<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1999
REGISTRATION NO. 333-91183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMPHENOL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2785165
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
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)
------------------------------
EDWARD C. WETMORE, ESQ.
AMPHENOL CORPORATION
358 HALL AVENUE
WALLINGFORD, CONNECTICUT 06492
(203) 265-8900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN B. TEHAN, ESQ. PHILIP E. COVIELLO, JR., ESQ.
SIMPSON THACHER & BARTLETT LATHAM & WATKINS
425 LEXINGTON AVENUE 885 THIRD AVENUE, SUITE 1000
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC RELATING TO THESE SECURITIES IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION--DECEMBER 6, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 1999
AMPHENOL CORPORATION
2,750,000 SHARES OF CLASS A COMMON STOCK
- ----------------------------------------------------------------------
THE COMPANY:
- - We are one of the world's largest designers, manufacturers and marketers of
electrical, electronic and fiber optic connectors, interconnect systems and
coaxial and flat-ribbon cable.
- - The primary end markets for our products are voice, video and data
communications systems, including wireless handsets, cable television systems
and personal computer peripherals; commercial and military aerospace
electronics; automotive and mass transportation applications; and industrial
factory automation equipment.
- - Amphenol Corporation
358 Hall Avenue
Wallingford, CT 06492
(203) 265-8900
NYSE SYMBOL: APH
THE OFFERING:
- - We are offering 2,750,000 shares in the offering.
- - Stockholders are not selling shares in the offering.
- - The underwriters have an option to purchase an additional 412,500 shares from
us to cover over-allotments.
- - There is an existing trading market for the shares. The last reported sale
price on the NYSE on December 3, 1999 was $68.375 per share.
- - We plan to use the proceeds from the offering to redeem part of our
outstanding senior subordinated debt and to repay part of our bank term loan.
- - Closing: , 1999.
<TABLE>
- ----------------------------------------------------------------------------------
Per Share Total
- ----------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Amphenol:
- ----------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
- ---------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 8
Use of Proceeds........................ 13
Price Range of Class A Common Stock
and Dividend Policy.................. 13
Capitalization......................... 14
Selected Consolidated Financial Data... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Business............................... 23
Management............................. 33
Description of Capital Stock........... 35
Underwriting........................... 36
Legal Matters.......................... 38
Experts................................ 38
Where You Can Find More Information.... 38
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
<PAGE>
(This page intentionally left blank.)
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SECTION SUMMARIZES MORE DETAILED INFORMATION PRESENTED LATER
IN THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE "RISK
FACTORS." UNLESS THE CONTEXT OTHERWISE SUGGESTS, "WE," "US," "OUR" AND SIMILAR
TERMS, AS WELL AS REFERENCES TO "AMPHENOL" OR THE "COMPANY," ALL REFER TO
AMPHENOL CORPORATION AND ITS SUBSIDIARIES UNLESS THE CONTEXT REQUIRES OTHERWISE.
THE ADDRESS AND TELEPHONE NUMBER OF AMPHENOL'S PRINCIPAL EXECUTIVE OFFICES ARE
358 HALL AVENUE, WALLINGFORD, CONNECTICUT 06492, (203) 265-8900. UNLESS
INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT
THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED.
THE COMPANY
We are one of the world's largest designers, manufacturers and marketers of
electrical, electronic and fiber optic connectors, interconnect systems and
coaxial and flat-ribbon cable. The primary end markets for our products are:
- communication systems for the converging technologies of voice, video and
data communications;
- commercial and military aerospace electronics applications; and
- industrial factory automation equipment and automotive and mass
transportation applications.
We focus on optimizing our mix of higher margin, higher growth
application-specific products in our product offerings and maintaining
continuing programs of productivity improvement. As a result of these
initiatives, our operating profit margin has increased from 13.5% in fiscal year
1993 to 15.6% for the twelve months ended September 30, 1999. For the twelve
months ended September 30, 1999 we reported net sales, operating profit and net
income of $974.8 million, $151.8 million and $38.6 million, respectively. The
table below summarizes information regarding our primary markets and end
applications for our products:
<TABLE>
<CAPTION>
COMMERCIAL AND
MILITARY AEROSPACE AND
OTHER MILITARY ELECTRONICS INDUSTRIAL, TRANSPORTATION
COMMUNICATIONS APPLICATIONS AND OTHER
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
PERCENTAGE 59% (including 24% for the 20% 21%
OF SALES* cable television market)
PRIMARY Voice Military and Commercial Factory Automation
END - wireless handsets and Aircraft Instrumentation Systems
APPLICATIONS personal communication - avionics Automobile Systems
devices - engine controls Mass Transportation Systems
- base stations and other - flight controls Oil Exploration
wireless infrastructure - entertainment systems
Video Missile Systems
- cable television coaxial Battlefield Communications
cables, connectors and set Satellite and Space Station
top converters Programs
Data
- cable modems
- personal computers and
related peripherals
</TABLE>
- ------------------
*For the nine months ended September 30, 1999.
1
<PAGE>
We design and manufacture connectors and interconnect systems which are used
primarily to conduct electrical and optical signals for a wide range of
sophisticated electronic applications. We believe, based primarily on published
market research, that we are one of the largest connector manufacturers in the
world. We have developed a broad range of connector and interconnect products to
serve the rapidly growing and converging voice, video and data communications
markets. These markets include wireless communications, including cellular and
personal communication networks, fiber optic networks and broadband cable
networks. Based primarily on published market research, we also believe that we
are the leading supplier of high performance environmental connectors that
require superior performance and reliability under conditions of stress and in
hostile environments. These conditions are frequently encountered in commercial
and military aerospace applications and other demanding industrial applications
such as oil exploration, medical instrumentation and off-road construction. We
are also one of the leaders in developing interconnect products for factory
automation, machine tools, instrumentation systems, mass transportation
applications and automotive safety applications including airbags, pretensioner
seatbelts and anti-lock braking systems.
We believe that the worldwide industry for interconnect products and systems
is highly fragmented with over 2,000 producers of connectors worldwide, of which
the 10 largest, including Amphenol, accounted for a combined market share of
approximately 32% in 1998. Industry analysts estimate that the total sales for
the industry were approximately $34 billion in 1998.
Our Times Fiber subsidiary is the world's second largest producer of coaxial
cable for the cable television market. We believe that our Times Fiber unit is
one of the lowest cost producers of coaxial cable for the cable television
market, and that it is one of the technological leaders in increasing the
bandwidth of coaxial cable products. For example, our Times Fiber unit was the
first to standardize a coaxial cable with a 1 GHZ bandwidth, and all of its
coaxial cable presently has that bandwidth capability. Our coaxial cable and
connector products are used in cable television systems including full service
cable television/telecommunication systems being installed by cable operators
and telecommunication companies offering video, voice and data services. We are
also a major supplier of coaxial cable to the developing international cable
television markets. In addition, we have developed coaxial cable products, in
conjunction with connector products, used in the infrastructure for wireless
communication systems.
We are a global manufacturer employing advanced manufacturing processes. We
manufacture and assemble our products at facilities in North America, South
America, Europe, Asia and Australia. We sell our connector products through our
own global sales force and independent manufacturers' representatives to
thousands of original equipment manufacturers, which we refer to as "OEMs," in
52 countries throughout the world as well as through a global network of
electronics distributors. We sell our coaxial cable products primarily to cable
television operators and to telecommunication companies who have entered the
broadband communications market. For the first nine months of 1999,
approximately 57% of our net sales were in North America, 27% were in Europe and
16% were in Asia and other countries.
We implement our product development strategy through product design teams
and collaboration arrangements with customers which results in our obtaining
approved vendor status for our customer's new products and programs. We seek to
have our products become widely accepted within the industry for similar
applications and products manufactured by other potential customers, which we
believe will provide additional sources of future revenue. By developing
application-specific products, we have decreased our exposure to standard
products which generally experience greater pricing pressure. In addition to
product design teams and customer collaboration arrangements, we use key account
managers to manage customer relationships on a global basis such that we can
bring to bear our total resources to meet the worldwide needs of our
multinational customers. We are also focused on making strategic acquisitions in
some markets to further broaden and enhance our product offerings and expand our
global capabilities.
2
<PAGE>
Management and partnerships affiliated with Kohlberg Kravis Roberts & Co.,
L.P. ("KKR") purchased 75% of our Class A common stock in May 1997 through a
merger and recapitalization (the "Recapitalization"). KKR, through its
affiliates, owned 73.7% of our Class A common stock as of November 12, 1999. No
existing stockholders, including management and partnerships affiliated with
KKR, will sell shares in this offering. After the offering, on a pro forma
basis, KKR, through its affiliates, will own approximately 63.9% of our Class A
common stock.
COMPETITIVE STRENGTHS
LEADER IN GROWING MARKET SEGMENTS
We serve diverse markets within the connector industry such as the worldwide
communications, aerospace, industrial and automotive markets and growing
segments within these markets. We are a leader in the design, manufacture and
marketing of connector and interconnect systems in the rapidly growing and
converging markets of voice, video and data communications. We are also a leader
in developing coaxial cable products for cable television systems; we have been
one of the technological leaders in expanding the bandwidth characteristics of
coaxial cable so as to permit greater channel capacity for offering enhanced
voice, video and data communications. We have also developed interconnect
technology for sophisticated military and commercial avionics applications as
well as for use in the international Space Station Program. In addition, we have
pioneered the development of interconnect products for automotive safety systems
such as airbags and pretensioner seatbelts and have been an innovator in the
development of motion control connector products for factory automation.
CLOSE RELATIONSHIPS WITH MAJOR OEMS
Due in part to our over 65 year history in the connector business and our
reputation for innovative, high quality interconnection products, we have
developed close relationships with many of our OEM customers in our various
product segments. To this end, we have achieved preferred supplier designations
from many OEMs, enabling us to work closely with these OEMs through product
design teams and collaborative arrangements to design and manufacture
application-specific products.
GLOBAL PRESENCE
Approximately 48% of our sales for the nine months ended September 30, 1999
were outside the United States. We have 48 manufacturing and assembly operations
on five continents. Our products are sold through our global sales force and
independent manufacturers' representatives to thousands of OEMs in 52 countries
throughout the world as well as through a global network of electronic
distributors. Our global presence enables us to serve the expanding global needs
and requirements of our existing multinational and international OEM customers
and to position ourselves to develop new customer relationships with other
multinational and international OEMs.
EXTENSIVE PRODUCT LINE
Through our advanced technological and design capabilities, we have
developed an extensive line of interconnect products for our customers worldwide
which resulted in sales of approximately 85,000 stock keeping units in 1998. By
offering a broad array of high quality products, we strive to provide
highly-engineered, reliable and value-added solutions for all of our customers'
interconnection needs.
BROAD CUSTOMER BASE
Our products are used in a wide variety of applications at over 10,000
customer locations worldwide. Our largest commercial customer accounted for
approximately 5% of our net sales for the nine months ended September 30, 1999.
The U.S. government and its subcontractors accounted for 7% of our net sales for
the nine months ended September 30, 1999; however, we participate across a broad
spectrum of defense programs and believe that no single program accounted for
more than 2% of those net sales.
3
<PAGE>
STRONG MANAGEMENT TEAM
Our senior management team has successfully led us through rapid changes in
the connector and interconnect industry. This management team has focused on
solidifying our position as a leading provider of connector and interconnect
technology in our core markets. Our management team has been working together
since 1987 and our managers have significant experience in our industry.
BUSINESS STRATEGY
FOCUS ON RAPIDLY GROWING COMMUNICATIONS SEGMENT
We intend to capitalize on the convergence in the communications sector of
voice, video and data technologies. The growth in recent years of mobile
communications and Internet utilization has been substantial. We believe,
however, that both technologies are in their infancy in terms of market
potential. We will continue to aggressively pursue these opportunities through
the development of new application-specific products to serve this expanding
market.
EXPAND SALES OF BROADBAND PRODUCTS
We believe that the increasing demand for enhanced services from existing
cable television systems and the relatively low penetration rate for cable
television in countries outside of the United States provides significant
opportunity for future growth of coaxial cable and other broadband interconnect
products. The demands of the digital age for high-speed Internet access, video
on demand, specialized programming, etc., all place significant emphasis on
expanded bandwidth for network delivery systems. Cable system developments are
currently planned in a number of different countries, including large portions
of Europe, Asia and Latin America. We believe that we are well positioned to
take advantage of these opportunities because we are one of the world's leading
producers of coaxial cable and broadband interconnect products and because we
have extensive relationships with many of the multinational cable operators that
are upgrading and expanding in the domestic and international markets.
DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR OEMS
We seek to expand the scope and number of preferred supplier designations
and application-specific assignments we have with OEM customers. We work closely
with our network of OEM customers at the design stage to create and manufacture
innovative connector solutions to meet our customers' specific interconnection
needs. Our application-specific products designed and manufactured for OEMs in
this manner generally have higher value-added content than our other
interconnection products and have been developed across all of our product
lines.
EXPAND PRODUCT LINES
Our product lines encompass market segments comprising approximately 50% of
the $34 billion connector industry. We have broad product lines for the markets
we serve; as an example, in 1998 our sales included approximately 85,000 stock
keeping units. We continuously strive to expand our product lines in order to
become a primary source supplier of interconnect solutions for many of our
customers. By expanding our product lines, we intend to leverage our extensive
customer relationships to cross-sell additional connector products.
EXPAND GLOBAL PRESENCE
We intend to further expand our global manufacturing, sales and service
operations to better serve our existing client base, penetrate developing
markets and establish new customer relationships. As our multinational OEM
customers expand their international operations to take advantage of developing
markets and the lower manufacturing and labor costs of such markets, we intend
to similarly expand our international capabilities in order to provide
just-in-time facilities near these customers. We believe
4
<PAGE>
that this type of international expansion will enable us to take advantage of
the lower manufacturing costs in some countries. We have established low-cost
manufacturing and assembly facilities in the three major geographical markets of
the Americas, Europe and Asia.
PURSUE STRATEGIC ACQUISITIONS AND INVESTMENTS
We intend to continue to pursue strategic acquisitions that complement our
existing business and further expand our product lines and technological
capabilities. We believe that the fragmented nature of the connector industry
provides significant opportunities for future strategic acquisitions.
Furthermore, we believe that we can improve the profitability of the acquired
companies through economies of scale. We believe that this offering should
position us to more effectively capitalize on acquisition opportunities.
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered(1).............. 2,750,000 shares
Class A common stock to be outstanding
after the offering(2)...................... 20,615,544 shares
Use of Proceeds.............................. We plan to use the proceeds from the offering
to redeem part of our outstanding senior
subordinated debt and to repay part of our
bank term loan.
NYSE symbol for the Class A common stock..... APH
</TABLE>
- ------------------------
(1) Excludes 412,500 shares of Class A common stock to be sold if the
underwriters' over-allotment option is exercised in full. See
"Underwriting."
(2) Based upon outstanding shares as of October 1, 1999 and exclusive of up to
1,481,946 shares issuable on the exercise of stock options in connection
with employee benefit plans.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data for the three years ended
December 31, 1998, has been derived from the consolidated financial statements
of Amphenol and should be read in conjunction with the consolidated financial
statements and notes thereto incorporated herein by reference and
"Capitalization," "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The unaudited financial information
presented below for the nine-month period ended September 30, 1999, reflects all
normal and recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of Amphenol's consolidated results of
operations and financial position for such periods. The information shown for
the nine-month periods is not necessarily indicative of full year results. The
pro forma data set forth under the "Year Ended December 31, 1998" and "Nine
Months Ended September 30, 1999" columns in the "Pro Forma Income Statement
Data" section of the following table gives effect to the offering as if it had
occurred on the first day of each period. The pro forma data set forth under the
"As Adjusted for the Offering" column gives effect to the offering as if it had
occurred on September 30, 1999.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............................. $ 776,221 $ 884,348 $ 918,877 $ 685,501 $ 741,459
Cost and expenses:
Cost of sales, excluding depreciation
and amortization................... 494,689 572,092 601,930 447,494 487,685
Depreciation and amortization
expense............................ 17,846 20,428 23,553 17,181 21,057
Selling, general and administrative
expense............................ 114,746 125,064 131,966 98,191 107,428
Amortization of goodwill............. 10,962 11,316 11,701 8,653 9,263
----------- ----------- ----------- ----------- -----------
Operating income....................... 137,978 155,448 149,727 113,982 116,026
Interest expense....................... (24,617) (64,713) (81,199) (60,745) (59,673)
Other expenses, net(1)................. (3,696) (3,561) (4,545) (3,022) (3,817)
----------- ----------- ----------- ----------- -----------
Income before income taxes and
extraordinary item................... 109,665 87,174 63,983 50,215 52,536
Provision for income taxes............. (42,087) (35,910) (27,473) (21,975) (22,248)
----------- ----------- ----------- ----------- -----------
Income before extraordinary item....... 67,578 51,264 36,510 28,240 30,288
Extraordinary item:
Loss on early extinguishment of debt,
net of income taxes of $14,728..... -- (24,547) -- -- --
----------- ----------- ----------- ----------- -----------
Net income........................... $ 67,578 $ 26,717 $ 36,510 $ 28,240 $ 30,288
=========== =========== =========== =========== ===========
Net income per common share:
Income before extraordinary item..... $ 1.45 $ 1.84 $ 2.07 $ 1.60 $ 1.70
Extraordinary loss................... -- (.88) -- -- --
----------- ----------- ----------- ----------- -----------
Net income........................... $ 1.45 $ .96 $ 2.07 $ 1.60 $ 1.70
=========== =========== =========== =========== ===========
Average common shares outstanding...... 46,649,541 27,806,260 17,663,212 17,596,608 17,863,510
Net income per common share--assuming
dilution:
Income before extraordinary item..... $ 1.45 $ 1.83 $ 2.03 $ 1.58 $ 1.67
Extraordinary loss................... -- (.88) -- -- --
----------- ----------- ----------- ----------- -----------
Net income........................... $ 1.45 $ .95 $ 2.03 $ 1.58 $ 1.67
=========== =========== =========== =========== ===========
Average common shares outstanding--
assuming dilution.................... 46,720,900 28,002,977 17,942,397 17,927,434 18,107,502
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA, AS
ADJUSTED FOR THE OFFERING:
Net income before extraordinary items
for early extinguishment of debt..... $ 48,987 $ 39,645
Interest expense....................... 61,892 45,193
Net income per common share--assuming
dilution............................. $ 2.37 $ 1.90
OTHER DATA:
EBITDA................................. $168,180 $188,471 $192,090 $142,109 $150,099
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
-------------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and short-term cash investments...................... $ 8,969 $ 8,969
Working capital........................................... 193,040 193,040
Total assets.............................................. 848,163 844,287
Total debt (including current portion).................... 939,918 765,960
Total shareholders' (deficit)............................. (265,110) (95,028)
</TABLE>
- --------------------------
(1) Other expenses for the year ended December 31, 1997 includes $2,500 of other
expenses related to the Recapitalization.
For purposes of the financial data set forth above in the table, "EBITDA"
represents earnings before interest expense, other financing fees associated
with program fees on sale of accounts receivable, interest income, income taxes,
and depreciation and amortization expense, and excludes minority interest and
includes other adjustments as defined in our bank credit facility. EBITDA is not
intended to represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net income as
an indicator of our operating performance or to cash flow as a measure of
liquidity. EBITDA is included in the prospectus as it is a basis upon which we
assess our financial performance, and certain covenants in our borrowing
arrangements are tied to similar measures. EBITDA, as presented, represents a
useful measure of assessing our ongoing operating activities without the impact
of financing activity and non-recurring charges. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service requirements, it
is not necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of calculation.
7
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR CLASS A COMMON STOCK, YOU SHOULD BE AWARE OF
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER
THESE RISK FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS, BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR CLASS A COMMON
STOCK.
WE HAVE SUBSTANTIAL LEVERAGE AND DEBT OBLIGATIONS
As of September 30, 1999, after giving pro forma effect to the offering, we
would have $766.0 million of consolidated indebtedness and $95.0 million of
consolidated shareholders' deficit. As of September 30, 1999 and after giving
pro forma effect to the offering, we had $136.5 million available to be borrowed
under our bank credit facility (including both the term loan and revolving
credit portions). We and our subsidiaries may incur additional indebtedness in
the future, subject to certain limitations contained in the instruments
governing our indebtedness. We will continue to have significant debt service
obligations.
Our debt service obligations could have important consequences to our
operations, including:
- a substantial portion of our cash flow available from operations after
satisfying some liabilities arising in the ordinary course of business
will be dedicated to the payment of principal and interest on our
indebtedness, thereby reducing the funds that would otherwise be available
to us, including funds for acquisitions and future business opportunities;
- our ability to obtain additional financing in the future may be limited;
- some of our borrowings (including, but not limited to, the amounts
borrowed under our bank credit facility) are at variable rates of
interest, which could cause us to be vulnerable to increases in interest
rates;
- our flexibility in planning for, or reacting to, changes in our business
and the industry may be limited;
- our higher degree of leverage may make us relatively more vulnerable to
economic downturns and competitive pressures; and
- a substantial decrease in our net operating cash flows or an increase in
our expenses could make it difficult for us to meet our debt service
requirements or force us to modify our operations.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance our indebtedness and to make scheduled payments
under our operating leases depends on our future performance, which to a certain
extent is subject to economic, financial, competitive and other factors beyond
our control. Based upon the current level of operations and anticipated growth,
management believes that future cash flow from operations, together with
available borrowings under our bank credit facility, will be adequate to meet
our anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources." There can be no assurance, however, that our business will continue
to generate sufficient cash flows from operations in the future to service our
debt and make necessary capital expenditures after satisfying liabilities
arising in the ordinary course of business. If we are not able to service our
debt, we may be required to refinance all or a portion of our existing debt, to
sell assets or to obtain additional financing. There can be no assurance that
any refinancing would be possible or that any such sales of assets or additional
financing could be achieved.
8
<PAGE>
WE ARE INCREASINGLY DEPENDENT ON THE TELECOMMUNICATIONS INDUSTRY, INCLUDING THE
WIRELESS COMMUNICATIONS INDUSTRY
Approximately 17% of our revenues came from sales to the telecommunications
industry, including the wireless communications industry in the nine month
period ended September 30, 1999, as compared to 12% in the comparable period in
1998. Demand for these products is subject to rapid technological change (see
"--We are dependent on the acceptance of new product introductions for continued
revenue growth"). This market is dominated by several large manufacturers who
regularly exert significant price pressure on their suppliers, including us.
There can be no assurance that we will be able to continue to compete
successfully in our sales to the telecommunications industry, and our failure to
do so could impair our results of operations.
WE ARE DEPENDENT ON THE CABLE TELEVISION INDUSTRY AND CABLE TELEVISION CAPITAL
SPENDING
Approximately one quarter of our revenues come from sales to the cable
television industry. Demand for our cable television products depends primarily
on capital spending by cable television operators for constructing, rebuilding
or upgrading their systems. The amount of this capital spending, and, therefore,
our sales and profitability will be affected by a variety of factors, including
general economic conditions, acquisitions of cable television operators by
non-cable television operators, cable system consolidation within the industry,
the financial condition of domestic cable television operators and their access
to financing, competition from satellite and wireless television providers and
telephone companies, technological developments and new legislation and
regulation of cable television operators. There can be no assurance that cable
television capital spending will increase from historical levels or that
existing levels of cable television capital spending will be maintained.
Although the domestic cable television industry is comprised of
approximately 10,900 cable systems, a small number of cable television operators
own a majority of cable television systems and account for a majority of the
capital expenditures made by cable television operators. The loss of some or all
of our principal cable television customers could have a material adverse effect
on our business.
CHANGES IN MILITARY EXPENDITURES MAY REDUCE OUR SALES
We are a major supplier of high performance environmental connectors for
military applications. The U.S. defense budget has been declining in real terms
since the mid-1980s, resulting in some delays in new program starts, program
deferrals and program cancellations. Sales under contracts with the U.S.
government or under contracts with subcontractors that identified the U.S.
government as the ultimate purchaser represented approximately 8% of our sales
for the year ended December 31, 1998, compared to approximately 9% for 1997 and
8% for 1996. Additionally, we sell our products to the U.S. government through
our distributors. Our participation across a broad spectrum of defense programs
is such that we believe that no one military program accounted for more than 2%
of 1998 net sales. A significant further decline in U.S. military expenditures
could adversely affect our sales.
WE ENCOUNTER COMPETITION IN SUBSTANTIALLY ALL AREAS OF OUR BUSINESS
We compete primarily on the basis of product quality, price, engineering,
customer service and delivery time. Competitors include large, diversified
companies, some of which have substantially greater assets and financial
resources than we do, as well as medium to smaller companies. In the area of
coaxial cable for cable television, we believe that we and CommScope, Inc. are
the primary providers of such cable; however, CommScope is larger than Amphenol
in this market. There can be no assurance that additional competitors will not
enter our existing markets, nor can there be any assurance that we will be able
to compete successfully against existing or new competition.
9
<PAGE>
WE ARE DEPENDENT ON THE ACCEPTANCE OF NEW PRODUCT INTRODUCTIONS FOR CONTINUED
REVENUE GROWTH
Management estimates that products introduced in the last two years
accounted for approximately 20% of net sales for the nine months ended
September 30, 1999. Our long-term results of operations depend substantially
upon our ability to continue to conceive, design, source and market new products
and upon continuing market acceptance of our existing and future product lines.
In the ordinary course of our business, we continually develop or create new
product line concepts. If we fail or are significantly delayed in introducing
new product line concepts or if our new products do not meet with market
acceptance, our results of operations may be impaired.
OUR ACTIONS MAY BE RESTRICTED BY LOAN COVENANTS
Our credit facility and the indenture relating to our senior subordinated
notes contain numerous financial and operating covenants that limit the
discretion of our management with respect to some business matters. The
covenants place significant restrictions on, among other things, our ability to
incur additional indebtedness, to create liens or other encumbrances, to make
some payments and investments, to sell or otherwise dispose of assets, and to
merge or consolidate with other entities. The credit facility also requires us
to meet some financial ratios and tests. A failure to comply with the
obligations contained in the credit facility or the indenture could result in an
event of default under either the credit facility or the indenture, which could
result in the acceleration of the related debt and the acceleration of debt
under other instruments evidencing indebtedness that may contain cross-
acceleration or cross-default provisions.
OUR RESULTS MAY BE NEGATIVELY AFFECTED BY CHANGING INTEREST RATES
We are subject to market risk from exposure to changes in interest rates
based on our financing activities. We utilize interest rate swap agreements to
manage and mitigate our exposure to changes in interest rates. At September 30,
1999, we had interest rate protection in the form of such swaps that effectively
fixed our LIBOR interest rate on $450 million of floating rate bank debt at
5.76%. At September 30, 1999, the three month LIBOR rate was approximately
6.08%. These swap agreements are in effect to the extent that LIBOR remains
below 7% for $300 million of debt and remains below 8% for an additional
$150 million of debt. These swap agreements expire in July 2002. A 10% change in
the LIBOR interest rate at September 30, 1999 would have the effect of
increasing or decreasing interest expense by approximately $1.5 million.
However, if the LIBOR interest rate increased above 7% (a 15% increase from the
LIBOR interest rate at September 30, 1999), further increases above 7% would
have a more significant effect in increasing interest expense. We do not expect
changes in interest rates to have a material effect on income or cash flows in
1999, although there can be no assurance that interest rates will not
significantly change.
OUR RESULTS MAY BE NEGATIVELY AFFECTED BY FOREIGN CURRENCY EXCHANGE RATES
We conduct business in several major international currencies through our
worldwide operations, and as a result we are subject to foreign exchange
exposures due to changes in exchange rates of the various currencies. Changes in
exchange rates can positively or negatively affect our sales, gross margins and
retained earnings. We attempt to minimize currency exposure risk by producing
our products in the same country or region in which the products are sold and
thereby generating revenues and incurring expenses in the same currency and by
managing our working capital; however, there can be no assurance that this
approach will be successful, especially in the event of a significant and sudden
decline in the value of any of the international currencies of our worldwide
operations. In addition, we periodically enter into foreign exchange contracts
to hedge our transaction exposures. At September 30, 1999 we had no outstanding
foreign exchange contracts. We do not engage in purchasing forward exchange
contracts for speculative purposes.
10
<PAGE>
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY FOREIGN OPERATIONS
International manufacturing and sales are subject to inherent risks,
including changes in local economic or political conditions, the imposition of
currency exchange restrictions, unexpected changes in regulatory environments,
potentially adverse tax consequences and the exchange rate risk discussed above.
There can be no assurance that these factors will not have a material adverse
impact on our production capabilities or otherwise adversely affect our business
and operating results.
EXISTING STOCKHOLDERS MAY SELL THEIR CLASS A COMMON STOCK WHICH MAY REDUCE OUR
STOCK PRICE
We cannot predict the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price of the
Class A common stock. Sales of substantial amounts of Class A common stock
(including shares issued upon the exercise of stock options), or the perception
that such sales could occur, may adversely affect prevailing market prices for
the Class A common stock. Amphenol, its officers and directors and some of its
stockholders (which in the aggregate owned 13,434,319 shares at November 12,
1999), including affiliates of KKR, are not selling shares in this offering and
have agreed not to offer, sell, contract to sell or otherwise dispose of any
Class A common stock for a period of 90 days after the date of this prospectus
without the written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
WE WILL CONTINUE TO BE CONTROLLED BY AFFILIATES OF KKR AS LONG AS IT CONTROLS A
MAJORITY OF OUR OUTSTANDING VOTING STOCK, AND OUR OTHER STOCKHOLDERS WILL BE
UNABLE TO AFFECT THE OUTCOME OF STOCKHOLDERS' VOTING DURING SUCH TIME
13,165,745 shares or approximately 73.7% of the outstanding shares of
Class A common stock are held on a fully diluted basis by three limited
partnerships affiliated with KKR, KKR 1996 Fund L.P., NXS Associates L.P. and
KKR Partners II L.P. (the "KKR Partnerships") organized at the direction of KKR
and who are controlled by affiliates of KKR. KKR and its affiliates are not
selling shares in the offering. After the offering, the KKR Partnerships will
own 13,165,745 shares or approximately 63.9% of our outstanding Class A common
stock on a fully diluted basis and will continue to control us. Accordingly,
affiliates of KKR will be able to elect the entire Board, control the management
and policies of Amphenol and, in general, determine (without the consent of our
other stockholders) the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of Amphenol's assets. Affiliates of KKR
will also be able to prevent or cause a change in control of Amphenol and will
be able, under most circumstances, to amend our charter or bylaws at any time.
The directors elected by the KKR Partnerships will have the authority to effect
decisions affecting the capital structure of Amphenol, including the issuance of
additional capital stock, the implementation of stock repurchase programs and
the declaration of dividends. In addition, there can be no assurance that the
interests of KKR and its affiliates will not conflict with the interest of the
other holders of the Class A common stock.
FAILURE TO ACHIEVE YEAR 2000 READINESS COULD DISRUPT OPERATIONS AND CAUSE
FINANCIAL LOSSES WHICH COULD DECREASE OUR STOCK PRICE
We believe we have replaced all of our systems that were not Year 2000
compliant. However, if any of our systems are not compliant or if our customers,
buying agencies, manufacturers or shippers fail to achieve Year 2000 compliance,
we may experience the following adverse consequences:
- We may be unable to receive our products due to failures by our
manufacturers, buying agencies or shippers;
- Our customers may be unable to place orders with us due either to our
system failures or those of our customers; and
11
<PAGE>
- We may be unable to deliver our products on a timely basis.
For a description of our Year 2000 compliance efforts you should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Information Systems and the Year 2000."
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS
Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Business" and elsewhere in this prospectus include forward-looking
statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").
Statements that are predictive in nature, that depend upon or refer to future
events or conditions or that include words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates" and similar expressions are
forward-looking statements. Although we believe that these statements are based
upon reasonable assumptions, we can give no assurance that our goals will be
achieved. These forward-looking statements are made as of the date of this
prospectus, and we assume no obligation to update them or the reasons why actual
results may differ. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Cautionary Statements for Purposes of
Forward-Looking Information."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to Amphenol from the sale of the 2,750,000 shares of
Class A common stock offered hereby, after deducting the underwriting fees and
estimated offering expenses of $9.4 million, are estimated to be approximately
$178.6 million, based on a price per share of $68.375. These proceeds will be
used to redeem $96.0 million principal amount of Amphenol's 9 7/8% Senior
Subordinated Notes due 2007, pay associated prepayment penalties and expenses,
net of tax benefits and repay $78.0 million of indebtedness under one of
Amphenol's term loans. The term loan will mature in May 2005. At September 30,
1999, the interest rate on the term loan to be partially repaid was 8.1% per
annum.
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
Our Class A common stock is listed on the New York Stock Exchange (the
"NYSE"). The following table sets forth the range of high and low sale prices as
reported on the NYSE Composite Transactions Tape during the periods indicated:
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ -------- --------
<S> <C> <C>
1996
First Quarter............................................. $26 $20 1/8
Second Quarter............................................ 27 5/8 19 7/8
Third Quarter............................................. 22 7/8 18 3/4
Fourth Quarter............................................ 23 19
1997
First Quarter............................................. $26 1/8 $21 1/2
Second Quarter............................................ 39 23
Third Quarter............................................. 43 13/16 38 1/2
Fourth Quarter............................................ 56 5/8 42 7/8
1998
First Quarter............................................. $64 $52 3/4
Second Quarter............................................ 61 5/8 39
Third Quarter............................................. 44 1/4 29 5/16
Fourth Quarter............................................ 35 1/2 27
1999
First Quarter............................................. $38 1/2 $29 7/16
Second Quarter............................................ 40 3/8 34 1/2
Third Quarter............................................. 56 5/8 39 5/16
Fourth Quarter (through December 3, 1999)................. 69 1/2 45 3/4
</TABLE>
The last reported sale price of the Class A common stock on the NYSE on
December 3, 1999, was $68.375 per share.
Holders of Class A common stock are entitled to receive cash dividends when
declared by the Board out of funds legally available. Since our initial public
offering in 1991, we have not paid any cash dividends on our Class A common
stock and we do not have any present intention to commence payment of any cash
dividends. We intend to retain earnings to provide funds for the operation and
expansion of our business and to repay outstanding indebtedness.
Currently we are restricted from declaring and paying any cash dividends on,
or repurchasing our Class A common stock under some covenants contained in our
debt agreements.
13
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
September 30, 1999, and as adjusted to give effect to (i) the receipt by us of
the net proceeds from the offering, after deducting the underwriting discount
and estimated offering expenses payable by us, and (ii) the application of the
net proceeds as described under "Use of Proceeds." The following table should be
read in conjunction with our consolidated financial statements and notes thereto
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
----------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
--------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion):
Revolving credit facility................................. $ 5,500 $ 5,542
Term loan facility........................................ 680,000 602,000
9 7/8% Senior Subordinated Notes due 2007................. 240,000 144,000
Other debt (a)............................................ 14,418 14,418
--------- ---------
Total long-term debt.................................... 939,918 765,960
Stockholders' deficit:
Class A common stock, par value $.001 per share;
40,000,000 shares authorized............................ 18 21
Additional paid-in deficit................................ (499,793) (321,166)
Accumulated earnings (b).................................. 245,149 236,601
Accumulated other comprehensive loss...................... (10,484) (10,484)
--------- ---------
Total stockholders' deficit............................. (265,110) (95,028)
--------- ---------
Total capitalization........................................ $ 674,808 $ 670,932
========= =========
</TABLE>
- ------------------------
(a) Represents debt of foreign subsidiaries and capital leases.
(b) Accumulated earnings as adjusted for the offering has been reduced by
$13,356, less applicable taxes of $4,808, to writeoff deferred financing
costs and the premium associated with the purchase of the 9 7/8% Senior
Subordinated Notes.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information has been derived
from our consolidated financial statements for (i) each of the two years in the
period ended December 31, 1998, which statements have been audited by
Deloitte & Touche LLP, (ii) the year ended December 31, 1996, which statements
have been audited by PricewaterhouseCoopers LLP and (iii) the unaudited nine
month periods ended September 30, 1998 and 1999. The information set forth below
should be read in conjunction with our consolidated financial statements and
notes thereto and "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The financial information presented below for the nine month periods
ended September 30, 1998 and 1999, reflects all normal and recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
our consolidated results of operations and financial position for such periods.
The information shown for the nine-month periods is not necessarily indicative
of full year results. The pro forma data set forth under the "Year Ended
December 31, 1998" and "Nine Months Ended September 30, 1999" columns in the
"Pro Forma Income Statement Data" section of the following table gives effect to
the offering as if it had occurred on the first day of each period. The pro
forma data set forth under the "As Adjusted for the Offering" column gives
effect to the offering as if it had occurred on September 30, 1999.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............................. $ 776,221 $ 884,348 $ 918,877 $ 685,501 $ 741,459
Cost and expenses:
Cost of sales, excluding depreciation
and amortization................... 494,689 572,092 601,930 447,494 487,685
Depreciation and amortization
expense............................ 17,846 20,428 23,553 17,181 21,057
Selling, general and administrative
expense............................ 114,746 125,064 131,966 98,191 107,428
Amortization of goodwill............. 10,962 11,316 11,701 8,653 9,263
---------- ---------- ---------- ---------- ----------
Operating income....................... 137,978 155,448 149,727 113,982 116,026
Interest expense....................... (24,617) (64,713) (81,199) (60,745) (59,673)
Other expenses, net(1)................. (3,696) (3,561) (4,545) (3,022) (3,817)
---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary item................... 109,665 87,174 63,983 50,215 52,536
Provision for income taxes............. (42,087) (35,910) (27,473) (21,975) (22,248)
---------- ---------- ---------- ---------- ----------
Income before extraordinary item....... 67,578 51,264 36,510 28,240 30,288
Extraordinary item:
Loss on early extinguishment of debt,
net of income taxes of $14,728..... -- (24,547) -- -- --
---------- ---------- ---------- ---------- ----------
Net income........................... $ 67,578 $ 26,717 $ 36,510 $ 28,240 $ 30,288
========== ========== ========== ========== ==========
Net income per common share:
Income before extraordinary item..... $ 1.45 $ 1.84 $ 2.07 $ 1.60 $ 1.70
Extraordinary loss................... -- (.88) -- -- --
---------- ---------- ---------- ---------- ----------
Net income........................... $ 1.45 $ .96 $ 2.07 $ 1.60 $ 1.70
========== ========== ========== ========== ==========
Average common shares outstanding...... 46,649,541 27,806,260 17,663,212 17,596,608 17,863,510
Net income per common share--assuming
dilution:
Income before extraordinary item..... $ 1.45 $ 1.83 $ 2.03 $ 1.58 $ 1.67
Extraordinary loss................... -- (.88) -- -- --
---------- ---------- ---------- ---------- ----------
Net income........................... $ 1.45 $ .95 $ 2.03 $ 1.58 $ 1.67
========== ========== ========== ========== ==========
Average common shares outstanding--
assuming dilution.................... 46,720,900 28,002,977 17,942,397 17,927,434 18,107,502
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA, AS
ADJUSTED FOR THE OFFERING:
Net income before extraodinary items
for early extinguishment of debt..... $ 48,987 $ 39,645
Interest expense....................... 61,892 45,193
Net income per common share--assuming
dilution............................. $ 2.37 $ 1.90
OTHER DATA:
EBITDA................................. $168,180 $188,471 $192,090 $142,109 $150,099
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
-------------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Cash and short-term cash investments...................... $ 8,969 $ 8,969
Working capital........................................... 193,040 193,040
Total assets.............................................. 848,163 844,287
Total debt (including current portion).................... 939,918 765,960
Total shareholders' (deficit)............................. (265,110) (95,028)
</TABLE>
- ------------------------
(1) Other expenses for the year ended December 31, 1997 includes $2,500 of other
expenses related to the Recapitalization.
For purposes of the financial data set forth above in the table, "EBITDA"
represents earnings before interest expense, other financing fees associated
with program fees on sale of accounts receivable, interest income, income taxes,
and depreciation and amortization expense, and excludes minority interest and
includes other adjustments as defined in our bank credit facility. EBITDA is not
intended to represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net income as
an indicator of our operating performance or to cash flow as a measure of
liquidity. EBITDA is included in the prospectus as it is a basis upon which we
assess our financial performance, and certain covenants in our borrowing
arrangements are tied to similar measures. EBITDA, as presented, represents a
useful measure of assessing our ongoing operating activities without the impact
of financing activity and non-recurring charges. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service requirements, it
is not necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of calculation.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited
consolidated financial statements and notes for the three years ended
December 31, 1998 and our condensed consolidated financial statements and notes
for the nine months ended September 30, 1999 included elsewhere in this
prospectus.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales for the third quarter of 1999 increased 12% to $256.9 million
compared to $229.0 million for the third quarter of 1998. Net sales for the nine
months ended September 30, 1999 increased 8% to $741.5 million compared to
$685.5 million for the comparable 1998 period. The increase in sales for the
third quarter and nine-month 1999 periods is primarily attributable to increased
sales of products and interconnect systems for wireless and broadband
communication applications offset in part by a decline in interconnect products
for aerospace applications. Currency translation had the effect of reducing
sales in the third quarter 1999 by approximately $1.6 million and by
approximately $1.5 million in the nine-month period 1999 when compared to
exchange rates for the comparable 1998 periods.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) remained constant at approximately 32% for the three and nine
months ended September 30, 1999 compared to the 1998 periods.
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, 1999 and 1998, respectively.
Interest expense for the third quarter and nine months decreased to
$20.0 million and $59.7 million in 1999 from $20.5 million and $60.7 million in
1998, respectively. The decrease in both periods is primarily attributable to
lower interest rates on our term loan facility as well as reduced indebtedness
for the nine months ended September 30, 1999 compared to the 1998 period.
The provision for income taxes for the third quarter and nine months was
$8.3 million and $22.2 million in 1999 compared to $6.6 million and
$22.0 million in 1998, respectively. The 1999 estimated effective tax rate of
approximately 42% reflects federal, state and foreign taxes and the generally
non-deductible expense of goodwill amortization.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Net sales were $918.9 million for the year ended December 31, 1998 compared
to $884.3 million for 1997. Sales of interconnect products and assemblies
increased 6% compared to 1997 ($718.1 million in 1998 versus $679.9 million in
1997). Such increase is primarily due to increased sales of interconnect
products and assemblies for wireless communications, data applications and smart
card acceptor devices. Sales of interconnect products for space, military and
commercial aviation applications increased slightly and were offset by a decline
in sales for industrial applications. Sales of cable products declined 2%
compared to 1997 ($200.8 million in 1998 versus $204.5 million in 1997). Sales
of coaxial cable for cable television increased in the U.S. as cable operators
began upgrading and expanding their systems to offer enhanced services; however,
the increase was offset by declines in sales in international cable television
markets, primarily Asia and Latin America, as a result of generally weak
economic conditions in those regions. Sales of flat ribbon cable, primarily for
data communication applications, were approximately even with the prior year.
17
<PAGE>
Geographically, sales in the U.S. in 1998 increased 8% compared to 1997
($499.9 million in 1998 versus $462.3 million in 1997); international sales for
1998, including export sales, decreased 1% in U.S. dollars ($419.0 million in
1998 versus $422.0 million in 1997) and increased approximately 1% in local
currency compared to 1997. The comparatively strong U.S. dollar in 1998 had the
currency effect of decreasing net sales by approximately $8.7 million when
compared to foreign currency translation rates in 1997.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) decreased to 32% in 1998 from 33% in 1997. The decrease is
generally attributable to competitive pricing pressure on our coaxial cable
products.
Selling, general and administrative expenses as a percentage of sales
remained relatively constant at approximately 14% in 1998 compared to 1997.
Interest expense was $81.2 million for 1998 compared to $64.7 million for
1997. The increase is due to increased debt levels resulting from the
Recapitalization in May 1997.
Other expenses, net for 1998 was $4.5 million, an increase of $3.4 million
from 1997. The 1997 period included a gain on the sale of marketable securities
of $3.9 million. See Note 9 to our Consolidated Financial Statements set forth
elsewhere in this prospectus for details of the components of other expenses,
net.
The provision for income taxes for 1998 was at an effective rate of 42.9%
compared to an effective rate of 41.2% in 1997. The increase is generally
attributable to non-deductible expenses (goodwill amortization) being a higher
percentage of pretax income.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales were $884.3 million for the year ended December 31, 1997 compared
to $776.2 million for 1996. Sales of interconnect products and assemblies
increased 16% compared to 1996 ($679.9 million in 1997 versus $585.0 million in
1996). Such increase is primarily due to increased sales for wireless
communications, data applications and smart card acceptor devices as well as new
and enhanced electronic aerospace and avionics interconnect systems for space,
military and commercial aviation applications. Sales of cable products increased
7% compared to 1996 ($204.5 million in 1997 versus $191.2 million in 1996). Such
increase is primarily due to increased sales of coaxial cable for international
cable television applications and increased sales of flat ribbon cable for
communication applications, partially offset by a decline in sales of coaxial
cable for U.S. cable television applications as a result of soft demand and
competitive pricing pressures.
Geographically, sales in the U.S. in 1997 increased 16% compared to 1996
($462.3 million in 1997 versus $397.0 million in 1996); international sales for
1997, including export sales, increased 11% in U.S. dollars ($422.0 million in
1997 versus $379.2 million in 1996) and increased approximately 18% in local
currencies compared to 1996. The comparatively stronger U.S. dollar in 1997 had
the currency translation effect of decreasing net sales by approximately
$24.6 million when compared to foreign currency translation rates in 1996.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) decreased to 33% in 1997 from 34% in 1996. The decrease is
generally attributable to price reductions on our coaxial cable products
partially offset by increased sales of higher margin application-specific
connector products, increased efficiencies due to increased production rates for
certain connector products and continuing cost control programs.
Selling, general and administrative expenses as a percentage of sales
declined to approximately 14% in 1997 compared to approximately 15% in 1996
primarily as a result of higher sales volume in the 1997 period.
18
<PAGE>
Interest expense was $64.7 million for 1997 compared to $24.6 million for
1996. The increase is due to increased debt levels resulting from the
Recapitalization in May 1997.
Other expenses, net for 1997 was $1.1 million, a decrease of $2.6 million
from 1996. See Note 9 to our Consolidated Financial Statements set forth
elsewhere in this prospectus for details of the components of other expenses,
net.
The provision for income taxes for 1997 was at an effective rate of 41.2%
compared to an effective rate of 38.4% in 1996. The increase is generally
attributable to non-deductible expenses (goodwill amortization) being a higher
percentage of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $40.2 million in the nine months
ended September 30, 1999 compared to $35.7 million in the 1998 period. The
increase in cash flow relates primarily to an increase in net income adjusted
for depreciation and amortization charges and offset in part by a net increase
in non-cash components of working capital.
In 1999, cash from operating activities was used to fund capital
expenditures of $18.3 million and acquisitions of $1.4 million, and to repay
indebtedness of $14.6 million. In 1998, cash from operating activities and
borrowings under the credit facility were used to fund capital expenditures of
$20.8 million and acquisitions of $30.4 million.
In conjunction with the Recapitalization in 1997, we entered into a
$900 million bank agreement with a syndicate of financial institutions (the
"Bank Agreement"), comprised of a $150 million revolving credit facility that
expires in the year 2004 and a $750 million term loan facility. The term loan
facility includes a $350 million Tranche A maturing over a 7 year period ending
2004, and a $375 million Tranche B with required amortization in 2005 and 2006.
The credit agreement is secured by pledges of 100% of the capital stock of our
direct domestic subsidiaries and 65% of the capital stock of direct material
foreign subsidiaries, and the 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 our common stock. At September 30, 1999 there were $680 million of borrowings
outstanding under the term loan facility. Availability under the revolving
credit facility at September 30, 1999 was $136.5 million, after reduction of
$8.0 million for outstanding letters of credit. The availability under the
revolving credit facility will remain unchanged as a result of the offering. Pro
forma for the application of proceeds from the offering, borrowing outstanding
under the Bank Agreement was $607.5 million at September 30, 1999.
In July 1997, we entered into interest rate protection agreements that
effectively fixed our 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.
Our EBITDA as defined in the Bank Agreement was $150.1 million and
$142.1 million for the nine months ended September 30, 1999 and 1998,
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. We believe that EBITDA provides
additional information for determining our ability to meet future debt service
requirements; however, EBITDA does not reflect cash available to fund debt
requirements.
Our primary ongoing cash requirements will be for debt service, capital
expenditures and product development activities. Our debt service requirements
consist primarily of principal and interest on bank borrowings and interest on
our 9 7/8% Senior Subordinated Notes due 2007. Pro forma for the application of
proceeds from the offering, the face value of the 9 7/8% Senior Subordinated
Notes due 2007 outstanding as of September 30, 1999 reduced from $240.0 million
to $144.0. We have not paid, and do not have any present intention to commence
payment of, cash dividends on our common stock.
19
<PAGE>
We expect that ongoing requirements for debt service, capital expenditures and
product development activities will be funded by internally-generated cash flow
and availability under our revolving credit facility. We may also use cash to
fund part or all of the cost of future acquisitions.
ENVIRONMENTAL MATTERS
Subsequent to the acquisition of Amphenol from Allied Signal Corporation in
1987, Amphenol and Allied have been named jointly and severally liable as
potentially responsible parties in relation to several environmental cleanup
sites. Amphenol and Allied have jointly consented to perform certain
investigations 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,
Allied is currently obligated to pay 80% of the costs up to $30.0 million and
100% of the costs in excess of $30.0 million. At September 30, 1999,
approximately $17.2 million of costs that have been incurred are covered by this
agreement. We do not believe that the costs associated with resolution of these
or any other environmental matters will have a material adverse effect on our
financial condition or results of operations.
RECENT ACCOUNTING CHANGE
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." This statement requires that an entity
recognize all derivatives as either assets or liabilities in the Statement of
Financial Position and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and its resulting designation. We
are in the process of evaluating the effect this new standard will have on our
financial statements. We are required to adopt FAS 133, as amended by FAS 137,
beginning January 1, 2001.
INFORMATION SYSTEMS AND THE YEAR 2000
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, we began a systematic review of all of our
business information systems to ensure that the systems now in use worldwide
will be Year 2000 compliant before the turn of the century. We have established
a Year 2000 Program Management Group to provide overall guidance and direction
for this compliance mission. We initiated communications to all of our 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:
- information systems software and hardware;
- non-information technology systems;
- facilities equipment; and
- customer and vendor relationships.
We upgraded and replaced existing information systems with Year 2000 compliant
versions of software at all principal business units. Our Year 2000 conversion
project is completed at all of our business units and we have not experienced
any significant impact on our business operations as a result of the conversion
process.
20
<PAGE>
We do not believe that the Year 2000 issue will have a material adverse
effect on our financial condition or results of operations. We operate a number
of business units worldwide and have a large supplier base and believe that this
will mitigate any adverse impact. Our beliefs and expectations, however, are
based on certain assumptions and expectations that ultimately may prove to be
inaccurate. Potential sources of risk include:
- the inability of principal suppliers to be Year 2000 ready, which could
result in delays in product deliveries from such suppliers,
- disruption of the product distribution channel, including ports and
transportation vendors and
- the general breakdown of necessary infrastructure such as electricity
supply.
We are developing contingency plans to reduce the impact of transactions with
non-compliant suppliers and other parties. Although there can be no assurance
that multiple business disruptions caused by technology failures can be
adequately anticipated, we are identifying various alternatives to minimize the
potential risk to our business operations.
We estimate the cost for our Year 2000 compliance efforts to be
approximately $3.0 million, including the cost of new systems and system
upgrades some of which will be capitalized. The cost is being funded through
operating cash flows. Our aggregate cost estimate does not include time and
costs that may be incurred by us as a result of the failure of any third
parties, including suppliers, to become Year 2000 ready or costs to implement
any contingency plans. Such costs are not anticipated to have a material impact
on our financial position, results of operations or cash flows.
EURO CURRENCY CONVERSION
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency (the "Euro"). The transition period for the
introduction of the Euro is between January 1, 1999 and January 1, 2002. We are
addressing issues associated with the Euro conversion and although we cannot
predict the overall impact of the Euro conversion at this time, we do not expect
that the Euro conversion will have a material adverse effect on our financial
condition or results of operations.
CAUTIONARY STATEMENTS FOR PURPOSES OF FORWARD-LOOKING INFORMATION
Statements made by us in written or oral form to various persons, including
statements made in this document and other filings with the Securities and
Exchange Commission, which we refer to in this prospectus as the "Commission,"
that are not strictly historical facts are "forward-looking" statements. Such
statements should be considered as subject to uncertainties that exist in our
operations and business environment. The following includes some, but not all,
of the factors or uncertainties that could cause us to fail to conform with
expectations and predictions:
- A global economic slowdown in any one, or all, of our market segments.
- The effects of significant changes in monetary and fiscal policies in the
U.S. and abroad including extreme currency fluctuations and unforeseen
inflationary pressures.
- Rapid and unforeseen price pressure on our products or significant cost
increases that cannot be recovered through price increases or productivity
improvements.
- Increased difficulties in obtaining a consistent supply of basic material
like steel, aluminum, copper, gold or plastic resins at stable pricing
levels.
- Unpredictable difficulties or delays in the development of new product
programs.
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<PAGE>
- Significant changes in interest rates or in the availability of financing
for us or some of our customers.
- Rapid escalation of the cost of regulatory compliance and litigation.
- Unexpected government policies and regulations affecting us or our
significant customers.
- Unforeseen intergovernmental conflicts or actions, including but not
limited to armed conflict and trade wars.
- Difficulties and unanticipated expense of assimilating newly-acquired
businesses.
- Any difficulties in obtaining or retaining the management and other human
resource and competencies that we need to achieve our business objectives.
- The risks associated with any technological shift away from our
technologies and core competencies. For example, a technological shift
away from the use of coaxial cable in cable television/telecommunication
systems could have a substantial impact on our coaxial cable business.
- Unforeseen interruptions to our business with our largest customers,
distributors and suppliers resulting from, but not limited to, strikes,
financial instabilities, computer malfunctions or inventory excesses.
22
<PAGE>
BUSINESS
GENERAL
We are one of the world's largest designers, manufacturers and marketers of
electrical, electronic and fiber optic connectors, interconnect systems and
coaxial and flat-ribbon cable. The primary end markets for our products are:
- communication systems for the converging technologies of voice, video and
data communications;
- commercial and military aerospace electronics applications; and
- industrial factory automation equipment and automotive and mass
transportation applications.
We focus on optimizing our mix of higher margin, higher growth
application-specific products in our product offerings and maintaining
continuing programs of productivity improvement. As a result of these
initiatives, our operating profit margin has increased from 13.5% in fiscal year
1993 to 15.6% for the twelve months ended September 30, 1999. For the twelve
months ended September 30, 1999 we reported net sales, operating profit and net
income of $974.8 million, $151.8 million and $38.6 million, respectively. The
table below summarizes information regarding our primary markets and end
applications for our products:
<TABLE>
<CAPTION>
COMMERCIAL AND
MILITARY AEROSPACE AND
OTHER MILITARY ELECTRONICS INDUSTRIAL, TRANSPORTATION
COMMUNICATIONS APPLICATIONS AND OTHER
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
PERCENTAGE 59% (including 24% for the 20% 21%
OF SALES* cable television market)
PRIMARY Voice Military and Commercial Factory Automation
END - wireless handsets and Aircraft Instrumentation Systems
APPLICATIONS personal communication - avionics Automobile Systems
devices - engine controls Mass Transportation Systems
- base stations and other - flight controls Oil Exploration
wireless infrastructure - entertainment systems
Video Missile Systems
- cable television coaxial Battlefield Communications
cables, connectors and set Satellite and Space Station
top converters Programs
Data
- cable modems
- personal computers and
related peripherals
</TABLE>
- ------------------
*For the nine months ended September 30, 1999.
We design and manufacture connectors and interconnect systems which are used
primarily to conduct electrical and optical signals for a wide range of
sophisticated electronic applications. We believe, based primarily on published
market research, that we are one of the largest connector manufacturers in the
world. We have developed a broad range of connector and interconnect products to
serve the rapidly growing and converging voice, video and data communications
markets. These markets include wireless communications including cellular and
personal communication networks, fiber optic networks and broadband cable
networks. Based primarily on published market research, we also
23
<PAGE>
believe that we are the leading supplier of high performance environmental
connectors that require superior performance and reliability under conditions of
stress and in hostile environments. These conditions are frequently encountered
in commercial and military aerospace applications and other demanding industrial
applications such as oil exploration, medical instrumentation and off-road
construction. We are also one of the leaders in developing interconnect products
for factory automation, machine tools, instrumentation systems, mass
transportation applications and automotive safety applications, including
airbags, pretensioner seatbelts and anti-lock braking systems.
We believe that the worldwide industry for interconnect products and systems
is highly fragmented with over 2,000 producers of connectors worldwide, of which
the 10 largest, including Amphenol, accounted for a combined market share of
approximately 32% in 1998. Industry analysts estimate that the total sales for
the industry were approximately $34 billion in 1998.
Our Times Fiber subsidiary is the world's second largest producer of coaxial
cable for the cable television market. We believe that our Times Fiber unit is
one of the lowest cost producers of coaxial cable for the cable television
market, and that it is one of the technological leaders in increasing the
bandwidth of coaxial cable products. For example, our Times Fiber unit was the
first to standardize a coaxial cable with a 1 GHZ bandwidth, and all of its
coaxial cable presently has that bandwidth capability. Our coaxial cable and
connector products are used in cable television systems including full service
cable television/telecommunication systems being installed by cable operators
and telecommunication companies offering video, voice and data services. We are
also a major supplier of coaxial cable to the developing international cable
television markets. In addition, we have developed coaxial cable products, in
conjunction with connector products, used in the infrastructure for wireless
communication systems.
We are a global manufacturer employing advanced manufacturing processes. We
manufacture and assemble our products at facilities in North America, South
America, Europe, Asia and Australia. We sell our connector products through our
own global sales force and independent manufacturers' representatives to
thousands of OEMs in 52 countries throughout the world as well as through a
global network of electronics distributors. We sell our coaxial cable products
primarily to cable television operators and to telecommunication companies who
have entered the broadband communications market. For the first nine months of
1999, approximately 57% of our net sales were in North America, 27% were in
Europe and 16% were in Asia and other countries.
We implement our product development strategy through product design teams
and collaboration arrangements with customers which result in our obtaining
approved vendor status for our customers' new products and programs. We seek to
have our products become widely accepted within the industry for similar
applications and products manufactured by other potential customers, which we
believe will provide additional sources of future revenue. By developing
application-specific products, we have decreased our exposure to standard
products which generally experience greater pricing pressure. In addition to
product design teams and customer collaboration arrangements, we use key account
managers to manage customer relationships on a global basis such that we can
bring to bear our total resources to meet the worldwide needs of our
multinational customers. We are also focused on making strategic acquisitions in
some markets to further broaden and enhance our product offerings and expand our
global capabilities.
Management and partnerships affiliated with KKR purchased 75% of our
Class A common stock in May 1997 through the Recapitalization. KKR, through its
affiliates, owned 73.7% of our Class A common stock as of November 12, 1999. No
existing stockholders, including management and partnerships affiliated with KKR
will sell shares in this offering. After the offering, on a pro forma basis,
KKR, through its affiliates, will own approximately 63.9% of our Class A common
stock.
24
<PAGE>
COMPETITIVE STRENGTHS
LEADER IN GROWING MARKET SEGMENTS
We serve diverse markets within the connector industry such as the worldwide
communications, aerospace, industrial and automotive markets and growing
segments within these markets. We are a leader in the design, manufacture and
marketing of connector and interconnect systems in the rapidly growing and
converging markets of voice, video and data communications. For instance, we
have a broad product offering of communications-related connector and
interconnect products used in base stations and handheld sets in wireless
communications, and interconnect acceptor devices used in smart card systems. We
are also a leader in developing coaxial cable products for cable television
systems; we have been one of the technological leaders in expanding the
bandwidth characteristics of coaxial cable so as to permit greater channel
capacity for offering enhanced voice, video and data communications. We have
also developed interconnect technology for sophisticated military and commercial
avionics applications as well as for use in the international Space Station
Program. In addition, we have pioneered the development of interconnect products
for automotive safety systems such as airbags and pretensioner seatbelts and
have been an innovator in the development of motion control connector products
for factory automation.
CLOSE RELATIONSHIPS WITH MAJOR OEMS
Due in part to our over 65 year history in the connector business and our
reputation for innovative, high quality interconnection products, we have
developed close relationships with many of our OEM customers in our various
product segments. To this end, we have achieved preferred supplier designations
from many OEMs, enabling us to work closely with these OEMs through product
design teams and collaborative arrangements to design and manufacture
application-specific products. Our key account managers enhance our role as a
supplier of application specific products for OEMs by directing customer
relationships on a global basis and bringing to bear our global resources to
satisfy the worldwide needs of our multinational OEMs.
GLOBAL PRESENCE
Approximately 48% of our sales for the nine months ended September 30, 1999
were outside the United States. We have 48 manufacturing and assembly operations
on five continents. Our products are sold through our global sales force and
independent manufacturers' representatives to thousands of OEMs in 52 countries
throughout the world as well as through a network of electronic distributors.
Our global presence enables us to serve the expanding global needs and
requirements of our existing multinational and international OEM customers and
to position ourselves to develop new customer relationships with other
multinational and international OEMs. We believe that having a local presence in
foreign markets in which our OEM customers operate is an important factor in our
ability to provide high quality products on a timely and efficient basis.
Moreover, we attain important operational advantages by developing and sharing
"best practices" across our international design and manufacturing network.
EXTENSIVE PRODUCT LINE
Through our advanced technological and design capabilities, we have
developed an extensive line of interconnect products for our customers worldwide
which resulted in sales of approximately 85,000 stock keeping units in 1998. By
offering a broad array of high quality products, we strive to provide
highly-engineered, reliable and value-added solutions for all of our customers'
interconnection needs. For example, based on our position as the leading
supplier in the high performance environmental connector market, we performed
certain research and development for, and are now producing, a family of
connectors comprising approximately 1,000 stock keeping units for use in the
international
25
<PAGE>
Space Station Program. We believe that the breadth of our product line combined
with our global presence is an important competitive advantage in an environment
in which many OEMs and other customers are reducing the size of their supplier
bases.
BROAD CUSTOMER BASE
Our products are used in a wide variety of applications at over 10,000
customer locations worldwide. Our largest commercial customer accounted for
approximately 5% of our net sales for the nine months ended September 30, 1999.
The U.S. government and its subcontractors accounted for 7% of our net sales for
the nine months ended September 30, 1999; however, we participate across a broad
spectrum of defense programs and believe that no single program accounted for
more than 2% of those net sales. Our products are also sold to additional
customer locations through eight of the 10 largest (based on sales) U.S.
electronics distributors, which we believe is an important competitive advantage
in effectively marketing our products. By servicing a broad array of customers
in a variety of different industries and countries, we strive to develop
opportunities to cross-market products and technologies.
STRONG MANAGEMENT TEAM
Our senior management team has successfully led Amphenol through rapid
changes in the connector and interconnect industry. This management team has
focused on solidifying our position as a leading provider of connector and
interconnect technology in our core markets. Our management team has been
working together since 1987 and our managers have significant experience in our
industry.
BUSINESS STRATEGY
FOCUS ON RAPIDLY GROWING COMMUNICATIONS SEGMENT
We intend to capitalize on the convergence in the communications sector of
voice, video and data technologies. The growth in recent years of mobile
communications and Internet utilization has been substantial. We believe,
however, that both technologies are in their infancy in terms of market
potential. For example, it is estimated that mobile telephone subscribers will
increase from the 1998 level of 280 million to 700 million by 2002. We will
continue to aggressively pursue infocom opportunities through the development of
new application-specific products to serve this expanding market. For instance,
we have developed a broad range of radio frequency connector products and
interconnect systems for the wireless communications market. Our technology for
smart card acceptor devices and other connector components are used in many of
the handheld cellular telephones in Europe and elsewhere.
EXPAND SALES OF BROADBAND PRODUCTS
We believe that the increasing demand for enhanced services from existing
cable television systems and the relatively low penetration rate for cable
television in countries outside of the United States provides significant
opportunity for future growth of coaxial cable and other broadband interconnect
products. For example, the demands of the digital age for high-speed Internet
access, video on demand, specialized programming, etc., all place significant
emphasis on expanded bandwidth for network delivery systems. In addition, it is
estimated that in 1998 only 31% of the television households in Europe, 17% of
such households in Asia and 14% of such households in Latin America subscribed
to some form of multichannel television service as compared to an estimated
subscription rate of 66% in the United States. Cable system developments are
currently planned in a number of different countries, including large portions
of Europe, Asia and Latin America. We believe that we are well positioned to
take advantage of these opportunities because we are one of the world's leading
producers of coaxial
26
<PAGE>
cable and broadband interconnect products and because we have extensive
relationships with many of the multinational cable operators that are upgrading
and expanding in the domestic and international markets.
DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR OEMS
We seek to expand the scope and number of preferred supplier designations
and application-specific assignments we have with OEM customers. We work closely
with our network of OEM customers at the design stage to create and manufacture
innovative connector solutions to meet our customers' specific interconnection
needs. Our application-specific products designed and manufactured for OEMs in
this manner generally have higher value-added content than our other
interconnection products and have been developed across all of our product
lines. In addition to developing further our relationship with these OEMs and
providing a source of high value-added sales, this product development strategy
has a number of important ancillary benefits. For instance, once an application-
specific product has been developed for a specific OEM customer, such new
product often becomes widely accepted in the industry for similar applications
and products manufactured by other potential customers, thereby providing
additional sources of future revenue.
EXPAND PRODUCT LINES
Our product lines encompass market segments comprising approximately 50% of
the $34 billion connector industry. We have broad product lines for the markets
we serve; as an example, in 1998 our sales included approximately 85,000 stock
keeping units. We continuously strive to expand our product lines in order to
become a primary source supplier of interconnect solutions for many of our
customers. By expanding our product lines, we intend to leverage our extensive
customer relationships to cross-sell additional connector products. For example,
we developed and are now producing a broad line of radio frequency coaxial and
fiber optic connectors for the cable television industry, which we market to our
large base of existing coaxial cable customers. Moreover, in an environment in
which many OEMs and other customers are reducing the size of their supplier
bases, we believe that the expansion of our product lines will further solidify
our importance to existing customers and enable us to effectively market
products to new customers.
EXPAND GLOBAL PRESENCE
We intend to further expand our global manufacturing, sales and service
operations to better serve our existing client base, penetrate developing
markets and establish new customer relationships. As our multinational OEM
customers expand their international operations to take advantage of developing
markets and the lower manufacturing and labor costs of such markets, we intend
to similarly expand our international capabilities in order to provide
just-in-time facilities near these customers. We believe that this type of
international expansion will enable us to take advantage of the lower
manufacturing costs in some countries. We have established low-cost
manufacturing and assembly facilities in the three major geographical markets of
the Americas, Europe and Asia.
PURSUE STRATEGIC ACQUISITIONS AND INVESTMENTS
We intend to continue to pursue strategic acquisitions that complement our
existing business and further expand our product lines and technological
capabilities. We believe that the fragmented nature of the connector industry
provides significant opportunities for future strategic acquisitions.
Furthermore, we believe that we can improve the profitability of the acquired
companies through economies of scale. We believe that this offering should
position us to more effectively capitalize on acquisition opportunities.
Acquisition transactions are typically subject to numerous conditions, including
due diligence investigation, Board approval and negotiation of a definitive
purchase agreement. In evaluating acquisition targets, we consider, among other
things, the target's competitive
27
<PAGE>
market position, management team and growth position. At any time, we may have
one or more offers outstanding and may have executed one or more non-binding
letters of intent. In view of that fact that letters of intent are non-binding
and subject to various conditions, we cannot predict whether these letters of
intent will lead to definitive agreements, whether the terms of any such
definitive agreements will be the same as the terms contemplated by the letters
of intent or whether any transaction contemplated by a letter of intent will be
consummated.
BUSINESS SEGMENTS
The following table sets forth the dollar amounts of our net sales for our
business segments. For a discussion of factors affecting changes in sales by
business segment, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES BY BUSINESS SEGMENT:
Interconnect products and assemblies.... $585,033 $679,887 $718,109 $535,654 $563,085
Cable products.......................... 191,188 204,461 200,768 149,847 178,374
-------- -------- -------- -------- --------
TOTAL..................................... $776,221 $884,348 $918,877 $685,501 $741,459
======== ======== ======== ======== ========
NET SALES BY GEOGRAPHIC AREA:
United States operations................ $397,023 $462,349 $499,891 $378,349 $383,518
International operations (1)............ 379,198 421,999 418,986 307,152 357,941
-------- -------- -------- -------- --------
TOTAL..................................... $776,221 $884,348 $918,877 $685,501 $741,459
======== ======== ======== ======== ========
</TABLE>
- ------------------------
(1) Includes international coaxial cable sales, which are primarily export
sales.
INTERCONNECT PRODUCTS AND ASSEMBLIES. We produce a broad range of
interconnect products and assemblies primarily for voice, video and data
communication systems, commercial and military aerospace systems, automotive and
mass transportation applications, and industrial and factory automation
equipment. Interconnect products include connectors, which when attached to an
electronic or fiber optic cable, a printed circuit board or other device
facilitate electronic or fiber optic transmission. Interconnect assemblies
generally consist of a system of cable and connectors for linking electronic and
fiber optic equipment. We design and produce a broad range of connector products
used in communication applications, such as:
- smart card acceptor devices used in mobile GSM telephones, cable modems
and other applications to facilitate reading data from smart cards;
- fiber optic couplers and connectors used in fiber optic signal
transmission;
- input/output connectors used for linking personal computers and peripheral
equipment; and
- sculptured flexible circuits used for integrating printed circuit boards
in communication applications.
We also design and produce a broad range of radio frequency connector
products used in telecommunications, computer and office equipment,
instrumentation equipment and local area networks. Our radio frequency
connectors are used in base stations, hand held sets and other components of
cellular and personal communications networks. We have also developed a broad
line of radio frequency connectors for coaxial cable for full service cable
television/telecommunication networks. We believe, based primarily on published
market research, that we are the largest supplier of
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<PAGE>
circular, military-specification connectors. Such connectors require superior
performance and reliability under conditions of stress and in hostile
environments. High performance environmental connectors are generally used to
interconnect electronic and fiber optic systems in sophisticated aerospace,
military, commercial and industrial equipment. These applications present
demanding technological requirements in that the connectors can be subject to
rapid and severe temperature changes, vibration, humidity and nuclear radiation.
Frequent applications of these connectors include aircraft, guided missiles,
radar, military vehicles, equipment for spacecraft, energy, medical
instrumentation and geophysical applications and off-road construction
equipment. We also design and produce industrial interconnect products used in a
variety of applications such as factory automation equipment, mass
transportation applications including railroads and marine transportation; and
automotive safety products including interconnect devices and systems used in
automotive airbags, pretensioner seatbelts and anti-lock braking systems. We
also design and produce highly-engineered cable assemblies. Such assemblies are
specially designed by us in conjunction with OEM customers for specific
applications, primarily for computer, wired and wireless communication systems
and office equipment applications. The cable assemblies utilize our connector
and cable products as well as components purchased from others.
CABLE PRODUCTS. We design, manufacture and market coaxial cable primarily
for use in the cable television industry. We manufacture two primary types of
coaxial cable: semi-flexible, which has an aluminum tubular shield, and
flexible, which has one or more braided metallic shields. Semi-flexible coaxial
cable is used in the trunk and feeder distribution portion of cable television
systems, and flexible cable (also known as drop cable) is used primarily for
hookups from the feeder cable to the cable television subscriber's residence.
Flexible cable is also used in other communication applications.
The rapid developments in fiber optic technologies, digital compression
(which allows several channels to be transmitted within the same bandwidth that
a single analog channel currently requires) and other communication
technologies, including our development of higher capacity coaxial cable, have
resulted in technologies which enable cable television systems to provide
channel capacity in excess of 500 channels. Such expanded channel capacity,
along with other component additions, will permit cable operators to offer full
service networks with a variety of capabilities including near video-on-demand,
pay-per-view special events, home shopping networks, interactive entertainment
and education services, telephone services and high-speed access to data
resources such as the Internet. With respect to expanded channel capacity
systems, cable operators have generally adopted, and we believe that for the
foreseeable future will continue to adopt, a cable system using both fiber optic
cable and coaxial cable. Such systems combine the advantages of fiber optic
cable in transmitting clear signals over a long distance without amplification,
with the advantages of coaxial cable in ease of installation, low cost and
compatibility with the receiving components of the customer's communications
devices. We believe that while system operators are likely to increase their use
of fiber optic cable for the trunk and feeder portions of the cable systems,
there will be an ongoing need for high capacity coaxial cable for the local
distribution and street-to-the-home portions of the cable system.
U.S. cable system designs are increasingly being employed in international
markets where cable television penetration is low. For example, it is estimated
that in 1998 only 31% of the television households in Europe subscribed to some
form of multichannel television service as compared to an estimated subscription
rate of 66% in the U.S. The estimated subscription rates in the Asian and Latin
American markets are even lower at approximately 15% and 14%, respectively. In
terms of television households, it is estimated that there are 256 million
television households in Europe, 453 million in Asia and 96 million in Latin
America. This compares to an estimated 96 million television households in the
U.S. In 1998, we had sales of coaxial cable in approximately 50 countries, and
we believe the development of cable television systems in international markets
presents a significant opportunity to increase sales of our coaxial cable
products.
29
<PAGE>
We are also a leading producer of flat-ribbon cable, a cable made of wires
assembled side by side such that the finished cable is flat. Flat-ribbon cable
is used to connect internal components in systems with space and component
configuration limitations. The product is used in computer and office equipment
components as well as in a variety of telecommunications applications.
INTERNATIONAL OPERATIONS
We believe that our global presence is an important competitive advantage as
it allows us to provide quality products on a timely and worldwide basis to our
multinational customers. Approximately 46% of our sales for the year ended
December 31, 1998 were outside the United States. Approximately 60% of such
international sales were in Europe. We have manufacturing and assembly
facilities in Germany, United Kingdom, France, Sweden, the Czech Republic,
Estonia and sales offices in most European markets. Our European operations
generally have strong positions in their respective local markets. Local
operations coordinate product design and manufacturing responsibility with our
other operations around the world. The balance of our international activities
are located primarily in the Far East, which includes manufacturing facilities
in Japan, Taiwan, People's Republic of China, Korea and India, and Canada,
Mexico, Brazil and Australia. Our manufacturing and assembly facilities
generally serve the respective local markets. In addition, we have low cost
manufacturing and assembly operations in Mexico, the People's Republic of China,
the Czech Republic, Estonia and Scotland to serve regional and world markets.
CUSTOMERS
Our products are used in a wide variety of applications by numerous
customers, the largest of which is the U.S. government and its subcontractors
which accounted for 7% of sales for the nine months ended September 30, 1999;
however we participate across a broad spectrum of government programs and
believe that no single program accounted for more than 2% of those net sales. We
sell our products at over 10,000 customer locations worldwide. Our products are
sold both directly to OEMs, cable system operators, telecommunication companies
and through distributors. There has been a trend on the part of OEM customers to
consolidate their lists of qualified suppliers to companies that have a global
presence, can meet quality and delivery standards, have a broad product
portfolio and design capability, and have competitive prices. We have focused
our global resources to position ourselves to compete effectively in this
environment. We have concentrated our efforts on service and productivity
improvements including advanced computer aided design and manufacturing systems,
statistical process controls and just-in-time inventory programs to increase
product quality and shorten product delivery schedules. Our strategy is to
provide a broad selection of products in the areas in which we compete. We have
achieved a preferred supplier designation from many of our OEM customers.
Our sales to distributors represented approximately 27% of our 1998 sales.
Our recognized brand names including "Amphenol," "Times Fiber," "Tuchel,"
"Socapex," "Sine," "Spectra-Strip," "Pyle-National," "Matrix" and "Kai Jack"
together with our strong connector design-in position (products that are
specified in the plans and qualified by the OEM), enhance our ability to reach
the secondary market through our network of distributors. We believe that our
distributor network represents a competitive advantage.
MANUFACTURING
We employ advanced manufacturing processes including molding, stamping,
plating, turning, extruding, die casting and assembly operations as well as
proprietary process technology for flat-ribbon
30
<PAGE>
and coaxial cable production. Our manufacturing facilities are generally
vertically integrated operations from the initial design stage through final
design and manufacturing. Outsourcing of certain fabrication processes is used
when cost-effective. Substantially all of our manufacturing facilities are
certified to the ISO9000 series of quality standards.
We employ a global manufacturing strategy to lower our production costs and
to improve service to customers. We source our products on a worldwide basis
with manufacturing and assembly operations in North and South America, Europe,
Asia and Australia. To better serve high volume OEM customers, we have
established just-in-time facilities near major customers.
Our policy is to maintain strong cost controls in our manufacturing and
assembly operations. We have undertaken programs to rationalize our production
facilities, reduce expenses and maximize the return on capital expenditures. The
programs to improve productivity are ongoing.
We purchase a wide variety of raw materials for the manufacture of our
products, including precious metals such as gold and silver used in plating;
aluminum, brass, steel and copper used for cable, contacts and connector shells;
and plastic materials used for cable and connector bodies and inserts. Such raw
materials are generally available throughout the world and are purchased locally
from a variety of suppliers. We are not dependent upon any one source for raw
materials, or if one source is used we attempt to protect ourselves through
long-term supply agreements.
RESEARCH AND DEVELOPMENT
Our research, development and engineering expenditures for the creation and
application of new and improved products and processes were $17.7 million,
$15.3 million and $14.6 million (excluding customer sponsored programs
representing expenditures of $0.5 million, $0.2 million and $0.9 million) for
1998, 1997 and 1996, respectively. Our research and development activities focus
on selected product areas and are performed by individual operating divisions.
Generally, the operating divisions work closely with OEM customers to develop
highly-engineered products that meet customer needs. We continue to focus our
research and development efforts primarily on those product areas that we
believe have the potential for broad market applications and significant sales
within a one-to-three year period.
TRADEMARKS AND PATENTS
We own a number of active patents worldwide. While we consider our patents
to be valuable assets, we do not believe that our competitive position is
dependent on patent protection or that our operations are dependent on any
individual patent. We regard our trademarks "Amphenol," "Times Fiber," "Tuchel,"
"Socapex," "Sine," "Spectra-Strip," "Pyle-National," "Matrix" and "Kai Jack" to
be of value in our businesses. We have exclusive rights in all our major markets
to use these registered trademarks.
COMPETITION
We encounter competition in substantially all areas of our business. We
compete primarily on the basis of product quality, price, engineering, customer
service and delivery time. Competitors include large, diversified companies,
some of which have substantially greater assets and financial resources than we
do, as well as medium to small companies. In the area of coaxial cable for cable
television, we believe that we and CommScope are the primary providers of such
cable; however, CommScope is larger than us in this market. In addition, we face
competition from other companies that have concentrated their efforts in one or
more areas of the coaxial cable market.
31
<PAGE>
BACKLOG
We estimate that our backlog of unfilled orders was $227.7 million at
September 30, 1999 and $221.5 million at December 31, 1998. Orders typically
fluctuate from quarter to quarter based on customer demands and general business
conditions. Unfilled orders may be canceled prior to shipment of goods; however,
such cancellations historically have not been significant. It is expected that
all or a substantial portion of the backlog will be filled within the next
12 months. Significant elements of our business, such as sales to the cable
television industry, distributors, the computer industry, and other commercial
customers, generally have short lead times. Therefore, backlog may not be
indicative of future demand.
EMPLOYEES
As of September 30, 1999, we had approximately 7,700 full-time employees
worldwide. Of these employees, approximately 5,600 were hourly employees, of
which approximately 3,000 were represented by labor unions, and the remainder
were salaried. We had a one week strike in October 1995 at our Sidney, New York
facility relating to the renewal of the labor contract at that facility with the
International Association of Machinists and Aerospace Workers. We have not had
any other work stoppages in the past ten years. In 1997, the United States
Steelworkers International Union, AFL-CIO established a union, affecting
approximately 500 employees, at our plant in Chatham, Virginia, our primary
plant for the production of coaxial cable. We believe that we have a good
relationship with our unionized and non-unionized employees.
32
<PAGE>
MANAGEMENT
The following table sets forth the name, age as of November 12, 1999 and
position of our directors or executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Martin H. Loeffler........................ 55 Chairman of the Board, Chief Executive
Officer, President and Director
Edward G. Jepsen.......................... 56 Executive Vice President and Chief
Financial Officer
Timothy F. Cohane......................... 47 Senior Vice President
Edward C. Wetmore......................... 43 Secretary and General Counsel
Diana G. Reardon.......................... 40 Controller and Treasurer
Andrew M. Clarkson........................ 62 Director
G. Robert Durham.......................... 70 Director
Henry R. Kravis........................... 55 Director
George R. Roberts......................... 56 Director
Michael W. Michelson...................... 48 Director
Marc S. Lipschultz........................ 30 Director
</TABLE>
MARTIN H. LOEFFLER has been a Director of Amphenol since December 1987 and
Chairman of the Board since May 1997. He has been Chief Executive Officer since
May 1996 and President since July 1987.
EDWARD G. JEPSEN has been Executive Vice President and Chief Financial
Officer of Amphenol since May 1989 and Senior Vice President and Director of
Finance since November 1988.
TIMOTHY F. COHANE has been Senior Vice President of Amphenol since
December 1994 and a vice president since 1991.
EDWARD C. WETMORE has been Secretary and General Counsel of Amphenol since
1987.
DIANA G. REARDON has been Treasurer of Amphenol since March 1992 and
Controller since July 1994 and Assistant Controller since June 1988.
ANDREW M. CLARKSON has been a Director of AutoZone, Inc. since 1986,
Chairman of the Finance Committee of AutoZone, Inc. since 1995, Secretary from
1988 to 1993 and Treasurer from 1990 to 1995.
G. ROBERT DURHAM retired on June 1, 1996 from Walter Industries, Inc. having
served as Chairman and Chief Executive Officer since 1995 and President and
Chief Executive Officer since 1991. He formerly served as Chairman, President
and Chief Executive Office of Phelps Dodge Corporation. He is a Director of
Earle M. Jorgenson Company, the FINOVA Group Inc. and MONY Group Inc.
HENRY R. KRAVIS is a Founding Partner of KKR and since January 1996 a
Managing Member of the Executive Committee of the limited liability company
which serves as the general partner of Kohlberg Kravis Roberts & Co., L.P. He is
also a Director of Accuride Corporation, Borden, Inc., The Boyds
Collection, Ltd., Evenflo Company Inc., The Gillette Company, IDEX Corporation,
KinderCare Learning Centers, Inc., KSL Recreation Group, Inc.,
Owens-Illinois, Inc., PRIMEDIA Inc., Regal Cinemas, Inc., Safeway, Inc.,
Sotheby's Holdings, Inc., Spalding Holdings Corporation, and TI Group plc.
Messrs. Kravis and Roberts are first cousins.
GEORGE R. ROBERTS is a Founding Partner of KKR and since January 1996 a
Managing Member of the Executive Committee of the limited liability company
which serves as the general partner of Kohlberg Kravis Roberts & Co., L.P. He is
also a Director of Accuride Corporation, Borden, Inc., The Boyds Collection,
Ltd., Evenflo Company Inc., IDEX Corporation, KinderCare Learning Center, Inc.,
33
<PAGE>
KSL Recreation Group, Inc., Owens-Illinois, Inc., PRIMEDIA Inc., Regal
Cinemas, Inc., Safeway, Inc. and Spalding Holdings Corporation. Messrs. Kravis
and Roberts are first cousins.
MICHAEL W. MICHELSON is member of the limited liability company which serves
as the General Partner of KKR since 1996 and a General Partner of KKR since
1987. He is a Director of AutoZone, Inc., Owens-Illinois, Inc. and Promus Hotel
Corporation.
MARC S. LIPSCHULTZ has been an Executive at KKR since 1995. From 1993 to
1995, Mr. Lipschultz attended Harvard Business School. Prior thereto, he was an
investment banker with Goldman, Sachs & Co. He is also a Director of The Boyds
Collection, Ltd., Evenflo Company Inc. and Spalding Holdings Corporation.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 40 million shares of the Class A common stock and
no other shares of common stock or preferred stock. As of September 30, 1999,
there were approximately 17.9 million shares of the Class A common stock issued
and outstanding. The following is a summary of some of the rights and privileges
pertaining to the Class A common stock. For a full description of the Class A
common stock, reference is made to our Amended and Restated Certificate of
Incorporation and to our By-Laws.
Holders of the Class A common stock are entitled to one vote per share on
all matters submitted to a vote of stockholders. Approval of matters brought
before the stockholders requires the affirmative vote of a majority of shares
present and voting, except as otherwise required by law and except that the vote
of 80% or more of outstanding shares entitled to vote is required to modify the
provisions of the Amended and Restated Certificate of Incorporation relating to
the election of directors for staggered terms, the total number of directors and
independent directors, removal of directors, and the provision requiring an 80%
stockholder vote for certain actions. Director nominations may be made by
stockholders in accordance with our By-Laws, as amended, not less than 90 days
in advance of the meeting at which the election is to occur.
Holders of the Class A common stock are entitled to participate in dividends
as and when declared by the Board out of funds legally available therefor. Our
ability to pay cash dividends is subject to certain restrictions. See "Price
Range of Class A Common Stock and Dividend Policy."
Subject to the rights of creditors and holders of preferred stock, any
holders of Class A common stock are entitled to share ratably in a distribution
of our assets upon any liquidation, dissolution or winding-up of Amphenol.
Our directors serve in three different classes of approximately equal
numbers, and the term of only one class expires at each annual meeting. Before
the expiration of their terms, our directors may be removed by the affirmative
vote of the majority of the stockholders entitled to vote for the election of
directors but only for cause.
The transfer agent and registrar for the Class A common stock is EquiServe
Limited Partnership.
35
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith
Barney Inc. have severally agreed to purchase from us the number of shares set
forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
UNDERWRITERS:
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lehman Brothers Inc.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Salomon Smith Barney Inc....................................
---------
Total....................................................... 2,750,000
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares included in this offering are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to purchase and accept delivery
of all the shares (other than those covered by the over-allotment option
described below) if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters
may allow, and these dealers may re-allow, a concession not in excess of
$ per share on sales to some other dealers. After the initial offering
of the shares to the public, the representatives of the underwriters may change
the public offering price and these concessions. The underwriters do not intend
to confirm sales to any accounts over which they exercise discretionary
authority.
The following table shows the underwriting fees that we will pay to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of Class A common stock.
<TABLE>
<CAPTION>
PAID BY US
------------------------
FULL
NO EXERCISE EXERCISE
----------- ----------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
We will pay the offering expenses, estimated to be .
We have granted to the underwriters an option, exercisable for 30 days from
the date of the underwriting agreement, to purchase up to 412,500 additional
shares at the public offering price less the underwriting fees. The underwriters
may exercise this option solely to cover over-allotments, if any, made in
connection with this offering. To the extent that the underwriters exercise this
option, each underwriter will become obligated, subject to some conditions, to
purchase a number of additional shares approximately proportionate to that
underwriter's initial purchase commitment.
We have agreed to indemnify the underwriters against some civil liabilities,
including liabilities under the Securities Act of 1933 or to contribute to
payments that the underwriters may be required to make in respect of any of
these liabilities.
36
<PAGE>
Each of Amphenol, its executive officers and directors and some of its
stockholders has agreed that, for a period of 90 days from the date of this
prospectus, they will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Class A common stock or any securities
convertible into or exercisable or exchangeable for Class A common stock;
or
- enter into any swap or other arrangements that transfers all or a portion
of the economic consequences associated with the ownership of any Class A
common stock.
Each of the above transfer restrictions will apply regardless of whether a
covered transaction is to be settled by the delivery of Class A common stock or
other securities, in cash or otherwise. During the 90-day period, Amphenol may
grant stock options pursuant to existing stock option plans, issue shares upon
the exercise of an option or warrant or the conversion of some securities and
issue shares as consideration for some acquisitions made by Amphenol or its
subsidiaries. In addition, during the 90 day period, we have agreed not to file
any registration statement with respect to, and each of our executive officers
and directors and some of our stockholders has agreed not to make any demand
for, or exercise any right with respect to, the registration of any shares of
Class A common stock or any securities convertible into or exercisable for
Class A common stock without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of Class A common
stock included in this offering in any jurisdiction where action for that
purpose is required. The shares included in this offering may not be offered or
sold, directly or indirectly, nor may this prospectus or any other offering
material or advertisement in connection with the offer and sale of any of these
shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the Class A common stock and the distribution of this
prospectus. This prospectus is not an offer to sell or a solicitation of an
offer to buy any shares of Class A common stock included in this offering in any
jurisdiction where that would not be permitted or legal.
The underwriters or their affiliates have provided or may in the future
provide investment banking or other financial advisory services to KKR and its
affiliates and/or to us and our affiliates in the ordinary course of business,
for which they have received and are expected to receive customary fees and
expenses.
In connection with this offering, some underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Class A common stock. Specifically, the underwriters may overallot this
offering, creating a syndicate short position. In addition, the underwriters may
bid for and purchase shares of Class A common stock in the open market to cover
syndicate short positions or to stabilize the price of the Class A common stock.
These activities may stabilize or maintain the market price of the Class A
common stock above independent market levels. The underwriters are not required
to engage in these activities and may end any of these activities at any time.
37
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A common stock offered hereby will be
passed upon for us by Simpson Thacher & Bartlett, New York, New York and for the
Underwriters by Latham & Watkins, New York, New York. Certain partners of
Simpson Thacher & Bartlett and Latham & Watkins, members of their families,
related persons and others, have an indirect interest, through limited
partnerships, who are investors in KKR 1996 Fund L.P., in less than 1% of the
Class A common stock. In addition, Simpson Thacher & Bartlett and Latham &
Watkins have in the past provided, and may continue to provide, legal services
to KKR and its affiliates, including KKR 1996 Fund L.P.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1997 and
for each of the two years in the period ended December 31, 1998 included and
incorporated by reference in this prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is included
and incorporated by reference herein, and have been so included and incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The 1996 financial statements included and incorporated in this prospectus
by reference to Amphenol's Form 10-K for the year ended December 31, 1998, have
been so included and incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
information with the Commission. We have also filed with the Commission a
registration statement on Form S-3 to register the Class A common stock being
offered in this prospectus. This prospectus, which forms part of the
registration statement, does not contain all of the information included in the
registration statement. For further information about us and the Class A common
stock offered in this prospectus, you should refer to the registration statement
and its exhibits.
The Commission allows us to "incorporate by reference" the information we
file with them, which means we can disclose important information to you by
referring you to those documents. The information included in the following
documents is incorporated by reference and is considered to be a part of this
prospectus. The most recent information that we file with the Commission
automatically updates and supersedes older information. We have previously filed
the following documents with the Commission and are incorporating them by
reference into this prospectus:
1. Our Annual Report on Form 10-K and 10-K/A for the year ended December 31,
1998; and
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999.
Until we have sold all of the shares of the Class A common stock which we
are offering for sale under this prospectus, we will also incorporate by
reference all documents which we may file in the future pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act.
We will provide without charge to each person who receives a prospectus,
including any beneficial owner, a copy of the information that has been
incorporated by reference in this prospectus. If you would like to obtain this
information from us, please direct your request, either in writing or by
telephone, to the Secretary, Amphenol Corporation, 358 Hall Avenue, Wallingford,
Connecticut 06492, telephone (203) 265-8900.
38
<PAGE>
The registration statement can also be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The public may obtain information regarding the
Washington, D.C. Public Reference Room by calling the Commission at
1-800-SEC-0330. In addition, the Registration Statement is publicly available
through the Commission's site on the Internet's World Wide Web, located at:
http://www.sec.gov. Following the offering, our future public filings are
expected to be available for inspection at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
39
<PAGE>
(This page has been left intentionally blank.)
40
<PAGE>
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS OF AMPHENOL CORPORATION
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS (AUDITED):
Independent Auditors' Report (Deloitte & Touche LLP)...... F-2
Report of Independent Accountants (PricewaterhouseCoopers
LLP).................................................... F-3
Consolidated Statement of Income for the Three Years Ended
December 31, 1998....................................... F-4
Consolidated Balance Sheet as of December 31, 1998 and
1997.................................................... F-5
Consolidated Statement of Changes in Stockholders Equity
(Deficit) for the Three Years Ended December 31, 1998... F-6
Consolidated Statement of Cash Flow for the Three Years
Ended December 31, 1998................................. F-7
Notes to Consolidated Financial Statements................ F-8
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Condensed Consolidated Balance Sheet as of September 30,
1999 and December 31, 1998.............................. F-23
Condensed Consolidated Statements of Income for the Three
and Nine Months Ended September 30, 1999 and 1998....... F-24
Condensed Consolidated Statement of Changes in
Shareholders' Deficit for the Nine Months Ended
September 30, 1999...................................... F-25
Condensed Consolidated Statement of Changes in
Shareholders' Deficit for the Nine Months Ended
September 30, 1998...................................... F-26
Condensed Consolidated Statements of Cash Flow for the
Nine Months Ended September 30, 1999 and 1998........... F-27
Notes to Condensed Consolidated Financial Statements...... F-28
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of Amphenol Corporation
We have audited the accompanying consolidated balance sheet of Amphenol
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in shareholders' equity (deficit),
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 1998 and 1997 consolidated financial statements present
fairly, in all material respects, the financial position of Amphenol Corporation
and its subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
January 19, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Amphenol Corporation
In our opinion, the consolidated statement of income, of changes in
shareholders' equity and of cash flow for the year ended December 31, 1996
present fairly, in all material respects, the results of operations and cash
flows of Amphenol Corporation and its subsidiaries for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Amphenol
Corporation for any period subsequent to December 31, 1996.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
January 14, 1997
F-3
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................. $ 918,877 $ 884,348 $ 776,221
Costs and expenses:
Cost of sales, excluding depreciation and
amortization...................................... 601,930 572,092 494,689
Depreciation and amortization expense............... 23,553 20,428 17,846
Selling, general and administrative expense......... 131,966 125,064 114,746
Amortization of goodwill............................ 11,701 11,316 10,962
----------- ----------- -----------
Operating income...................................... 149,727 155,448 137,978
Interest expense...................................... (81,199) (64,713) (24,617)
Expenses relating to Merger and Recapitalization (Note
2).................................................. (2,500)
Other expenses, net................................... (4,545) (1,061) (3,696)
----------- ----------- -----------
Income before income taxes and extraordinary item..... 63,983 87,174 109,665
Provision for income taxes............................ (27,473) (35,910) (42,087)
----------- ----------- -----------
Income before extraordinary item...................... 36,510 51,264 67,578
Extraordinary item:
Loss on early extinguishment of debt, net of income
taxes of $14,728 (Notes 2 and 3).................. (24,547)
----------- ----------- -----------
Net income............................................ $ 36,510 $ 26,717 $ 67,578
=========== =========== ===========
Net income per common share:
Income before extraordinary item.................... $ 2.07 $ 1.84 $ 1.45
Extraordinary loss.................................. (.88)
----------- ----------- -----------
Net income.......................................... $ 2.07 $ .96 $ 1.45
=========== =========== ===========
Average common shares outstanding..................... 17,663,212 27,806,260 46,649,541
Net income per common share--assuming dilution:
Income before extraordinary item.................... $ 2.03 $ 1.83 $ 1.45
Extraordinary loss.................................. (.88)
----------- ----------- -----------
Net income.......................................... $ 2.03 $ .95 $ 1.45
=========== =========== ===========
Average common shares outstanding--assuming
dilution............................................ 17,942,397 28,002,977 46,720,900
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments...................... $ 3,095 $ 4,713
Accounts receivable, less allowance for doubtful accounts
of $1,832 and $1,633.................................... 83,065 70,037
Inventories:
Raw materials and supplies................................ 24,806 21,115
Work in process........................................... 114,035 96,833
Finished goods............................................ 45,583 49,062
--------- ---------
184,424 167,010
Prepaid expenses and other assets......................... 17,089 13,020
--------- ---------
Total current assets.................................. 287,673 254,780
--------- ---------
Land and depreciable assets:
Land...................................................... 10,782 10,702
Buildings................................................. 68,426 64,149
Machinery and equipment................................... 237,618 206,525
--------- ---------
316,826 281,376
Less accumulated depreciation............................. (190,047) (169,784)
--------- ---------
126,779 111,592
Deferred debt issuance costs................................ 16,783 19,377
Excess of cost over fair value of net assets acquired....... 360,265 339,223
Other assets................................................ 15,901 12,182
--------- ---------
$ 807,401 $ 737,154
========= =========
LIABILITIES & SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 67,885 $ 64,255
Accrued interest.......................................... 11,306 11,442
Accrued salaries, wages and employee benefits............. 14,385 14,229
Other accrued expenses.................................... 28,934 27,116
Current portion of long-term debt......................... 1,655 212
--------- ---------
Total current liabilities............................. 124,165 117,254
--------- ---------
Long-term debt.............................................. 952,469 937,277
Deferred taxes and other liabilities........................ 23,024 25,748
Commitments and contingent liabilities (Notes 3, 7 and 10)
Shareholders' Deficit:
Class A Common Stock, $.001 par value; 40,000,000 shares
authorized; 17,862,328 and 17,532,804 shares outstanding
at December 31, 1998 and 1997, respectively............. 18 18
Additional paid-in deficit................................ (499,928) (511,582)
Accumulated earnings...................................... 214,861 178,351
Accumulated other comprehensive income (Note 6)........... (7,208) (9,912)
--------- ---------
Total shareholders' deficit........................... (292,257) (343,125)
--------- ---------
$ 807,401 $ 737,154
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
PAID-IN COMPREHENSIVE TREASURY SHAREHOLDERS'
COMMON CAPITAL COMPREHENSIVE ACCUMULATED INCOME STOCK EQUITY
STOCK (DEFICIT) INCOME EARNINGS (NOTE 6) AT COST (DEFICIT)
-------- ----------- -------------- ------------ -------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995.... $47 $ 265,193 $ 84,056 $(5,211) $ 344,085
Comprehensive income:
Net income................. [$67,578] 67,578 67,578
---------
Other comprehensive income
(loss), net of tax:
Unrealized loss on
marketable
securities............. (1,085) (1,085)
Translation
adjustments............ 647 647
Minimum pension liability
adjustment............. 1,762 1,762
---------
Other comprehensive
income................... 1,324 1,324
---------
Comprehensive income......... [$68,902]
=========
Purchase of Treasury Stock... $(52,671) (52,671)
Amortization of deferred
compensation............... 65 65
Stock options exercised...... 167 167
--- ----------- -------- ------- -------- -----------
Balance December 31, 1996.... 47 265,425 151,634 (3,887) (52,671) 360,548
Comprehensive income:
Net income................. [$26,717] 26,717 26,717
---------
Other comprehensive income
(loss), net of tax:
Reclassification
adjustment for gain on
securities realized in
net income............. (3,687) (3,687)
Translation
adjustments............ (8,147) (8,147)
Minimum pension liability
adjustment............. 5,809 5,809
---------
Other comprehensive
income................... (6,025) (6,025)
---------
Comprehensive income......... [$20,692]
=========
Stock subscription
proceeds................... 532 532
Sale of 13,116,955 shares of
Common Stock (Note 2)...... 13 341,028 341,041
Purchase of 40,325,240 shares
of Common Stock (Note 2)... (40) (1,048,450) (1,048,490)
Fees and other expenses
related to the Merger and
Recapitalization (Note
2)......................... (17,644) (17,644)
Retirement of Treasury
Stock...................... (2) (52,669) 52,671
Amortization of deferred
compensation............... 186 186
Stock options exercised...... 10 10
--- ----------- -------- ------- -------- -----------
Balance December 31, 1997.... 18 (511,582) 178,351 (9,912) -- (343,125)
Comprehensive income:
Net income................. [$36,510] 36,510 36,510
---------
Other comprehensive income,
net of tax:
Translation
adjustments............ 2,704 2,704 2,704
---------
Comprehensive income......... [$39,214]
=========
Stock subscription
proceeds................... 25 25
Deferred compensation........ 180 180
Stock issued in connection
with acquisition........... 11,449 11,449
--- ----------- -------- ------- -------- -----------
Balance December 31, 1998.... $18 $ (499,928) $214,861 $(7,208) $ -- $ (292,257)
=== =========== ======== ======= ======== ===========
</TABLE>
- ------------------------------
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOW
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
-------- ----------- --------
<S> <C> <C> <C>
Net income.................................................. $ 36,510 $ 26,717 $ 67,578
Adjustments for cash from operations:
Depreciation and amortization............................. 35,254 31,744 28,808
Amortization of deferred debt issuance costs.............. 2,749 2,638 691
Net extraordinary charge for write off of deferred debt
issuance costs.......................................... 24,547
Non-recurring expenses relating to the Merger and
Recapitalization........................................ 2,500
Gain on sale of marketable securities..................... (3,917)
Net change in:
Accounts receivable..................................... (2,926) (18,261) 7,315
Inventory............................................... (9,229) (17,700) (10,801)
Prepaid expenses and other assets....................... (1,788) (2,479) 604
Accounts payable........................................ (257) 15,653 (3,411)
Accrued liabilities..................................... (4,251) 18,938 (13,644)
Accrued interest........................................ (142) 8,944 (188)
Accrued pension and post employment benefits............ (1,102) (4,717) (7,590)
Deferred taxes and other liabilities.................... 57 2,607 (970)
Other................................................... (1,647) (952) (185)
-------- ----------- --------
Cash flow provided by operations............................ 53,228 86,262 68,207
-------- ----------- --------
Cash flow from investing activities:
Additions to property, plant and equipment................ (26,340) (24,059) (20,374)
Investments in acquisitions and joint ventures............ (32,663) (4,000) (29,461)
Proceeds from the sale of marketable securities............. 7,351
-------- ----------- --------
Cash flow used by investing activities...................... (59,003) (20,708) (49,835)
-------- ----------- --------
Cash flow from financing activities:
Net change in borrowings under revolving credit
facilities.............................................. 9,157 (20,461) 26,255
Repurchase of senior notes and subordinated debt.......... (212,479)
Payment of fees and other expenses related to Merger and
Recapitalization........................................ (59,436)
Borrowings under Bank Agreement........................... 750,000
Net change in receivables sold............................ 10,000
Decrease in borrowings under Bank Agreement............... (5,000) (65,000)
Proceeds from the issuance of senior subordinated notes... 240,000
Purchase of Amphenol Common Stock......................... (1,048,490)
Sale of common stock related to Merger.................... 341,041
Treasury stock repurchases................................ (52,671)
-------- ----------- --------
Cash flow provided by (used by) financing activities........ 4,157 (64,825) (26,416)
-------- ----------- --------
Net change in cash and short-term cash investments.......... (1,618) 729 (8,044)
Cash and short-term cash investments balance, beginning of
period.................................................... 4,713 3,984 12,028
-------- ----------- --------
Cash and short-term cash investments balance, end of
period.................................................... $ 3,095 $ 4,713 $ 3,984
======== =========== ========
Cash paid during the year for:
Interest.................................................. $ 78,634 $ 53,237 $ 24,180
Income taxes paid, net of refunds......................... 26,024 20,623 54,765
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Amphenol Corporation ("Amphenol" or the "Company") is in two business
segments which consist of manufacturing and selling interconnect products and
assemblies, and manufacturing and selling cable products.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany transactions have been eliminated in
consolidation.
CASH AND SHORT-TERM CASH INVESTMENTS
Cash and short-term cash investments consist of cash and liquid investments
with an original maturity of less than three months.
INVENTORIES
Inventories are stated at the lower of standard cost, which approximates
average cost, or market. The principal components of cost included in
inventories are materials, direct labor and manufacturing overhead.
DEPRECIABLE ASSETS
Property, plant and equipment are carried at cost. Depreciation and
amortization of property, plant and equipment are provided on a straight-line
basis over the respective asset lives determined on a composite basis by asset
group or on a specific item basis using the estimated useful lives of such
assets which range from 3 to 12 years for machinery and equipment and 20 to 40
years for buildings. It is the Company's policy to periodically review fixed
asset lives.
DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs are being amortized on the interest method over
the term of the related debt and such amortization is included in interest
expense.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
The excess of cost over the fair value of net assets acquired (goodwill) is
being amortized on the straight-line basis over a period of 40 years.
Accumulated amortization was $108,674 and $96,973 at December 31, 1998 and 1997,
respectively. Management continually reassesses the appropriateness of both the
carrying value and remaining life of goodwill. Such reassessments are based on
forecasting
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
cash flows, on an undiscounted basis, and other factors. In the event an
impairment is indicated, the amount of the impairment would be based on
estimated discounted cash flows.
REVENUE RECOGNITION
Sales and related cost of sales are recognized upon shipment of products.
Sales and related cost of sales under long-term contracts with commercial
customers and the U.S. Government are recognized as units are delivered or
services provided.
RETIREMENT PENSION PLANS
Costs for retirement pension plans include current service costs and
amortization of prior service costs over periods of up to thirty years. It is
the Company's policy to fund current pension costs taking into consideration
minimum funding requirements and maximum tax deductible limitations. The expense
of retiree medical benefit programs is recognized during the employees' service
with the Company as well as amortization of a transition obligation recognized
on adoption of the accounting principle.
INCOME TAXES
Deferred income taxes are provided for revenue and expenses which are
recognized in different periods for income tax and financial statement purposes.
Deferred income taxes are not provided on undistributed earnings of foreign
affiliated companies which are considered to be permanently invested.
RESEARCH AND DEVELOPMENT
Research, development and engineering expenditures for the creation and
application of new and improved products and processes were $17,669, $15,313 and
$14,550, excluding customer sponsored programs representing expenditures of
$523, $214 and $927, for the years 1998, 1997 and 1996, respectively.
ENVIRONMENTAL OBLIGATIONS
The Company recognizes the potential cost for environmental remediation
activities when assessments are made, remedial efforts are probable and related
amounts can be reasonably estimated; potential insurance reimbursements are not
recorded. The Company regularly assesses its environmental liabilities through
reviews of contractual commitments, site assessments, feasibility studies and
formal remedial design and action plans.
NET INCOME PER COMMON SHARE
Net income per common share is based on the net income for the period
divided by the weighted average common shares outstanding. Net income per common
share assuming dilution assumes the exercise of outstanding, dilutive stock
options using the treasury stock method.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, which are periodically used by the Company
in the management of its interest rate and foreign currency exposures, are
accounted for on an accrual basis. Income and expense are recorded in the same
category as that arising from the related asset or liability. For example,
amounts to be paid or received under interest rate swap agreements are
recognized as interest income or expense in the periods in which they accrue.
NOTE 2--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 have been recorded as a recapitalization
("Merger and Recapitalization"). Expenses of $17,644 related to the repurchase
of the Company's common stock have been reflected as a reduction of additional
paid-in capital; other expenses of approximately $2,500, primarily relating to
the buyout of certain stock options, are reflected in the accompanying
Consolidated Statement of Income. In conjunction with the Merger and
Recapitalization, the Company recorded the costs associated with early
extinguishment of debt of $12,845, net of tax, as an extraordinary item in the
accompanying Consolidated Statement of Income. Such costs included the premium
associated with redemption of the Company's 10.45% Senior Notes and 12 3/4%
Subordinated Debentures and the write off of unamortized deferred debt issuance
costs. Supplemental earnings per share for 1997 assuming the Merger and
Recapitalization was completed at January 1, 1997, and excluding the impact of
related non-recurring expenses, is $1.98 per share.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
INTEREST RATE AT -------------------
DECEMBER 31, 1998 MATURITY 1998 1997
----------------- --------- -------- --------
<S> <C> <C> <C> <C>
Bank Agreement:
Term loan.................................. 7.35% 2000-2006 $680,000 $685,365
Revolving credit facility.................. 7.12% 2004 19,500
Senior subordinated notes.................... 9.875% 2007 240,000 240,000
Notes payable to foreign banks and other
debt....................................... 1.0%-21.0% 1999-2004 14,624 12,124
---------- --------- -------- --------
954,124 937,489
Less current portion......................... 1,655 212
-------- --------
Total long-term debt......................... $952,469 $937,277
======== ========
</TABLE>
In conjunction with the Merger and Recapitalization, the Company entered
into a $900,000 Bank Agreement with a syndicate of financial institutions,
comprised of a $150,000 revolving credit facility that expires in the year 2004
and a $750,000 term loan facility--$350,000 (Tranche A) maturing over a
seven-year period ending 2004, $200,000 (Tranche B) maturing in 2005 and
$200,000 (Tranche C) maturing in 2006. In October 1997, the Company negotiated a
significant amendment and restatement to the term loan under the Bank Agreement.
The amendment extinguished the Tranche B and C indebtedness with borrowings
under a new $375,000 Term Loan Tranche B with required amortization in 2005 and
2006. In conjunction with the amendment and restatement, the Company incurred an
extraordinary loss, net of tax, of $11,702 for the write off of unamortized
deferred debt issuance costs. At December 31, 1998, the Company had prepaid
$70,000 of the original term loan. Availability under the revolving credit
facility at December 31, 1998 was $128,478, after reduction of $2,022 for
outstanding letters of credit.
At December 31, 1998, interest under the Bank Agreement generally accrues at
.25% to .75% over prime or 1.50% to 2.0% over LIBOR at the Company's option. The
Company also pays certain annual agency and commitment fees. At December 31,
1998, the Company had interest rate protection in the form of swap agreements
that effectively fixed the Company's LIBOR interest rate on $450,000 of floating
rate bank debt at 5.76%. Such agreements are in effect to the extent that LIBOR
remains below 7% for $300,000 of debt and remains below 8% for an additional
$150,000 of debt. These agreements expire in July 2002.
The Bank Agreement is secured by a first priority pledge of 100% of the
capital stock of the Company's direct domestic subsidiaries and 65% of the
capital stock of direct material foreign subsidiaries, as defined in the Bank
Agreement. The Bank Agreement also requires that the Company satisfy certain
financial covenants including interest coverage and leverage ratio tests, and
includes limitations with respect to, among other things, (i) incurring debt,
(ii) creating or incurring liens, (iii) making other investments,
(iv) acquiring or disposing of assets, (v) capital expenditures, and (vi)
restricted payments, including dividends on the Company's common stock.
The 9 7/8% Senior Subordinated Notes due 2007 are general unsecured
obligations of the Company. The notes are subject to redemption at the option of
the Company, in whole or in part, beginning in 2002 at 104.938% and declining to
100% by 2005. In addition, at any time prior to 2000, the Company may, at its
option, redeem up to $96,000 of the notes at a redemption price of 109.875% with
the net cash proceeds of one or more equity offerings.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--LONG-TERM DEBT (CONTINUED)
The maturity of the Company's long-term debt over each of the next five
years ending December 31, is as follows: 1999--$1,655; 2000--$16,573; 2001
- -$49,151; 2002--$61,504; 2003--$82,026.
NOTE 4--INCOME TAXES
The components of income before income taxes and extraordinary item and the
provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income before taxes and extraordinary item:
United States............................................. $18,725 $45,354 $ 67,889
Foreign................................................... 45,258 41,820 41,776
------- ------- --------
$63,983 $87,174 $109,665
======= ======= ========
Current provision:
United States............................................. $10,002 $21,857 $ 24,174
Foreign................................................... 17,651 12,611 15,993
------- ------- --------
27,653 34,468 40,167
------- ------- --------
Deferred provision:
United States............................................. $ 745 $ 1,407 $ 1,884
Foreign................................................... (925) 35 36
------- ------- --------
(180) 1,442 1,920
------- ------- --------
Total provision for income taxes............................ $27,473 $35,910 $ 42,087
======= ======= ========
</TABLE>
At December 31, 1998, the Company had $19,253 of foreign tax loss
carryforwards, of which $1,768 expire at various dates through 2003 and the
balance can be carried forward indefinitely, and $450 of tax credit
carryforwards that expire between the years 1999 and 2011. Accrued income tax
liabilities of $5,667 and $8,251 at December 31, 1998 and 1997, respectively,
are included in other accrued expenses in the Consolidated Balance Sheet.
Differences between the U.S. statutory federal tax rate and the Company's
effective income tax rate are analyzed below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
U.S. statutory federal tax rate............................. 35.0% 35.0% 35.0%
State and local taxes....................................... 2.1 1.4 1.5
Non-deductible purchase accounting differences.............. 6.4 4.5 3.7
Foreign tax provisions (benefit) at rates different from the
U.S. statutory rate....................................... 1.4 (2.2) .5
Tax cost (benefit) of foreign dividend income, net of
related tax credits....................................... 1.4 3.1 (2.6)
Valuation allowance......................................... (.9) .1 (4.1)
Other....................................................... (2.5) (.7) 4.4
---- ---- ----
Effective tax rate.......................................... 42.9% 41.2% 38.4%
==== ==== ====
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--INCOME TAXES (CONTINUED)
The Company's deferred tax assets and liabilities, excluding a valuation
allowance, were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves........................ $ 4,415 $ 5,583
Operating loss carryforwards............................ 7,298 7,214
Foreign tax credit carryforwards........................ 450 348
Employee benefits....................................... 2,221 1,933
------- -------
$14,384 $15,078
======= =======
Deferred tax liabilities:
Depreciation............................................ $ 7,399 $ 8,031
Prepaid pension costs................................... 6,103 6,984
------- -------
$13,502 $15,015
======= =======
</TABLE>
A valuation allowance of $9,182 and $9,731 at December 31, 1998 and 1997,
respectively, has been recorded which relates primarily to foreign net operating
loss carryforwards, tax credits and certain deferred tax deductions for which a
tax benefit is less likely than not to be received. The net change in the
valuation allowance for deferred tax assets was a reduction of $549 in 1998 and
an increase of $1,547 in 1997. The net change in the valuation allowance was
principally due to the expiration of tax credits in 1998 and the incurrence of
foreign net operating loss carryforwards in 1997. Current and non-current
deferred tax assets and liabilities within the same tax jurisdiction are offset
for presentation in the Consolidated Balance Sheet.
United States income taxes have not been provided on undistributed earnings
of international subsidiaries. The Company's intention is to reinvest these
earnings permanently or to repatriate the earnings only when it is tax effective
to do so. Accordingly, the Company believes that any United States tax on
repatriated earnings would be substantially offset by U.S. foreign tax credits.
The Company is subject to periodic audits of its various tax returns by
government agencies; management does not believe that amounts, if any, which may
be required to be paid by reason of such audits will have a material effect on
the Company's financial position or results of operations.
NOTE 5--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company and its domestic subsidiaries had a number of defined benefit
plans covering substantially all U.S. employees. Effective December 31, 1997,
the individual U.S. plans were merged into one plan . The information presented
below for U.S. plans for 1998 and 1997 is on the basis of the merged plans. Plan
benefits are generally based on years of service and compensation. The plans are
noncontributory, except for certain salaried employees. Certain foreign
subsidiaries have defined benefit
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
plans covering their employees. The following is a summary of the Company's
defined benefit plans funded status as of the most recent actuarial valuations
(December 31, 1998 and 1997).
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- -------------------------
ACCUMULATED ASSETS ACCUMULATED ASSETS
BENEFITS EXCEED BENEFITS EXCEED
EXCEED ACCUMULATED EXCEED ACCUMULATED
ASSETS BENEFITS ASSETS BENEFITS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year..... $ 21,540 $178,982 $ 23,691 $166,535
Service cost................................ 768 3,697 744 3,225
Interest cost............................... 1,450 12,692 1,403 12,358
Plan participants' contributions............ 272 265
Plan amendments............................. 4,797 1,678
Actuarial (gain) loss....................... 762 7,955 (52) 10,819
Settlements and curtailments................ (609)
Foreign exchange............................ 1,717 (223) (3,369) (452)
Benefits paid............................... (935) (14,538) (877) (14,837)
-------- -------- -------- --------
Benefit obligation at end of year........... 25,302 193,634 21,540 178,982
-------- -------- -------- --------
Change in plan assets:
Fair value of plan assets at beginning of
year...................................... 204,679 178,839
Actual return on plan assets................ 32,065 37,832
Employer contribution....................... 61 3,458
Plan participants' contributions............ 272 265
Foreign exchange............................ (320) (878)
Benefits paid............................... (14,538) (14,837)
-------- -------- -------- --------
Fair value of plan assets at end of year.... -- 222,219 -- 204,679
-------- -------- -------- --------
Funded status................................. (25,302) 28,585 (21,540) 25,697
Unrecognized net actuarial (gain) loss........ 1,075 (9,236) 252 (4,046)
Unrecognized prior service cost............... 10,076 6,609
Unrecognized transition obligation net........ 167 (2,540) 177 (2,867)
-------- -------- -------- --------
(Accrued) prepaid benefit cost................ $(24,060) $ 26,885 $(21,111) $ 25,393
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Components of net pension cost:
Service cost.............................................. $ 4,465 $ 3,969 $ 3,723
Interest cost............................................. 14,142 13,761 13,707
Expected return on plan assets............................ (18,038) (35,321) (16,193)
Net amortization and deferral of actuarial losses......... 983 19,417 1,321
-------- -------- --------
Net pension cost............................................ $ 1,552 $ 1,826 $ 2,558
======== ======== ========
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The weighted-average discount rate and rate of increase in future
compensation levels used in determining actuarial present value of the projected
benefit obligation was 7.0% (7.25% in 1997 and 7.5% in 1996) and 3.0% (3.25% in
1997 and 3.50% in 1996), respectively. The expected long-term rate of return on
assets was 10.5%. Plan assets consist primarily of U.S. equity and debt
securities. The Company has also adopted an unfunded Supplemental Employee
Retirement Plan ("SERP") which provides for the payment of the portion of annual
pension which cannot be paid from the retirement plan as a result of regulatory
limitations on average compensation for purposes of the benefit computation. The
largest non-U.S. pension plan, in accordance with local custom, is unfunded and
had an accumulated benefit obligation of approximately $21,139 and $18,656 at
December 31, 1998 and 1997, respectively. Such obligation is included in the
Consolidated Balance Sheet and the tables above. Pension plans of certain of the
Company's other international subsidiaries generally do not determine the
actuarial value of accumulated benefits and the value of net assets on the basis
shown above. The plans, in accordance with local practices, are generally
unfunded. The vested benefit obligations of these plans are not significant.
The Company maintains self insurance programs for that portion of its health
care and workers compensation costs not covered by insurance. The Company also
provides certain health care and life insurance benefits to certain eligible
retirees through postretirement benefit programs. The Company's share of the
cost of such plans for most participants is fixed, and any increase in the cost
of such plans will be the responsibility of the retirees. The Company funds the
benefit costs for such plans on a pay-as-you-go basis. Since the Company's
obligation for postretirement medical plans is fixed and since the accumulated
postretirement benefit obligation ("APBO") and the net postretirement benefit
expense are not material in relation to the Company's financial condition or
results of operations, management believes any change in medical costs from that
estimated will not have a significant impact on the Company. The discount rates
used in determining the APBO at December 31, 1998 and 1997 were 7.0% and 7.25%,
respectively.
Summary information on the Company's postretirement medical plans as of
December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year............... $ 13,027 $ 13,102
Service cost.......................................... 72 65
Interest cost......................................... 935 963
Benefits and expenses paid by Amphenol................ (2,616) (2,092)
Actuarial gain (loss)................................. 1,247 989
-------- --------
Benefit obligation at end of year..................... $ 12,665 $ 13,027
======== ========
Funded status........................................... $(12,665) $(13,027)
Unrecognized net actuarial loss......................... 9,111 8,507
Unrecognized transition obligation...................... 869 931
-------- --------
Accrued benefit cost.................................... $ (2,685) $ (3,589)
======== ========
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Components of net postretirement benefit cost:
Service cost.............................................. $ 72 $ 65 $ 36
Interest cost............................................. 935 963 1,545
Amortization of transition obligation..................... 62 62 424
Net amortization and deferral of actuarial losses......... 961 733 729
------ ------ ------
Net postretirement benefit cost............................. $2,030 $1,823 $2,734
====== ====== ======
</TABLE>
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT)
The Company had a stock option plan which authorized the granting of stock
options by the Board of Directors for up to a maximum of 1,000,000 shares of
Class A Common Stock (the "Old Plan"). In conjunction with the Merger and
Recapitalization, all outstanding options under the Old Plan were cancelled and
the holders of options with an exercise price less than $26.00 per share were
paid the difference between $26.00 and the exercise price. Such amount for all
of the then outstanding options was approximately $2.2 million. In May 1997, the
Company adopted the 1997 Option Plan (the "New Plan") which authorizes the
granting of stock options by a committee of the Board of Directors for up to a
maximum of 1,200,000 shares of Common Stock. In May 1998, the New Plan was
amended to increase the number of authorized shares to a maximum of 1,750,000.
Options granted under the New Plan vest ratably over a period of five years from
the date of grant and are exercisable over a period of ten years from the date
of grant. In addition, shares issued in conjunction with the exercise of stock
options under the New Plan are generally subject to a Management Stockholders'
Agreement which, among other things, places restrictions on the sale or transfer
of such shares.
Stock option plan activity for 1996, 1997, and 1998 was as follows:
<TABLE>
<CAPTION>
OLD PLAN NEW PLAN AVERAGE PRICE
--------- --------- -------------
<S> <C> <C> <C>
Options outstanding at December 31, 1995................... 313,844 $18.48
Options granted............................................ 173,600 23.82
Options exercised.......................................... (15,005) 11.11
Options cancelled.......................................... (49,001) 21.53
---------
Options outstanding at December 31, 1996................... 423,438 20.58
Options granted............................................ 1,190,176 26.12
Options exercised.......................................... (14,001) 13.15
Options cancelled.......................................... (409,437) (11,750) 20.47
--------- ---------
Options outstanding at December 31, 1997................... -- 1,178,426 26.12
Options granted............................................ -- 240,460 50.82
Options cancelled.......................................... -- (148,450) 51.36
--------- ---------
Options outstanding at December 31, 1998................... -- 1,270,436 $27.85
========= =========
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- -------------------
AVERAGE AVERAGE
EXERCISE PRICE SHARES PRICE TERM SHARES PRICE
- -------------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$26.00 1,137,676 $26.00 8.38 227,535 $26.00
32.00 66,060 32.00 9.82 -- --
39.93 10,000 39.93 8.63 2,000 39.93
58.00 56,700 58.00 9.27 -- --
</TABLE>
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the stock option
plans. Accordingly, no compensation cost has been recognized for the plans. Had
compensation cost for the stock option plans been determined based on the fair
value of the option at date of grant consistent with the requirements of SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's income before
extraordinary item and net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary item.................... As reported $36,510 $51,264 $67,578
Pro forma 34,075 49,704 66,884
Income per share before extraordinary item.......... As reported $ 2.07 $ 1.84 $ 1.45
Pro forma 1.93 1.79 1.43
Income per share before extraordinary item -
assuming dilution................................. As reported $ 2.03 $ 1.83 $ 1.45
Pro forma 1.90 1.78 1.43
Net income.......................................... As reported $36,510 $26,717 $67,578
Pro forma 34,075 25,157 66,884
Net income per share................................ As reported $ 2.07 $ .96 $ 1.45
Pro forma 1.93 .90 1.43
Net income per share - assuming dilution............ As reported $ 2.03 $ .95 $ 1.45
Pro forma 1.90 .90 1.43
</TABLE>
The fair value of each stock option has been estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Risk free interest rate........................... 5.1% 5.4% 6.1%
Expected life..................................... 4 years 4 years 4 years
Expected volatility............................... 30.0% 30.0% 30.0%
Expected dividend yield........................... -- -- --
</TABLE>
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The weighted-average fair values of options granted during 1998, 1997 and
1996 were $16.69, $8.36 and $7.98, respectively.
Activity in the Company's Accumulated Other Comprehensive Income accounts
for 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
CUMULATIVE
CUMULATIVE MINIMUM ACCUMULATED
CUMULATIVE APPRECIATION PENSION OTHER
TRANSLATION IN MARKETABLE LIABILITY COMPREHENSIVE
ADJUSTMENT SECURITIES ADJUSTMENT INCOME
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Balance December 31, 1995................... $(2,412) $ 4,772 $(7,571) $(5,211)
Translation adjustments................... 647 647
Change in appreciation in market value of
marketable securities
available-for-sale...................... (1,085) (1,085)
Change in minimum pension liability
adjustment.............................. 1,762 1,762
------- ------- ------- -------
Balance December 31, 1996................... (1,765) 3,687 (5,809) (3,887)
Translation adjustments................... (8,147) (8,147)
Change in appreciation in market value of
marketable securities
available-for-sale...................... (1,140) (1,140)
Sale of available-for-sale securities..... (2,547) (2,547)
Change in minimum pension liability
adjustment.............................. 5,809 5,809
------- ------- ------- -------
Balance December 31, 1997................... (9,912) -- -- (9,912)
Translation adjustments................... 2,704 2,704
------- ------- ------- -------
Balance December 31, 1998................... $(7,208) -- -- $(7,208)
======= ======= ======= =======
</TABLE>
NOTE 7--LEASES
At December 31, 1998, the Company was committed under operating leases which
expire at various dates through 2008. Total rent expense under operating leases
for the years 1998, 1997, and 1996 was $13,927, $11,495 and $12,216
respectively.
Minimum lease payments under non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
1999........................................................ $12,535
2000........................................................ 9,322
2001........................................................ 6,586
2002........................................................ 4,763
2003........................................................ 2,857
Beyond 2003................................................. 2,109
-------
Total minimum obligation $38,172
=======
</TABLE>
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8--REPORTABLE BUSINESS SEGMENTS AND INTERNATIONAL OPERATIONS
The Company has two reportable business segments: interconnect products and
assemblies and cable products. The interconnect products and assemblies segment
produces connectors and connector assemblies primarily for the communications,
aerospace, industrial and automotive markets. The cable products segment
produces coaxial and flat ribbon cable primarily for communication markets,
including cable television. The accounting policies of the segments are the same
as those for the Company as a whole and are described in Note 1 herein. The
Company evaluates the performance of business units on, among other things,
profit or loss from operations before interest expense, goodwill and other
intangible amortization expense, headquarters' expense allocations, income taxes
and nonrecurring gains and losses. The Company's reportable segments are an
aggregation of business units that have similar production processes and
products.
<TABLE>
<CAPTION>
INTERCONNECT PRODUCTS CABLE
AND ASSEMBLIES PRODUCTS TOTAL
------------------------------ ------------------------------ ------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales
--external................... $718,109 $679,887 $585,033 $200,768 $204,461 $191,188 $918,877 $884,348 $776,221
--intersegment............... 358 102 76 7,189 5,037 4,462 7,547 5,139 4,538
Depreciation and
amortization................. 18,235 15,029 13,110 3,039 2,960 2,306 21,274 17,989 15,416
Segment operating income....... 135,739 132,520 102,937 31,880 39,313 43,818 167,619 171,833 146,755
Segment assets................. 311,892 256,380 232,765 55,119 58,743 51,129 367,011 315,123 283,894
Additions to property, plant
and equipment................ 22,483 21,275 17,654 3,834 2,666 3,388 26,317 23,941 21,042
</TABLE>
Reconciliation of segment operating income to consolidated income before
taxes and extraordinary item:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Segment operating income...................... $167,619 $171,833 $146,755
Amortization of goodwill...................... (11,701) (11,316) (10,962)
Interest expense.............................. (81,199) (64,713) (24,617)
Headquarters' expense and other net
expenses.................................... (10,736) (8,630) (1,511)
-------- -------- --------
Consolidated income before taxes and
extraordinary item.......................... $ 63,983 $ 87,174 $109,665
======== ======== ========
</TABLE>
Reconciliation of segment assets to consolidated total assets:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Segment assets................................ $367,011 $315,123 $283,894
Goodwill...................................... 360,265 339,223 346,583
Other unallocated assets...................... 80,125 82,808 80,185
-------- -------- --------
Consolidated total assets..................... $807,401 $737,154 $710,662
======== ======== ========
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8--REPORTABLE BUSINESS SEGMENTS AND INTERNATIONAL OPERATIONS (CONTINUED)
Geographic information:
<TABLE>
<CAPTION>
LAND AND
NET SALES DEPRECIABLE ASSETS
------------------------------ ------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States.......................... $591,377 $581,278 $503,385 $ 70,072 $ 64,020 $ 60,413
Europe................................. 245,057 230,923 233,670 43,301 36,519 33,761
Other.................................. 155,350 133,355 92,689 13,406 11,053 7,901
Eliminations........................... (72,907) (61,208) (53,523)
-------- -------- -------- -------- -------- --------
Total.................................. $918,877 $884,348 $776,221 $126,779 $111,592 $102,075
======== ======== ======== ======== ======== ========
</TABLE>
Revenues by geographic area are based on origin of shipment. The Company had
export sales from the United States operations of approximately $58,000, $88,000
and $80,000 in 1998, 1997 and 1996, respectively.
NOTE 9--OTHER EXPENSES, NET
Other income (expense) is comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Interest income................................... $ 121 $ 234 $ 784
Foreign currency transaction gains................ 1,445 1,283 339
Program fees on sale of accounts receivable....... (4,121) (3,671) (3,504)
Minority interests................................ (849) (1,042) (251)
Gain on sale of marketable securities............. 3,917
Agency and commitment fees........................ (705) (678) (257)
Other............................................. (436) (1,104) (807)
------- ------- -------
$(4,545) $(1,061) $(3,696)
======= ======= =======
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
In the course of pursuing its normal business activities, the Company is
involved in various legal proceedings and claims. Management does not expect
that amounts, if any, which may be required to be paid by reason of such
proceedings or claims will have a material effect on the Company's financial
position or results of operations.
Subsequent to the acquisition of Amphenol from Allied Signal Corporation
("Allied") in 1987, Amphenol and Allied have been named jointly and severally
liable as potentially responsible parties in relation to several environmental
cleanup sites. Amphenol and Allied have jointly consented to perform certain
investigations and remedial and monitoring activities at two sites and they have
been jointly ordered to perform work at another site. The responsibility for
costs incurred relating to these sites is apportioned between Amphenol and
Allied based on an agreement entered into in connection with the acquisition.
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,
Allied is currently obligated to pay 80% of the
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
costs up to $30,000 and 100% of the costs in excess of $30,000. At December 31,
1998, approximately $15,000 of total costs have been incurred applicable to this
agreement. 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 May
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 expenses, net, in the accompanying Consolidated Statement
of Income. The agreement contains certain covenants and provides for various
events of termination. In certain circumstances the Company is contingently
liable for the collection of the receivables sold; management believes that its
allowance for doubtful accounts is adequate to absorb the expense of any such
liability. At December 31, 1998 and 1997, approximately $60,000 in receivables
were sold under the agreement and are therefore not reflected in the accounts
receivable balance in the accompanying Consolidated Balance Sheet.
NOTE 11--FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and short-term cash investments: The carrying amount approximates fair
value because of the short maturity of those instruments.
Long-term debt: The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.
At December 31, 1998 and 1997, based on market quotes for the same or similar
securities it is estimated that the Company's 9 7/8% Subordinated Debentures
were trading at a premium of 5% over book value. The book value of the Company's
other long-term debt approximates fair value.
Investments: The Company periodically uses derivative financial instruments.
The instruments are primarily used to manage defined interest rate risk, and to
a lesser extent foreign exchange and commodity risks arising out of the
Company's core activities. In 1997, the Company entered into interest rate swaps
to limit exposure to interest rate fluctuations on the Company's floating rate
bank debt. At December 31, 1998 and 1997, the Company had $450,000 of interest
rate swaps outstanding as described in Note 3. While it is not the Company's
intention to terminate the interest rate swap agreements, the fair values were
estimated by obtaining quotes from brokers which represented the amounts that
the Company would receive or pay if the agreements were terminated. These fair
values indicated that termination of the agreements at December 31, 1998 and
1997 would have resulted in a pretax loss of $12,829 and $3,085, respectively.
Due to the volatility of interest rates, these estimated results may or may not
be realized.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11--FINANCIAL INSTRUMENTS (CONTINUED)
The Company does not utilize financial instruments for trading or other
speculative purposes. It is estimated that the carrying value of the Company's
other financial instruments at December 31, 1998 and 1997 approximates fair
value.
NOTE 12--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1998
Net sales........................................ $228,541 $227,942 $229,018 $233,376
Gross profit, including depreciation............. 74,397 74,621 72,813 72,892
Net income....................................... 9,673 10,355 8,212 8,270
Net income per share............................. .55 .59 .46 .46
Net income per share assuming dilution........... .54 .58 .46 .46
Stock price--High................................ 64 61 5/8 44 1/8 35 1/16
--Low................................... 53 1/4 39 29 13/16 27 1/2
1997
Net sales........................................ $211,773 $226,996 $223,494 $222,085
Gross profit, including depreciation............. 69,583 75,682 74,002 74,069
Income before extraordinary items................ 17,497 15,774 8,559 9,434
Income per share before extraordinary item....... .39 .50 .49 .54
Income per share before extraordinary item
assuming dilution.............................. .39 .49 .48 .53
Net income (loss)................................ 17,497 2,929 8,559 (2,268)
Net income (loss) per share...................... .39 .09 .49 (.13)
Net income (loss) per share assuming dilution.... .39 .09 .48 (.13)
Stock price--High 26 38 7/8 43 1/2 56
--Low................................... 21 3/4 24 1/8 39 1/16 44
1996
Net sales........................................ $194,822 $198,921 $184,876 $197,602
Gross profit, including depreciation............. 66,639 67,816 63,523 66,539
Net income....................................... 16,940 17,408 16,697 16,533
Net income per share (1)......................... .36 .37 .36 .37
Stock price--High................................ 26 27 5/8 22 7/8 23
--Low................................... 20 1/8 19 7/8 18 3/4 19
</TABLE>
- ------------------------
(1) Net income per share assuming dilution is equal to net income per share.
F-22
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments...................... $ 8,969 $ 3,095
Accounts receivable, less allowance for doubtful accounts
of $2,303 and $1,832, respectively...................... 116,463 83,065
Inventories............................................... 195,987 184,424
Prepaid expenses and other assets......................... 19,315 17,089
-------- --------
Total current assets........................................ 340,734 287,673
-------- --------
Land and depreciable assets, less accumulated depreciation
of $197,287 and $190,047, respectively.................... 122,315 126,779
Deferred debt issuance costs................................ 14,711 16,783
Excess of cost over fair value of net assets acquired....... 359,747 360,265
Other assets................................................ 10,656 15,901
-------- --------
$848,163 $807,401
======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 76,776 $ 67,885
Accrued interest.......................................... 17,003 11,306
Other accrued expenses.................................... 52,219 43,319
Current portion of long-term debt......................... 1,696 1,655
-------- --------
Total current liabilities................................... 147,694 124,165
-------- --------
Long-term debt.............................................. 938,222 952,469
Deferred taxes and other liabilities........................ 27,357 23,024
Shareholders' Deficit:
Common stock.............................................. 18 18
Additional paid-in deficit................................ (499,793) (499,928)
Accumulated earnings...................................... 245,149 214,861
Accumulated other comprehensive loss...................... (10,484) (7,208)
-------- --------
Total shareholders' deficit................................. (265,110) (292,257)
-------- --------
$848,163 $807,401
======== ========
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
F-23
<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,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales..................................... $256,857 $229,018 $741,459 $685,501
Costs and expenses:
Cost of sales, excluding depreciation and
amortization.............................. 168,198 150,601 487,685 447,494
Depreciation and amortization expense....... 7,108 5,944 21,057 17,181
Selling, general and administrative
expense................................... 37,369 33,210 107,428 98,191
Amortization of goodwill.................... 3,103 2,995 9,263 8,653
---------- ---------- ---------- ----------
Operating income.............................. 41,079 36,268 116,026 113,982
Interest expense.............................. (20,001) (20,453) (59,673) (60,745)
Other expenses, net........................... (1,229) (1,040) (3,817) (3,022)
---------- ---------- ---------- ----------
Income before income taxes.................... 19,849 14,775 52,536 50,215
Provision for income taxes.................... 8,263 6,563 22,248 21,975
---------- ---------- ---------- ----------
Net income.................................... $11,586 $8,212 $30,288 $28,240
---------- ---------- ---------- ----------
Net income per common share................... $.65 $.46 $1.70 $1.60
---------- ---------- ---------- ----------
Average common shares outstanding............. 17,864,646 17,716,592 17,863,510 17,596,608
---------- ---------- ---------- ----------
Net income per common share--assuming
dilution.................................... $.64 $.46 $1.67 $1.58
---------- ---------- ---------- ----------
Average common shares outstanding assuming
dilution.................................... 18,196,036 17,917,861 18,107,502 17,927,434
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to condensed
consolidated financial statements.
F-24
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(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, 1998......... $18 $(499,928) $214,861 $ (7,208) $(292,257)
Comprehensive income:
Net income................ [$ 30,288] 30,288 30,288
-----------------
Other comprehensive loss,
net of tax:
Foreign currency
translation
adjustment............ (3,276) (3,276) (3,276)
-----------------
Comprehensive income........ [$ 27,012]
=================
Other adjustments........... 135 135
--- --------- -------- -------- ---------
Ending balance at
Sept. 30, 1999............ $18 $(499,793) $245,149 $(10,484) $(265,110)
=== ========= ======== ======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-25
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' DEFICIT
FOR THE 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......... $18 $(511,582) $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............ $18 $(499,973) $206,591 $(7,606) $(300,970)
=== ========= ======== ======= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE>
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net income.................................................. $30,288 $28,240
Adjustments for cash from operations:
Depreciation and amortization............................. 30,320 25,834
Amortization of deferred debt issuance costs.............. 2,072 2,059
Net change in non-cash components of working capital...... (22,513) (20,454)
------- -------
Cash flow provided by operations............................ 40,167 35,679
------- -------
Cash flow from investing activities:
Capital additions, net.................................... (18,299) (20,753)
Investments in acquisitions............................... (1,416) (30,373)
------- -------
Cash flow used by investing activities...................... (19,715) (51,126)
------- -------
Cash flow from financing activities:
Net change in borrowings under revolving credit
facilities.............................................. (14,578) 18,010
Decrease in borrowings under New Credit Facility.......... -- (5,000)
------- -------
Cash flow (used by) provided by financing activities........ (14,578) 13,010
------- -------
Net change in cash and short-term cash investments.......... 5,874 (2,437)
Cash and short-term cash investments balance, beginning of
period.................................................... 3,095 4,713
------- -------
Cash and short-term cash investments balance, end of
period.................................................... $ 8,969 $ 2,276
------- -------
Cash paid during the period for:
Interest.................................................. $51,903 $51,879
Income taxes paid, net of refunds......................... 16,459 20,747
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-27
<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, 1999 and
December 31, 1998, and the related condensed consolidated statements of income
for the three and nine months ended September 30, 1999 and 1998 and of changes
in shareholders' deficit and of cash flow for the nine months ended September
30, 1999 and 1998 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, 1999 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 1998 Annual Report
on Form 10-K.
NOTE 2--INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
-------------
<S> <C> <C>
Raw materials and supplies.......................... $ 28,090 $ 24,806
Work in process..................................... 121,426 114,035
Finished goods...................................... 46,471 45,583
-------- --------
$195,987 $184,424
======== ========
</TABLE>
NOTE 3--REPORTABLE BUSINESS SEGMENTS (UNAUDITED)
The Company has two reportable business segments: interconnect products and
assemblies and cable products. The interconnect products and assemblies segment
produces connectors and connector assemblies primarily for the communications,
aerospace, industrial and automotive markets. The cable products segment
produces coaxial and flat ribbon cable primarily for communication markets,
including cable television. The Company evaluates the performance of business
units on, among other things, profit or loss from operations before interest
expense, goodwill and other intangible amortization expense, headquarters'
expense allocations, income taxes and nonrecurring gains and losses. The
Company's reportable segments are an aggregation of business units that have
similar production processes and products. The segment results for the nine
months ended September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
INTERCONNECT
PRODUCTS CABLE
AND ASSEMBLIES PRODUCTS TOTAL
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales
- -external.............................. $563,085 $535,654 $178,374 $149,847 $741,459 $685,501
- -intersegment.......................... 533 266 6,819 5,554 7,352 5,820
Segment operating income............... 98,432 105,278 36,441 22,328 134,873 127,606
</TABLE>
F-28
<PAGE>
AMPHENOL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--REPORTABLE BUSINESS SEGMENTS (UNAUDITED) (CONTINUED)
Reconciliation of segment operating income to consolidated income before
taxes for the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Segment operating income................................ $134,873 $127,606
Amortization of goodwill................................ (9,263) (8,653)
Interest expense........................................ (59,673) (60,745)
Other net expenses...................................... (13,401) (7,993)
-------- --------
Consolidated income before income taxes................. $ 52,536 $ 50,215
-------- --------
</TABLE>
NOTE 4--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 AlliedSignal Inc. ("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,
Allied is currently obligated to pay 80% of the costs up to $30,000 and 100% of
the costs in excess of $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 expenses, 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. At September 30, 1999 and December 31, 1998,
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.
F-29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
AMPHENOL CORPORATION
2,750,000 SHARES OF CLASS A COMMON STOCK
--------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Amphenol
have not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by Amphenol in connection with the offering
described in this Registration Statement are as follows:
<TABLE>
<S> <C>
Registration Fee............................................ $ 56,268
Legal fees and expenses..................................... 350,000
Blue Sky fees and expenses.................................. 5,000
Accounting fees and expenses................................ 60,000
Transfer agent and expenses................................. 2,500
Printing and duplicating expenses........................... 120,000
Miscellaneous expenses...................................... 51,232
----------
Total................................................... $ 645,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement or
otherwise. Article VII of the Registrant's Restated Certificate of Incorporation
and Article IV of the Registrant's By-laws requires indemnification to the
fullest extent permitted by Delaware law.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) for improper payment of
dividends or redemption of shares, or (iv) for any breach of a director's duty
of loyalty to the company or its stockholders. Article VII of the Registrant's
Restated Certificate of Incorporation includes such a provision.
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the Amphenol's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each
II-1
<PAGE>
filing of an employee benefit plan's annual report pursuant to section 15(d) of
the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Wallingford, State of Connecticut, on November 19,
1999.
<TABLE>
<S> <C> <C>
AMPHENOL CORPORATION
By: /s/ MARTIN H. LOEFFLER
-----------------------------------------
Martin H. Loeffler
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed on November 19, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman, Chief Executive Officer and
------------------------------------------- President (Principal Executive Officer)
Martin H. Loeffler
* Chief Financial Officer (Principal Financial
------------------------------------------- and Accounting Officer)
Edward G. Jepsen
* Director
-------------------------------------------
Andrew Clarkson
* Director
-------------------------------------------
G. Robert Durham
Director
-------------------------------------------
Henry R. Kravis
* Director
-------------------------------------------
Marc S. Lipschultz
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
-------------------------------------------
Michael W. Michelson
* Director
-------------------------------------------
George R. Roberts
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ EDWARD C. WETMORE
--------------------------------------
Edward C. Wetmore
AS ATTORNEY IN FACT
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement*
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 (File
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) (incorporated by reference to 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 (incorporated by reference to Exhibit 3.2 to
the June 30, 1997 10-Q).
4.1 Form of Class A common stock certificate (incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-1 (File No. 333-42296) of the Company).
4.2 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
(incorporated by reference to Exhibit 4.1 to the June 30,
1997 10-Q).
5.1 Opinion of legal counsel regarding legality of securities
being registered.*
23.1 Consent of Deloitte & Touche LLP.*
23.2 Consent of PricewaterhouseCoopers LLP.*
23.3 Consent of legal counsel included in Exhibit 5.1.*
24.1 Power of Attorney included in Part II of the Registration
Statement.
</TABLE>
- ------------------------
* Filed herewith
<PAGE>
2,750,000 SHARES
AMPHENOL CORPORATION
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
December __, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Amphenol Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell 2,750,000 shares of its Class A common stock, par
value $.001 per share (the "FIRM SHARES"), to the several underwriters named in
SCHEDULE I hereto (the "UNDERWRITERS"). The Company also proposes to issue and
sell to the several Underwriters not more than an additional 412,500 shares of
its Class A common stock (the "ADDITIONAL SHARES") if requested by the
Underwriters as provided in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter referred to collectively as the "SHARES". The shares of
Class A common stock of the Company to be outstanding after giving effect to the
sales contemplated hereby are hereinafter referred to as the "COMMON STOCK."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-3 (No. 333-91183),
including a prospectus relating to the Shares. The registration statement as
amended at the time it became effective, including all financial schedules and
exhibits thereto and documents incorporated therein by reference and including a
registration statement (if any) filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act and information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A or Rule 434 under the Act, is hereinafter
referred to as the "REGISTRATION
<PAGE>
STATEMENT"; and the prospectus (including any prospectus subject to completion
taken together with any term sheet meeting the requirements of Rule 434(b) or
Rule 434(a) under the Act) in the form first used to confirm sales of the Shares
is hereinafter referred to as the "PROSPECTUS," except that if any revised
prospectus shall be provided to you by the Company for use in connection with
the offering of the Shares as contemplated by Section 5 hereof which differs
from the form of prospectus first used to confirm sales of the Shares, the term
"PROSPECTUS" shall refer to such revised prospectus from and after the time it
is first provided to you for such use. Any reference herein to any preliminary
prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, as of the date of such preliminary prospectus or Prospectus, as
the case may be, and any reference to any amendment or supplement to any
preliminary prospectus or Prospectus shall be deemed to refer to and include any
documents filed after the date of such preliminary prospectus or Prospectus, as
the case may be, under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder (collectively, the "EXCHANGE
ACT"), and incorporated by reference in such preliminary prospectus or
Prospectus, as the case may be; and any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any annual report
of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act
after the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement.
2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a price per Share of $___ (the "PURCHASE PRICE"),
the number of Firm Shares set forth opposite the name of such Underwriter in
SCHEDULE I hereto.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to issue and sell the Additional Shares to the Underwriters and the Underwriters
shall have the right to purchase, severally and not jointly, up to 412,500
Additional Shares from the Company at the Purchase Price, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Firm Shares but not payable on the Additional Shares. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part from time
to time by giving written notice thereof to the Company within 30 days after the
date of this Agreement. You shall give any such notice on behalf of the
Underwriters and such notice shall specify the aggregate number of Additional
Shares to be purchased pursuant to such exercise and the date for payment and
delivery thereof, which date shall be a business day (i) no earlier than two
business days after such notice has been given (and, in any event, no earlier
than the Closing Date (as defined below)) and (ii) no later than ten business
days after such notice has been given. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the total number of Additional Shares to be purchased from the Company as the
number of Firm Shares set forth opposite the name of such Underwriter in
SCHEDULE I bears to the total number of Firm Shares.
2
<PAGE>
The Company hereby agrees not to (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers all
or a portion of the economic consequences associated with the ownership of any
Common Stock (regardless of whether any of the transactions described in clause
(i) or (ii) is to be settled by the delivery of Common Stock, or such other
securities, in cash or otherwise), except to the Underwriters pursuant to this
Agreement, for a period of 90 days after the date of the Prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period (i) the Company may grant
stock options pursuant to the Company's existing stock option plan, (ii) the
Company may issue shares of Common Stock upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof, and
(iii) [the Company may issue shares of Common Stock as consideration for
acquisitions made by the Company or its Subsidiaries.] The Company also agrees
not to file any registration statement with respect to any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock for a period of 90 days after the date of the Prospectus without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The Company shall, prior to or concurrently with the execution of
this Agreement, deliver an agreement executed by each of the parties listed on
SCHEDULE II hereto to the effect that such person will not, during the period
commencing on the date such person signs such agreement and ending 90 days after
the date of the Prospectus, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, (A) engage in any of the transactions
described in the first sentence of this paragraph or (B) make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the effective date of the Registration
Statement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two full business days prior to the Closing Date or
the applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the Company, to Donaldson, Lufkin & Jenrette Securities Corporation through the
facilities of The Depository Trust Company ("DTC"), for the respective accounts
of the several Underwriters, against payment to the Company of the Purchase
Price therefore by wire transfer of Federal or other funds immediately available
in New York City. The certificates representing the Shares shall be made
available for inspection not later than 9:30 A.M., New York City time, on the
business day prior to the Closing Date or the applicable Option Closing Date (as
defined below), as the case may be, at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of delivery and payment
for the Firm Shares shall be 9:00 A.M., New York City time, on ________, 1999 or
such other time on the same or such other date as you and the Company shall
agree in writing. The time and date of delivery for the Firm Shares
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are hereinafter referred to as the "Closing Date". The time and date of delivery
and payment for any Additional Shares to be purchased by the Underwriters shall
be 9:00 A.M., New York City time, on the date specified in the applicable
exercise notice given by you pursuant to Section 2 or such other time on the
same or such other date as you and the Company shall agree in writing. The time
and date of delivery for the Option Shares are hereinafter referred to as an
"Option Closing Date".
The documents to be delivered on the Closing Date or any
Option Closing Date on behalf of the parties hereto pursuant to Section 8 of
this Agreement shall be delivered at the offices of Latham & Watkins, 885 Third
Avenue, New York, New York 10022 and the Shares shall be delivered at the
Designated Office, all on the Closing Date or such Option Closing Date, as the
case may be.
5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) If necessary, to (i) file (A) an amendment to the
Registration Statement, (B) a post-effective amendment to the
Registration Statement pursuant to Rule 430A under the Act or (C) a new
or additional registration statement pursuant to Rule 462(b) or (c)
under the Act, in each case, as soon as practicable after the execution
and delivery of this Agreement; (ii) provide evidence satisfactory to
the Underwriters of such timely filing; and (iii) use its best efforts
to cause the Registration Statement or such post-effective amendment to
become effective at the earliest possible time.
(b) To comply fully and in a timely manner with the applicable
provisions of Rule 424, Rule 430A and Rule 462 under the Act.
(c) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment to it becomes
effective, (ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of the suspension or qualification of the Shares for
offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (f) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to
make the statements therein not misleading, or of the necessity to
amend or supplement the Registration Statement or Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(d) To furnish to you, without charge, a signed copy of the
Registration Statement as first filed with the Commission and each
amendment to it, including all exhibits and documents incorporated
therein by reference, and to furnish to you such
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number of conformed copies of the Registration Statement as so filed
and of each amendment to it, without exhibits, as you may reasonably
request.
(e) Not to file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, to make any amendment or supplement to the
Prospectus or to make any filing with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of which you
shall not previously have been advised or to which you shall reasonably
object.
(f) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as a
prospectus is required by law to be delivered in connection with sales
by an Underwriter or a dealer, to furnish to each Underwriter as many
copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such Underwriter may reasonably request.
(g) If, during the period specified in paragraph (f), any
event shall occur as a result of which it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading or if it is necessary to amend or supplement
the Prospectus to comply with the Act or the Exchange Act, forthwith to
(i)(A) prepare and file, subject to the provisions of paragraph (e)
above, with the Commission an appropriate amendment or supplement to
the Prospectus or (B) file under the Exchange Act a document to be
incorporated by reference in the Prospectus, so that in either case,
the statements in the Prospectus, as so amended or supplemented, will
not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the Act and the
Exchange Act, and (ii) furnish to each of you, such number of copies of
such documents as such Underwriter may reasonably request.
(h) Prior to any public offering of the Shares, (i) to
cooperate with you and counsel for the Underwriters in connection with
the registration or qualification of the Shares for offer and sale by
the several Underwriters and by dealers under the state securities or
Blue Sky laws of such jurisdictions of the United States as you may
request, (ii) to continue such registration or qualification in effect
so long as required for distribution of the Shares and (iii) to file
such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification;
PROVIDED, HOWEVER, that the Company shall not be required to qualify as
a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or
taxation, other than as to matters and transactions relating to the
offer and sale of the Shares, in any jurisdiction where it is not now
so subject.
(i) To mail and make generally available to its stockholders
as soon as reasonably practicable an earnings statement for the
twelve-month period ending December 31, 2000 that shall satisfy the
provisions of the last paragraph of Section 11(a) of the Act.
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(j) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to (i)
the preparation, printing, filing and distribution to the Underwriters
of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus and all amendments and
supplements to any of them prior to or during the period specified in
paragraph (f), (ii) the printing and delivery to the Underwriters of
the Prospectus and all amendments or supplements to it during the
period specified in paragraph (f), (iii) the transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iv) the printing and delivery of this Agreement and
the preliminary and final blue sky memoranda (including in each case
any disbursements of counsel for the Underwriters relating to such
printing and delivery), (v) the registration with the Commission of the
Shares, (vi) the registration or qualification of the Shares for offer
and sale under the securities or blue sky laws of the several states
and any foreign jurisdiction (including in each case fees and
disbursements of counsel for the Underwriters relating to such
registration or qualification and memoranda relating thereto), (vii)
filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. ("NASD") in connection with the
offering of the Shares, (viii) furnishing such copies of the
Registration Statement, the preliminary prospectus, the Prospectus and
all amendments and supplements thereto as may be requested for use in
connection with the offering or sale of the Shares by the Underwriters,
(ix) fees, disbursements and expenses of the Company's counsel and
accountants, (x) printing certificates representing the Shares, (xi)
the costs and charges of any transfer agent, registrar and/or
depositary, and (xii) all other reasonable costs and expenses incident
to the performance by the Company of its other obligations under this
Agreement (other than each parties' respective share of the costs and
expenses incurred in connection with the roadshow; PROVIDED that the
Company and the Underwriters shall split equally the costs of private
air travel).
(k) If the Registration Statement at the time of the
effectiveness of this Agreement does not cover all of the Shares, to
file a Rule 462(b) Registration Statement with the Commission
registering the Shares not so covered in compliance with Rule 462(b) by
10:00 P.M., New York City time, on the date of this Agreement and to
pay to the Commission the filing fee for such Rule 462(b) Registration
Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under
the Act.
6. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to each Underwriter that:
(a) The Registration Statement has become effective (other
than any Rule 462(b) Registration Statement to be filed by the Company
after the effectiveness of this Agreement).
(b) The Company either (i) has filed with the Commission prior
to the effectiveness of the Registration Statement, a further amendment
thereto, including therein a final prospectus, or (ii) will file with
the Commission after the effectiveness of such Registration Statement,
a final prospectus in accordance with Rules 430A and
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424(b) under the Act and (iii) may file with the Commission after the
effectiveness of such Registration Statement, a post-effective
amendment thereto or a new or additional registration statement in
accordance with Rule 462 under the Act; any required filing of the
Prospectus, or any supplement thereto, pursuant to Rule 424(b) under
the Act has been or will be made in the manner and within the time
period required thereunder; any required filing of a post-effective
amendment under Rule 430A of the Act or any new or additional
registration statement pursuant to Rule 462 under the Act has been or
will be made in the manner and within the time period required
thereunder; no stop order suspending or preventing the use of the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, has been issued and no proceedings for such purpose
are, to the knowledge of the Company, pending before or threatened by
the Commission.
(c) (i) The documents incorporated by reference in the
Registration Statement, when they became effective or were filed with
the Commission, as the case may be, did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) the documents incorporated by reference in the
Registration Statement, when they became effective or were filed with
the Commission, as the case may be, conformed in all material respects
to the requirements of the Exchange Act; (iii) any further documents so
filed and incorporated by reference in the Registration Statement or
any further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Exchange
Act; and (iv) any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement
thereto, when such documents become effective or are filed with the
Commission, as the case may be, will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except that the representations and warranties set forth in this
paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished through you expressly for use
therein.
(d) (i) The Registration Statement, in the form in which it
became or becomes effective, did not or will not contain and the
Registration Statement, as amended or supplemented, if applicable, will
not contain, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Act and (iii) the
Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that the representations and warranties set
forth in this paragraph (d) do not apply to statements or omissions in
the Registration Statement or the Prospectus, or any amendment or
supplement thereto, based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter expressly
through you for use therein.
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<PAGE>
(e) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, and each
Registration Statement filed pursuant to Rule 462(b) under the Act, if
any, complied when so filed in all material respects with the Act; and
did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (e) do not
apply to statements or omissions in any preliminary prospectus, or any
amendment or supplement thereto, based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter
expressly through you for use therein.
(f) Each of the Company and its Subsidiaries (as defined
below) organized under the laws of the United States, any state thereof
or the District of Columbia (the "DOMESTIC SUBSIDIARIES") has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as it is
currently being conducted and to own, lease and operate its properties,
except where the failure to be duly incorporated or validly existing or
to have such power and authority would not have a Material Adverse
Effect (as defined below). The Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where to
failure to be so qualified would not have a material adverse effect on
the business, condition (financial or otherwise), results of operations
or properties of the Company and its Subsidiaries, taken as a whole
(each, a "MATERIAL ADVERSE EFFECT").
(g) Each Subsidiary of the Company that is not a Domestic
Subsidiary and would constitute a "significant subsidiary" (as defined
in Section 1-02 of Regulation S-X of the Commission) has been duly
incorporated (or the equivalent thereof), is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its
business as it is currently being conducted and to own, lease and
operate its properties. The term "SUBSIDIARY" means each person with at
least nominal assets of which a majority of the voting equity
securities or other interests is owned, directly or indirectly, by the
Company as of the Closing Date, such persons being referred to
collectively as the "SUBSIDIARIES."
(h) Each of the Domestic Subsidiaries is duly qualified and is
in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect.
(i) Each Subsidiary of the Company that is not a Domestic
Subsidiary and would constitute a "significant subsidiary" (as defined
in Section 1-02 of Regulation S-X of the Commission) is duly qualified
and is in good standing (or the equivalent thereof) as a foreign
corporation authorized to do business in each jurisdiction in which the
nature
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<PAGE>
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a Material Adverse Effect.
(j) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company or any of its subsidiaries relating to
or entitling any person to purchase or otherwise to acquire any shares
of the capital stock of the Company or any of its subsidiaries, except
as otherwise disclosed in the Registration Statement.
(k) All the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights; and
the Shares have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or
similar rights.
(l) All of the outstanding shares of capital stock of, or
other ownership interests in, each of the Company's Subsidiaries have
been duly authorized and validly issued and are fully paid and
non-assessable and are owned by the Company or a Subsidiary of the
Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature, except for nominal
shares held pursuant to the requirements of local law, and except as
described in the Prospectus; there are no outstanding rights, warrants
or options to acquire, or securities convertible into or exchangeable
for, any shares of capital stock or other equity interest in any of the
Company's Subsidiaries.
(m) The Company has the authorized, issued and outstanding
capitalization as of September 30, 1999 set forth in the Prospectus
under the heading "Capitalization" (except for subsequent issuances, if
any, pursuant to existing employee benefit plans and reservations or
agreements that are listed on SCHEDULE III hereto).
(n) The authorized capital stock of the Company conforms in
all material respects as to legal matters to the description thereof
contained in the Prospectus.
(o) This Agreement has been duly authorized, executed and
delivered by the Company.
(p) Neither the Company nor any of its Subsidiaries is (i) in
violation of its respective charter or by-laws, (ii) in default in any
material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence
of indebtedness or in any other agreement, indenture or instrument
material to the conduct of the business of the Company and its
Subsidiaries, taken as a whole, to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries or
their respective property is bound or (iii) except for violations that,
individually or in the aggregate, would not have a Material Adverse
Effect or a material adverse effect on the ability of the Company and
the Underwriters to consummate the
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<PAGE>
offering of the Shares, in violation of any law, statute, rule,
regulation, judgment or court decree applicable to the Company or any
of its Subsidiaries.
(q) The execution, delivery and performance of this Agreement
by the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not conflict with, constitute a default under or violate (i) any
of the terms, conditions or provisions of the certificate of
incorporation or by-laws of the Company or any of its Subsidiaries,
(ii) any of the terms, conditions or provisions of any document,
agreement, indenture or other instrument to which the Company or any of
its Subsidiaries is a party or by which the Company, any of its
Subsidiaries or their respective properties are bound, or (iii) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on the Company, any of its Subsidiaries
or their respective properties except, in the case of (ii) and (iii),
for such conflicts, defaults or violations that would not have a
Material Adverse Effect. No consent, approval, waiver, license or
authorization or other action by or filing with any governmental
authority is required in connection with the execution, delivery and
performance by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, except under the Act
and the state or foreign securities or blue sky laws or except as shall
have been obtained or made on or prior to the Closing Date.
(r) The statistical and market-related data included in the
Prospectus or incorporated therein by reference are based on or derived
from sources that the Company believes to be reliable and accurate in
all material respects.
(s) Except as otherwise set forth in the Prospectus, there are
no legal or governmental proceedings pending to which the Company or
any of its Subsidiaries is a party or of which any of their respective
property is the subject that are required to be described in the
Registration Statement or Prospectus, and to the best of the Company's
knowledge, no such proceedings are threatened. No contract or other
document of a character required to be filed as an exhibit to the
Registration Statement is not so filed as required.
(t) (i) The Company and each of its Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("PERMITS"), including, without limitation,
under any applicable foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants,
as are necessary to own, lease and operate its respective properties
and to conduct its business in the manner it is currently being
conducted; (ii) neither the Company nor any of its Subsidiaries has
received notice of any proceedings relating to the revocation or
termination of any such permits; except, in the case of clauses (i) and
(ii), where failure to have such permits, or the revocation or
termination of any such permits would not, individually or in the
aggregate, result in a Material Adverse Effect.
(u) The Company and each of its Subsidiaries has good and
marketable title, free and clear of all liens, claims, encumbrances and
restrictions to all property and assets
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described in the Registration Statement as being owned by it except for
any such liens (i) for taxes not yet due and payable or for taxes being
contested in good faith for which adequate reserves, in accordance with
generally accepted accounting principles, have been taken or (ii) as
would not, individually or in the aggregate, have a Material Adverse
Effect.
(v) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(w) Except as (i) set forth in the Prospectus or (ii) pursuant
to the Registration Rights Agreement dated as of May 19, 1997 by and
among the Company and the persons signatory thereto, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with
the Shares registered pursuant to the Registration Statement.
(x) The Company and/or its Subsidiaries owns all
rights to or has the right to use the designs embodying all of
the patents, trademarks, service marks, trade names,
copyrights, licenses and rights presently used by them in the
conduct of the Company's business and neither the Company nor
any of its Subsidiaries has received notice or is otherwise
aware of any conflict with the rights of others, the result of
which conflict is reasonably likely to result in a Material
Adverse Effect, and to the best of the Company's knowledge,
there is no infringement on such patents, trademarks,
servicemarks, trade names, copyrights, licenses and right by
others the result of which infringement is reasonably likely
to result in a Material Adverse Effect.
(y) Deloitte & Touche LLP are independent public
accountants with respect to the Company as required by the
Act. PricewaterhouseCoopers LLP were independent public
accountants with respect to the Company as required by the Act
for the year ended December 31, 1996.
(z) The financial statements, together with related
schedules and notes forming part of the Registration Statement
and the Prospectus (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of
operations and changes in financial position of the Company
and its Subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective
periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein;
and the other financial and statistical information and data
set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) is, in all material
respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and
records of the Company and its Subsidiaries.
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(aa) The pro forma financial information and the related notes thereto
included in the Registration Statement (and any amendment or supplement thereto)
have been prepared in accordance with the applicable requirements of the Act,
include all adjustments necessary to present fairly in all material respects the
pro forma financial condition and results of operations at the respective dates
and for the respective periods indicated.
(bb) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, subsequent to the respective dates as of which
information is given therein and up to and including the Closing Date, (i) none
of the Company or any of its Subsidiaries has entered into any transactions that
are material to the Company and its Subsidiaries, taken as a whole, outside of
the ordinary course of business, (ii) there has not been any material adverse
change in the business, condition (financial or otherwise), results of
operations or properties of the Company and its Subsidiaries, taken as a whole
(each, a "MATERIAL ADVERSE CHANGE") and (iii) there has not been any issuance of
options or warrants to purchase capital stock of the Company or any of its
Subsidiaries (other than options or warrants granted pursuant to the Company's
existing stock option plan or similar benefit plan), or any payment of or
declaration to pay any dividends or other distribution with respect to the
capital stock of the Company.
(cc) Except as disclosed in the Prospectus (including with respect to
this Agreement), neither the Company nor any Subsidiary is a party to any
contract, agreement or understanding with any person that would give rise to a
valid claim against the Company or any Subsidiary or the Underwriters for a
brokerage commission, finder's fee or like payment in connection with the
offering of the Shares.
(dd) There are no parties that have rights to register any securities
of the Company, other than KKR 1996 Fund L.P., NXS Associates, L.P., KKR
Partners II, L.P. and NXS I, L.L.C. each of who has waived such rights by
executing the Registration Rights Waiver dated the date hereof.
(ee) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a Material
Adverse Effect) and has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or penalty
that is currently being contested in good faith or as would not have a Material
Adverse Effect.
(ff) No labor problem or dispute with the employees of the Company or
any of its subsidiaries exists or, to the Company's knowledge, is threatened,
and the Company is not aware of any existing labor dispute by the employees of
any of its or its subsidiaries' principal suppliers, contractors or customers,
that could have a Material Adverse Effect.
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7. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus (as amended or
supplemented), any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company or
on behalf of any Underwriter through you expressly for use therein; PROVIDED,
HOWEVER, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages and liabilities and judgments
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or delivered by or on behalf
of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Shares to
such person, and if the Prospectus (as amended and supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability or judgment.
In addition, the Company agrees to indemnify and hold harmless any Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against all
costs of such Underwriter or controlling person (including reasonable fees and
expenses of counsel) incurred in connection with the enforcement by the
Underwriter or such controlling person of the indemnification provisions of
Section 7(a) of this Agreement against the Company,
(b) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus, the
Registration
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Statement or the Prospectus, any amendment or supplement thereto or any document
incorporated therein by reference and with respect to which indemnity may be
sought against the Company, such Underwriter shall promptly notify the Company
in writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all reasonable fees and expenses; PROVIDED that the Company shall not
be liable to such indemnified party for any legal expenses of other counsel or
any other expenses, in each case, subsequently incurred by such indemnified
party, in connection with the defense thereof, other than the reasonable cost of
the investigation. Any Underwriter or any such controlling person shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the employment
of such counsel has been specifically authorized in writing by the Company, (ii)
the Company shall have failed to assume the defense and employ counsel or (iii)
the named parties to any such action (including any impleaded parties) include
both such Underwriter or such controlling person and the Company and such
Underwriter or such controlling person shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Company, in which case the Company
shall not have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person and the Company shall be liable for the
reasonable legal expenses of counsel to such Underwriter or such controlling
person in connection with the defense of such action, PROVIDED that such counsel
to such Underwriter or such controlling person shall use reasonable efforts to
coordinate with counsel to the Company on overlapping issues, it being
understood, however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to one separate firm of local counsel in each such jurisdiction) at any
time, for all such Underwriters and controlling persons, which firm shall be
designated in writing by Donaldson, Lufkin and Jenrette Securities Corporation
and that all such fees and expenses shall be reimbursed promptly upon request.
The Company shall not be liable for any settlement of any action subject to
indemnification hereunder effected without the written consent of the Company,
which consent shall not be unreasonably withheld, but if settled with the
written consent of the Company the Company agrees to indemnify and hold harmless
any Underwriter and any such controlling person from and against any loss or
liability by reason of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the
14
<PAGE>
Company to each Underwriter but only with reference to information relating to
such Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement or the Prospectus
(as amended or supplemented) or any preliminary prospectus. In case any action
shall be brought against the Company, any of its directors, any such officer or
any person controlling the Company based on the Registration Statement or the
Prospectus (as amended or supplemented) or any preliminary prospectus and in
respect of which indemnity may be sought against any Underwriter, the
Underwriter shall have the rights and duties given to the Company (except that
if the Company shall have assumed the defense thereof, such Underwriter shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Underwriter), and the Company, its directors,
any such officers and any person controlling the Company shall have the rights
and duties given to the Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as the total
proceeds from the offering (before deducting expenses but after deducting
underwriting discounts and commissions) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, bear to the
total price to the public of the Shares, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or
15
<PAGE>
defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(b) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Shares on the Closing Date are
subject to the satisfaction of each of the following conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date, with the same force and effect as if made on and as of the
Closing Date. The Company shall have performed or complied in all
material respects with all of the agreements herein contained and
required to be performed or complied with by the Company at or prior to
the Closing Date.
(b) (i) The Registration Statement shall have become effective
(or if (i) a post-effective amendment thereto (including any such
amendment required to be filed pursuant to Rule 430A under the Act) or
(ii) a new or additional registration statement pursuant to Rule 462
under the Act has been filed, such post-effective amendment or new or
additional registration statement (as applicable) shall have become
effective) not later than the opening of business on the first full
business day next following the date of this Agreement or at such later
date and time as you may approve in writing, (ii) at the Closing Date,
no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending before or contemplated by
the Commission and every comment by or request for additional
information on the part of the Commission or any securities commission
or regulatory authority of the several states or any foreign
jurisdiction shall have been responded to or complied with in all
material respects and (iii) no stop order suspending the sale of the
Shares shall have been issued and no proceeding for that purpose shall
have been commenced and be pending before any securities regulators,
and the Company shall not have received notice of the contemplation of
any such issuance by any such securities regulator, in each case set
forth in this clause (iii) that, in your opinion, would materially
adversely affect the offering of the Shares.
(c) Subsequent to the effective date of this Agreement, except
as set forth in or contemplated by the Registration Statement and the
Prospectus, (i) there shall not have been any Material Adverse Change,
or any development involving a prospective Material Adverse Change,
whether or not arising in the ordinary course of business of the
Company, (ii) there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock
or in the long-term debt of the Company or any of its Subsidiaries
(other than as a result of borrowings (revolving or other) for working
capital incurred in the ordinary course of business) and (iii) neither
the
16
<PAGE>
Company nor any of its Subsidiaries shall not have incurred any
liability or obligation, direct or contingent, which is material to the
Company and its Subsidiaries, taken as a whole and which have
materially changed the financial position of the Company and its
Subsidiaries, taken as a whole.
(d) On the Closing Date, you shall have received a certificate
dated the Closing Date signed by Mr. Martin H. Loeffler and Mr. Edward
G. Jepsen, in their capacities as (A) the President and Chief Executive
Officer and (B) Executive Vice President and Chief Financial Officer of
the Company, respectively, confirming the matters set forth in
paragraphs (a), (b), and (c)(i) of this Section 8 and that the Company
has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or
satisfied by the Company on or prior to the Closing Date..
(e) You shall have received on the Closing Date an opinion (in
the form attached hereto as EXHIBIT A), dated the Closing Date, of
Simpson Thacher & Bartlett, special counsel for the Company, with
respect to the Company and its Subsidiaries. The opinion of Simpson
Thacher & Bartlett shall be rendered to you at the request of the
Company and so state therein.
(f) You shall have received on the Closing Date an opinion (in
the form attached hereto as EXHIBIT B), dated the Closing Date, of
Edward C. Wetmore, counsel for the Company, with respect to the Company
and its Subsidiaries. The opinion of Edward C. Wetmore shall be
rendered to you at the request of the Company and shall so state
therein.
(g) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Latham & Watkins, counsel for the
Underwriters, in form and substance reasonably satisfactory to the
Underwriters.
(h) You shall have received a letter concurrently with the
execution of this Agreement and on and as of the Closing Date in form
and substance reasonably satisfactory to you, from Deloitte & Touche
LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus and/or incorporated therein
by reference.
(i) Latham & Watkins shall have been furnished with such
documents as they may reasonably require for the purpose of enabling
them to review or pass upon the matters referred to in this Section 8.
The several obligations of the Underwriters to purchase any
Additional Shares hereunder are subject to the delivery to you on the applicable
Option Closing Date of such documents as you may reasonably request with respect
to the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Company will be in compliance
with the provisions hereof if and only if they
17
<PAGE>
are reasonably satisfactory in form and substance to the Underwriters. The
Company will furnish the Underwriters with such conformed copies of such
opinions, certificates, letters and other documents as the Underwriters or their
counsel shall reasonably request.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This
Agreement shall become effective upon the later of (i) execution of this
Agreement, (ii) when notification of the effectiveness of the Registration
Statement has been released by the Commission and (iii) if a post-effective
amendment to the Registration Statement has been filed (including any
post-effective amendment required to be filed pursuant to Rule 430A) or a new or
additional registration statement has been filed (including any new or
additional registration statement required to be filed pursuant to Rule 462
under the Act), the effectiveness of such post-effective amendment or new or
additional registration statement. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying the Underwriters or
by the Underwriters by notifying the Company.
This Agreement may be terminated at any time after it becomes
effective and prior to the Closing Date by you by written notice to the Company
if any of the following has occurred: (i) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, or (ii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or limitation on prices for
securities on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, or (iv) the declaration of a banking moratorium by
either federal or New York State authorities.
If on the Closing Date or on the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase the Firm Shares or Additional Shares, as the case may be, that it or
they have agreed to purchase hereunder on such date, and the aggregate number of
Firm Shares or Additional Shares, as the case may be, that such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of Firm Shares or
Additional Shares, as the case may be, to be purchased on such date by all
Underwriters, each non-defaulting Underwriter shall be obligated severally, in
the proportion that the number of Firm Shares set forth opposite its name in
SCHEDULE I bears to the total number of Firm Shares that all the non-defaulting
Underwriters, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Firm Shares or Additional Shares,
as the case may be, that such defaulting Underwriter or Underwriters, as the
case may be, agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Firm Shares or Additional Shares, as the
case may be, that any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Firm Shares or Additional Shares, as the case may
be, without the written consent of such Underwriter. If on the Closing Date any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased on
such date by all Underwriters and arrangements satisfactory to you and the
Company for
18
<PAGE>
purchase of such Firm Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. If,
on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase such Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
10. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to the Company, to Amphenol
Corporation, 358 Hall Avenue, Wallingford, Connecticut, 06492-7530, Attention:
President, and (b) if to any Underwriter, to Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the several
Underwriters set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Shares, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter or by or on behalf of
the Company, the officers or directors of the Company or any controlling person
of the Company, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters
because of any failure or refusal on the part of the Company to comply with the
terms hereof or to fulfill any of the conditions set forth in Section 8 of this
Agreement, other than by reason of a default under this Agreement by an
Underwriter, the Company agrees to reimburse the several Underwriters upon
demand accompanied by reasonable supporting documentation for all out-of-pocket
expenses (including the reasonable fees and disbursements of counsel) reasonably
incurred by them in connection with the matters contemplated by this Agreement.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
19
<PAGE>
This Agreement may be signed in various counterparts, which
together shall constitute one and the same instrument.
[Signature page follows]
20
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
AMPHENOL CORPORATION
By: ____________________________
Name: Edward G. Jepson
Title: Executive Vice President and
Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALMON SMITH BARNEY INC.
Acting severally on behalf of themselves
and the several Underwriters named in SCHEDULE I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Underwriter Number of Firm Shares
- ----------- to be Purchased
---------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation..............................................
Lehman Brothers Inc....................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.....................
Salomon Smith Barney Inc...............................................
================
Total 2,750,000
</TABLE>
I-1
<PAGE>
SCHEDULE II
PARTIES DELIVERING A LOCK-UP AGREEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Andrew M. Clarkson
Timothy F. Cohane
G. Robert Durham
Edward G. Jepsen
Henry R. Kravis
Marc S. Lipschultz
Martin H. Loeffler
Michael W. Michelson
Diana G. Reardon
George R. Roberts
Edward C. Wetmore
STOCKHOLDERS
KKR 1996 FUND L.P.
NXS ASSOCIATES, L.P.
KKR PARTNERS II, L.P.
II-1
<PAGE>
SCHEDULE III
III-1
<PAGE>
EXHIBIT 5.1
SIMPSON THACHER & BARTLETT
425 Lexington Avenue
New York, NY 10014
December 6, 1999
Amphenol Corporation
358 Hall Avenue
Wallingford, CT 06492
Ladies and Gentlemen:
We have acted as counsel to Amphenol Corporation, a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), relating to the issuance by the Company of 3,162,500 shares of Class A
Common Stock, par value $.001 per share (together with any additional shares of
such stock that may be issued by the Company pursuant to Rule 462(b) (as
prescribed by the Commission pursuant to the Act) in connection with the
offering described in the Registration Statement, the "Shares").
We have examined the Registration Statement and a form of the share
certificate which has been filed with the Commission as an exhibit to the
Registration Statement. We also have examined the originals, or duplicates or
certified or conformed copies, of such records, agreements, instruments and
other documents and have made such other and further investigations as we have
deemed relevant and necessary in connection with the opinions expressed herein.
As to questions of fact material to this opinion, we have relied upon
certificates of public officials and of officers and representatives of the
Company.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as duplicates or certified or conformed copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that (1) when the Board of Directors of the
Company (the "Board") has taken all necessary corporate action to authorize and
approve the issuance of the Shares and (2) upon payment and delivery in
accordance with the applicable definitive underwriting agreement approved by the
Board, the Shares will be validly issued, fully paid and nonassessable.
We are members of the Bar of the State of New York and we do not express any
opinion herein concerning any law other than the Delaware General Corporation
Law.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
<TABLE>
<S> <C>
Very truly yours,
/s/ Simpson Thacher & Bartlett
---------------------------------------------
Simpson Thacher & Bartlett
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-91183 of Amphenol Corporation on Form S-3 of our
report dated January 19, 1999, appearing in the Annual Report on Form 10-K of
Amphenol Corporation for the year ended December 31, 1998, and to the use of our
report dated January 19, 1999, appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
December 6, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We hereby consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-91183 on Form S-3 of our report dated
January 14, 1997 relating to the financial statements, which appears in Amphenol
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998,
and to the use of our report dated January 14, 1997, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
references to us under the headings "Experts" and "Selected Consolidated
Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
December 6, 1999
