<PAGE>
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 June 30, 1998
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 July 1, 1998, the total number of shares outstanding of Class A Common
Stock was 17,538,738. There are no shares outstanding of Class B Common Stock.
<PAGE>
AMPHENOL CORPORATION
Index to Quarterly Report
on Form 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
Three and six months ended June 30, 1998 and 1997 5
Condensed Consolidated Statement of Changes
in Shareholders' Deficit
Six months ended June 30, 1998 6
Condensed Consolidated Statement of Changes
in Shareholders' Equity (Deficit)
Six months ended June 30, 1997 7
Condensed Consolidated Statements of Cash Flow
Six months ended June 30, 1998 and 1997 8
Notes to Condensed Consolidated Financial
Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote
of Security-Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 19
</TABLE>
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
A S S E T S
<S> <C> <C>
Current Assets:
Cash and short-term cash investments.......... $ 2,923 $ 4,713
Accounts receivable, less allowance
for doubtful accounts of $1,376
and $1,633, respectively.................... 86,352 70,037
Inventories................................... 172,783 167,010
Prepaid expenses and other assets............. 14,464 13,020
-------- --------
Total current assets............................ 276,522 254,780
-------- --------
Land and depreciable assets, less
accumulated depreciation of
$178,529 and $169,784, respectively........... 117,276 111,592
Deferred debt issuance costs.................... 18,055 19,377
Excess of cost over fair value of net
assets acquired............................... 340,008 339,223
Other assets.................................... 13,811 12,182
-------- --------
$765,672 $737,154
======== ========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
<S> <C> <C>
Current Liabilities:
Accounts payable.............................. $ 63,476 $ 64,255
Accrued interest.............................. 12,616 11,442
Other accrued expenses........................ 45,102 41,345
Current portion of long-term debt............. 1,390 212
-------- --------
Total current liabilities....................... 122,584 117,254
-------- --------
Long-term debt.................................. 943,097 937,277
Deferred taxes and other liabilities............ 23,805 25,748
Shareholders' Deficit:
Common stock.................................. 20 20
Additional paid-in deficit.................... (511,469) (511,584)
Accumulated earnings.......................... 198,379 178,351
Cumulative translation adjustment............. (10,744) (9,912)
-------- --------
Total shareholders' deficit..................... (323,814) (343,125)
-------- --------
$765,672 $737,154
======== ========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales....................................... $227,942 $226,996 $456,483 $438,769
Costs and expenses:
Cost of sales, excluding depreciation
and amortization............................. 147,824 146,463 296,893 283,985
Depreciation and amortization expense......... 5,832 5,055 11,237 9,920
Selling, general and administrative expense... 32,297 31,973 64,981 62,440
Amortization of goodwill...................... 2,830 2,829 5,658 5,659
-------- -------- -------- --------
Operating income................................ 39,159 40,676 77,714 76,765
Interest expense................................ (19,990) (14,249) (40,292) (20,671)
Expenses relating to Merger
and Recapitalization.......................... - (2,500) - (2,500)
Other income (expense), net..................... (903) 2,901 (1,982) 1,684
-------- -------- -------- --------
Income before income taxes
and extraordinary item........................ 18,266 26,828 35,440 55,278
Provision for income taxes...................... 7,911 11,054 15,412 22,007
-------- -------- -------- --------
Income before extraordinary item................ 10,355 15,774 20,028 33,271
Extraordinary item:
Loss on early extinguishment
of debt, net of income taxes................. - (12,845) - (12,845)
-------- -------- -------- --------
Net income...................................... $ 10,355 $ 2,929 $ 20,028 $ 20,426
======== ======== ======== ========
Income per common share before
extraordinary charge.......................... $.59 $.50 $1.14 $ .87
Extraordinary charge............................ - (.41) - (.34)
---- ---- ----- ------
Net income per common share..................... $.59 $.09 $1.14 $ .53
==== ==== ===== ======
Average common shares outstanding............... 17,537,425 31,866,577 17,535,622 38,257,794
========== ========== ========== ==========
Income per common share before extraordinary
charge - assuming dilution.................... $.58 $ .49 $1.12 $ .87
Extraordinary charge - assuming dilution........ - (.40) - (.34)
---- ---- ----- ------
Net income per common share - assuming dilution. $.58 $.09 $1.12 $ .53
==== ==== ===== ======
Average common shares outstanding
assuming dilution............................. 17,938,514 31,939,714 17,940,106 38,333,692
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
for the six months ended June 30, 1998
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Comprehensive Accumulated Comprehensive Shareholders'
Stock Deficit Income Earnings Loss Deficit
-------- ---------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance
at December 31, 1997........... $20 ($511,584) $178,351 ($ 9,912) ($343,125)
Comprehensive income:
Net income..................... [ $20,028 ] 20,028 20,028
-------
Other comprehensive loss,
net of tax:
Foreign currency translation
adjustment................. (832) (832) (832)
-------
Comprehensive income............. [ $19,196 ]
=======
Other adjustments................ 115 115
-------- ---------- ----------- ------------- ------------
Ending balance at June 30, 1998.. $20 ($511,469) $198,379 ($10,744) ($323,814)
======== ========== =========== ============= ============
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIT)
for the six months ended June 30, 1997
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated Total
Additional Other Treasury Shareholders'
Common Paid-in Comprehensive Accumulated Comprehensive Stock Equity
Stock Deficit Income Earnings Loss at Cost (Deficit)
-------- ---------- ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance
at December 31, 1996........... $47 $265,425 $151,634 ($3,887) ($52,671) $360,548
Comprehensive income:
Net income..................... [ $20,426 ] 20,426 20,426
-------
Other comprehensive loss,
net of tax:
Foreign currency translation
adjustment................. (5,899) (5,899)
Reclassification adjustment
for gain on securities
realized in net income...... (3,687) (3,687)
-------
Other comprehensive loss....... (9,586) (9,586)
-------
Comprehensive income............. [ $10,840 ]
=======
Stock subscription proceeds...... 448 448
Sale of 13,116,955 shares of
Common Stock.................... 13 341,028 341,041
Purchase of 40,325,240 shares of
Common Stock.................... (40) (1,048,450) (1,048,490)
Fees and other expenses related
to the Merger and
Recapitalization................. (17,644) (17,644)
Retirement of Treasury Stock..... (52,671) 52,671
Other adjustments................ 196 196
-------- ---------- ----------- ------------- --------- -----------
Ending balance at June 30, 1997.. $20 ($511,668) $172,060 ($13,473) $ - ($353,061)
======== ========== =========== ============= ========= ===========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Net income....................................... $ 20,028 $20,426
Adjustments for cash from operations:
Depreciation and amortization.................. 16,895 15,579
Amortization of deferred debt issuance costs... 1,372 798
Net loss on early extinguishment of debt....... - 12,845
Expenses relating to the Merger and Recapitalization - 2,500
Gain on sale of marketable securities.......... - (3,917)
Net change in non-cash components of
working capital............................... (18,325) 2,022
------- -------
Cash flow provided by operations................. 19,970 50,253
------- -------
Cash flow from investing activities:
Capital additions, net......................... (14,417) (10,246)
Proceeds from the sale of marketable securities - 7,351
Investments in acquisitions.................... (12,067) -
------- -------
Cash flow used by investing activities........... (26,484) (2,895)
------- -------
Cash flow from financing activities:
Net change in borrowings under revolving
credit facilities.......................... 9,724 (23,824)
Repurchase of senior notes and subordinated debt - (211,153)
Payment of fees and other expenses related to
Merger and Recapitalization.................. - (48,851)
Borrowings under New Credit Facility........... - 750,000
Decrease in borrowings under New Credit Facility (5,000) (40,000)
Proceeds from the issuance of senior notes..... - 240,000
Purchase of Amphenol Common Stock.............. - (1,048,490)
Equity proceeds related to Merger.............. - 341,041
------- -------
Cash flow provided by (used by)
financing activities........................... 4,724 (41,277)
------- -------
Net change in cash and short-term
cash investments............................... (1,790) 6,081
Cash and short-term cash investments
balance, beginning of period................... 4,713 3,984
------- -------
Cash and short-term cash investments
balance, end of period......................... $ 2,923 $10,065
======= =======
Cash paid during the period for:
Interest....................................... $38,030 $13,751
Income taxes paid, net of refunds.............. 12,814 9,960
</TABLE>
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 sheets as of June 30, 1998 and December
31, 1997, and the related condensed consolidated statements of income for the
three and six months ended June 30, 1998 and 1997 and of changes in
shareholders' equity (deficit) and of cash flow for the six months ended June
30, 1998 and 1997 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 and six months ended June 30,
1998 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 1997 Annual Report on
Form 10-K.
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (FAS 130), "Reporting Comprehensive
Income" which requires a statement of comprehensive income to be included in the
financial statements for fiscal years beginning after December 15, 1997. The
Company has adopted the statement and the appropriate disclosure is reflected in
the accompanying Condensed Consolidated Statements of Changes in Shareholders'
Equity (Deficit).
Note 2 - Inventories
- --------------------
Inventories consist of:
June 30, December 31,
<TABLE>
<CAPTION>
1998 1997
--------- ------------
(Unaudited)
<S> <C> <C>
Raw materials and supplies......... $ 22,219 $ 21,115
Work in process.................... 102,709 96,833
Finished goods..................... 47,855 49,062
-------- --------
$172,783 $167,010
======== ========
</TABLE>
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
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 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 were borne by Amphenol and had 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 condition or results of
operations.
A subsidiary of the Company has an agreement with a financial institution
whereby the subsidiary can sell an undivided interest of up to $60,000 in a
designated pool of qualified accounts receivable. The agreement expires in 2004.
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 income (expense), net, in the accompanying Consolidated
Statements 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 is adequate to absorb the
expense of any such liability. During 1997, the Company adopted SFAS No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." Adoption had no effect on the Company's financial statements.
At June 30, 1998 and December 31, 1997, approximately $60,000 in receivables
were sold under the agreement and are therefore not reflected in the accounts
receivable balance in the accompanying Condensed Consolidated Balance Sheets at
that date.
Note 4 - Merger and Recapitalization
- ------------------------------------
On May 19, 1997, the Company merged with NXS Acquisition Corp., a wholly
owned subsidiary of KKR 1996 Fund L.P., KKR Partners II, L.P., and NXS
Associates, L.P., limited partnerships formed at the direction of Kohlberg
Kravis Roberts & Co. L.P. ("KKR"). The Merger had the effect of affiliates of
KKR investing $341,041 in exchange for 13,116,955 shares, or 75% of the
Company's common stock. Such equity proceeds, along with $240,000 of proceeds
from the sale of 9 7/8% Senior Subordinated Notes due 2007 and borrowings of
$750,000 under a $900,000 bank loan agreement ("Bank Agreement") were used to
repurchase 40,325,240 shares of the Company's common stock for $1,048,490,
purchase all of the Company's outstanding 10.45% Senior Notes and substantially
all of the Company's 12 3/4% Subordinated Debentures for $211,153 and pay fees
and expenses of $59,436, including $18,000 paid to KKR and $39,292 relating to
the issuance of new debt.
The Merger and related transactions were recorded as a Recapitalization
("Merger and Recapitalization"). Expenses of $17,644 related to the repurchase
of the Company's common stock were reflected as a reduction of additional
paid-in capital; other expenses of approximately $2,500, primarily relating to
the buyout of certain stock options, were reflected in the 1997 Consolidated
Statement of Income. Supplemental earnings per share for the second quarter and
six months ended June 30, 1997 assuming the Merger and Recapitalization was
completed at the beginning of 1997 was $.63 and $.95 per share, respectively.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands, except per share data)
Results of Operations
- ---------------------
Quarter and six months ended June 30, 1998 compared to the quarter and six
- --------------------------------------------------------------------------
months ended June 30, 1997
- --------------------------
Net sales for the second quarter of 1998 were $227,942 compared to $226,996
for the second quarter of 1997. Net sales for the six months ended June 30, 1998
were $456,483 compared to $438,769 for the comparable 1997 period. The increase
in sales for the second quarter and six month 1998 periods is primarily
attributable to increased sales of interconnect products particularly in the
aerospace, industrial and communications markets, partially offset by a decline
in sales of coaxial cable for cable television applications. Currency
translation had the effect of reducing sales in the second quarter 1998 by
approximately $3.8 million and by approximately $9.0 million in the six month
period 1998 when compared to exchange rates for the comparable 1997 periods.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) remained constant at approximately 33% for the second quarter
and six months ended June 30, 1998 and 1997, respectively.
Selling, general and administrative expenses as a percentage of net sales
remained relatively constant at approximately 14% for the second quarter and six
months ended June 30, 1998 and 1997, respectively.
Interest expense for the second quarter and six months increased to $19,990
and $40,292 in 1998 from $14,249 and $20,671 in 1997, respectively. The increase
in both periods is due to increased debt levels resulting from the Merger and
Recapitalization which closed on May 19, 1997 (Note 4).
Other income (expense), net for the second quarter and six months was ($903)
and ($1,982) in 1998 compared to $2,901 and $1,684 in 1997, respectively. The
1997 periods include a gain on sale of marketable securities of $3,917.
The provision for income taxes for the second quarter and six months was
$7,911 and $15,412 in 1998 compared to $11,054 and $22,007 in 1997,
respectively. The 1998 estimated effective tax rate of approximately 43%
reflects federal, state and foreign taxes.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $19,970 in the six months ended
June 30, 1998 compared to $50,253 in the 1997 period. The decrease in cash flow
relates primarily to increased interest payments ($38,030 in 1998 and $13,751 in
1997) on borrowings resulting from the Merger and Recapitalization (Note 4) and
to a net increase in non-cash components of working capital.
In 1998, cash from operating activities and borrowings under the credit
facility were used to fund capital expenditures of $14,417 and acquisitions of
$12,067. In 1997, cash from operating activities, proceeds from the sale of
marketable securities of $7,351 and net funds available from the Merger and
Recapitalization (Note 4) of $22,547 were used to fund capital expenditures of
$10,246 and debt reduction of $63,824 (of which $40 million represented a
prepayment of term loan borrowings under the Company's Bank Agreement).
In conjunction with the Merger and Recapitalization, the Company entered into
a $900 million Bank Agreement with a syndicate of financial institutions,
<PAGE>
comprised of a $150 million revolving credit facility that expires in the year
2004 and a $750 million term loan facility - $350 million (Tranche A) maturing
over a 7 year period ending 2004, $200 million (Tranche B) maturing in 2005 and
$200 million (Tranche C) maturing in 2006. In October 1997, the Company
negotiated an amendment to the term loan under the Bank Agreement. The
amendment extinguished the Tranche B and C indebtedness with borrowings under a
new $375 million Term Loan Tranche B. The new Term Loan Tranche B has required
amortization in 2005 and 2006. At June 30, 1998 the Company had prepaid $70
million of the term loan. The credit agreement requires the maintenance of
certain interest coverage and leverage ratios, and includes limitations with
respect to, among other things, indebtedness, and restricted payments, including
dividends on the Company's common stock. At June 30, 1998 there were $680
million of borrowings outstanding under the term loan facility and there were
$13.4 million of borrowings outstanding under the revolving credit facility.
In July 1997, the Company entered into interest rate protection agreements
that effectively fix the Company's interest cost on $450 million of borrowings
under the Bank Agreement to the extent that LIBOR interest rates remain below 7%
for $300 million of borrowings and below 8% for $150 million of borrowings.
The Company's EBITDA as defined in the Bank Agreement was $96.0 million and
$93.5 million for the six months ended June 30, 1998 and 1997, respectively.
EBITDA is not a defined term under Generally Accepted Accounting Principles
(GAAP) and is not an alternative to operating income or cash flow from
operations as determined under GAAP. The Company believes that EBITDA provides
additional information for determining its ability to meet future debt service
requirements; however, EBITDA does not reflect cash available to fund debt
requirements.
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 principal and interest on bank
borrowings and interest on Senior Subordinated Notes due 2007. 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 and availability under the Company's
revolving credit facility.
Environmental Matters
- ---------------------
Subsequent to the acquisition of Amphenol from 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 were borne by Amphenol
and had 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 condition or results of operations.
Future Accounting Changes
- -------------------------
In June 1997 the Financial Accounting Standards Board issued Statement of
<PAGE>
Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of
an Enterprise and Related Information" which requires disclosure of certain
information about operating segments and about products and services, the
geographic areas in which a company operates and their major customers. Any
resulting change in disclosure will be reflected in the year ended December 31,
1998 Consolidated Financial Statements.
In February 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132 (FAS 132), "Employers' Disclosures about
Pensions and Other Postretirement Benefits" which revises and standardizes the
disclosure requirements for pensions and other postretirement benefits, requires
additional information on changes in the benefit obligations and fair values of
the plan assets and eliminates certain disclosures that are considered no longer
useful. The disclosure changes resulting from this standard will be reflected in
the year ended December 31, 1998 Consolidated Financial Statements.
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments and hedging activities. The Company is
required to adopt the statement for all fiscal quarters of fiscal years
beginning after June 15, 1999.
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 1997 Annual Report on Form 10-K.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to the Company's 1997 Annual Report on Form 10-K,
(the "10-K").
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Annual Meeting of Stockholders was held on Wednesday, May 20, 1998.
(b) Not applicable.
(c) The following matters were submitted to and approved by the stockholders:
(i) The election of two directors, Martin H. Loeffler and Michael W.
Michelson, each for a three year term expiring in the year 2001. For Martin H.
Loeffler, the votes were cast as follows: For - 17,276,833, Against - 0;
Authority Withheld - 13,715. For Michael W. Michelson, the votes were cast as
follows: For - 17,238,333, Against - 0; Authority Withheld - 52,215.
<PAGE>
(ii) Ratification of Deloitte & Touche LLP as independent accountants of
the Company. The votes were cast as follows: For - 17,289,224, Against - 411;
Abstentions - 913.
(iii) Ratification and approval of the Amended 1997 Option Plan for Key
Employees of Amphenol and Subsidiaries. The votes were cast as follows: For -
16,213,411, Against - 271,875; Abstentions and broker non-votes - 805,262.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
2.1 Agreement and Plan of Merger dated as of January 23, 1997 between NXS
Acquisition Corp. and Amphenol Corporation (incorporated by reference
to Current Report on Form 8-K dated January 23, 1997).**
2.2 Amendment, dated as of April 9, 1997, to the Agreement and Plan of
Merger between NXS Acquisition Corp. and Amphenol Corporation, dated as
of January 23, 1997 (incorporated by reference to the Registration
Statement on Form S-4 (registration No. 333-25195) filed on April 15,
1997).**
* Filed herewith
** Previously filed
3.1 Certificate of Merger, dated May 19, 1997 (including Restated
Certificate of Incorporation of Amphenol Corporation)(filed as Exhibit
3.1 to the June 30, 1997 10-Q).**
3.2 By-Laws of the Company as of May 19, 1997 - NXS Acquisition Corp.
By-Laws (filed as Exhibit 3.2 to the June 30, 1997 10-Q).**
4.1 Indenture between Amphenol Corporation and IBJ Schroeder Bank and Trust
Company, as Trustee, dated as of May 19, 1997, relating to Senior
Subordinated Notes due 2007 (filed as Exhibit 4.1 to the June 30, 1997
10-Q).**
10.1 Amended and Restated Receivables Purchase Agreement dated as of May 19,
1997 among Amphenol Funding Corp., the Company, Pooled Accounts
Receivable Capital Corporation and Nesbitt Burns Securities, Inc., as
Agent (filed as Exhibit 10.1 to the June 30, 1997 10-Q).**
10.2 Amended and Restated Purchase and Sale Agreement dated as of May 19,
1997 among the Originators named therein, Amphenol Funding Corp. and the
Company (filed as Exhibit 10.2 to the June 30, 1997 10-Q).**
10.3 Credit Agreement dated as of May 19, 1997 among the Company, Amphenol
Holding UK, Limited, Amphenol Commercial and Industrial UK, Limited, the
Lenders listed therein, The Chase Manhattan Bank, as Syndication Agent,
the Bank of New York, as Documentation Agent and Bankers Trust Company,
as Administrative Agent and Collateral Agent (filed as Exhibit 10.3 to
the June 30, 1997 10-Q).**
Management Contracts and Compensatory Plans (Exhibits 10.4 through 10.11).
10.4 1997 Amphenol Incentive Plan (filed as Exhibit 10.13 to the 1996 10-K).**
<PAGE>
10.5 1998 Amphenol Incentive Plan (filed as Exhibit 10.5 to the December 31,
1997 10-K).**
10.6 Amended and Restated Salaried Employees Pension Plan of Amphenol
Corporation (filed as Exhibit 10.12 to the 1994 10-K).**
10.7 Amended and Restated LPL Technologies Inc. Retirement Plan for Salaried
Employees (filed as Exhibit 10.13 to the 1994 10-K).**
10.8 Amphenol Corporation Supplemental Employee Retirement Plan formally
adopted effective January 25, 1996 (filed as Exhibit 10.18 to the
1996 10-K).**
10.9 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).**
* Filed herewith
** Previously filed
10.10 Management Agreement between the Company and Dr. Martin H. Loeffler,
dated July 28, 1987 (filed as Exhibit 10.7 to the 1987 Registration
Statement).**
10.11 Amphenol Corporation Directors' Deferred Compensation Plan (filed as
Exhibit 10.11 to the December 31, 1997 10-K).**
10.12 Agreement and Plan of Merger among Amphenol Acquisition Corporation,
Allied Corporation and the Company, dated April 1, 1987, and the
Amendment thereto dated as of May 15, 1987 (filed as Exhibit 2 to the
1987 Registration Statement).**
10.13 Settlement Agreement among Allied Signal Inc., the Company and LPL
Investment Group, Inc. dated November 28, 1988 (filed as Exhibit 10.20
to the 1991 Registration Statement).**
10.14 Registration Rights Agreement dated as of May 19, 1997, among NXS
Acquisition Corp., KKR 1996 Fund L.P., NXS Associates L.P., KKR Partners
II, L.P. and NXS I, L.L.C. (filed as Exhibit 99.5 to Schedule 13D,
Amendment No. 1, relating to the beneficial ownership of shares of the
Company's Common Stock by NXS I, L.L.C., KKR 1996 Fund, L.P., KKR
Associates (1996) L.P., KKR 1996 GP LLC, KKR Partners II, L.P., KKR
Associates L.P., NXS Associates L.P., KKR Associates (NXS) L.P., and
KKR-NXS L.L.C. dated May 27, 1997).**
10.15 Management Stockholders' Agreement entered into as of May 19, 1997
between the Company and Martin H. Loeffler (filed as Exhibit 10.13 to
the June 30, 1997 10-Q).**
10.16 Management Stockholders' Agreement entered into as of May 19, 1997
between the Company and Edward G. Jepsen (filed as Exhibit 10.14 to the
June 30, 1997 10-Q).**
10.17 Management Stockholders' Agreement entered into as of May 19, 1997
between the Company and Timothy F. Cohane (filed as Exhibit 10.15 to
the June 30, 1997 10-Q).**
10.18 1997 Option Plan for Key Employees of Amphenol and Subsidiaries (filed
as Exhibit 10.16 to the June 30, 1997 10-Q).**
<PAGE>
10.19 Amended 1997 Option Plan for Key Employees of Amphenol and Subsidiaries.*
10.20 Non-Qualified Stock Option Agreement between the Company and Martin H.
Loeffler dated as of May 19, 1997 (filed as Exhibit 10.17 to the June
30, 1997 10-Q).**
10.21 Non-Qualified Stock Option Agreement between the Company and Edward G.
Jepsen dated as of May 19, 1997 (filed as Exhibit 10.18 to the June 30,
1997 10-Q).**
* Filed herewith
** Previously filed
10.22 Non-Qualified Stock Option Agreement between the Company and Timothy F.
Cohane dated as of May 19, 1997 (filed as Exhibit 10.19 to the June 30,
1997 10-Q).**
10.23 First Amendment to Amended and Restated Receivables Purchase Agreement
dated as of September 26, 1997 (filed as Exhibit 10.20 to the September
30, 1997 10-Q).**
10.24 Canadian Purchase and Sale Agreement dated as of September 26, 1997
among Amphenol Canada Corp., Amphenol Funding Corp. and Amphenol
Corporation, individually and as the initial servicer (filed as Exhibit
10.21 to the September 30, 1997 10-Q).**
10.25 Amended and Restated Credit Agreement dated as of October 3, 1997 among
the Company, Amphenol Holding UK, Limited, Amphenol Commercial and
Industrial UK, Limited, the Lenders listed therein, The Chase Manhattan
Bank, as Syndication Agent, the Bank of New York, as Documentation Agent
and Bankers Trust Company, as Administrative Agent and Collateral Agent
(filed as Exhibit 10.22 to the September 30, 1997 10-Q).**
10.26 First Amendment dated as of May 1, 1998 to the Amended and Restated
Credit Agreement dated as of October 3, 1997 among the Company, Amphenol
Holding UK, Limited, Amphenol Commercial and Industrial UK, Limited, the
Lenders listed therein, The Chase Manhattan Bank, as Syndication Agent,
the Bank of New York, as Documentation Agent and Bankers Trust Company,
as Administrative Agent and Collateral Agent (filed as Exhibit 10.25 to
the March 31, 1998 10-Q).**
27 Financial Data Schedule.*
(b) Reports filed on Form 8-K
There were no reports on Form 8-K filed for or during the second
quarter ended June 30, 1998.
<PAGE>
* Filed herewith
** Previously filed
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: August 14, 1998 /s/Edward G. Jepsen
--------------- ---------------------------
Edward G. Jepsen
Executive Vice President and
Chief Financial Officer
<PAGE>
Exhibit 10.19
THE AMENDED 1997 OPTION PLAN
FOR KEY EMPLOYEES OF
AMPHENOL AND SUBSIDIARIES
1. Purpose of Plan
The 1997 Option Plan for Key Employees of Amphenol and Subsidiaries (the
"Plan") is designed:
(a) to promote the long term financial interests and growth of Amphenol
Corporation (the "Corporation") and its subsidiaries by attracting and retaining
management personnel with the training, experience and ability to enable them to
make a substantial contribution to the success of the Corporation's business;
(b) to motivate management personnel by means of growth-related incentives
to achieve long range goals; and
(c) to further the alignment of interests of participants with those of the
stockholders of the Corporation through opportunities for increased stock, or
stock-based, ownership in the Corporation.
2. Definitions
As used in the Plan, the following words shall have the following meanings:
(a) "Board of Directors" means the Board of Directors of the Corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
(d) "Common Stock" or "Share" means Series A Common Stock of the
Corporation which may be authorized but unissued, or issued and reacquired.
(e) "Employee" means a person, including an officer, in the regular
full-time employment of the Corporation or one of its Subsidiaries who, in the
opinion of the Committee, is, or is expected to be, primarily responsible for
the management, growth or protection of some part or all of the business of the
Corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(g) "Fair Market Value" means such value of a Share as reported for stock
exchange transactions and/or determined in accordance with any applicable
resolutions or regulations of the Committee in effect at the relevant time.
<PAGE>
1/21/98
(h) "Management Stockholders' Agreement" means an agreement between the
Corporation and a Participant that sets forth the terms and conditions and
limitations applicable to any Shares purchased pursuant to Options granted under
this Plan.
(i) "Option Agreement" means an agreement between the Corporation and a
Participant that sets forth the terms, conditions and limitations applicable to
a grant of Options pursuant to the Plan.
(j) "Option" means an option to purchase shares of the Common Stock which
will not be an "incentive stock option" (within the meaning of Section 422 of
the Code).
(k) "Participant" means an Employee, or other person having a unique
relationship with the Corporation or one of its Subsidiaries, to whom one or
more grants of Options have been made and such grants have not all been
forfeited or terminated under the Plan; provided, however, that a non-employee
director of the Corporation or one of its Subsidiaries may not be a Participant.
(l) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Corporation if each of the corporations, or
group of commonly controlled corporations, other than the last corporation in
the unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
3. Administration of Plan
(a) The Plan shall be administered by the Committee. None of the members
of the Committee shall be eligible to be selected for Option grants or to
purchase Shares under the Plan, or have been so eligible for selection within
one year prior thereto; provided, however, that the members of the Committee
shall qualify to administer the Plan for purposes of Rule 16b-3 (and any other
applicable rule) promulgated under Section 16(b) of the Exchange Act to the
extent that the Corporation is subject to such rule. The Committee may adopt
its own rules of procedure, and action of a majority of the members of the
Committee taken at a meeting, or action taken without a meeting by unanimous
written consent, shall constitute action by the Committee. The Committee shall
have the power and authority to administer, construe and interpret the Plan, to
make rules for carrying it out and to make changes in such rules. Any such
interpretations, rules and administration shall be consistent with the basic
purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Corporation its duties under the Plan subject to such
conditions and limitations as the Committee shall prescribe except that only the
Committee may designate and make Option grants to Participants who are subject
to Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Corporation, and the
officers and directors of the Corporation shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final
<PAGE>
and binding upon all Participants, the Corporation and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
Option grants, and all members of the Committee shall be fully protected by the
Corporation with respect to any such action, determination or interpretation.
4. Eligibility
The Committee may from time to time make Option grants under the Plan to
such Employees, or other persons having a unique relationship with Corporation
or any of its Subsidiaries, and in such form and having such terms, conditions
and limitations as the Committee may determine. No Option grants may be made
under this Plan to non-employee directors of Corporation or any of its
Subsidiaries. Options may be granted singly, in combination or in tandem. The
terms, conditions and limitations of each Option grant under the Plan shall be
set forth in an Option Agreement, in a form approved by the Committee,
consistent, however, with the terms of the Plan and the Management Stockholders'
Agreement.
5. Grants
From time to time, the Committee, in its sole discretion, will determine
the forms and amounts of Options to be granted to Participants. At the time of
an Option grant, the Committee shall determine, and shall include in the Option
Agreement or other Plan rules, the option exercise period, the option price, and
such other conditions or restrictions on the grant or exercise of the Option as
the Committee deems appropriate. In addition to other restrictions contained in
the Plan, an Option granted under this Paragraph 5, (i) may not be exercised
more than 10 years after the date it is granted and (ii) may not have an option
exercise price less than 50% of the Fair Market Value of Common Stock on the
date the Option is granted. Payment of the option price shall be made in cash
or in shares of Common Stock, or a combination thereof, in accordance with the
terms of the Plan, the Option Agreement and of any applicable guidelines of the
Committee in effect at the time.
Options may be granted prior to the effective date of the Plan (as
determined pursuant to Paragraph 13 herein); provided, however, that no Option
shall be Exercisable prior to the date of the approval of the Plan by the
stockholders of the Corporation.
6. Limitations and Conditions
(a) The number of Shares available under this Plan shall be 1,750,000
shares of the authorized Common Stock as of the effective date of the Plan. The
number of Shares subject to Options under this Plan to any one Participant shall
not be more than 500,000 Shares. Unless restricted by applicable law, Shares
related to Options that are forfeited, terminated, cancelled or expire
unexercised, shall immediately become available to be subject to Option grants.
(b) No Options shall be granted under the Plan beyond ten years after the
effective date of the Plan, but the terms of Options granted on or before the
expiration of the Plan may extend beyond such expiration. At the time an Option
is granted or amended or the terms or conditions of
<PAGE>
an Option are changed, the Committee may provide for limitations or conditions
on such grant or purchase consistent with the terms of the Management
Stockholders' Agreement.
(c) Nothing contained herein shall affect the right of the Corporation to
terminate any Participant's employment at any time or for any reason.
(d) Other than as specifically provided with regard to the death of a
Participant, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Participant, be in any manner liable for or subject to
the debts, contracts, liabilities, engagements, or torts of the Participant.
(e) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of the Corporation in respect of any Shares
purchasable in connection with any Option grant unless and until certificates
representing any such Shares have been issued by the Corporation to such
Participants.
(f) No election as to benefits or exercise of Options may be made during a
Participant's lifetime by anyone other than the Participant except by a legal
representative appointed for or by the Participant.
(g) Absent express provisions to the contrary, any grant of Options under
this Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Corporation or its Subsidiaries
and shall not affect any benefits under any other benefit plan of any kind now
or subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
(h) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of the Corporation or any of
its Subsidiaries, nor shall any assets of the Corporation or any of its
Subsidiaries be designated as attributable or allocated to the satisfaction of
the Corporation's obligations under the Plan.
7. Transfers and Leaves of Absence
For purposes of the Plan, unless the Committee determines otherwise: (a) a
transfer of a Participant's employment without an intervening period of
separation among the Corporation and any Subsidiary shall not be deemed a
termination of employment, and (b) a Participant who is granted in writing a
leave of absence shall be deemed to have remained in the employ of the
Corporation during such leave of absence.
8. Adjustments
<PAGE>
In the event of any change in the outstanding Common Stock by reason of a
stock split, spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, change of control, or similar event, the Committee
may adjust appropriately the number of Shares subject to the Plan and available
for or covered by Option grants and exercise prices related to outstanding
Option grants and make such other revisions to outstanding Option grants as it
deems are equitably required.
9. Merger, Consolidation, Exchange,
Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and conditions as it deems
appropriate, coincident with or after the grant of any Option, the Committee may
provide that such Option cannot be exercised after the merger or consolidation
of the Corporation into another corporation, the exchange of all or
substantially all of the assets of the Corporation for the securities of another
corporation, the acquisition by another corporation of 80% or more of the
Corporation's then outstanding shares of voting stock or the recapitalization,
reclassification, liquidation or dissolution of the Corporation (a
"Transaction"), and if the Committee so provides, it shall, on such terms and
conditions as it deems appropriate, also provide, either by the terms of such
Option or by a resolution adopted prior to the occurrence of such Transaction,
that, for some reasonable period of time prior to such Transaction, such Option
shall be exercisable as to all shares subject thereto, notwithstanding anything
to the contrary herein (but subject to the provisions of Paragraph 6(b)) and
that, upon the occurrence of such event, such Option shall terminate and be of
no further force or effect; provided, however, that the Committee may also
provide, in its absolute discretion, that even if the Option shall remain
exercisable after any such event, from and after such event, any such Option
shall be exercisable only for the kind and amount of securities and/or other
property, or the cash equivalent thereof, receivable as a result of such event
by the holder of a number of shares of stock for which such Option could have
been exercised immediately prior to such event.
10. Amendment and Termination
The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Option grants as are consistent with
this Plan provided that, except for adjustments under Paragraph 8 or 9 hereof,
no such action shall modify such Option grant in a manner adverse to the
Participant without the Participant's consent except as such modification is
provided for or contemplated in the terms of the Option grant.
The Board of Directors may amend, suspend or terminate the Plan except that
no such action, other than an action under Paragraph 8 or 9 hereof, may be taken
which would, without shareholder approval, increase the aggregate number of
Shares subject to Options under the Plan, decrease the exercise price of
outstanding Options, change the requirements relating to the Committee or extend
the term of the Plan.
<PAGE>
11. Foreign Options and Rights
The Committee may grant Options to Employees who are subject to the
laws of nations other than the United States, which Option grants may have terms
and conditions that differ from the terms thereof as provided elsewhere in the
Plan for the purpose of complying with foreign laws.
12. Withholding Taxes
The Corporation shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment. It shall be a condition to the
obligation of the Corporation to deliver shares upon the exercise of an Option
that the Participant pay to the Corporation such amount as may be requested by
the Corporation for the purpose of satisfying any liability for such withholding
taxes. Any Option Agreement may provide that the Participant may elect, in
accordance with any conditions set forth in such Option Agreement, to pay a
portion or all of such withholding taxes in shares of Common Stock.
13. Effective Date and Termination Dates
The Plan shall be effective on and as of the date of its approval by the
stockholders of the Corporation and shall terminate ten years later, subject to
earlier termination by the Board of Directors pursuant to Paragraph 10.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000820313
<NAME> AMPHENOL COPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2923
<SECURITIES> 0
<RECEIVABLES> 87728
<ALLOWANCES> (1376)
<INVENTORY> 172783
<CURRENT-ASSETS> 276522
<PP&E> 295805
<DEPRECIATION> (178529)
<TOTAL-ASSETS> 765672
<CURRENT-LIABILITIES> 122584
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> (323834)
<TOTAL-LIABILITY-AND-EQUITY> 765672
<SALES> 456483
<TOTAL-REVENUES> 456483
<CGS> 296893
<TOTAL-COSTS> 296893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (40292)
<INCOME-PRETAX> 35440
<INCOME-TAX> 15412
<INCOME-CONTINUING> 20028
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20028
<EPS-PRIMARY> 1.14
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</TABLE>
