<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 September 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 October 1, 1998, the total number of shares outstanding of Class A
Common Stock was 17,860,837.
<PAGE>
AMPHENOL CORPORATION
Index to Quarterly Report
on Form 10-Q
Page
----
Part I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
Three and nine months ended September 30, 1998 and 1997 5
Condensed Consolidated Statement of Changes
in Shareholders' Deficit
Nine months ended September 30, 1998 6
Condensed Consolidated Statement of Changes
in Shareholders' Equity (Deficit)
Nine months ended September 30, 1997 7
Condensed Consolidated Statements of Cash Flow
Nine months ended September 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 11
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
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
A S S E T S
Current Assets:
Cash and short-term cash investments.......... $ 2,276 $ 4,713
Accounts receivable, less allowance
for doubtful accounts of $1,421
and $1,633, respectively.................... 94,699 70,037
Inventories................................... 179,257 167,010
Prepaid expenses and other assets............. 17,072 13,020
-------- --------
Total current assets............................ 293,304 254,780
-------- --------
Land and depreciable assets, less
accumulated depreciation of
$185,244 and $169,784, respectively........... 126,692 111,592
Deferred debt issuance costs.................... 17,368 19,377
Excess of cost over fair value of net
assets acquired............................... 362,119 339,223
Other assets.................................... 10,948 12,182
-------- --------
$810,431 $737,154
See accompanying notes to condensed
consolidated financial statements.
3
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
September 30, December 31,
1998 1997
----------- ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.............................. $ 66,959 $ 64,255
Accrued interest.............................. 18,628 11,442
Other accrued expenses........................ 43,785 41,345
Current portion of long-term debt............. 1,792 212
-------- --------
Total current liabilities....................... 131,164 117,254
-------- --------
Long-term debt.................................. 957,181 937,277
Deferred taxes and other liabilities............ 23,056 25,748
Shareholders' Deficit:
Common stock.................................. 20 20
Additional paid-in deficit.................... (499,975) (511,584)
Accumulated earnings.......................... 206,591 178,351
Cumulative translation adjustment............. (7,606) (9,912)
-------- --------
Total shareholders' deficit..................... (300,970) (343,125)
-------- --------
$810,431 $737,154
See accompanying notes to condensed
consolidated financial statements.
4
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales....................................... $229,018 $223,494 $685,501 $662,263
Costs and expenses:
Cost of sales, excluding depreciation
and amortization............................. 150,601 144,697 447,494 428,682
Depreciation and amortization expense......... 5,944 5,156 17,181 15,490
Selling, general and administrative expense... 33,210 31,671 98,191 93,697
Amortization of goodwill...................... 2,995 2,829 8,653 8,488
-------- -------- -------- --------
Operating income................................ 36,268 39,141 113,982 115,906
Interest expense................................ (20,453) (22,991) (60,745) (43,662)
Expenses relating to Merger
and Recapitalization.......................... - - - (2,500)
Other income (expense), net..................... (1,040) (1,046) (3,022) 638
-------- -------- -------- --------
Income before income taxes
and extraordinary item........................ 14,775 15,104 50,215 70,382
Provision for income taxes...................... 6,563 6,545 21,975 28,552
-------- -------- -------- --------
Income before extraordinary item................ 8,212 8,559 28,240 41,830
Extraordinary item:
Loss on early extinguishment
of debt, net of income taxes................. - - - (12,845)
-------- -------- -------- --------
Net income...................................... $ 8,212 $ 8,559 $ 28,240 $ 28,985
Income per common share before
extraordinary charge.......................... $.46 $.49 $1.60 $1.34
Extraordinary charge............................ - - - (.41)
---- ---- ----- ----
Net income per common share..................... $.46 $.49 $1.60 $.93
Average common shares outstanding............... 17,716,592 17,519,781 17,596,608 31,269,159
---------- ---------- ---------- ----------
Income per common share before extraordinary
charge - assuming dilution.................... $.46 $.48 $1.58 $1.33
Extraordinary charge - assuming dilution........ - - - (.41)
---- ---- ----- ----
Net income per common share - assuming dilution. $.46 $.48 $1.58 $.92
Average common shares outstanding
assuming dilution............................. 17,917,861 17,793,239 17,927,434 31,410,910
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
5
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
Nine months ended September 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..................... [ $28,240 ] 28,240 28,240
-------
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment................. 2,306 2,306 2,306
-------
Comprehensive income............. [ $30,546 ]
=======
Issuance of 320,809 shares of
Common Stock related to
acquisition.................... 11,449 11,449
Other adjustments................ 160 160
-------- -------- -------- -------- --------
Ending balance at Sept. 30, 1998. $20 ($499,975) $206,591 ($7,606) ($300,970)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
6
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIT)
Nine months ended September 30, 1997
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated Total
Additional Other Treasury Shareholders'
Common Paid-in Comprehensive Accumulated Comprehensive Stock Equity
Stock Capital 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..................... [ $28,985 ] 28,985 28,985
Other comprehensive loss,
net of tax:
Foreign currency translation
adjustment................. (5,751) (5,751)
Reclassification adjustment for
gain on securities realized
in net income............... (3,687) (3,687)
Other comprehensive loss....... (9,438) (9,438)
-------
Comprehensive income............. [ $19,547 ]
=======
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 Sept. 30, 1997. $20 ($511,668) $180,619 ($13,325) $ - ($344,354)
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
7
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(dollars in thousands)
Nine Months Ended
September 30,
----------------------
1998 1997
-------- --------
Net income....................................... $ 28,240 $28,985
Adjustments for cash from operations:
Depreciation and amortization.................. 25,834 23,978
Amortization of deferred debt issuance costs... 2,059 2,033
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............................... (20,454) 4,253
------- -------
Cash flow provided by operations................. 35,679 70,677
------- -------
Cash flow from investing activities:
Capital additions, net......................... (20,753) (17,471)
Proceeds from the sale of marketable securities - 7,351
Investments in acquisitions.................... (30,373) -
------- -------
Cash flow used by investing activities........... (51,126) (10,120)
------- -------
Cash flow from financing activities:
Net change in borrowings under revolving
credit facilities.......................... 18,010 (19,782)
Repurchase of senior notes and subordinated debt - (211,153)
Payment of fees and other expenses related to
Merger and Recapitalization.................. - (53,469)
Borrowings under New Credit Facility........... - 750,000
Net change in receivables sold................. - 10,000
Decrease in borrowings under New Credit Facility (5,000) (65,000)
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........................... 13,010 (56,853)
------- -------
Net change in cash and short-term
cash investments............................... (2,437) 3,704
Cash and short-term cash investments
balance, beginning of period................... 4,713 3,984
------- -------
Cash and short-term cash investments
balance, end of period......................... $ 2,276 $ 7,688
Cash paid during the period for:
Interest....................................... $51,879 $27,561
Income taxes paid, net of refunds.............. 20,747 18,162
See accompanying notes to condensed
consolidated financial statements.
8
<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 September 30, 1998 and
December 31, 1997, and the related Condensed Consolidated Statements of
Income for the three and nine months ended September 30, 1998 and 1997 and of
Changes in Shareholders' Equity (Deficit) and of Cash Flow for the nine
months ended September 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 nine months ended September 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:
September 30, December 31,
1998 1997
----------- ------------
(Unaudited)
Raw materials and supplies......... $ 24,174 $ 21,115
Work in process.................... 112,592 96,833
Finished goods..................... 42,491 49,062
-------- --------
$179,257 $167,010
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.
9
<PAGE>
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 Condensed 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 September 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 those
dates.
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 assuming
the Merger and Recapitalization were completed at the beginning of the nine
months ended September 30, 1997 but excluding the impact of non-recurring
expenses relating to the Merger and Recapitalization, was $1.44 for the nine
months.
10
<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 nine months ended September 30, 1998 compared to the quarter
- ------------------------------------------------------------------------
and nine months ended September 30, 1997
- ----------------------------------------
Net sales for the third quarter of 1998 were $229,018 compared to $223,494
for the third quarter of 1997. Net sales for the nine months ended September
30, 1998 were $685,501 compared to $662,263 for the comparable 1997 period.
The increase in sales is primarily attributable to increased sales of
interconnect products in the industrial market for the third quarter and in
the aerospace, industrial and communications markets for the nine months,
partially offset by a decline in sales of coaxial cable for cable television
applications. Currency translation had the effect of reducing sales in the
third quarter 1998 by approximately $1.2 million and by approximately $10.2
million in the nine 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) was 32% for the 1998 third quarter and nine
month period compared to 33% for the 1997 third quarter and nine month
period, respectively. The decrease in the gross profit margin in both the
1998 quarter and nine month period is generally attributable to product mix
and pricing pressure in both the connector and coaxial cable businesses.
Selling, general and administrative expenses as a percentage of net sales
remained relatively constant at approximately 14% for the third quarter and
nine months ended September 30, 1998 and 1997, respectively.
Interest expense for the 1998 third quarter decreased to $20,453 from
$22,991 in the comparable 1997 period. The decrease is primarily attributable
to a prepayment of term loan borrowings under the Company's Bank Agreement,
partially offset by increased borrowings under the Company's revolving credit
facility. Interest expense for the nine month period increased to $60,745 in
1998 from $43,662 in 1997. The increase in the nine month period 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 third quarter and nine months was
($1,040) and ($3,022) in 1998 compared to ($1,046) and $638 in 1997,
respectively. The nine month 1997 period includes a gain on sale of marketable
securities of $3,917.
The provision for income taxes for the third quarter and nine months was
$6,563 and $21,975 in 1998 compared to $6,545 and $28,552 in 1997,
respectively. The 1998 estimated effective tax rate of approximately 44%
reflects federal, state and foreign taxes and non-deductible goodwill
amortization.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $35,679 in the nine months ended
September 30, 1998 compared to $70,677 in the 1997 period. The decrease in
cash flow relates primarily to increased interest payments ($51,879 in 1998
and $27,561 in 1997) on borrowings resulting from the Merger and
Recapitalization (Note 4) and to a net increase in non-cash components of
working capital.
11
<PAGE>
In 1998, cash from operating activities and borrowings under the credit
facility were used to fund capital expenditures of $20,753 and acquisitions
of $30,373. 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 $17,929 were used to fund capital
expenditures of $17,471 and debt reduction of $84,782 (of which $65 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, comprised of a $150 million revolving credit facility that
expires in 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 September 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 September 30, 1998 there were $680 million of borrowings outstanding under
the term loan facility and there were $23 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 $142.1 million
and $141.5 million for the nine months ended September 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.
12
<PAGE>
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
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.
Year 2000 Issue
- ---------------
The Year 2000 issue is primarily the result of computer programs using a
two digit format, as opposed to four digits, to indicate the year. Such
computer systems will be unable to interpret dates beyond the year 1999,
which could cause a system failure or other computer errors, leading to a
disruption in the operation of such systems. In 1996, the Company began a
systematic review of all of its business information systems to ensure that
the systems now in use worldwide will be Year 2000 compliant before the turn
of the century. The Company has established a Year 2000 Program Management
Group to provide overall guidance and direction for this compliance mission.
Communications were initiated to all of the Company's business units focusing
on the critical nature of this project and the Program Management Group has
continually monitored the progress and status of each business unit. The
Program Management Group has focused its efforts on four main areas: (1)
information systems software and hardware; (2) non-information technology
systems; (3) facilities equipment; and (4) customer and vendor relationships.
Based on current estimates, the Company expects to complete its Year 2000
project in early 1999.
Risks/Contingency Plans. Based on the assessment efforts to date, the
Company does not believe that the Year 2000 issue will have a material
adverse effect on its financial condition or results of operations. The
Company operates a number of business units worldwide and has a large
supplier base and believes that this will mitigate any adverse impact. The
Company's beliefs and expectations, however, are based on certain assumptions
and expectations that ultimately may prove to be inaccurate. Potential
sources of risk include (a) the inability of principal suppliers to be Year
2000 ready, which could result in delays in product deliveries from such
suppliers, and (b) disruption of the product distribution channel, including
ports, transportation vendors, and the Company's own shipping departments as
a result of a general
13
<PAGE>
system failure and necessary infrastructure such as electricity supply. The
development of a Year 2000 contingency plan is currently in process.
The Company does not expect the costs associated with its Year 2000
efforts to be substantial. The estimated cost for this project could range as
high as $3.0 million, including the cost of new systems and upgrades some of
which will be capitalized. The cost is being funded through operating cash
flows. The Company's aggregate cost estimate does not include time and costs
that may be incurred by the Company as a result of the failure of any third
parties, including suppliers, to become Year 2000 ready or costs to implement
any contingency plans.
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.
14
<PAGE>
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
None
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).**
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).**
* Filed herewith
** Previously filed
15
<PAGE>
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).**
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).**
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).**
* Filed herewith
** Previously filed
16
<PAGE>
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).**
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
17
<PAGE>
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 third
quarter ended September 30, 1998.
* Filed herewith
** Previously filed
18
<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: November 12, 1998 /s/ Edward G. Jepsen
----------------- ---------------------------
Edward G. Jepsen
Executive Vice President and
Chief Financial Officer
19
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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<BONDS> 957,181
0
0
<COMMON> 20
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<INTEREST-EXPENSE> (60,745)
<INCOME-PRETAX> 50,215
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