SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to _________________
Commission File Number 1-10879
AMPHENOL CORPORATION
(Exact name of Registrant as specified in its Charter)
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)
Indicate by check mark whether the Registrant (1) has filed 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
___ ___
As of April 1, 1997, the total number of shares outstanding of Class A
Common Stock was 44,719,954. There are no shares outstanding of Class B Common
Stock.
<PAGE>
AMPHENOL CORPORATION
Index to Quarterly Report
on Form 10-Q
Page
____
Part I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statement of Income
Three months ended March 31, 1997 and 1996 5
Condensed Consolidated Statement of Cash Flow
Three months ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9
Part II Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote
of Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
A S S E T S
Current Assets:
Cash and short-term cash investments......... $ 6,822 $ 3,984
Accounts receivable, less allowance
for doubtful accounts of $2,004
and $1,868, respectively................... 82,212 64,904
Inventories.................................. 161,010 153,283
Prepaid expenses and other assets............ 12,350 11,611
-------- --------
Total current assets........................... 262,394 233,782
-------- --------
Land and depreciable assets, less
accumulated depreciation of
$164,366 and $163,110, respectively.......... 101,824 102,075
Deferred debt issuance costs................... 3,524 3,717
Excess of cost over fair value of net
assets acquired.............................. 347,634 346,583
Other assets................................... 16,399 24,505
-------- --------
$731,775 $710,662
________ ________
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................. $ 62,154 $ 49,484
Accrued interest.............................. 8,191 2,481
Other accrued expenses........................ 48,420 37,194
Current portion of long-term debt............. 9,962 7,759
-------- --------
Total current liabilities....................... 128,727 96,918
-------- --------
Long-term debt.................................. 197,091 219,484
Accrued pension and post employment
benefit obligations........................... 12,604 15,016
Deferred taxes and other liabilities............ 21,119 18,696
Shareholders' Equity:
Common stock.................................. 47 47
Additional paid-in capital.................... 265,446 265,425
Accumulated earnings.......................... 169,131 151,634
Cumulative valuation adjustment............... (9,719) (3,887)
Treasury stock, at cost....................... (52,671) (52,671)
-------- --------
Total shareholders' equity...................... 372,234 360,548
-------- --------
$731,775 $710,662
________ ________
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(dollars in thousands, except per share data)
Three months ended
March 31,
----------------------
1997 1996
-------- --------
Net sales....................................... $211,773 $194,822
Costs and expenses:
Cost of sales, excluding depreciation
and amortization............................. 137,522 123,928
Depreciation and amortization expense......... 7,695 7,186
Selling, general and administrative expense... 30,467 28,699
-------- --------
Operating income................................ 36,089 35,009
Interest expense................................ (6,422) (6,052)
Other expense, net.............................. (1,217) (724)
-------- --------
Income before income taxes...................... 28,450 28,233
Provision for income taxes...................... 10,953 11,293
-------- --------
Net income...................................... $ 17,497 $ 16,940
________ ________
Net income per common and common
equivalent share.............................. $.39 $.36
____ ____
Average common and common
equivalent shares outstanding................. 44,720,024 47,320,536
__________ __________
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(dollars in thousands)
Three Months Ended
March 31,
----------------------
1997 1996
-------- --------
Net income....................................... $17,497 $16,940
Adjustments for cash from operations:
Depreciation and amortization.................. 7,695 7,186
Amortization of deferred debt issuance costs... 173 174
Net change in non-cash components of
working capital............................... 2,833 (4,908)
------- -------
Cash provided from operations.................... 28,198 19,392
------- -------
Cash flow from investing activities:
Capital additions, net......................... (4,555) (5,499)
------- -------
Cash flow used by investing activities........... (4,555) (5,499)
------- -------
Cash flow from financing activities:
Net change in borrowings under revolving
credit facilities.......................... (20,805) 2,338
------- -------
Cash flow from (used by) financing activities.... (20,805) 2,338
------- -------
Net change in cash and short-term
cash investments............................... 2,838 16,231
Cash and short-term cash investments
balance, beginning of period................... 3,984 12,028
------- -------
Cash and short-term cash investments
balance, end of period......................... $ 6,822 $28,259
_______ _______
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 1 - Principles of Consolidation and Interim Financial Statements
- ---------------------------------------------------------------------
The condensed consolidated balance sheet as of March 31, 1997 and December
31, 1996, and the related condensed consolidated statements of income and of
cash flow for the three months ended March 31, 1997 and 1996 include the
accounts of the Company and its subsidiaries. The interim financial
statements included herein are unaudited. In the opinion of management all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such interim financial statements have been included. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the financial
statements and notes included in the Company's 1996 Annual Report on Form 10-K,
as amended by Amendment No. 1 thereto on Form 10-K/A.
Note 2 - Inventories
- --------------------
Inventories consist of:
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
Raw materials and supplies......... $ 21,871 $ 21,648
Work in process.................... 98,349 92,771
Finished goods..................... 40,790 38,864
-------- --------
$161,010 $153,283
________ ________
Note 3 - 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 responsibility
for costs incurred relating to these sites is apportioned between Amphenol and
Allied based on an agreement entered into in connection with the acquisition.
<PAGE>
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 $13,000 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 March 31, 1997 and December 31,
1996, approximately $50,000 in receivables were sold under the agreement and
are therefore not reflected in the accounts receivable balance in the
accompanying Consolidated Balance Sheet at that date.
Note 4 - Proposed Merger Transaction
- ------------------------------------
The Company has established May 14, 1997 as the date for a Special Meeting
of Shareholders for the purpose of considering and voting on the previously
announced Agreement and Plan of Merger ("Merger Agreement") between Amphenol
and NXS Acquisition Corp., a wholly owned subsidiary of KKR 1993 Fund L.P. and
KKR 1996 Fund L.P., limited partnerships formed at the direction of Kohlberg
Kravis Roberts & Co. L.P. Proxy materials containing a full description of the
Merger Agreement and related matters were mailed to stockholders on April 16,
1997.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(dollars in thousands, except per share data)
Results of Operations
- ---------------------
Three months ended March 31, 1997 compared to three months ended March 31, 1996
- -------------------------------------------------------------------------------
Net sales increased approximately 9% to $211,773 in the first quarter of
1997 compared to sales of $194,822 for the same period in 1996. The increase
is attributable to increased sales of interconnect products particularly in the
communications, aerospace and industrial markets. Currency translation had the
effect of reducing sales in the first quarter 1997 by approximately $4.7
million when compared to exchange rates for the 1996 period.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) decreased to 33% for the three months ended March 31, 1997
compared to 34% for the three months ended March 31, 1996. The decrease is
generally attributable to margin pressure in the Company's coaxial cable
business and certain European interconnect product operations.
Selling, general and administrative expenses as a percentage of net sales
remained relatively constant at approximately 14.5% for the three months ended
March 31, 1997 compared to the 1996 period.
Interest expense for the first quarter of 1997 was $6,422 compared to $6,052
for the first quarter of 1996. The increase is primarily attributable to
increased average debt levels in 1997.
Other income and expense for the three months ended March 31, 1997 was
$1,217 compared to $724 in 1996. The increase in 1997 relates to the absence in
the 1997 period of nonrecurring income in 1996 associated with the settlement
of certain claims relating to an asset sale.
The provision for income taxes for the three months ended March 31, 1997 was
$10,953 compared to $11,293 in 1996. The 1997 estimated effective tax rate of
approximately 38.5% reflects federal, state and foreign taxes.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $28,198 in the quarter ended March
31, 1997 compared to $19,392 in the 1996 period. The increase in cash flow
relates primarily to a net decrease in non-cash components of working capital.
The Company's primary ongoing cash requirements will be for debt service,
capital expenditures and product development activities. The Company's debt
service requirements consist primarily of interest on Senior Notes due 2001 and
Senior Subordinated Notes due 2002. The Company has not paid, and does not
have any present intention to commence payment of, cash dividends on its Common
Stock. The Company expects that ongoing requirements for debt service, capital
expenditures and product development activities will be funded by
internally-generated cash flow.
<PAGE>
Environmental Matters
- ---------------------
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 responsibility
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 $13,000 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.
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 Extinguishment of Liabilities." The Company
adopted the Statement effective January 1, 1997. Adoption of the Statement had
no effect on the Company's financial position or results of operations.
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (FAS 128), "Earnings per Share."
Management has reviewed the statement and believes that implementation of the
statement will not have a material effect on the Company's results of
operations. The Company is required to adopt the statement effective December
15, 1997.
Proposed Merger Transaction
- ---------------------------
The Company has established May 14, 1997 as the date for a Special Meeting
of Shareholders for the purpose of considering and voting on the previously
announced Agreement and Plan of Merger ("Merger Agreement") between Amphenol
and NXS Acquisition Corp., a wholly owned subsidiary of KKR 1993 Fund L.P. and
KKR 1996 Fund L.P., limited partnerships formed at the direction of Kohlberg
Kravis Roberts & Co. L.P. Proxy materials containing a full description of the
Merger Agreement and related matters were mailed to stockholders on April 16,
1997.
Safe Harbor Statement
- ---------------------
Statements in this report that are not strictly historical are
"forward-looking" statements which should be considered as subject to the many
uncertainties that exist in the Company's operations and business environment.
These uncertainties which include, among other things, economic and currency
conditions, market demand and pricing and competitive and cost factors are set
forth in the Company's 1996 Annual Report on Form 10-K, as amended by Amendment
No. 1 thereto on Form 10-K/A.
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to the Company's 1996 Annual Report on Form 10-K,
as amended by Amendment No. 1 thereto on Form 10-K/A, (the "10-K").
As described in greater detail in the 10-K, in December 1995, the
Company and Allied received a letter from the United States Environ-
mental Protection Agency (the "EPA"), demanding that the Company and
Allied accept responsibility for the investigation and cleanup of the
Sidney Center Landfill, a "Superfund" site (the "Sidney 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 Site. The Company and Allied responded to the unilateral order
by agreeing to undertake certain remedial design activities. In March
1997, the EPA filed a lawsuit by which it seeks to recover from Allied
and the Company $2.7 million in alleged past response costs relating to
the Sidney Site. To date the Company and Allied have not accepted any
responsibility for the cleanup of the Sidney Site.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports filed on Form 8-K
A current report on Form 8-K dated January 23, 1997 was filed with
the Securities and Exchange Commission on January 29, 1997, reporting
information under Items 5 and 7 thereof and providing copies of the
Agreement and Plan of Merger dated as of January 23, 1997 between NXS
Acquisition Corp. and Amphenol Corporation, the Stockholders
Agreement dated as of January 23, 1997 by and between NXS I, L.L.C.
and the other parties signatory thereto and the Press Release of
Amphenol Corporation dated January 23, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMPHENOL CORPORATION
DATE: May 5, 1997 /s/Edward G. Jepsen
--------------- ---------------------------
Edward G. Jepsen
Executive Vice President and
Chief Financial Officer
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