several other off-site disposal sites.
During 1996, the Company spent approximately $1.4 million in connection with
investigating, remediating and monitoring environmental conditions at these
facilities and sites. Amphenol expects such expenditures, net of indemnification
payments expected from Allied, to be less than $.5 million in 1997.

Since 1987, the Company has not been identified nor has it been named as a
potentially responsible party with respect to any other significant on-site or
off-site hazardous waste matters. In addition, the Company believes that all of
its manufacturing activities and disposal practices since 1987 have been in
material compliance with all applicable environmental laws and regulations.
Nonetheless, it is possible that the Company will be named as a potentially
responsible party in the future with respect to additional Superfund or other
sites. Although the Company is unable to predict with any reasonable certainty
the extent of its ultimate liability with respect to any pending or future
environmental matters, the Company believes, based upon all information
currently known by management about the Company's manufacturing activities,
disposal practices and estimates of liability with respect to all known
environmental matters, that any such liability will not be material to its
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None

ITEM 4.1 EXECUTIVE OFFICERS

The following table sets forth the name, age and position with the Company
of each person who was an executive officer of Amphenol as of December 31, 1996.
Officers are elected to serve at the discretion of the Board of Directors in
accordance with the By-Laws of the Company. The By-Laws of the Company provide
that the Board of Directors shall elect the officers of the Company at its first
meeting held after

14
<PAGE>
the Annual Meeting of Stockholders of the Company. All officers of the Company
are elected to hold office until their successors are chosen and qualified, or
until their earlier resignation or removal.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>

Lawrence J. DeGeorge....................... 80 Chairman of the Board

Martin H. Loeffler......................... 52 Director, President and Chief Executive
Officer

Edward G. Jepsen........................... 53 Director, Executive Vice President and
Chief Financial Officer

Timothy F. Cohane.......................... 44 Director and Senior Vice President

Edward C. Wetmore.......................... 40 Secretary and General Counsel

Diana G. Reardon........................... 37 Controller and Treasurer
</TABLE>

Lawrence J. DeGeorge has been Chairman of the Board of Amphenol since June
1987 and Chief Executive Officer of Amphenol from June 1987 through May 1995. He
was also Chairman of the Board and Chief Executive Officer of LPL Technologies
Inc. ("LPL") from 1985 to December 1992. LPL merged into a subsidiary of
Amphenol in December 1992.

Martin H. Loeffler has been a Director of Amphenol since December 1987. He
has also served as President and Chief Operating Officer of Amphenol since July
1987. He has been President and Chief Executive Officer of the Company since May
1996. He was also a Vice President of LPL from May 1989 to December 1992.

Edward G. Jepsen has been a Director of Amphenol since January 1991,
Executive Vice President and Chief Financial Officer of Amphenol since May 1989
and Senior Vice President and Director of Finance since November 1988. He was
also an Executive Vice President, Chief Financial Officer and Controller of LPL
from November 1988 to December 1992 and a Director of LPL from January 1991 to
December 1992.

Timothy F. Cohane has been a Director of Amphenol since June 1987 and Vice
President of Amphenol since December 1991. He was also a Director of LPL from
December 1986 to December 1992 and Vice President of LPL from April 1988 to
December 1992.

Edward C. Wetmore has been Secretary and General Counsel of Amphenol since
1987. He was also Secretary and General Counsel of LPL until December 1992.

Diana G. Reardon has been Treasurer of Amphenol since March 1992 and
Controller since July 1994. From June 1988 until her appointment as Treasurer
she served as Assistant Controller of Amphenol and LPL.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company effected the initial public offering of its Class A Common Stock
in November 1991. The Company's Common Stock has been listed on the New York
Stock Exchange since that time under the

15
<PAGE>
symbol "APH." The following table sets forth on a per share basis the high and
low sales prices for the Common Stock for both 1996 and 1995 as reported on the
New York Stock Exchange.

<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------

<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------

First Quarter........................................... 26 20 1/8 27 1/2 20

Second Quarter.......................................... 27 5/8 19 7/8 30 3/8 23 3/4

Third Quarter........................................... 22 7/8 18 3/4 29 1/2 21 1/2

Fourth Quarter.......................................... 23 19 24 1/4 18 3/4
</TABLE>

As of February 28, 1997, there were 176 holders of record of the Company's
Common Stock. The Company believes that a significant number of outstanding
shares of Common Stock are registered in the name of only one holder, which is a
nominee of The Depository Trust Company, a securities depository for banks and
brokerage firms.

Since its initial public offering in 1991, the Company has not paid any cash
dividends on its Common Stock and it does not have any present intention to
commence payment of any cash dividends. The Company intends to retain earnings
to provide funds for the operation and expansion of the Company's business and
to repay outstanding indebtedness.

The Company's debt agreements contain covenants restricting the payment of
dividends on, or repurchases of, the Company's Common Stock. The Company's
Revolving Credit Agreement, which contains the most restrictive provision, in
effect permits the declaration and payment of cash dividends on, or repurchase
of, Common Stock only if, immediately after giving effect to any such proposed
action, the accumulated amount of all dividends and repurchases since December
1995 does not exceed the sum of (i) 50% of the Company's cumulative consolidated
net income (as defined) since December 1995, plus (ii) $110 million, plus (iii)
the net cash proceeds received by the Company from sales of its Common Stock
after December 1995. As of December 31, 1996, the amount available under this
provision for future dividends on or repurchases of Common Stock by the Company
was approximately $93 million.

16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------

OPERATIONS

Net sales.......................................... $ 776,221 $ 783,233 $ 692,651 $ 603,967 $ 457,677

Net income before extraordinary item............... 67,578 62,858 42,400 24,749 8,639(1)

Extraordinary loss................................. (4,087)

Net income......................................... 67,578 62,858 38,313 24,749 8,639(1)

Net income per share before extraordinary item..... 1.45 1.33 .91 .58 .26(1)

Extraordinary loss per share....................... (.09)

Net income per share............................... 1.45 1.33 .82 .58 .26(1)

FINANCIAL POSITION

Working capital.................................... $ 136,864 $ 121,313 $ 95,590 $ 90,463 $ 151,544

Total assets....................................... 710,662 689,924 677,055 691,277 766,397

Current portion of long-term debt.................. 7,759 2,670 13,925 27,265 29,623

Long-term debt..................................... 219,484 195,195 234,251 364,574 458,446

Shareholders' equity............................... 360,548 344,085 278,640 173,292 149,688

Weighted average shares outstanding................ 46,649,541 47,304,180 46,611,759 42,821,091 32,983,315
</TABLE>

- ------------------------

(1) Includes a non-recurring, after-tax charge for expenses of $3,139 ($.10 per
share) associated with an acquistion.

17
<PAGE>
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations for the
three fiscal years ended December 31, 1996 has been derived from and should be
read in conjunction with the consolidated financial statements contained herein.

RESULTS OF OPERATIONS

The following table sets forth the components of net income before
extraordinary item as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Net sales................................................................................ 100.0% 100.0% 100.0%
Cost of sales, excluding depreciation and amortization................................... 63.7 64.7 66.2
Depreciation and amortization expense.................................................... 3.7 3.5 4.1
Selling, general and administrative expense.............................................. 14.8 14.6 14.7
--------- --------- ---------
Operating income......................................................................... 17.8 17.2 15.0
Interest expense......................................................................... (3.2) (3.3) (4.4)
Other expense, net....................................................................... (.5) (.6) (.6)
--------- --------- ---------
Income before income taxes and extraordinary item........................................ 14.1 13.3 10.0
Provision for income taxes............................................................... (5.4) (5.3) (3.9)
--------- --------- ---------
Net income before extraordinary item..................................................... 8.7% 8.0% 6.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>

1996 COMPARED TO 1995

Net sales were $776.2 million for the year ended December 31, 1996 compared
to $783.2 million for 1995. Sales of commercial, radio frequency and industrial
interconnect products, cable assemblies and flat-ribbon cable for 1996 increased
4.9% compared to 1995 ($388.9 million--1996; $370.6 million--1995). Such
increase is primarily due to increased sales of cable assembly and interconnect
products including fiber optics, smart card reader devices, automotive safety
devices (airbags and pretensioner seatbelts) and communications related
interconnect products. Sales of high performance environmental connectors for
1996 increased 19.4% compared to 1995 ($208.1 million--1996; $174.3 million
- -1995). The increase is primarily attributable to strong demand for the
Company's application specific products for new and enhanced electronic
aerospace and avionics interconnect systems for space, military and commercial
aviation applications. Sales of coaxial cable products primarily for cable
television applications for 1996 declined 24.8% ($179.2 million--1996; $238.3
million -1995) primarily due to: (1) a decline in U.S coaxial cable television
sales which declined from $115.4 million in 1995 to $94.5 million in 1996, of
which $18.4 million of the decline is attributable to diminished sales of
coaxial cable to regional Bell operating companies ("RBOCs") that slowed their
construction of broadband systems in 1996, and reduced sales to a major U.S.
cable operator in the latter part of 1996 as that operator reduced expenditures
for the rebuilding of its systems; and (2) a decline in international coaxial
cable television sales which declined from $122.9 million in 1995 to $84.7
million in 1996, of which $29.1 million of the decline is attributable to
reduced sales to a foreign cable operator as that operator selected local
sourcing for its cable requirements, and reduced sales to companies in a foreign
country as that country is undergoing a regulation of cable television
franchises which slowed the construction of new systems.

Geographically, sales in the United States in 1996 increased 0.6% compared
to 1995 ($397.0 million-- 1996; $394.6 million--1995); international sales for
1996, including export sales, declined 2.4% in U.S. dollars ($379.2
million--1996; $388.7 million--1995) and increased approximately .5% in local
currencies

18
<PAGE>
compared to 1995. The comparatively stronger U.S. dollar in 1996 had the
currency translation effect of decreasing net sales by approximately $11.4
million when compared to foreign currency translation rates in 1995. Changes in
net sales for 1996 compared to 1995 are primarily due to changes in unit volume
and product mix as opposed to changes in unit prices.

The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) increased to 34% in 1996 from 33% in 1995. The increase is
generally attributable to increased sales of higher margin application-specific
connector products, increased efficiencies due to increased production rates for
certain connector products and continuing cost control programs, the effect of
which was partially offset by lower coaxial cable sales.

Selling, general and administrative expenses as a percentage of sales for
1996 remained constant at approximately 15% when compared to 1995.

Interest expense was $24.6 million for 1996 compared to $25.5 million for
1995. The decrease is due to generally lower average debt outstanding during the
year.

Other expenses, net for 1996 was $3.7 million, a decrease of $.8 million
from 1995. See Note 8 to the Company's Consolidated Financial Statements for
details of the components of other expenses, net.

The provision for income taxes for 1996 was at an effective rate of 38.4%
compared to an effective rate of 40.0% in 1995.

1995 COMPARED TO 1994

Net sales were $783.2 million for the year ended December 31, 1995 compared
to $692.7 million for 1994. Sales of commercial, radio frequency and industrial
interconnect products, cable assemblies and flat-ribbon cable for 1995 increased
15.3% ($370.6 million--1995; $321.5 million--1994). Such increase is primarily
due to strong demand, especially internationally, for connectors and
interconnect systems used in telecommunications applications, automotive safety
devices (airbags and pretensioner seatbelts), machine tool and factory
automation equipment and smart card reader devices. Sales of high performance
environmental connectors for 1995 increased 11.0% compared to 1994 ($174.3
million--1995; $157.0 million--1994). The increase is primarily attributable to
strong demand for the Company's application specific products for new and
enhanced electronic aerospace and avionics interconnect systems. Sales of
coaxial cable products primarily for cable television applications for 1995
increased 11.3% ($238.3 million--1995; $214.1 million--1994) primarily due to
increased international sales; U.S. sales of coaxial cable were approximately
even with 1994 with increased sales to certain RBOCs as they began initial
construction of broadband systems offsetting a decline in sales to traditional
cable television operators.

Geographically, sales in the United States in 1995 increased 3.6% compared
to 1994 ($394.6 million-- 1995; $381.0 million--1994); international sales for
1995, including export sales, increased 24.7% in U.S. dollars ($388.7
million--1995; $311.6 million--1994) and increased approximately 19% in local
currencies compared to 1994. The comparatively weaker U.S. dollar in 1995 had
the currency translation effect of increasing net sales by approximately $19.2
million when compared to foreign currency translation rates in 1994. Changes in
net sales for 1995 compared to 1994 are primarily due to changes in unit volume
and product mix as opposed to changes in unit prices.

The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) increased to 33% in 1995 from 31% in 1994. The increase is
generally attributable to increased sales of higher margin application specific
connector products, increased sales of the relatively higher gross margin
coaxial cable products and continuing cost control programs.

Selling, general and administrative expenses as a percentage of sales for
1995 remained even with 1994 at approximately 15%.

19
<PAGE>
Interest expense was $25.5 million for 1995 compared to $30.4 million for
1994. The decrease is due to decreased debt outstanding.

Other expenses, net for 1995 was $4.5 million, an increase of $.3 million
from 1994. See Note 8 to the Company's Consolidated Financial Statements for
details of the components of other expenses, net.

The provision for income taxes for 1995 was at an effective rate of 40%
compared to an effective rate of 39% in 1994.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities totaled $68.2 million, $79.2 million
and $88.9 million for 1996, 1995 and 1994, respectively. The decrease in cash
from operating activities in 1996 compared to 1995 is primarily attributable to
increased cash tax payments in certain foreign jurisdictions, increased cash
payments to the Company's pension plans and increases in inventory. In 1995, the
cash from operating activities was lower than 1994 primarily because of changes
in the non-cash components of working capital primarily reflecting higher sales
levels and a reduction in accrued liabilities.

Cash from operating activities was used for capital expenditures: $20.4
million, $20.4 million and $10.9 million in 1996, 1995 and 1994, respectively.
In 1996, cash from operating activities was also used for acquisitions ($29.5
million) and to repurchase in the open market the Company's common stock ($52.7
million). In 1995 and 1994, the Company also used the cash flow from operations
for debt reduction ($50.4 million--1995; $145.6 million--1994); the 1994 debt
reduction also includes approximately $67.0 million net proceeds from the sale
of 4.4 million shares of common stock. In 1996, the Company increased its net
borrowings by approximately $26.3 million to supplement the cash flow from
operations to fund the expenditures described above.

The Company has a $150.0 million unsecured revolving bank credit agreement
that expires in the year 2000. The credit agreement requires the maintenance of
a minimum net worth, interest coverage and leverage ratio and includes
limitations with respect to secured borrowings and restricted payments,
including dividends on the Company's common stock. At December 31, 1996, there
was $24.0 million of borrowings outstanding with respect to the credit
agreement.

In December 1993, a subsidiary of the Company entered into an asset-backed
securitization program whereby the subsidiary can sell to a financial
institution up to $50.0 million of trade accounts receivable (See Note 9 to the
Company's Consolidated Financial Statements). The program costs approximate
rates charged on high quality commercial paper, plus certain administrative
expenses. At December 31, 1996, sales under the program were approximately $50.0
million. The program expires in December 1997; however, the Company believes
that it will be able to renew such program for one or more years.

In 1996, the Company's Board of Directors authorized an open market share
repurchase program of up to 5.0 million shares of the Company's common stock. At
December 31, 1996, the Company had repurchased in the open market approximately
2.6 million shares of its common stock at an average price of $20.01 per share.

The Company's primary ongoing cash requirements will be for capital
expenditures and debt service. The Company does not have any present intention
for the payment of cash dividends on its common stock. The Company expects that
ongoing requirements for capital expenditures and debt service will be funded by
internally generated cash flow. The Company expects that capital expenditures in
1997 will not exceed $25.0 million. The Company's required debt amortization in
1997 is $7.8 million; the Company's required cash interest payments for 1997, at
current interest rates, are estimated at approximately $25.0 million.

ENVIRONMENTAL MATTERS

Subsequent to the acquisition of Amphenol from Allied Corporation in 1987,
Amphenol and Allied have been named jointly and severally liable as potentially
responsible parties in relation to several environmental cleanup sites. Amphenol
and Allied have jointly consented to perform certain investigations

20
<PAGE>
and remedial and monitoring activities at two sites and they have been jointly
ordered to perform work at another site. The reponsibility for costs incurred
relating to these sites is apportioned between Amphenol and Allied based on an
agreement entered into in connection with the acquisition. For sites covered by
this agreement, to the extent that conditions or circumstances occurred or
existed at the time of or prior to the acquisition, the first $13.0 million of
costs are borne by Amphenol and have been incurred as of December 31, 1996.
Allied is obligated to pay 80% of the excess over $13.0 million and 100% of the
excess over $30.0 million. Management does not believe that the costs associated
with resolution of these or any other environmental matters will have a material
adverse effect on the Company's financial position or results of operations.

INFLATION AND COSTS

The cost of the Company's products is influenced by the cost of a wide
variety of raw materials, including precious metals such as gold and silver used
in plating; aluminum, copper, brass and steel used for contacts, shells and
cable; and plastic materials used in molding connector bodies, inserts and
cable. In general, increases in the cost of raw materials, labor and services
have been offset by price increases, productivity improvements and cost saving
programs.

RISK MANAGEMENT

The Company has to a significant degree mitigated its exposure to currency
risk in its business operations by manufacturing and procuring its products in
the same country or region in which the products are sold so that costs reflect
local economic conditions. In other cases involving U.S. export sales, raw
materials are a significant component of product costs for the majority of such
sales and raw material costs are generally dollar based on a worldwide scale,
such as basic metals and petroleum derived materials. The majority of the
Company's debt is at fixed interest rates and not subject to fluctuations. The
Company does have credit agreements which allow it to borrow at variable rates.
In such cases the Company may use financial instruments, primarily LIBOR
contracts and interest rate swap contracts to fix such variable rates for
varying periods, generally not longer than one year.

FUTURE ACCOUNTING CHANGES

In June 1996 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 (FAS 125), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." Management
has reviewed the statement and believes that implementation of the statement
will not have a material effect on the Company's financial position or results
of operations. The Company is required to adopt the statement effective January
1, 1997.

SUBSEQUENT EVENT--PROPOSED TRANSACTION

On January 23, 1997, the Company announced that it signed an Agreement and
Plan of Merger ("Agreement") with an affiliate of Kohlberg Kravis Roberts & Co.
L.P. ("KKR"). Upon completion of the transaction, which is expected to be
consummated in April 1997, affiliates of KKR will be the majority owner of the
Company. The Agreement provides that the owner of each share of Class A common
stock can elect either to receive $26.00 in cash for that share or to retain
that share. However, in no event can more that 4.4 million shares of common
stock (approximately 10% of the currently outstanding shares) be retained by
present Amphenol shareholders. If holders elect to retain more than 4.4 million
of the outstanding shares, then the shares available will be prorated among
those electing to retain and cash will be paid for all other shares. If holders
elect to retain fewer than 4.4 million of the outstanding shares, the remaining
available shares will be prorated among those electing cash. Following the
merger, affiliates of KKR expect to own in excess of 75% of the Company's
outstanding shares. Affiliates of KKR will invest up to $374 million of equity
in the transaction. The balance of funds necessary to complete the transaction,
estimated at approximately $990 million, including refinancing the Company's
indebtedness and obligations, will come from new borrowings.

21
<PAGE>
Lawrence J. DeGeorge, Chairman of the Board of the Company, and certain
members of his family (and a trust founded by them) who hold, in the aggregate,
approximately 30% of the outstanding common stock, have agreed to vote their
shares in favor of the merger. An affiliate of KKR will also have the option to
call the DeGeorge family shares under certain circumstances, and following the
recapitalization the DeGeorge interests will have the option to put the shares
which they retain following the merger to the affiliate, in each case for $26.00
in cash per share.

The merger is subject to certain conditions including the approval of the
Company's shareholders at its annual meeting, the expiration of antitrust
regulatory waiting periods and the completion of financing arrangements. After
the merger, Amphenol will continue to operate as an independent public company
under its current name with headquarters in Wallingford, Connecticut.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

Management is responsible for the integrity and objectivity of the financial
statements and other information appearing in this annual report on Form 10-K.
The financial statements have been prepared in conformity with generally
accepted accounting principles and include amounts based on management's best
estimates and judgments, with due consideration given to materiality. The
Company maintains a system of internal accounting controls and procedures
intended to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and accounted for in accordance with
management's authorization.

Price Waterhouse LLP has been engaged to audit the financial statements in
accordance with generally accepted auditing standards. They obtain an
understanding of the Company's accounting policies and controls, and conduct
such tests and related procedures as they consider necessary to arrive at their
opinion. The Board of Directors has appointed an Audit Committee composed of
outside directors. The Audit Committee meets periodically with representatives
of management and Price Waterhouse LLP to discuss and review their activities
with respect to internal accounting controls and financial reporting and
auditing.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Amphenol Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 38 present fairly, in all material
respects, the financial position of Amphenol Corporation and its subsidiaries at
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

Hartford, Connecticut

January 14, 1997, except as to Note 12, which is as of January 23, 1997

22
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1995 1994
------------- ------------- -------------

<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net sales........................................................... $ 776,221 $ 783,233 $ 692,651
Costs and expenses:
Cost of sales, excluding depreciation and amortization............ 494,689 506,707 458,318
Depreciation and amortization expense............................. 28,808 27,795 28,099
Selling, general and administrative expense....................... 114,746 114,041 102,183
------------- ------------- -------------
Operating income.................................................... 137,978 134,690 104,051
Interest expense.................................................... (24,617) (25,548) (30,382)
Other expenses, net................................................. (3,696) (4,515) (4,160)
------------- ------------- -------------
Income before income taxes and extraordinary item................... 109,665 104,627 69,509
Provision for income taxes.......................................... (42,087) (41,769) (27,109)
------------- ------------- -------------
Net income before extraordinary item................................ 67,578 62,858 42,400
Extraordinary item:
Loss on early extinguishment of debt, net of income taxes of
$2,613 (Note 1)................................................. (4,087)
------------- ------------- -------------
Net income.......................................................... $ 67,578 $ 62,858 $ 38,313
------------- ------------- -------------
------------- ------------- -------------
Net income per share:
Income before extraordinary item.................................. $ 1.45 $ 1.33 $ .91
Extraordinary loss................................................ (.09)
------------- ------------- -------------
Net income........................................................ $ 1.45 $ 1.33 $ .82
------------- ------------- -------------
------------- ------------- -------------
Average common shares outstanding................................... 46,649,541 47,304,180 46,611,759
</TABLE>

See accompanying notes to consolidated financial statements.

23
<PAGE>
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
ASSETS
Current Assets:
Cash and short-term cash investments.................................................. $ 3,984 $ 12,028
Accounts receivable, less allowance for doubtful accounts of $1,868 and $1,758........ 64,904 67,419
Inventories:
Raw materials and supplies.......................................................... 21,648 21,094
Work in process..................................................................... 92,771 79,971
Finished goods...................................................................... 38,864 33,688
----------- -----------
153,283 134,753
Prepaid expenses and other assets..................................................... 11,611 11,516
----------- -----------
Total current assets................................................................ 233,782 225,716
----------- -----------
Land and depreciable assets:
Land.................................................................................. 11,090 11,143
Buildings............................................................................. 65,379 64,452
Machinery and equipment............................................................... 188,716 169,624
----------- -----------
265,185 245,219
Less accumulated depreciation......................................................... (163,110) (150,560)
----------- -----------
102,075 94,659
Deferred debt issuance costs............................................................ 3,717 4,332
Excess of cost over fair value of net assets acquired................................... 346,583 342,624
Other assets............................................................................ 24,505 22,593
----------- -----------
$ 710,662 $ 689,924
----------- -----------
----------- -----------

LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................................................... $ 49,484 $ 51,684
Accrued interest...................................................................... 2,481 2,701
Accrued salaries, wages and employee benefits......................................... 12,671 11,972
Other accrued expenses................................................................ 24,523 35,376
Current portion of long-term debt..................................................... 7,759 2,670
----------- -----------
Total current liabilities........................................................... 96,918 104,403
----------- -----------
Long-term debt.......................................................................... 219,484 195,195
Deferred taxes and other liabilities.................................................... 18,696 18,755
Accrued pension and post employment benefit obligations................................. 15,016 27,486
Commitments and contingent liabilities (Notes 2, 6 and 9)

Shareholders' Equity:
Class A Common Stock, $.001 par value; 96,250,000 shares authorized; 44,720,287 and
47,320,382 shares outstanding at December 31, 1996 and 1995, respectively........... 47 47
Additional paid-in capital............................................................ 265,425 265,193
Accumulated earnings.................................................................. 151,634 84,056
Cumulative valuation adjustments (Note 5)............................................. (3,887) (5,211)
Treasury stock, at cost, 2,625,100 shares............................................. (52,671)
----------- -----------
Total shareholders' equity.......................................................... 360,548 344,085
----------- -----------
$ 710,662 $ 689,924
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

24
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED CUMULATIVE TREASURY TOTAL
COMMON PAID-IN EARNINGS VALUATION STOCK SHAREHOLDERS'
STOCK CAPITAL (DEFICIT) ADJUSTMENTS AT COST EQUITY
------------- ---------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

BALANCE DECEMBER 31, 1993.................... $ 42 $ 197,424 $ (17,115) $ (7,059) $ 173,292
Net income................................. 38,313 38,313
Translation adjustments.................... 3,786 3,786
Net proceeds from sale of 4,410,689 shares
of Class A Common Stock.................. 4 66,913 66,917
Conversion of warrants..................... 1 5 6
Amortization of deferred compensation...... 66 66
Stock options exercised.................... 413 413
Appreciation in market value of marketable
securities available for sale, net of
tax...................................... 162 162
Minimum pension liability adjustment, net
of tax................................... (4,315) (4,315)
--- ---------- ------------ ----------- ---------- -------------
BALANCE DECEMBER 31, 1994.................... 47 264,821 21,198 (7,426) 278,640
Net income................................. 62,858 62,858
Translation adjustments.................... 2,246 2,246
Amortization of deferred compensation...... 384 384
Stock options exercised and vesting of
restricted stock, net of tax............. (12) (12)
Decline in market value of marketable
securities available for sale, net of
tax...................................... (1,194) (1,194)
Minimum pension liability adjustment, net
of tax................................... 1,163 1,163
--- ---------- ------------ ----------- ---------- -------------
BALANCE DECEMBER 31, 1995.................... 47 265,193 84,056 (5,211) 344,085
Net income................................. 67,578 67,578
Translation adjustments.................... 647 647
Purchase of Treasury Stock................. (52,671) (52,671)
Amortization of deferred compensation...... 65 65
Stock options exercised.................... 167 167
Decline in market value of marketable
securities available for sale, net of
tax...................................... (1,085) (1,085)
Minimum pension liability adjustment, net
of tax................................... 1,762 1,762
--- ---------- ------------ ----------- ---------- -------------
BALANCE DECEMBER 31, 1996.................... $ 47 $ 265,425 $ 151,634 $ (3,887) $ (52,671) $ 360,548
--- ---------- ------------ ----------- ---------- -------------
--- ---------- ------------ ----------- ---------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

25
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOW

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net income.................................................................... $ 67,578 $ 62,858 $ 38,313
Adjustments for cash from operations:
Depreciation and amortization............................................... 28,808 27,795 28,099
Amortization of deferred debt issuance costs................................ 691 652 674
Net extraordinary charge for write off of deferred debt issuance costs...... 4,087
Net change in:
Accounts receivable......................................................... 7,315 (6,954) (14,236)
Inventory................................................................... (10,801) (1,790) 13,483
Prepaid expenses and other assets........................................... 604 90 2,152
Accounts payable............................................................ (3,411) 4,121 4,282
Accrued liabilities......................................................... (13,832) 831 11,352
Accrued pension and post employment benefits................................ (7,590) (2,483) (1,492)
Deferred taxes and other liabilities........................................ (970) (5,443) 824
Other....................................................................... (185) (450) 1,333
---------- ---------- ----------
Cash provided by operations................................................... 68,207 79,227 88,871
---------- ---------- ----------
Cash flow from investing activities:
Additions to property, plant and equipment.................................. (20,374) (20,381) (10,936)
Net investment in acquisitions and joint ventures........................... (29,461) (1,234)
Other....................................................................... (1,030) (1,290)
---------- ---------- ----------
Cash flow used by investing activities........................................ (49,835) (21,411) (13,460)
---------- ---------- ----------
Cash flow from financing activities:
Decrease in long-term debt.................................................. (45,368) (97,972)
Net increase (decrease) in borrowings under revolving credit facilities..... 26,255 (5,002) (47,659)
Net proceeds from issuance of common stock.................................. 66,917
Net proceeds from the sale of accounts receivable........................... 5,000
Treasury stock repurchases.................................................. (52,671)
---------- ---------- ----------
Cash flow used by financing activities........................................ (26,416) (50,370) (73,714)
---------- ---------- ----------
Net change in cash and short-term cash investments............................ (8,044) 7,446 1,697
Cash and short-term cash investments balance, beginning of period............. 12,028 4,582 2,885
---------- ---------- ----------
Cash and short-term cash investments balance, end of period................... $ 3,984 $ 12,028 $ 4,582
---------- ---------- ----------
---------- ---------- ----------
Cash paid during the year for:
Interest.................................................................... $ 24,180 $ 25,109 $ 30,139
Income taxes paid, net of refunds........................................... 54,765 37,606 15,624
</TABLE>

See accompanying notes to consolidated financial statements.

26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS

Amphenol Corporation ("Amphenol" or the "Company") is in one business
segment which consists of designing, manufacturing and marketing connectors,
cable and interconnect systems, principally for telephone, wireless and data
communication systems; cable television; commercial and military aerospace
electronics equipment; automotive and mass transportation applications; and
industrial factory automation equipment.

USE OF ESTIMATES

The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION AND INVESTMENTS

The consolidated financial statements include the accounts of the Company
and its subsidiaries. Other assets includes an investment in equity securities
deemed available-for-sale. Such investment is recorded at its market value at
December 31, 1996 of $8,187 ($9,857 at December 31, 1995), and the cumulative
appreciation in market value over the cost basis of the investment, net of
deferred tax, of $3,687 ($4,772 at December 31, 1995) is recorded as a component
of shareholders' equity.

CASH AND SHORT-TERM CASH INVESTMENTS

Cash and short-term cash investments consist of cash and liquid investments
with a maturity of less than three months.

INVENTORIES

Inventories are stated at the lower of standard cost, which approximates
average cost, or market. The principal components of cost included in
inventories are materials, direct labor and manufacturing overhead.

DEPRECIABLE ASSETS

Property, plant and equipment are carried at cost. Depreciation and
amortization of property, plant and equipment are provided on a straight-line
basis over the respective asset lives determined on a composite basis by asset
group or on a specific item basis using the estimated useful lives of such
assets which range from 3 to 12 years for machinery and equipment and 20 to 40
years for buildings. It is the Company's policy to periodically review fixed
asset lives.

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs are being amortized on the interest method over
the term of the related debt and such amortization is included in interest
expense. In 1994, in conjunction with the prepayment of

27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
certain bank debt, the Company incurred an extraordinary net charge of
approximately $4,087 for the write off of deferred debt issuance costs.

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED

The excess of cost over the fair value of net assets acquired (goodwill) is
being amortized on the straight-line basis over a period of 40 years.
Accumulated amortization was $85,657 and $74,695 at December 31, 1996 and 1995,
respectively. Management continually reassesses the appropriateness of both the
carrying value and remaining life of goodwill. Such reassessments are based on
forecasting cash flows, on an undiscounted basis, and other factors. In the
event an impairment is indicated, the amount of the impairment would be based on
estimated discounted cash flows.

REVENUE RECOGNITION

Sales and related cost of sales are recognized upon shipment of products.
Sales and related cost of sales under long-term contracts with commercial
customers and the U.S. Government are recognized as units are delivered or
services provided.

RETIREMENT PENSION PLANS

Costs for retirement pension plans include current service costs and
amortization of prior service costs over periods of up to thirty years. It is
the Company's policy to fund current pension costs in conformance with minimum
funding requirements and maximum tax deductible limitations. The expense of
retiree medical benefit programs is recognized during the employees' service
with the Company as well as amortization of a transition obligation recognized
on adoption of the accounting principle in 1993.

INCOME TAXES

Deferred income taxes are provided for revenue and expenses which are
recognized in different periods for income tax and financial statement purposes.
Deferred income taxes are not provided on undistributed earnings of foreign
affiliated companies which are considered to be permanently invested.

RESEARCH AND DEVELOPMENT

Research, development and engineering expenditures for the creation and
application of new and improved products and processes were $14,550, $15,740 and
$14,261, excluding customer sponsored programs representing expenditures of
$927, $1,272 and $831, for the years 1996, 1995 and 1994, respectively.

ENVIRONMENTAL OBLIGATIONS

The Company recognizes the potential cost for environmental remediation
activities when assessments are made, remedial efforts are probable and related
amounts can be reasonably estimated; potential insurance reimbursements are not
recorded. The Company regularly assesses its environmental liabilities through
reviews of contractual commitments, site assessments, feasibility studies and
formal remedial design and action plans.

28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE

Net income per share is based on the net income for the period divided by
the weighted average common shares outstanding.

DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments, which are periodically used by the Company
in the management of its interest rate and foreign currency exposures, are
accounted for on an accrual basis. Income and expense are recorded in the same
category as that arising for the related asset or liability. For example,
amounts to be paid or received under interest rate swap agreements are
recognized as interest income or expense in the periods in which they accrue.

NOTE 2--LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
INTEREST RATE AT ------------------------
DECEMBER 31, 1996 MATURITY 1996 1995
----------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Senior notes.......................................... 10.45% 1999-2001 $ 100,000 $ 100,000
Senior subordinated debentures........................ 12.75% 2002 95,000 95,000
Revolving credit facility............................. 6.0% 2000 24,000
Notes payable to foreign banks........................ 1.62-9.25% 1997-2000 8,243 2,865
---------- ------------
227,243 197,865
Less current portion.................................. 7,759 2,670
---------- ------------
Total long-term debt.................................. $ 219,484 $ 195,195
---------- ------------
---------- ------------
</TABLE>

On November 30, 1995, the Company entered into a $150,000 five year
unsecured revolving credit agreement with a group of banks. Interest on
borrowings under the credit agreement generally accrues at 0.275% over LIBOR or,
at the Company's option, at the bank's base rate; in addition, the Company pays
a facility fee. The credit agreement requires the Company to meet certain
financial tests including minimum net worth, interest coverage and leverage
ratios. In addition, the agreement includes limitations with respect to secured
borrowings and restricted payments, including dividends on the Company's common
stock.

The Senior Notes are unsecured and subject to redemption at the option of
the Company at any time, in whole or in part, at par plus a make-whole premium
determined in relation to the current interest rate on U.S. Government
securities at the time of an optional redemption. The Senior Subordinated
Debentures are subject to redemption at the option of the Company, in whole or
in part, beginning in 1997 at 104.8% and declining to 100% by 2000.

The maturity of the Company's long-term debt over each of the next five
years ending December 31, is as follows: 1997--$7,759; 1998--$206;
1999--$33,576; 2000--$33,368; and 2001--$33,334.

29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 3--INCOME TAXES

The components of income before income taxes and the provision (benefit) for
income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ---------
Income before taxes and extraordinary item:
United States................................................................ $ 67,889 $ 69,694 $ 47,402
Foreign...................................................................... 41,776 34,933 22,107
---------- ---------- ---------
$ 109,665 $ 104,627 $ 69,509
---------- ---------- ---------
---------- ---------- ---------
Current provision:
United States................................................................ $ 24,174 $ 18,045 $ 25,771
Foreign...................................................................... 15,993 16,144 3,000
---------- ---------- ---------
40,167 34,189 28,771
---------- ---------- ---------
---------- ---------- ---------
Deferred provision (benefit):
United States................................................................ 1,884 7,122 (1,103)
Foreign...................................................................... 36 458 (559)
---------- ---------- ---------
1,920 7,580 (1,662)
---------- ---------- ---------
Total provision for income taxes............................................... $ 42,087 $ 41,769 $ 27,109
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

At December 31, 1996, the Company had $15,009 of foreign tax loss
carryforwards, of which $2,100 expires at various dates through 2001 and the
balance can be carried forward indefinitely, and $380 of tax credit
carryforwards that expire in various periods from 1997 to 1999. Accrued income
tax liabilities of $11,352 and $24,632 at December 31, 1996 and 1995
respectively, are included in other accrued expenses on the Consolidated Balance
Sheet.

Differences between the U.S. statutory federal tax rate and the Company's
effective income tax rate are analyzed below:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
U.S. statutory federal tax rate...................................................... 35.0% 35.0% 35.0%
State and local taxes................................................................ 1.5 1.2 1.8
Non-deductible purchase accounting differences....................................... 3.7 3.6 5.4
Foreign tax provisions at rates different from the U.S. statutory rate............... .5 4.8 .7
Tax cost (benefit) of foreign dividend income, net of related tax credits............ (2.6) (2.8) .2
Valuation allowance.................................................................. (4.1) (1.8) (5.3)
Other................................................................................ 4.4 (.1) 1.2
--- --- ---
Effective tax rate................................................................... 38.4% 39.9% 39.0%
--- --- ---
--- --- ---
</TABLE>

30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 3--INCOME TAXES (CONTINUED)
The Company's deferred tax assets and liabilities, prior to valuation
allowance, were comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Deferred tax assets:
Accrued liabilities and reserves...................................... $ 6,359 $ 9,190
Operating loss carryforwards.......................................... 4,447 5,663
Foreign tax credit carryforwards...................................... 380 1,558
Employee benefits..................................................... 6,459 8,499
--------- ---------
$ 17,645 $ 24,910
--------- ---------
--------- ---------
Deferred tax liabilities:
Depreciation.......................................................... $ 9,351 $ 10,262
Marketable securities................................................. 1,985 2,570
Prepaid pension costs................................................. 4,930 3,510
--------- ---------
$ 16,266 $ 16,342
--------- ---------
--------- ---------
</TABLE>

A valuation allowance of $8,184 and $12,628 at December 31, 1996 and 1995,
respectively, has been recorded which relates primarily to foreign net operating
loss carryforwards, foreign tax credits and certain deferred tax deductions for
which a tax benefit is less likely than not to be received. The net change in
the valuation allowance for deferred tax assets was a decrease of $4,444 in 1996
and $1,842 in 1995 and reduced income tax expenses each year. The net decrease
in the valuation allowance related primarily to benefits arising from
utilization of foreign net operating losses and foreign tax credit carryforwards
in 1996 and 1995. Changes to certain deferred tax deductions resulted in an
increase to the valuation allowance for 1995 and a decrease for 1996. Current
and non-current deferred tax assets and liabilities within the same tax
jurisdiction are offset for presentation in the consolidated balance sheet.

United States income taxes have not been provided on undistributed earnings
of international subsidiaries. The Company's intention is to reinvest these
earnings permanently or to repatriate the earnings only when it is tax effective
to do so. Accordingly, the Company believes that any United States tax on
repatriated earnings would be substantially offset by U.S. foreign tax credits.

NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company and its domestic subsidiaries have a number of defined benefit
plans covering substantially all U.S. employees. Plan benefits are generally
based on years of service and compensation. The plans are noncontributory,
except for certain salaried employees. Certain foreign subsidiaries have

31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
defined benefit plans covering their employees. The following is a summary of
the defined benefit plans' funded status as of the most recent actuarial
valuations (December 31, 1996 and 1995).

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
ACCUMULATED ASSETS ACCUMULATED ASSETS
BENEFITS EXCEED BENEFITS EXCEED
EXCEED ACCUMULATED EXCEED ACCUMULATED
ASSETS BENEFITS ASSETS BENEFITS
------------ ------------ ------------ ------------
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $ 72,983 $ 102,685 $ 145,750 $ 26,595
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated benefit obligation............................ $ 74,319 $ 104,576 $ 147,390 $ 26,802
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Projected benefit obligation.............................. $ 76,959 $ 112,777 $ 156,824 $ 28,316
Plan assets at fair value................................. 42,637 136,202 114,485 39,366
------------ ------------ ------------ ------------
Plan assets over (under) projected benefit obligation..... (34,322) 23,425 (42,339) 11,050
Unrecognized net loss (gain).............................. 11,625 (2,994) 22,986 (2,365)
Unrecognized prior service cost........................... 4,116 1,351 6,214 (154)
Unrecognized transition asset............................. 241 (3,350) (11) (2,236)
------------ ------------ ------------ ------------
Pension asset (liability) included in the Consolidated
Balance Sheet........................................... $ (18,340) $ 18,432 $ (13,150) $ 6,295
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Net pension expense included the following components:
Service cost benefits earned.................................................... $ 3,551 $ 3,221 $ 3,163
Interest cost on projected benefit obligation................................... 13,707 13,313 12,508
Actual return on plan assets.................................................... (16,193) (33,906) 4,664
Net amortization and deferral of actuarial (gains) losses....................... 1,321 20,045 (17,862)
--------- --------- ---------
Net pension expense............................................................... $ 2,386 $ 2,673 $ 2,473
--------- --------- ---------
--------- --------- ---------
</TABLE>

The weighted-average discount rate and rate of increase in future
compensation levels used in determining actuarial present value of the projected
benefit obligation was 7.5% (7.5% in 1995 and 8.5% in 1994) and 3.50% (3.50% in
1995 and 4.50% in 1994), respectively. The expected long-term rate of return on
assets was 10.5%. Plan assets consist primarily of U.S. equity and debt
securities. The largest non-U.S. plan, in accordance with local custom, is
unfunded and had an accumulated benefit obligation of approximately $20,485 and
$20,761 at December 31, 1996 and 1995, respectively. Such obligation is included
in the consolidated balance sheet and the tables above. Pension plans of certain
of the Company's other international subsidiaries generally do not determine the
actuarial value of accumulated benefits and the value of net assets on the basis
shown above. The plans, in accordance with local practices, are generally
unfunded. The vested benefit obligations of these plans are not significant.

In accordance with the provisions of FAS No. 87, the Company recorded a
minimum pension liability at December 31, 1996 of 13,572 ($15,558 at December
31, 1995) for circumstances in which a pension

32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
plan's accumulated benefit obligation exceeded the fair value of the plan's
assets and accrued pension liability. Such liability was partially offset by an
intangible asset equal to the unrecognized prior service cost, with the balance
recorded as a reduction in shareholders' equity, net of related deferred tax
benefits.

The Company maintains self insurance programs for that portion of its health
care and workers compensation costs not covered by insurance. The Company also
provides certain health care and life insurance benefits to certain eligible
retirees through postretirement benefit programs. Beginning in late 1996, the
Company implemented changes in its postretirement medical benefit plans such
that the Company's share of the cost of such plans for most participants is
fixed, and any increase in the cost of such plans will be the responsibility of
the retirees. The cost of postretirement health care and life insurance benefit
programs charged to expense was approximately $2,734, $2,088, and $1,831 for the
years 1996, 1995 and 1994, respectively. The Company expects to fund the benefit
costs principally on a pay-as-you-go basis. Since the Company has modified its
postretirement medical plans to hold constant its obligation and since the
accumulated postretirement benefit obligation ("APBO") and the net
postretirement benefit expense are not material in relation to the Company's
financial condition or results of operations, management believes any change in
medical costs from that estimated will not have a significant impact on the
Company. The discount rate used in determining the APBO at December 31, 1996 and
1995 was 7.5%.

Summary information on the Company's postretirement medical plans as of
December 31, 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Accumulated postretirement benefit obligation:
Retirees.............................................................. $ 10,710 $ 15,486
Fully eligible, active plan participants.............................. 1,236 832
Other active participants............................................. 1,156 825
--------- ---------
Postretirement benefit obligation..................................... 13,102 17,143
Unrecognized gain (loss).............................................. (6,815) (2,891)
Unrecognized transition obligation.................................... (933) (7,134)
--------- ---------
Postretirement benefit liability included in the balance sheet........ $ 5,354 $ 7,118
--------- ---------
--------- ---------
Components of net postretirement benefit expense are as follows:
Service cost.......................................................... $ 36 $ 26
Interest cost......................................................... 1,545 1,535
Amortization of transition obligation................................. 424 424
Net amortization and deferral of actuarial (gains) losses............. 729 103
--------- ---------
Net postretirement benefit expense.................................... $ 2,734 $ 2,088
--------- ---------
--------- ---------
</TABLE>

NOTE 5--SHAREHOLDERS' EQUITY

The Company has entered into a Stockholders' Agreement with Lawrence J.
DeGeorge, Chairman. The Agreement provides that if Mr. DeGeorge, together with
his estate and his spouse, own at least 25%

33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
of the Company's outstanding common stock, the Company will agree to nominate
directors designated by Mr. DeGeorge, his estate or his spouse that represent up
to 25% of the Board of Directors (but in no event fewer than two directors). If
Mr. DeGeorge, together with his estate and his spouse, own less than 25% but at
least 10% of the Company's outstanding common stock, the Company will agree to
nominate that number of directors designated by Mr. DeGeorge, his estate or his
spouse, that represent not less than 10% of the Board of Directors (but in no
event fewer than one director). The Agreement also provides for certain
registration rights in respect of common stock owned by Mr. DeGeorge. At
December 31, 1996, Mr. DeGeorge, his estate and his spouse beneficially owned
approximately 25.2% of the Company's common stock on a fully diluted basis.

The Company has authorized 3,750,000 shares of Class B Common Stock, par
value $.001. Such shares are equivalent to Class A Common Stock except the Class
B shares are non-voting. There are no Class B shares outstanding.

The Company has adopted a stock option plan which, as amended in 1996,
authorized the granting of stock options by the Board of Directors for up to a
maximum of 1,000,000 shares of Class A Common Stock. Options will be granted at
fair market value at the time of the grant. Options granted under the Stock
Option Plan may constitute incentive stock options (within the meaning of
Section 422A of the Internal Revenue Code of 1986) or nonstatutory stock
options. Such shares vest ratably over a period of three years from date of
grant and are exercisable over a period of ten years from date of grant. At
December 31, 1996 and 1995, 157,841 and 82,343 options were exercisable,
respectively.

Stock option plan activity for 1994, 1995, and 1996 was as follows:

<TABLE>
<CAPTION>
OPTIONS AVERAGE PRICE
--------- -------------
<S> <C> <C>
OPTIONS OUTSTANDING AT DECEMBER 31, 1993............................ 202,667 $ 8.94
Options granted..................................................... 155,000 15.53
Options exercised................................................... (47,787) 8.65
Options cancelled................................................... (38,499) 11.66
---------
OPTIONS OUTSTANDING AT DECEMBER 31, 1994............................ 271,381 12.36
Options granted..................................................... 155,500 26.32
Options exercised................................................... (54,705) 11.40
Options cancelled................................................... (58,332) 18.56
---------
OPTIONS OUTSTANDING AT DECEMBER 31, 1995............................ 313,844 18.48
Options granted..................................................... 173,600 23.82
Options exercised................................................... (15,005) 11.11
Options cancelled................................................... (49,001) 21.53
---------
OPTIONS OUTSTANDING AT DECEMBER 31, 1996............................ 423,438 $ 20.58
---------
---------
</TABLE>

34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE AVERAGE
EXERCISE PRICE SHARES PRICE TERM SHARES PRICE
- --------------------- --------- --------- ----- --------- ---------
$ 5.00-- $ 10.00 64,003 $ 9.14 5.93 64,003 $ 9.14
10.01-- 15.00 -- -- -- -- --
15.01-- 20.00 91,335 $ 15.59 7.25 56,838 $ 15.50
20.01-- 25.00 158,100 $ 23.88 9.25 333 $ 25.00
25.01-- 30.00 110,000 $ 26.63 8.25 36,667 $ 26.63
</TABLE>

The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the stock option plan.
Accordingly, no compensation cost has been recognized for the plan. Had
compensation cost for the stock option plan been determined based on the fair
value of the option at date of grant consistent with the requirements of
Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net income
As reported........................................................... $ 67,578 $ 62,858
Pro forma............................................................. 66,884 62,366
Net income per share
As reported........................................................... $ 1.45 $ 1.33
Pro forma............................................................. 1.43 1.32
</TABLE>

The fair value of each stock option has been estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Risk free interest rate............................................... 6.1% 6.6%
Expected life......................................................... 4 years 4 years
Expected volatility................................................... 30.0% 30.0%
Expected dividend yield -- --
</TABLE>

The weighted-average fair values of options granted during 1996 and 1995
were $7.98 and $9.14, respectively.

35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED)
Activity in the Company's Shareholders' Equity cumulative valuation
adjustment accounts for 1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
CUMULATIVE
CUMULATIVE MINIMUM TOTAL
CUMULATIVE APPRECIATION PENSION CUMULATIVE
TRANSLATION IN MARKETABLE LIABILITY VALUATION
ADJUSTMENT SECURITIES ADJUSTMENT ADJUSTMENT
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance December 31, 1993................................... $ (8,444) $ 5,804 $ (4,419) $ (7,059)
Translation adjustments................................... 3,786 3,786
Change in appreciation in market value of marketable
securities available-for-sale........................... 162 162
Change in minimum pension liability adjustment............ (4,315) (4,315)
----------- ------ ----------- -----------
Balance December 31, 1994................................... (4,658) 5,966 (8,734) (7,426)
Translation adjustments................................... 2,246 2,246
Change in appreciation in market value of marketable
securities available-for-sale........................... (1,194) (1,194)
Change in minimum pension liability adjustment............ 1,163 1,163
----------- ------ ----------- -----------
Balance December 31, 1995................................... (2,412) 4,772 (7,571) (5,211)
Translation adjustments................................... 647 647
Change in appreciation in market value of marketable
securities available-for-sale........................... (1,085) (1,085)
Change in minimum pension liability adjustment............ 1,762 1,762
----------- ------ ----------- -----------
Balance December 31, 1996................................... $ (1,765) $ 3,687 $ (5,809) $ (3,887)
----------- ------ ----------- -----------
----------- ------ ----------- -----------
</TABLE>

NOTE 6--LEASES

At December 31, 1996, the Company was committed under operating leases which
expire at various dates through 2004. Total rent expense under operating leases
for the years 1996, 1995, and 1994 was $12,216, $11,594 and $10,108,
respectively.

MINIMUM LEASE PAYMENTS UNDER NON-CANCELABLE OPERATING LEASES ARE AS FOLLOWS:

<TABLE>
<S> <C>
1997............................................................... $ 7,249
1998............................................................... 5,974
1999............................................................... 3,849
2000............................................................... 2,851
2001............................................................... 2,002
Beyond 2001........................................................ 2,915
---------
Total minimum obligation..................................... $ 24,840
---------
---------
</TABLE>

36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 7--INTERNATIONAL OPERATIONS

A portion of the Company's revenues and assets relate to international
operations. The Company has manufacturing facilities in Germany, the United
Kingdom, France, Canada, Taiwan and Hong Kong and operations of lesser size in a
number of other countries. Amounts included in the accompanying consolidated
financial statements associated with operations outside the United States
consist of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
Net sales:
United States operations................................................... $ 503,385 $ 534,322 $ 494,299
International operations:
Europe................................................................. 233,670 217,143 177,549
Other.................................................................. 92,689 78,442 59,744
Eliminations............................................................... (53,523) (46,674) (38,941)
---------- ---------- ----------
Net sales............................................................ $ 776,221 $ 783,233 $ 692,651
---------- ---------- ----------
---------- ---------- ----------
Net income before extraordinary item:
United States operations................................................... $ 42,614 $ 46,493 $ 25,505
International operations:
Europe................................................................. 21,954 16,266 16,679
Other.................................................................. 3,010 99 216
---------- ---------- ----------
Net income before extraordinary item................................. $ 67,578 $ 62,858 $ 42,400
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
United States operations................................................... $ 473,889 $ 458,313 $ 470,209
International operations:
Europe................................................................. 172,640 170,319 155,833
Other.................................................................. 75,560 73,406 65,682
Eliminations............................................................... (11,427) (12,114) (14,669)
---------- ---------- ----------
Total assets......................................................... $ 710,662 $ 689,924 $ 677,055
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The Company had export sales from its United States operations of
approximately $80,000, $118,000 and $93,000 in 1996, 1995 and 1994,
respectively. The sales were made principally to Asia and the Far East, Europe
and Latin America.

Pursuant to FAS No. 52, "Foreign Currency Translation," the financial
position and results of operations of all of the Company's significant foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of such subsidiaries have been translated at current
exchange rates, and related revenues and expenses have been translated at
weighted average exchange rates. The aggregate effect of translation adjustments
so calculated is included as a separate component of shareholders' equity.
Transaction gains and losses are included in other expenses, net.

The Company periodically enters into foreign exchange contracts to hedge its
transaction exposures. At December 31, 1996, the Company had no outstanding
foreign exchange contracts.

37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 8--OTHER EXPENSES, NET

Other income (expense) is comprised as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Royalty income (expense).......................................................... $ 108 $ (59) $ 92
Interest income................................................................... 784 134 66
Foreign currency transaction gains (losses)....................................... 339 205 (357)
Equity in net earnings (losses) of investments.................................... (60) 272
Gain (loss) on sale of assets..................................................... (28) 262 (18)
Program fees on sale of accounts receivable....................................... (3,504) (3,902) (3,180)
Minority interests................................................................ (251) (407) (105)
Other............................................................................. (1,144) (688) (930)
--------- --------- ---------
$ (3,696) $ (4,515) $ (4,160)
--------- --------- ---------
--------- --------- ---------
</TABLE>

NOTE 9--COMMITMENTS AND CONTINGENCIES

In the course of pursuing its normal business activities, the Company is
involved in various legal proceedings and claims. Management does not expect
that amounts, if any, which may be required to be paid by reason of such
proceedings or claims will have a material effect on the Company's financial
position or results of operations.

Subsequent to the acquisition of Amphenol from Allied Signal Corporation
("Allied") in 1987, Amphenol and Allied have been named jointly and severally
liable as potentially responsible parties in relation to several environmental
cleanup sites. Amphenol and Allied have jointly consented to perform certain
investigations and remedial and monitoring activities at two sites and they have
been jointly ordered to perform work at another site. The reponsibility for
costs incurred relating to these sites is apportioned between Amphenol and
Allied based on an agreement entered into in connection with the acquisition.
For sites covered by this agreement, to the extent that conditions or
circumstances occurred or existed at the time of or prior to the acquisition,
the first $13.0 million of costs are borne by Amphenol and have been incurred as
of December 31, 1996. Allied is obligated to pay 80% of the excess over $13,000
and 100% of the excess over $30,000. Management does not believe that the costs
associated with resolution of these or any other environmental matters will have
a material adverse effect on the Company's financial position or results of
operations.

In December 1993, a subsidiary of the Company entered into a four year
agreement with a financial institution whereby the subsidiary would sell an
undivided interest of up to $50,000 in a designated pool of qualified accounts
receivable. Under the terms of the agreement, new receivables are added to the
pool as collections reduce previously sold accounts receivable. The Company
services, administers and collects the receivables on behalf of the purchaser.
Fees payable to the purchaser under this agreement are equivalent to rates
afforded high quality commercial paper issuers plus certain administrative
expenses and are included in other expense, net in the accompanying Consolidated
Statement of Income. The agreement contains certain covenants and provides for
various events of termination. In certain circumstances the Company is
contingently liable for the collection of the receivables sold; management
believes that its allowance for doubtful accounts will be adequate to absorb the
expense of any such liability. At December 31, 1996 and 1995, approximately
$50,000 in receivables were sold under the agreement and are

38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
therefore not reflected in the accounts receivable balance in the accompanying
Consolidated Balance Sheet at that date.

NOTE 10--FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.

CASH AND SHORT-TERM CASH INVESTMENTS: The carrying amount approximates fair
value because of the short maturity of those instruments.

LONG-TERM DEBT: The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.

INVESTMENTS: The fair value of investments is based upon quoted market
prices. The fair value equals the carrying value of equity investments, which
are classified as available-for-sale.

At December 31, 1996 and 1995, based on market quotes for the same or
similar securities, it is estimated that the Company's 12.75% subordinated
debentures due 2002 and 10.45% senior notes due 2001 were trading at premiums of
approximately 10% to 20% over book value. It is estimated that the carrying
value of the Company's other financial instruments at December 31, 1996 and 1995
approximates fair value.

The Company periodically uses derivative financial instruments. The
instruments are primarily used to manage defined interest rate risk, and to a
lesser extent foreign exchange and commodity risks arising out of the Company's
core activities. During 1994, the Company had interest rate protection
agreements that fixed the interest cost relating to the majority of the
Company's floating rate debt. During 1995, the Company used forward contracts to
hedge certain foreign currency exposures. There were no derivative financial
instruments outstanding at December 31, 1996 and 1995.

39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 11--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ ------------
1996
Net sales.................................................... $ 194,822 $ 198,921 $ 184,876 $ 197,602
Gross profit, including depreciation......................... 66,639 67,816 63,523 66,539
Net income................................................... 16,940 17,408 16,697 16,533
Net income per share......................................... .36 .37 .36 .37
Stock price - High........................................... 26 27 5/8 22 7/8 23
- Low............................................... 20 1/8 19 7/8 18 3/4 19
1995
Net sales.................................................... $ 197,975 $ 207,584 $ 189,012 $ 188,662
Gross profit, including depreciation......................... 63,840 67,267 64,630 64,771
Net income................................................... 14,221 16,065 16,090 16,482
Net income per share......................................... .30 .34 .34 .35
Stock price - High........................................... 27 1/2 30 3/8 29 1/2 24 1/4
- Low............................................... 20 23 3/4 21 1/2 18 3/4
1994
Net sales.................................................... $ 155,508 $ 173,565 $ 178,172 $ 185,406
Gross profit, including depreciation......................... 46,974 54,431 56,606 59,997
Net income................................................... 7,047(a) 10,620 11,705 13,028
Net income per share......................................... .16(a) .22 .25 .28
Stock price - High........................................... 18 18 1/2 24 25 1/8
- Low............................................... 14 3/8 14 1/8 16 1/4 20 7/8
</TABLE>

- ------------------------

(a) Excludes an extraordinary charge for the write off of deferred debt issuance
costs of $4,087 or $.09 per share.

NOTE 12--SUBSEQUENT EVENT--PROPOSED TRANSACTION

On January 23, 1997, the Company announced that it signed an Agreement and
Plan of Merger ("Agreement") with an affiliate of Kohlberg Kravis Roberts & Co.
L.P. ("KKR"). Upon completion of the transaction, which is expected to be
consummated in April 1997, affiliates of KKR will be the majority owner of the
Company. The Agreement provides that the owner of each outstanding share of
Class A common stock can elect either to receive $26.00 in cash for that share
or to retain that share. However, in no event can more than 4.4 million shares
of common stock (approximately 10% of the currently outstanding shares) be
retained by present Amphenol shareholders. If holders elect to retain more than
4.4 million of the outstanding shares, then the shares available will be
prorated among those electing to retain and cash will be paid for all other
shares. If holders elect to retain fewer than 4.4 million of the outstanding
shares, the remaining available shares will be prorated among those electing
cash. Following the merger, affiliates of KKR expect to own in excess of 75% of
the Company's outstanding shares. Affiliates of KKR will invest up to $374
million of equity in the transaction. The balance of funds necessary to complete
the transaction, estimated at approximately $990 million, including refinancing
of the Company's existing indebtedness and obligations, will come from
borrowings.

40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 12--SUBSEQUENT EVENT--PROPOSED TRANSACTION (CONTINUED)
Lawrence J. DeGeorge, Chairman of the Board of the Company, and certain
members of his family (and a trust founded by them) who hold, in the aggregate,
approximately 30% of the outstanding common stock, have agreed to vote their
shares in favor of the merger. An affiliate of KKR will also have the option to
call the DeGeorge family shares under certain circumstances, and following the
recapitalization the DeGeorge interests will have the option to put the shares
which they retain following the merger to the affiliate, in each case for $26.00
in cash per share.

41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to Instruction G(3) to Form 10-K, the information required by Item
10 with respect to the Directors of the Registrant is incorporated by reference
from the Company's definitive proxy statement which is expected to be filed
pursuant to Regulation 14A within 120 days following the end of the fiscal year
covered by this report.

The information required by Item 10 with respect to the Executive Officers
of the Registrant has been included in Part I of this Form 10-K in reliance on
General Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of
Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION

Pursuant to Instruction G(3) to Form 10-K, the information required in Item
11 is incorporated by reference from the Company's definitive proxy statement
which is expected to be filed pursuant to Regulation 14A within 120 days
following the end of the fiscal year covered by this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Pursuant to Instruction G(3) to Form 10-K, the information required in Item
12 is incorporated by reference from the Company's definitive proxy statement
which is expected to be filed pursuant to Regulation 14A within 120 days
following the end of the fiscal year covered by this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to Instruction G(3) to Form 10-K, the information required in Item
13 is incorporated by reference from the Company's definitive proxy statement
which is expected to be filed pursuant to Regulation 14A within 120 days
following the end of the fiscal year covered by this report.

42
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Management....................................................................................... 22
Report of Independent Accountants.......................................................................... 22
Consolidated Statement of Income--
Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................. 23
Consolidated Balance Sheet--
December 31, 1996 and December 31, 1995.................................................................... 24
Consolidated Statement of Changes in Shareholders' Equity--
Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................... 25
Consolidated Statement of Cash Flow--
Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................... 26
Notes to Consolidated Financial Statements................................................................. 27
</TABLE>

(A)(2) FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS ENDED DECEMBER 31, 1996

All financial statement schedules are omitted because they are not
applicable or required, or because the required information is included in the
consolidated financial statements or notes thereto.

43
<PAGE>
(A)(3) LISTING OF EXHIBITS

<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of January 23, 1997 between NXS Acquisition
Corp. and Amphenol Corporation (filed as Exhibit 2.1 to the Current Report on Form
8-K dated January 23, 1997).*
3.1 Restated Certificate of Incorporation of the Company as of November 15, 1991 (filed
as Exhibit 3.1 to the Annual Report on Form 10-K for the Year ended December 31, 1991
(the "1991 10-K")).*
3.2 By-Laws of the Company as of October 30, 1991 (filed as Exhibit 3.2 to the 1991
10-K).*
4.1 $100,000,000 Note and Guarantee Agreement, dated as of October 30, 1991 between
Amphenol and the Purchasers named therein (the "Senior Note Agreement" (filed as
Exhibit 4.5 to the 1991 10-K)).*
4.2 Amendment letter dated November 7, 1991 to the Senior Note Agreement (filed as
Exhibit 4.2 to the Annual Report on Form 10-K for the Year Ended December 31, 1993
(the "1993 10-K")).*
4.3 Second Amendment to the Senior Note Agreement, dated as of December 9, 1992 (filed as
Exhibit (4)(b) to the Company's Form 8-K dated December 22, 1992 (the "1992 8-K")).*
4.4 $95,000,000 Senior Subordinated Note Indenture dated as of December 15, 1992 by and
between the Company and the Bank of New York, as trustee (filed as Exhibit (4)(a) to
the 1992 8-K).*
4.5 Stockholders' Agreement, dated as of December 15, 1992 (filed as Exhibit 4.8 to the
Registration Statement on Form S-1 (No. 33-54262) filed on November 5, 1992, and
effective December 10, 1992 (the "1992 Registration Statement")).*
10.1 Receivables Purchase Agreement, dated as of December 3, 1993, among Amphenol Funding
Corp., the Company, Pooled Accounts Receivable Capital Corporation and the Bank of
Montreal (filed as Exhibit 10.1 to the 1993 10-K).*
10.2 First Amendment to Receivables Purchase Agreement, dated as of November 21, 1995 by
and among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital
Corporation and Nesbitt Burns Securities, Inc., as successor to Bank of Montreal, as
agent (filed as Exhibit 10.6 to the Annual Report on Form 10-K for the Year ended
December 31, 1995 (the "1995 10K")).*
10.3 Second Amendment to Receivables Purchase Agreement, dated as of December 30, 1996 by
and among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital
Corporation and Nesbitt Burns Securities, Inc., as successor to Bank of Montreal, as
agent.**
10.4 Purchase and Sale Agreement, dated as of December 3, 1993, among the originators
named therein, Amphenol Funding Corp. and the Company (filed as Exhibit 10.2 to the
1993 10-K).*
10.5 First Amendment to Purchase and Sale Agreement, dated as of December 30, 1996 by and
among the originators named therein, Amphenol Funding Corp. and the Company.**
10.6 Subscription and Shareholder Agreement, dated as of December 3, 1993, among Amphenol
Funding Corp., the Company, AIPC, Pyle-National, Inc. and Times Fiber Communications
(filed as Exhibit 10.3 to the 1993 10-K).*
10.7 Agreement and Plan of Merger among the Company, Cable Acquisition Corp. and LPL,
dated as of October 28, 1992 (filed as Exhibit 2.1 to the 1992 Registration
Statement).*
10.8 $150,000,000 Credit Agreement, dated as of November 30, 1995, among the Company,
Chemical Bank and various other banks named therein (the "Credit Agreement") (filed
as Exhibit 10.5 to the 1995 10K).*
</TABLE>

<TABLE>
<C> <S>
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS (EXHIBITS 10.9 THROUGH 10.20)
10.9 Restricted Stock Plan of Amphenol effective July 1, 1987 (filed as Exhibit 10.6 to
the 1991 Registration Statement).*
10.10 1994 Amphenol Management Incentive Plan (filed as Exhibit 10.10 to the Annual Report
on Form 10-K for the Year Ended December 31, 1994 (the "1994 10-K")).*
</TABLE>

- ------------------------

* Incorporated herein by reference as stated.

** Previously filed.

44
<PAGE>
<TABLE>
<C> <S>
10.11 1995 Amphenol Management Incentive Plan (filed as Exhibit 10.10 to the 1995 10-K).*
10.12 1996 Amphenol Management Incentive Plan.**
10.13 1997 Amphenol Management Incentive Plan.**
10.14 Amended Stock Option Plan of Amphenol, effective May 23, 1996.**
10.15 1996 Long-Term Incentive Stock Plan of Amphenol.**
10.16 Amended and Restated Salaried Employees Pension Plan of the Amphenol Corporation
(filed as Exhibit 10.12 to the 1994 10-K).*
10.17 Amended and Restated LPL Technologies Inc. Retirement Plan for Salaried Employees
(filed as Exhibit 10.13 to the 1994 10-K).*
10.18 Amphenol Corporation Supplemental Employee Retirement Plan formally adopted effective
January 25, 1996.**
10.19 LPL Technologies Inc. and Affiliated Companies Employee Savings/401(k) Plan, dated
and adopted January 23, 1990 (filed as Exhibit 10.19 to the 1991 Registration
Statement).*
10.20 Management Agreement between Amphenol and Dr. Martin H. Loeffler, dated July 28, 1987
(filed as Exhibit 10.7 to the 1987 Registration Statement).*
10.21 Joint Venture Agreement between Allied Signal, Inc. and Daito Shoji Company Limited,
dated March 12, 1986 by Allied Corporation and dated March 1, 1986 by Daito Shoji
Company Limited (filed as Exhibit 10.14 to the 1991 Registration Statement).*
10.22 Stock Sale and Purchase Agreement dated as of July 2, 1994 between Daito Shoji
Company Limited and Amphenol Corporation (filed as Exhibit 10.16 to the 1994 10-K).*
10.23 License and Technical Assistance Agreement between Allied Corporation and Nippon
Interconnect Company, dated March 12, 1986 by Allied Corporation and April 1, 1986 by
Nippon Interconnect Company (filed as Exhibit 10.15 to the 1991 Registration
Statement).*
10.24 License and Technical Assistance Agreement between Amphenol and Amphetronix Limited,
dated July 30, 1991 (filed as Exhibit 10.17 to the 1991 Registration Statement).*
10.25 Agreement and Plan of Merger among Amphenol Acquisition Corporation, Allied
Corporation and Amphenol, dated April 1, 1987, and the Amendment thereto dated as of
May 15, 1987 (filed as Exhibit 2 to the 1987 Registration Statement).*
10.26 Settlement Agreement among Allied Signal Inc., Amphenol and LPL Investment Group,
Inc. dated November 28, 1988 (filed as Exhibit 10.20 to the 1991 Registration
Statement).*
11 Statement regarding computation of per share earnings.**
12 Statement regarding computation of ratio of earnings to fixed charges.**
22 Subsidiaries of the Company.**
99.1 Stockholders Agreement dated as of January 23, 1997 by and between NXS I, L.L.C. and
the other parties signatory thereto (filed as Exhibit 10.1 to the Current Report on
Form 8-K dated January 23, 1997).*
</TABLE>

(B) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the last quarter of the period
covered by this report.

- ------------------------

* Incorporated herein by reference as stated.

** Previously filed.

45
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Wallingford, State of Connecticut on the 28th day of March 1997.

AMPHENOL CORPORATION

By: /s/ MARTIN H. LOEFFLER
-----------------------------------------
Martin H. Loeffler
PRESIDENT AND
CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the date indicated below.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ LAWRENCE J. DEGEORGE
- ------------------------------ Chairman of the Board March 28, 1997
Lawrence J. DeGeorge

Director, President and
/s/ MARTIN H. LOEFFLER Chief Executive Officer
- ------------------------------ (Principal Executive March 28, 1997
Martin H. Loeffler Officer)

Director, Chief Financial
/s/ EDWARD G. JEPSEN Officer (Principal
- ------------------------------ Financial Officer and March 28, 1997
Edward G. Jepsen Principal Accounting
Officer)

/s/ TIMOTHY F. COHANE
- ------------------------------ Director March 28, 1997
Timothy F. Cohane

/s/ FLORENCE A. DEGEORGE
- ------------------------------ Director March 28, 1997
Florence A. DeGeorge

/s/ A. HENRY MORGAN
- ------------------------------ Director March 28, 1997
A. Henry Morgan

/s/ DR. MARCIA A. SAVAGE
- ------------------------------ Director March 28, 1997
Dr. Marcia A. Savage