<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
<S> <C> <C> <C> <C>
Class A common stock, par value $.001 per share..... 6,900,000 $ 60.75 $419,715,000 $ 110,663
</TABLE>
(1) Includes 900,000 shares covered by the over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c) of the Securities Act of 1933, based on the average
high and low prices per share of the registrant's Class A common stock on
April 26, 2000, as reported by the consolidated reporting system of the New
York Stock Exchange.
------------------------------
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--MAY 1, 2000
FILED PURSUANT TO RULE 424(B)(1)
REGISTRATION NO. 333-91183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
AMPHENOL CORPORATION
6,000,000 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:
- - The selling stockholders identified on page 34 of this prospectus are
offering all of the shares. After the offering, on a pro forma basis,
Kohlberg Kravis Roberts & Co., L.P., through it affiliates, will own not
less than 49.0% of our Class A common stock, which represents not less
than 77.2% of its initial investment.
- - The underwriters have an option to purchase an additional 900,000 shares
from the selling stockholders to cover over-allotments.
- - There is an existing trading market for the shares. The last reported
sale price on the NYSE on April 28, 2000 was $63 3/4 per share.
- - We will not receive any proceeds from the shares sold in the offering.
- - Closing: , 2000.
<TABLE>
- -----------------------------------------------------------------------------------
Per Share Total
- -----------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to the selling stockholders:
- -----------------------------------------------------------------------------------
</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>
Picture of global map showing the Company's manufacturing and assembly
operations.
Picture of two radio frequency connectors or assemblies used in cellular
telephone base stations.
Picture of two smart card acceptor devices (devices which accept encoded cards)
used in global satellite wireless handsets.
Picture of two connectors used internally in wireless handsets and personal
communication devices for both battery and antenna interconnections.
Picture of a connector assembly used in medical equipment applications.
Picture of eight different rectangular high-density Printed Circuit Board
Connectors used in aerospace applications.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 8
Use of Proceeds........................ 12
Price Range of Class A Common Stock
and Dividend Policy.................. 12
Capitalization......................... 13
Selected Consolidated Financial Data... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
Business............................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Management............................. 31
Principal and Selling Stockholders..... 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 16.9% for the three months ended March 31, 2000. In 1999 we reported net
sales, operating profit and income before extraordinary items of
$1,010.6 million, $160.7 million and $44.3 million, respectively. For the three
months ended March 31, 2000, we reported net sales, operating profit and net
income of $300.0 million, $50.7 million and $20.3 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 60% (including 24% for the 19% 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 networks Battlefield Communications
and related consumer Satellite and Space Station
electronics Programs
Data
- cable modems
- personal computers and
related peripherals
</TABLE>
- ------------------
*For the year ended December 31, 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 34% in 1999. Industry analysts estimate that the total sales for
the industry were approximately $37 billion in 1999.
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.
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
54 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. In 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 to
further broaden and enhance our product offerings and expand our global
capabilities.
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 "Merger and Recapitalization"). KKR, through
its affiliates, owned 63.5% of our Class A common
2
<PAGE>
stock as of April 27, 2000. After the offering, KKR, through its affiliates,
will own not less than 49.0% of our Class A common stock which represents not
less than 77.2% of its initial investment.
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
market 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 49% of our sales for the year ended December 31, 1999 were
outside the United States. We have 58 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 54 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 more than 100,000 stock keeping units in 1999. 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 year ended December 31, 1999. The U.S.
government and its subcontractors accounted for 7% of our net sales for the year
ended December 31, 1999; however, we participate across a broad spectrum of
defense programs and believe that no single program accounted for more than 2%
of net sales.
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
3
<PAGE>
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
Our strategic objective is to further enhance our position as a leading
global designer, manufacturer and marketer of connectors, interconnect systems
and cable products. We seek to achieve this objective by pursuing the following
strategies:
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. Analysts estimate that in 1999 there were over 300 million mobile
handset subscribers and over 200 million Internet subscribers, and that both
applications will increase to approximately 1 billion subscribers by 2004. We
will continue to aggressively pursue infocom opportunities through the
development of new application-specific interconnect 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 and the ability to carry voice, all place
significant emphasis on expanded bandwidth for network delivery systems. Cable
operators are upgrading and rebuilding their systems to offer such services. In
addition, cable system developments are planned for 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 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 $37 billion connector industry. We have broad product lines for the markets
we serve; as an example, in 1999 our sales included more than 100,000 stock
keeping units. We continuously strive to expand our product lines in order to
become a primary source supplier of interconnect solutions for 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
4
<PAGE>
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 pursuing strategic acquisitions that complement our
existing business and to further expand our product lines, technological
capabilities and geographic presence. 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 our channels of access to world markets and
through lower manufacturing costs as a result of economies of scale.
RECENT DEVELOPMENTS
On April 24, 2000, we effected a 2-for-1 stock split of our Class A common
stock for stockholders of record as of March 23, 2000. The additional shares
were distributed on April 24, 2000 and settlement of trading in the shares at
the post-split price began on April 26, 2000.
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered by the Selling
Stockholders............................... 6,000,000 shares(1)
Class A common stock to be outstanding
after the offering(2)...................... 41,451,572 shares
Use of Proceeds.............................. All the shares are being sold by the selling
stockholders. Accordingly, we will not
receive any proceeds from the shares sold in
the offering.
NYSE symbol for the Class A common stock..... APH
</TABLE>
- ------------------------
(1) Excludes 900,000 shares of Class A common stock to be sold by the selling
stockholders if the underwriters' over-allotment option is exercised in
full. See "Underwriting."
(2) Based on outstanding shares as of April 28, 2000 and exclusive of up to
2,919,020 shares issuable on the exercise of stock options in connection
with employee benefit plans.
ALL OF THE INFORMATION IN THIS PROSPECTUS, INCLUDING ALL REFERENCES TO THE
NUMBER OF SHARES OF CLASS A COMMON STOCK, GIVES EFFECT TO A 2-FOR-1 STOCK SPLIT
THAT OCCURRED ON APRIL 24, 2000. SETTLEMENT OF TRADING IN THE SHARES AT THE
POST-SPLIT PRICE BEGAN ON APRIL 26, 2000.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data for the three years ended
December 31, 1999, has been derived from our consolidated financial statements
and should be read in conjunction with our consolidated financial statements and
notes thereto 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 three-month periods ended March 31, 1999 and
2000, 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 three-month periods is not necessaily indicative of full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $ 884,348 $ 918,877 $ 1,010,603 $ 237,164 $ 300,049
Costs and expenses:
Cost of sales, excluding depreciation and
amortization............................... 572,092 601,930 663,978 157,289 197,176
Depreciation and amortization expense........ 20,428 23,553 27,673 6,885 7,039
Selling, general and administrative
expense.................................... 125,064 131,966 145,852 34,262 41,873
Amortization of goodwill..................... 11,316 11,701 12,371 3,078 3,275
----------- ----------- ----------- ----------- -----------
Operating income............................... 155,448 149,727 160,729 35,650 50,686
Interest expense............................... (64,713) (81,199) (79,297) (19,812) (15,843)
Other expenses, net(1)......................... (3,561) (4,545) (5,262) (1,233) (1,904)
----------- ----------- ----------- ----------- -----------
Income before income taxes and extraordinary
item......................................... 87,174 63,983 76,170 14,605 32,939
Provision for income taxes..................... (35,910) (27,473) (31,875) (6,366) (12,675)
----------- ----------- ----------- ----------- -----------
Income before extraordinary item............... 51,264 36,510 44,295 8,239 20,264
Extraordinary item:
Loss on early extinguishment of debt, net of
income taxes............................... (24,547) -- (8,674) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ 26,717 $ 36,510 $ 35,621 $ 8,239 $ 20,264
=========== =========== =========== =========== ===========
Net income per common share--basic:
Income before extraordinary item............. $ .92 $ 1.03 $ 1.23 $ .23 $ .49
Extraordinary loss........................... (.44) -- (.24) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ .48 $ 1.03 $ .99 $ .23 $ .49
=========== =========== =========== =========== ===========
Average common shares outstanding............ 55,612,520 35,326,424 36,059,556 35,724,682 41,465,756
Net income per common share--diluted:
Income before extraordinary item............. $ .92 $ 1.02 $ 1.21 $ .23 $ .48
Extraordinary loss........................... (.44) -- (.24) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ .48 $ 1.02 $ .97 $ .23 $ .48
=========== =========== =========== =========== ===========
Average common shares outstanding............ 56,005,954 35,884,794 36,664,016 36,062,650 42,580,344
OTHER DATA:
EBITDA......................................... $ 188,471 $ 192,090 $ 205,609 $ 46,901 $ 61,466
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and short-term cash investments...................... $ 12,560
Working capital........................................... 180,258
Total assets.............................................. 894,719
Total debt (including current portion).................... 767,959
Total shareholders' deficit............................... (56,475)
</TABLE>
- ------------------------------
(1) Other expenses for the year ended December 31, 1997 includes $2,500 of other
expenses related to the Merger and Recapitalization.
6
<PAGE>
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 ("GAAP") 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 March 31, 2000, we had $768.0 million of consolidated indebtedness and
$56.5 million of consolidated shareholders' deficit. As of March 31, 2000, we
had $136.5 million available to be borrowed under our bank credit facility. 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.
WE ARE INCREASINGLY DEPENDENT ON THE COMMUNICATIONS INDUSTRY, INCLUDING THE
WIRELESS COMMUNICATIONS INDUSTRY
Approximately 60% of our revenues came from sales to the communications
industry, including the wireless communications industry, in the year ended
December 31, 1999, as compared to 53% in 1998.
8
<PAGE>
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 communications 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 over 10,000
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 7% of our sales
for the year ended December 31, 1999, compared to approximately 8% for 1998 and
9% for 1997. 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 1999 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.
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 year ended December 31,
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
9
<PAGE>
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 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 March 31,
2000, 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 March 31, 2000, the three month LIBOR rate was approximately 6.29%.
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 March 31, 2000 would have the effect of increasing or
decreasing annual interest expense by approximately $1.0 million. However, if
the LIBOR interest rate increased above 7% (a 13% increase from the LIBOR
interest rate at March 31, 2000), such increase 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 2000, 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
net income. 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 March 31, 2000, we had no outstanding
foreign exchange contracts. We do not engage in purchasing forward exchange
contracts for speculative purposes.
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.
10
<PAGE>
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. Other than shares of Class A common stock to be sold
in this offering, Amphenol, its executive officers and directors and KKR and its
affiliates (which in the aggregate owned 27,946,308 shares at April 27, 2000)
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 AND KKR WILL BE ABLE TO
AFFECT THE OUTCOME OF STOCKHOLDERS' VOTING DURING SUCH TIME
26,331,490 shares or approximately 63.5% 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. After the offering, the KKR
Partnerships will own not less than 20,331,490 shares or not less than 49.0% of
our outstanding Class A common stock on a fully diluted basis, which represents
not less than 77.2% of its initial investment, 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.
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."
11
<PAGE>
USE OF PROCEEDS
All the shares are being sold by the selling stockholders. Accordingly, we
will not receive any proceeds from the sale of the shares in the offering.
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.
The share prices set forth below reflect the 2-for-1 stock split that occured on
April 24, 2000. Settlement of trading in the shares at the post-split price
began on April 26, 2000:
<TABLE>
<CAPTION>
POST-SPLIT
-------------------------
PERIOD HIGH LOW
- ------ ------------ ----------
<S> <C> <C>
1997
First Quarter..... $13 1/16 $10 3/4
Second Quarter.... 19 1/2 11 1/2
Third Quarter..... 21 29/32 19 1/4
Fourth Quarter.... 28 5/16 21 7/16
1998
First Quarter..... $32 $26 3/8
Second Quarter.... 30 13/16 19 1/2
Third Quarter..... 22 1/8 14 21/32
Fourth Quarter.... 17 3/4 13 1/2
1999
First Quarter..... $19 1/4 $14 23/32
Second Quarter.... 20 3/16 17 1/4
Third Quarter..... 28 5/16 19 21/32
Fourth Quarter.... 35 3/4 22 7/8
2000
First Quarter..... $51 21/32 $30 7/8
Second Quarter
(through April 28,
2000)............... 64 45 1/4
</TABLE>
The last reported sale price of the Class A common stock on the NYSE on
April 28, 2000, was $63 3/4 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.
12
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
March 31, 2000. The following table should be read in conjunction with our
consolidated financial statements and notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 2000
-----------------
(IN THOUSANDS)
<S> <C>
Long-term debt (including current portion):
Revolving credit facility................................. $ 8,200
Term loan facility........................................ 599,500
9 7/8% Senior Subordinated Notes due 2007................. 144,000
Other debt (a)............................................ 16,259
---------
Total long-term debt.................................... 767,959
---------
Stockholders' deficit:
Class A common stock, par value $.001 per share;
100,000,000 shares authorized (b)(c).................... 41
Additional paid-in deficit (c)............................ (311,064)
Accumulated earnings...................................... 270,746
Accumulated translation adjustment........................ (16,198)
---------
Total stockholders' deficit............................. (56,475)
---------
Total capitalization........................................ $ 711,484
=========
</TABLE>
- ------------------------
(a) Represents debt of foreign subsidiaries and capital leases.
(b) Our certificate of incorporation was amended on April 24, 2000 to increase
the number of authorized shares of Class A common stock to 100,000,000
shares.
(c) Gives effect to a 2-for-1 stock split that occurred on April 24, 2000.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data has been derived from our
consolidated financial statements for the three years in the period ended
December 31, 1999, which statements have been audited by Deloitte & Touche LLP,
and the unaudited three-month periods ended March 31, 1999 and 2000. 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 unaudited financial information
presented below for the three-month periods ended March 31, 1999 and 2000,
reflects all normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of our conslidated results of
operations and financial position for such periods. The information shown for
the three-month periods is not necessarily indicative of full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $ 884,348 $ 918,877 $ 1,010,603 $ 237,164 $ 300,049
Costs and expenses:
Cost of sales, excluding depreciation and
amortization............................... 572,092 601,930 663,978 157,289 197,176
Depreciation and amortization expense........ 20,428 23,553 27,673 6,885 7,039
Selling, general and administrative
expense.................................... 125,064 131,966 145,852 34,262 41,873
Amortization of goodwill..................... 11,316 11,701 12,371 3,078 3,275
----------- ----------- ----------- ----------- -----------
Operating income............................... 155,448 149,727 160,729 35,650 50,686
Interest expense............................... (64,713) (81,199) (79,297) (19,812) (15,843)
Other expenses, net(1)......................... (3,561) (4,545) (5,262) (1,233) (1,904)
----------- ----------- ----------- ----------- -----------
Income before income taxes and extraordinary
item......................................... 87,174 63,983 76,170 14,605 32,939
Provision for income taxes..................... (35,910) (27,473) (31,875) (6,366) (12,675)
----------- ----------- ----------- ----------- -----------
Income before extraordinary item............... 51,264 36,510 44,295 8,239 20,264
Extraordinary item:
Loss on early extinguishment of debt, net of
income taxes............................... (24,547) -- (8,674) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ 26,717 $ 36,510 $ 35,621 $ 8,239 $ 20,264
=========== =========== =========== =========== ===========
Net income per common share--Basic:
Income before extraordinary item............. $ .92 $ 1.03 $ 1.23 $ .23 $ .49
Extraordinary loss........................... (.44) -- (.24) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ .48 $ 1.03 $ .99 $ .23 $ .49
=========== =========== =========== =========== ===========
Average common shares outstanding............ 55,612,520 35,326,424 36,059,556 35,724,682 41,465,756
Net income per common share--Diluted:
Income before extraordinary item............. $ .92 $ 1.02 $ 1.21 $ .23 $ .48
Extraordinary loss........................... (.44) -- (.24) -- --
----------- ----------- ----------- ----------- -----------
Net income................................... $ .48 $ 1.02 $ .97 $ .23 $ .48
=========== =========== =========== =========== ===========
Average common shares outstanding............ 56,005,954 35,884,794 36,664,016 36,062,650 42,580,344
OTHER DATA:
EBITDA......................................... $ 188,471 $ 192,090 $ 205,609 $ 46,901 $ 61,466
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and short-term cash investments...................... $ 12,560
Working capital........................................... 180,258
Total assets.............................................. 894,719
Total debt (including current portion).................... 767,959
Total shareholders' deficit............................... (56,475)
</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 GAAP 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.
15
<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, 1999.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000 COMPARED WITH QUARTER ENDED MARCH 31, 1999
Net sales increased approximately 27% to $300.0 million in the first quarter
of 2000 compared to sales of $237.2 million for the same period in 1999. The
increase is primarily attributable to increased sales of interconnect products
and cable products for communication markets. In addition, sales of interconnect
products for aerospace and industrial applications increased in the first
quarter of 2000 compared to the same period in 1999. Currency translation had
the effect of decreasing sales in the first quarter of 2000 by approximately
$6.4 million when compared to exchange rates for the 1999 period.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) was 32% for the first quarter of 2000 compared to 31% for the
1999 period. The increase is generally attributable to changes in product mix.
Selling, general and administrative expenses as a percentage of net sales
remained constant at approximately 14% for the first quarter of 2000 compared to
the 1999 period.
Interest expense was $15.8 million for the first quarter of 2000 compared to
$19.8 million for the 1999 period. The decrease is primarily attributable to
lower average debt levels.
The provision for income taxes for the first quarter of 2000 was at an
effective rate of 38% compared to 44% in the 1999 period. The decrease is
generally attributable to non-deductible expenses (goodwill amortization) being
a lower percentage of pretax income. The effective rate excluding non-
deductible goodwill amortization for the first quarter of 2000 was 35% compared
to 36% in the 1999 period.
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Net sales were $1,010.6 million for the year ended December 31, 1999
compared to $918.9 million for 1998. Sales of interconnect products and
assemblies increased 7% compared to 1998 ($770.0 million in 1999 versus $718.1
million in 1998). Such increase is primarily attributable to increased sales of
products and interconnect systems for wireless, telecom and datacom
communications applications reflecting the continuing build and enhancements to
wireless communication infrastructure and mobile communication devices as well
as increasing Internet communication applications. The increase was partially
offset by a decline in sales of interconnect products for aerospace applications
reflecting lower builds of commercial aircraft, customer inventory reduction
programs and lower activity for the international Space Station program. Sales
of cable products increased 20% compared to 1998 ($240.6 million in 1999 versus
$200.8 million in 1998). Sales of coaxial cable for cable television increased
as cable operators continued to upgrade and expand their systems to offer
enhanced services and international markets for cable television strengthened,
especially in the economically recovering Asian markets.
Geographically, sales in the U.S. in 1999 increased approximately 4%
compared to 1998 ($519.5 million in 1999 versus $499.9 million in 1998);
international sales for 1999, including export sales, increased approximately
17% in U.S. dollars ($491.1 million in 1999 versus $419.0 million in 1998) and
increased approximately 19% in local currency compared to 1998. The
comparatively strong
16
<PAGE>
U.S. dollar in 1999 had the currency effect of decreasing net sales by
approximately $7.1 million when compared to foreign currency translation rates
in 1998.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) remained relatively constant at approximately 32% in 1999
compared to 1998.
Selling, general and administrative expenses as a percentage of sales
remained relatively constant at approximately 14% in 1999 compared to 1998.
Interest expense was $79.3 million for 1999 compared to $81.2 million for
1998. The decrease is primarily attributable to lower interest rates on our term
loan facility.
Other expenses, net for 1999 was $5.3 million, an increase of $0.7 million
from 1998. 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 1999 was at an effective rate of 42%
compared to an effective rate of 43% in 1998. The decrease is generally
attributable to non-deductible expenses (goodwill amortization) being a lower
percentage of pretax income. The effective rate excluding non-deductible
goodwill amortization was 36% in 1999 and in 1998.
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.
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 compared to 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 Merger and
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
17
<PAGE>
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 43%
compared to an effective rate of 41% in 1997. The increase is generally
attributable to non-deductible expenses (goodwill amortization) being a higher
percentage of pretax income. The effective rate excluding non-deductible
goodwill amortization was 36% in 1998 compared to 37% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $42.4 million and $12.5 million
for the three months ended March 31, 2000 and 1999, respectively. The increase
in cash flow relates primarily to an increase in net income adjusted for
depreciation and amortization charges and to a net decrease in non-cash
components of working capital. Cash provided by operating activities totaled
$64.1 million, $53.2 million and $86.3 million for 1999, 1998 and 1997,
respectively. The increase in cash from operating activities in 1999 compared to
1998 is primarily attributable 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 1998, cash from operating activities
was lower than 1997 primarily because of increased interest payments
($78.6 million in 1998 versus $53.2 million in 1997) on borrowings resulting
from the Merger and Recapitalization and increased income taxes paid
($26.0 million in 1998 versus $20.6 million in 1997).
For the first quarter of 2000, cash from operating activities and borrowings
under the credit facility was used to fund capital expenditures of
$10.3 million. In addition, we acquired two companies that manufacture
components for mobile handsets and one company that manufactures highly
engineered cable assemblies for automotive applications. The total amount paid
for these acquisitions was $32.7 million in cash and 226,414 shares of common
stock. These acquisitions contributed $8.0 million in sales in the first quarter
of 2000, and the effect on net income was not material. In the 1999 period, cash
from operating activities was used to fund capital expenditures of
$5.6 million, fund acquisitions of $1.4 million and repay indebtedness of
$4.8 million. In 1999, 1998 and 1997, cash from operating activities was used
for capital expenditures ($23.5 million, $26.3 million and $24.1 million in
1999, 1998 and 1997, respectively), and acquisitions ($12.3 million, $32.7
million and $4.0 million in 1999, 1998 and 1997, respectively).
In conjunction with the Merger and Recapitalization in 1997, we entered into
a $900 million Bank Agreement (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, as modified, included 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 Bank 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, 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 March 31, 2000 there were
$599.5 million of borrowings outstanding under the term loan facility.
Availability under the revolving credit facility at March 31, 2000 was
$136.5 million, after reduction of $5.3 million for outstanding letters of
credit.
We have entered into interest rate swap agreements that effectively fix 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 $61.5 million and
$46.9 million for the three months ended March 31, 2000 and 1999, respectively.
EBITDA is not a defined term under GAAP and is not an alternative to operating
income or cash flow from operations as determined under GAAP. We
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<PAGE>
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 cash 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.
In December 1999, we sold 5.5 million shares of common stock in a public
offering resulting in net proceeds of $181.8 million. $105.5 million of such
proceeds was used to redeem $96 million principal amount of our 9 7/8% Senior
Subordinated Notes due 2007 at a price of 109.875%, and the balance of the
proceeds was used to pay down term debt under the Bank Agreement. The redemption
of our 9 7/8% Senior Subordinated Notes due 2007 resulted in an extraordinary
loss for the early extinguishment of debt (consisting of a prepayment premium
and the write off of related deferred debt issuance costs) of $13.6 million less
tax benefits of $4.9 million.
We have not paid, and do not have any present intention to commence payment
of, cash dividends on our common stock. 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 March 31, 2000, approximately
$20.6 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.
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 began on January 1, 1999. Beginning January 1, 2002,
the participating countries will issue new euro-denominated bills and coins for
use in cash transactions. No later than July 1, 2002, the participating
countries will withdraw all bills and coins denominated in
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the legacy currencies, so that the legacy currencies will no longer be legal
tender for any transactions, making the conversion to the euro complete.
We are addressing the issues involved with the introduction of the euro.
Based on progress to date, we believe that the use of the euro will not have a
significant impact on the manner in which we conduct our business. Accordingly,
conversion to the euro is not expected to have a material effect on our
consolidated financial position, consolidated results of operations or
liquidity.
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.
- 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.
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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 16.9% for the three months ended March 31, 2000. In 1999 we reported net
sales, operating profit and income before extraordinary items of
$1,010.6 million, $160.7 million and $44.3 million, respectively. For the three
months ended March 31, 2000, we reported net sales, operating profit and net
income of $300.0 million, $50.7 million and $20.3 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 60% (including 24% for the 19% 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 networks Battlefield Communications
and related consumer Satellite and Space Station
electronics Programs
Data
- cable modems
- personal computers and
related peripherals
</TABLE>
- ------------------
*For the year ended December 31, 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
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<PAGE>
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 34% in 1999. Industry analysts estimate that the total sales for
the industry were approximately $37 billion in 1999.
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.
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 54 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. In 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 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 Merger and Recapitalization. KKR,
through its affiliates, owned 63.5% of our Class A common stock as of April 27,
2000. After the offering, KKR, through its affiliates, will own not less than
49.0% of our Class A common stock which represents not less than 77.2% of its
initial investment.
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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
market 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 49% of our sales for the year ended December 31, 1999 were
outside the United States. We have 58 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 54 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 more than 100,000 stock keeping units in 1999. 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 Space Station Program. We believe that the breadth of our product
line combined with our global
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<PAGE>
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 year ended December 31, 1999. The U.S.
government and its subcontractors accounted for 7% of our net sales for the year
ended December 31, 1999; however, we participate across a broad spectrum of
defense programs and believe that no single program accounted for more than 2%
of 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. Analysts estimate that in 1999 there were over 300 million mobile
handset subscribers and over 200 million Internet subscribers, and that both
applications will increase to approximately 1 billion subscribers by 2004. 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. The demands of the digital age for high-speed Internet access, video
on demand, specialized programming and the ability to carry voice, all place
significant emphasis on expanded bandwidth for network delivery systems. Cable
operators are upgrading and rebuilding their systems to offer such services. In
addition, cable system developments are planned for 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.
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<PAGE>
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 solidifying our relationship with 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 $37 billion connector industry. We have broad product lines for the markets
we serve; as an example, in 1999 our sales included more than 100,000 stock
keeping units. We continuously strive to expand our product lines in order to
become a primary source supplier of interconnect solutions for 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 pursuing strategic acquisitions that complement our
existing business and to further expand our product lines, technological
capabilities and geographic presence. 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 our channels of access to world markets and
through lower manufacturing costs as a result of economies of scale. 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 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
25
<PAGE>
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,
--------------------------------
1997 1998 1999
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
NET TRADE SALES BY BUSINESS SEGMENT:
Interconnect products and assemblies...................... $679,887 $718,109 $ 769,967
Cable products............................................ 204,461 200,768 240,636
-------- -------- ----------
TOTAL....................................................... $884,348 $918,877 $1,010,603
======== ======== ==========
NET TRADE SALES BY GEOGRAPHIC AREA:
United States operations.................................. $462,349 $499,891 $ 519,459
International operations (1).............................. 421,999 418,986 491,144
-------- -------- ----------
TOTAL....................................................... $884,348 $918,877 $1,010,603
======== ======== ==========
</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 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
26
<PAGE>
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 communication
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 1999 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 17% 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 1999, 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.
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.
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<PAGE>
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 49% of our sales for the year ended
December 31, 1999 were outside the United States. Approximately 55% 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. 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. Our international manufacturing and assembly facilities
generally serve the respective local markets, and local operations coordinate
product design and manufacturing responsibility with our other operations around
the world. 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 year ended December 31, 1999; however we
participate across a broad spectrum of government programs and believe that no
single program accounted for more than 2% of net sales. We sell our products to
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 25% of our 1999 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 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.
28
<PAGE>
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 $18.5 million,
$17.7 million and $15.3 million for 1999, 1998 and 1997, 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.
BACKLOG
We estimate that our backlog of unfilled orders was $305.0 million at
March 31, 2000 and $235.3 million at December 31, 1999. 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.
29
<PAGE>
EMPLOYEES
As of March 31, 2000, we had approximately 8,500 full-time employees
worldwide. Of these employees, approximately 6,200 were hourly employees, of
which approximately 2,900 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.
30
<PAGE>
MANAGEMENT
The following table sets forth the name, age as of April 27, 2000 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.......................... 71 Director
Henry R. Kravis........................... 56 Director
George R. Roberts......................... 56 Director
Michael W. Michelson...................... 49 Director
Marc S. Lipschultz........................ 31 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. Jorgensen 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., Dayton Power & Light, Evenflo Company Inc., IDEX Corporation, KinderCare
31
<PAGE>
Learning Centers, Inc., KSL Recreation Group, Inc., Owens-Illinois, Inc.,
PRIMEDIA 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., KinderCare Learning Centers, Inc.,
Owens-Illinois, Inc. and Promus Hotel Corporation.
MARC S. LIPSCHULTZ has been an Executive at KKR since 1995. 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.
32
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of April 27, 2000 by each of the following:
- each person who is known by us to beneficially own more than 5% of our
common stock
- each of our directors
- each of our executive officers
- all directors and executive officers as a group
- each selling stockholder
Unless otherwise indicated, the address of each person named in the table
below is Amphenol Corporation, 358 Hall Avenue, Wallingford, CT 06492
The amounts and percentage of common stock beneficially owned are reported
on the basis of regulations of the Securities and Exchange Commission governing
the determination of beneficial ownership of securities. Under the rules of the
Commission, a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or to
direct the voting of such security, or "investment power," which includes the
power to dispose of or to direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities of which that person has
a right to acquire beneficial ownership within 60 days. Under these rules, more
than one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which such
person has no economic interest. The information set forth in the following
table (1) assumes the over-allotment option by the underwriters has not been
exercised and (2) excludes any shares purchased in the offering by the
respective beneficial owner:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
------------------------------
SHARES BENEFICIALLY SHARES TO BE SOLD PERCENT BEFORE PERCENT AFTER
NAME AND ADDRESS OWNED IN OFFERING (2) OFFERING OFFERING
- ---------------- ------------------- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
KKR Associates 1996 L.P. (1)............. 26,331,490 63.52%
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Andrew M. Clarkson....................... 8,000(3) 0.02
Timothy F. Cohane........................ 440,368(4) 1.06
G. Robert Durham......................... 3,846(3) 0.01
Edward G. Jepsen......................... 445,468(4) 1.07
Henry R. Kravis.......................... 26,331,490(3)(5) 63.52
Marc S. Lipschultz....................... 0(3) --
Martin H. Loeffler....................... 646,544(4) 1.56
Michael W. Michelson..................... 26,331,490(3)(5) 63.52
Diana G. Reardon......................... 42,904(4) 0.10
George R. Roberts........................ 26,331,490(3)(5) 63.52
Edward C. Wetmore........................ 27,688(4) 0.06
All executive officers and directors of
the Company as a group (11 persons).... 27,946,308 67.42
</TABLE>
- ------------------------------
(1) Shares of Class A common stock shown, as owned by KKR, are owned of record
by three limited partnerships affiliated with KKR, KKR 1996 Fund L.P.
(20,582,388 shares), NXS Associates L.P. (5,568,814 shares) and KKR Partners
II L.P. (180,288 shares). Messrs. Henry R. Kravis, Michael W. Michelson and
George R. Roberts (directors of Amphenol) and Edward A. Gilhuly, Perry
Golkin, James H. Greene, Jr., Robert I. MacDonnell, Paul E. Raether, Scott
M. Stuart and Michael T. Tokarz, as members of the limited liability
company, which serves as the general partner of KKR,
33
<PAGE>
may be deemed to share beneficial ownership of the shares of our Class A
common stock shown as beneficially owned by KKR. Each of these individuals
disclaims beneficial ownership of such shares, other than to the extent of
his economic interest in such partnerships.
(2) In addition to our executive officers, each of our employees who has entered
into a Management Stockholder Agreement has the right to sell in this
offering a proportion of his or her shares, including shares issuable upon
the exercise of options, equal to the proportion of shares sold by KKR in
this offering ("tag along rights"). The shares that will be sold by our
executive officers and directors are shown in the table above. The maximum
number of shares that could be sold by the remaining employees pursuant to
the tag along rights would be shares. If the remaining employees
decide to exercise their tag along rights and choose to sell their shares in
this offering, the number of shares sold by KKR in this offering will be
reduced accordingly.
(3) The share ownership amounts for Messrs. Clarkson, Durham, Kravis,
Lipschultz, Michelson and Roberts reflected in the table do not include any
shares of our Class A common stock which may be issued pursuant to the
Amphenol Corporaiton Directors' Deferred Compensation Plan. The cumulative
balance in each director's deferred compensation account as of April 1, 2000
was approximately 3,634 shares. Mr. Lipschultz is a director of Amphenol and
is also an executive of KKR.
(4) Messrs. Loeffler, Jepsen, Cohane, Wetmore and Ms. Reardon entered into
Management Stockholder's Agreements with us in connection with the
Recapitalization, and each agreed to retain direct ownership of at least
189,698, 153,846, 153,846, 4,000 and 4,000 of our shares, respectively,
following the Recapitalization. Pursuant to the Management Stockholder's
Agreements and subject to stockholder approval of the underlying stock
option plan, in 1997 each were awarded 673,076, 461,538, 461,538, 34,000 and
34,000 options, respectively, to acquire our shares. Messrs. Loeffler,
Jepsen, Cohane, Wetmore and Ms. Reardon also received additional option
awards in 1998 and 1999. Such retained shares and shares acquired upon
exercise of such options are subject to significant transfer restrictions
and call rights in our favor for a period of five years following the
completion of the Recapitalization. The share ownership amounts for Messrs.
Loeffler, Jepsen, Cohane, Wetmore and Ms. Reardon reflected in this table
include 452,846, 291,622, 286,522, 23,340, and 23,340 shares, respectively,
which are not presently owned by such individuals but which would be
issuable upon the exercise of stock options which are currently exercisable
or exercisable within 60 days of May 1, 2000.
(5) Messrs. Kravis, Michelson and Roberts disclaim beneficial ownership of such
shares except to the extent of their respective economic interests in the
partnerships owning such shares.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 100 million shares of the Class A common stock
and no other shares of common stock or preferred stock. As of April 28, 2000,
there were approximately 41 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 , 2000, 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 the selling stockholders 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.......................................................
</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 the selling
stockholders 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 THE SELLING
STOCKHOLDERS
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share.......................................... $ $
Total.............................................. $ $
</TABLE>
The selling stockholders will pay the offering expenses, estimated to be
$ - .
The selling stockholders have granted to the underwriters an option,
exercisable for 30 days from the date of the underwriting agreement, to purchase
up to 900,000 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.
Amphenol and the selling stockholders 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 KKR and its
affiliates 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 KKR and its affiliates 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, the selling
stockholders 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, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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 reports with the Commission and are incorporating them by
reference into this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999,
except for Item 8;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
and
3. Our Current Report on Form 8-K filed on April 28, 2000.
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.
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.
38
<PAGE>
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS OF AMPHENOL CORPORATION
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS (AUDITED):
Independent Auditors' Report.............................. F-2
Consolidated Statement of Income for the Three Years Ended
December 31, 1999....................................... F-3
Consolidated Balance Sheet as of December 31, 1999 and
1998.................................................... F-4
Consolidated Statement of Changes in Shareholders' Equity
(Deficit) for the Three Years Ended December 31, 1999... F-5
Consolidated Statement of Cash Flow for the Three Years
Ended December 31, 1999................................. F-6
Notes to Consolidated Financial Statements................ F-7
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Condensed Consolidated Statement of Income for the Three
Months Ended March 31, 2000 and 1999.................... F-23
Condensed Consolidated Balance Sheet as of March 31, 2000
and December 31, 1999................................... F-24
Condensed Consolidated Statement of Changes in
Shareholders' Deficit for the Three
Months Ended March 31, 2000 and 1999.................... F-25
Condensed Consolidated Statement of Cash Flow for the
Three Months Ended March 31, 2000 and 1999.............. F-26
Notes to Condensed Consolidated Financial Statements...... F-27
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of Amphenol Corporation
We have audited the accompanying consolidated balance sheets of Amphenol
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in shareholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1999. 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 consolidated financial statements present fairly, in
all material respects, the financial position of Amphenol Corporation and
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -----------------------
Hartford, Connecticut
January 18, 2000
(April 26, 2000, as to Note 13)
F-2
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................. $ 1,010,603 $ 918,877 $ 884,348
Costs and expenses:
Cost of sales, excluding depreciation and
amortization...................................... 663,978 601,930 572,092
Depreciation and amortization expense............... 27,673 23,553 20,428
Selling, general and administrative expense......... 145,852 131,966 125,064
Amortization of goodwill............................ 12,371 11,701 11,316
----------- ----------- -----------
Operating income...................................... 160,729 149,727 155,448
Interest expense...................................... (79,297) (81,199) (64,713)
Expenses relating to Merger and Recapitalization (Note
2).................................................. (2,500)
Other expenses, net................................... (5,262) (4,545) (1,061)
----------- ----------- -----------
Income before income taxes and extraordinary item..... 76,170 63,983 87,174
Provision for income taxes............................ (31,875) (27,473) (35,910)
----------- ----------- -----------
Income before extraordinary item...................... 44,295 36,510 51,264
Extraordinary item:
Loss on early extinguishment of debt, net of income
taxes
(Notes 2 and 3)................................... (8,674) (24,547)
----------- ----------- -----------
Net income............................................ $ 35,621 $ 36,510 $ 26,717
=========== =========== ===========
Net income per common share--Basic:
Income before extraordinary item.................... $ 1.23 $ 1.03 $ .92
Extraordinary loss.................................. (.24) (.44)
----------- ----------- -----------
Net income.......................................... $ .99 $ 1.03 $ .48
=========== =========== ===========
Average common shares outstanding................... 36,059,556 35,326,424 55,612,520
Net income per common share--Diluted:
Income before extraordinary item.................... $ 1.21 $ 1.02 $ .92
Extraordinary loss.................................. (.24) (.44)
----------- ----------- -----------
Net income.......................................... $ .97 $ 1.02 $ .48
=========== =========== ===========
Average common shares outstanding................... 36,664,016 35,884,794 56,005,954
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments...................... $ 12,898 $ 3,095
Accounts receivable, less allowance for doubtful accounts
of $2,232 and $1,832.................................... 111,711 83,065
Inventories:
Raw materials and supplies................................ 28,022 24,806
Work in process........................................... 115,231 114,035
Finished goods............................................ 46,180 45,583
--------- ---------
189,433 184,424
Prepaid expenses and other assets......................... 21,137 17,089
--------- ---------
Total current assets.................................. 335,179 287,673
--------- ---------
Land and depreciable assets:
Land...................................................... 10,582 10,782
Buildings................................................. 69,493 68,426
Machinery and equipment................................... 246,798 237,618
--------- ---------
326,873 316,826
Less accumulated depreciation............................. (206,923) (190,047)
--------- ---------
119,950 126,779
Deferred debt issuance costs................................ 10,267 16,783
Excess of cost over fair value of net assets acquired....... 360,999 360,265
Other assets................................................ 9,981 15,901
--------- ---------
$ 836,376 $ 807,401
========= =========
LIABILITIES & SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 71,495 $ 67,885
Accrued interest.......................................... 9,779 11,306
Accrued salaries, wages and employee benefits............. 14,604 14,385
Other accrued expenses.................................... 33,220 28,934
Current portion of long-term debt......................... 16,829 1,655
--------- ---------
Total current liabilities............................. 145,927 124,165
--------- ---------
Long-term debt............................................ 745,658 952,469
Deferred taxes and other liabilities...................... 25,957 23,024
Commitments and contingent liabilities (Notes 3, 7 and 10)
Shareholders' Deficit:
Class A Common Stock, $.001 par value; 100,000,000 shares
authorized;
41,232,440 and 35,724,656 shares outstanding at December
31, 1999 and 1998, respectively......................... 21 18
Additional paid-in deficit................................ (318,641) (499,928)
Accumulated earnings...................................... 250,482 214,861
Accumulated other comprehensive loss (Note 6)............. (13,028) (7,208)
--------- ---------
Total shareholders' deficit........................... (81,166) (292,257)
--------- ---------
$ 836,376 $ 807,401
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE TREASURY
COMMON CAPITAL COMPREHENSIVE ACCUMULATED INCOME (LOSS) STOCK
STOCK (DEFICIT) INCOME EARNINGS (NOTE 6) AT COST
-------- ----------- ------------------------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996.... $47 $ 265,425 $151,634 $ (3,887) $(52,671)
Comprehensive income:
Net income................. [$ 26,717] 26,717
-------------------------
Other comprehensive income
(loss), net of tax:
Reclassification
adjustment for gain on
securities realized in
net income............. (3,687)
Translation
adjustments............ (8,147)
Minimum pension liability
adjustment............. 5,809
-------------------------
Other comprehensive loss... (6,025) (6,025)
-------------------------
Comprehensive income......... [$ 20,692]
=========================
Stock subscription
proceeds................... 532
Sale of 26,233,910 shares of
common stock (Note 2)...... 13 341,028
Purchase of 80,650,480 shares
of common stock (Note 2)... (40) (1,048,450)
Fees and other expenses
related to the Merger and
Recapitalization (Note
2)......................... (17,644)
Retirement of Treasury
Stock...................... (2) (52,669) 52,671
Amortization of deferred
compensation............... 186
Stock options exercised...... 10
--- ----------- -------- -------- --------
Balance December 31, 1997.... 18 (511,582) 178,351 (9,912)
Comprehensive income:
Net income................. [$ 36,510] 36,510
Other comprehensive income,
net of tax:
Translation
adjustments............ 2,704 2,704
-------------------------
Comprehensive income......... [$ 39,214]
=========================
Stock subscription
proceeds................... 25
Deferred compensation........ 180
Stock issued in connection
with acquisition........... 11,449
--- ----------- -------- --------
Balance December 31, 1998.... 18 (499,928) 214,861 (7,208)
Comprehensive income:
Net income................. [$ 35,621] 35,621
Other comprehensive loss,
net of tax:
Translation
adjustments............ (5,820) (5,820)
-------------------------
Comprehensive income......... [$ 29,801]
=========================
Deferred compensation........ 180
Sale of 5,500,000 shares of
common stock............... 3 181,107
--- ----------- -------- --------
Balance December 31, 1999.... $21 $ (318,641) $250,482 $(13,028)
=== =========== ======== ========
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balance December 31, 1996.... $ 360,548
Comprehensive income:
Net income................. 26,717
Other comprehensive income
(loss), net of tax:
Reclassification
adjustment for gain on
securities realized in
net income............. (3,687)
Translation
adjustments............ (8,147)
Minimum pension liability
adjustment............. 5,809
Other comprehensive loss...
Comprehensive income.........
Stock subscription
proceeds................... 532
Sale of 26,233,910 shares of
common stock (Note 2)...... 341,041
Purchase of 80,650,480 shares
of common stock (Note 2)... (1,048,490)
Fees and other expenses
related to the Merger and
Recapitalization (Note
2)......................... (17,644)
Retirement of Treasury
Stock......................
Amortization of deferred
compensation............... 186
Stock options exercised...... 10
-----------
Balance December 31, 1997.... (343,125)
Comprehensive income:
Net income................. 36,510
Other comprehensive income,
net of tax:
Translation
adjustments............ 2,704
Comprehensive income.........
Stock subscription
proceeds................... 25
Deferred compensation........ 180
Stock issued in connection
with acquisition........... 11,449
-----------
Balance December 31, 1998.... (292,257)
Comprehensive income:
Net income................. 35,621
Other comprehensive loss,
net of tax:
Translation
adjustments............ (5,820)
Comprehensive income.........
Deferred compensation........ 180
Sale of 5,500,000 shares of
common stock............... 181,110
-----------
Balance December 31, 1999.... $ (81,166)
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOW
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
--------- -------- -----------
<S> <C> <C> <C>
Net income.................................................. $ 35,621 $36,510 $ 26,717
Adjustments for cash from operations:
Depreciation and amortization............................. 40,044 35,254 31,744
Amortization of deferred debt issuance costs.............. 2,733 2,749 2,638
Net extraordinary loss on early extinguishment of debt.... 8,674 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..................................... (27,793) (2,926) (18,261)
Inventory............................................... (9,795) (9,229) (17,700)
Prepaid expenses and other assets....................... (2,856) (1,788) (2,479)
Accounts payable........................................ 2,646 (257) 15,653
Accrued liabilities..................................... 12,792 (4,251) 18,938
Accrued interest........................................ (2,262) (142) 8,944
Accrued pension and post employment benefits............ 1,113 (1,102) (4,717)
Deferred taxes and other liabilities.................... 2,887 57 2,607
Other................................................... 291 (1,647) (952)
--------- ------- -----------
Cash flow provided by operations............................ 64,095 53,228 86,262
--------- ------- -----------
Cash flow from investing activities:
Additions to property, plant and equipment................ (23,464) (26,340) (24,059)
Investments in acquisitions and joint ventures............ (12,274) (32,663) (4,000)
Proceeds from the sale of marketable securities........... 7,351
--------- ------- -----------
Cash flow used by investing activities...................... (35,738) (59,003) (20,708)
--------- ------- -----------
Cash flow from financing activities:
Net change in borrowings under revolving credit
facilities.............................................. (14,328) 9,157 (20,461)
Repurchase of senior notes and subordinated debt.......... (105,480) (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............... (80,500) (5,000) (65,000)
Proceeds from the issuance of senior subordinated notes... 240,000
Purchase of common stock.................................. (1,048,490)
Sale of common stock...................................... 181,754 341,041
--------- ------- -----------
Cash flow provided by (used by) financing activities........ (18,554) 4,157 (64,825)
--------- ------- -----------
Net change in cash and short-term cash investments.......... 9,803 (1,618) 729
Cash and short-term cash investments balance, beginning of
period.................................................... 3,095 4,713 3,984
--------- ------- -----------
Cash and short-term cash investments balance, end of
period.................................................... $ 12,898 $ 3,095 $ 4,713
========= ======= ===========
Cash paid during the year for:
Interest.................................................. $ 78,091 $78,634 $ 53,237
Income taxes paid, net of refunds......................... 20,285 26,024 20,623
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<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 $121,045 and $108,674 at December 31, 1999 and
1998, respectively. Management continually reassesses the appropriateness of
both the carrying value and remaining life of goodwill. Such reassessments are
based on forecasting
F-7
<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 $18,467, $17,669 and
$15,313, excluding customer sponsored programs representing expenditures of
$286, $523 and $214, for the years 1999, 1998 and 1997, 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
Basic income per common share is based on the net income for the period
divided by the weighted average common shares outstanding. Diluted income per
common share assumes the exercise of outstanding, dilutive stock options using
the treasury stock method.
F-8
<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.
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. The
Company is in the process of evaluating the effect this new standard will have
on the Company's financial statements. The Company is required to adopt FAS 133,
as amended by FAS 137, beginning January 1, 2001.
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 26,233,910 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 80,650,480 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 $0.99 per share.
F-9
<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, 1999 MATURITY 1999 1998
------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
Bank Agreement:
Term loan.................. 7.60% 2000-2006 $599,500 $680,000
Revolving credit
facility................. 8.64% 2004 7,100 19,500
Senior subordinated notes.... 9.875% 2007 144,000 240,000
Notes payable to foreign
banks and other debt....... 1.0%-15.0% 2000-2004 11,887 14,624
-------- --------
762,487 954,124
Less current portion......... 16,829 1,655
-------- --------
Total long-term debt......... $745,658 $952,469
======== ========
</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. Availability under the revolving credit facility
at December 31, 1999 was $134,581, after reduction of $8,319 for outstanding
letters of credit.
At December 31, 1999, 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,
1999, 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 December 1999, the Company funded the redemption of $96,000
principal amount of Notes at a price of 109.875% plus accrued interest. Such
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--LONG-TERM DEBT (CONTINUED)
funding was from a portion of the proceeds received on issuance of 5.5 million
shares of common stock. The redemption resulted in an extraordinary loss for the
early extinguishment of debt (consisting of a prepayment premium and the write
off of related deferred debt issuance costs) of $13,553, less tax benefits of
$4,879.
The maturity of the Company's long-term debt over each of the next five
years ending December 31, is as follows: 2000--$16,829; 2001--$48,701;
2002--$61,504; 2003--$82,026; and 2004--$119,561.
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,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income before taxes and extraordinary item:
United States.................................. $18,508 $18,725 $45,354
Foreign........................................ 57,662 45,258 41,820
------- ------- -------
$76,170 $63,983 $87,174
======= ======= =======
Current provision:
United States.................................. $13,671 $10,002 $21,857
Foreign........................................ 18,353 17,651 12,611
------- ------- -------
32,024 27,653 34,468
------- ------- -------
Deferred provision:
United States.................................. $ (260) $ 745 $ 1,407
Foreign........................................ 111 (925) 35
------- ------- -------
(149) (180) 1,442
------- ------- -------
Total provision for income taxes................. $31,875 $27,473 $35,910
======= ======= =======
</TABLE>
At December 31, 1999, the Company had $13,829 of foreign tax loss
carryforwards, of which $1,691 expire at various dates through 2003 and the
balance can be carried forward indefinitely, and $612 of tax credit
carryforwards, of which $450 expire between the years 2000 and 2011 and the
balance can be carried forward indefinitely. Accrued income tax liabilities of
$1,572 and $5,667 at December 31, 1999 and 1998, respectively, are included in
other accrued expenses in the Consolidated Balance Sheet.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--INCOME TAXES (CONTINUED)
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,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
U.S. statutory federal tax rate..................... 35.0% 35.0% 35.0%
State and local taxes............................... 1.7 2.1 1.4
Non-deductible purchase accounting differences...... 5.7 6.4 4.5
Foreign tax expense in excess of U.S. statutory
rate.............................................. 2.1 2.8 .9
Valuation allowance provided (utilized)............. (2.9) (.9) .1
Other............................................... .3 (2.5) (.7)
---- ---- ----
Effective tax rate.................................. 41.9% 42.9% 41.2%
==== ==== ====
</TABLE>
The Company's deferred tax assets and liabilities, excluding a valuation
allowance, were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves........................ $ 4,766 $ 4,415
Operating loss carryforwards............................ 4,882 7,298
Tax credit carryforwards................................ 612 450
Employee benefits....................................... 2,152 2,221
------- -------
$12,412 $14,384
======= =======
Deferred tax liabilities:
Depreciation............................................ $ 6,290 $ 7,399
Prepaid pension costs................................... 7,128 6,103
------- -------
$13,418 $13,502
======= =======
</TABLE>
A valuation allowance of $3,723 and $5,919 at December 31, 1999 and 1998,
respectively, has been recorded which relates primarily to foreign net operating
loss carryforwards and tax credits. The net change in the valuation allowance
for deferred tax assets was a reduction of $2,196 in 1999 and a decrease of $549
in 1998. In 1999 the net change in the valuation allowance was related to the
utilization of foreign net operating loss carryforwards and in 1998 to the
expiration of tax credits. 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.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company and its domestic subsidiaries have a defined benefit plan
covering substantially all U.S. employees. Plan benefits are generally based on
years of service and compensation. The plan is noncontributory, except for
certain salaried employees. Certain foreign subsidiaries have defined benefit
plans covering their employees. Certain U.S. employees not covered by the
defined benefit plan are covered by defined contribution plans. The following is
a summary of the Company's defined benefit plans funded status as of the most
recent actuarial valuations (December 31, 1999 and 1998).
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
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.......... $ 25,302 $193,634 $ 21,540 $178,982
Service cost..................................... 881 4,385 768 3,697
Interest cost.................................... 1,429 12,913 1,450 12,692
Plan participants' contributions................. -- 296 -- 272
Plan amendments.................................. -- -- -- 4,797
Actuarial (gain) loss............................ 827 (8,410) 762 7,955
Foreign exchange................................. (3,551) (159) 1,717 (223)
Benefits paid.................................... (914) (13,701) (935) (14,538)
-------- -------- -------- --------
Benefit obligation at end of year................ 23,974 188,958 25,302 193,634
-------- -------- -------- --------
Change in plan assets:
Fair value of plan assets at beginning of year... -- 222,219 -- 204,679
Actual return on plan assets..................... -- 29,849 -- 32,065
Employer contribution............................ -- 92 -- 61
Plan participants' contributions................. -- 296 -- 272
Foreign exchange................................. -- (208) -- (320)
Benefits paid.................................... -- (13,701) -- (14,538)
-------- -------- -------- --------
Fair value of plan assets at end of year......... -- 238,547 -- 222,219
-------- -------- -------- --------
Funded status...................................... (23,974) 49,589 (25,302) 28,585
Unrecognized net actuarial (gain) loss............. 3,419 (29,592) 1,075 (9,236)
Unrecognized prior service cost.................... -- 8,983 -- 10,076
Unrecognized transition obligation net............. 124 (2,276) 167 (2,540)
-------- -------- -------- --------
(Accrued) prepaid benefit cost..................... $(20,431) $ 26,704 $(24,060) $ 26,885
======== ======== ======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Components of net pension cost:
Service cost.............................................. $ 5,266 $ 4,465 $ 3,969
Interest cost............................................. 14,342 14,142 13,761
Expected return on plan assets............................ (19,110) (18,038) (35,321)
Net amortization and deferral of actuarial losses......... 1,376 983 19,417
-------- -------- --------
Net pension cost............................................ $ 1,874 $ 1,552 $ 1,826
======== ======== ========
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining actuarial present value of the projected
benefit obligation was 7.5% (7.0% in 1998 and 7.25% in 1997) and 3.5% (3.0% in
1998 and 3.25% in 1997), 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 $19,277 and $21,139 at
December 31, 1999 and 1998, 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, 1999 and 1998 were 7.5% and 7.0%,
respectively.
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)
Summary information on the Company's postretirement medical plans as of
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 12,665 $ 13,027
Service cost.............................................. 68 72
Interest cost............................................. 901 935
Paid benefits and expenses................................ (2,093) (2,616)
Actuarial gain (loss)..................................... 939 1,247
-------- --------
Benefit obligation at end of year......................... $ 12,480 $ 12,665
======== ========
Funded status............................................... $(12,480) $(12,665)
Unrecognized net actuarial loss............................. 8,897 9,111
Unrecognized transition obligation.......................... 807 869
-------- --------
Accrued benefit cost........................................ $ (2,776) $ (2,685)
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Components of net postretirement benefit cost:
Service cost.............................................. $ 68 $ 72 $ 65
Interest cost............................................. 901 935 963
Amortization of transition obligation..................... 62 62 62
Net amortization and deferral of actuarial losses......... 1,107 961 733
------ ------ ------
Net postretirement benefit cost............................. $2,138 $2,030 $1,823
====== ====== ======
</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 2,000,000 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 $13.00 per share were
paid the difference between $13.00 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 2,400,000 shares of common stock. In May 1998, the New Plan was
amended to increase the number of authorized shares to a maximum of 3,500,000.
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.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Stock option plan activity for 1997, 1998, and 1999 was as follows:
<TABLE>
<CAPTION>
OLD PLAN NEW PLAN AVERAGE PRICE
-------- --------- -------------
<S> <C> <C> <C>
Options outstanding at December 31, 1996.................... 846,876 $10.29
Options granted............................................. 2,380,352 13.06
Options exercised........................................... (28,002) 6.58
Options cancelled........................................... (818,874) (23,500) 10.24
-------- --------- ------
Options outstanding at December 31, 1997.................... -- 2,356,852 13.06
Options granted............................................. -- 480,920 25.41
Options cancelled........................................... -- (296,900) 25.68
-------- --------- ------
Options outstanding at December 31, 1998.................... -- 2,540,872 13.93
Options granted............................................. -- 482,800 19.24
Options cancelled........................................... -- (106,612) 14.99
-------- --------- ------
Options outstanding at December 31, 1999.................... -- 2,917,060 $14.77
======== ========= ======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- -------------------
AVERAGE REMAINING AVERAGE
EXERCISE PRICE SHARES PRICE TERM SHARES PRICE
- -------------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
$13.00 2,211,652 $13.00 7.38 897,142 $13.00
15.00-17.50 122,208 16.05 8.83 23,952 16.00
18.00-20.00 459,800 19.14 9.23 8,000 19.97
27.50-30.00 123,400 28.90 8.39 22,680 29.00
</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,
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
"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>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary item.................... As reported $44,295 $36,510 $51,264
Pro forma 42,261 34,075 49,704
Income per share before extraordinary
item--Basic....................................... As reported $ 1.23 $ 1.03 $ .92
Pro forma 1.17 .96 .89
Income per share before extraordinary
item--Diluted..................................... As reported $ 1.21 $ 1.02 $ .92
Pro forma 1.15 .95 .89
Net income.......................................... As reported $35,621 $36,510 $26,717
Pro forma 33,587 34,075 25,157
Net income per share--Basic......................... As reported $ .99 $ 1.03 $ .48
Pro forma .93 .96 .45
Net income per share--Diluted....................... As reported $ .97 $ 1.02 $ .48
Pro forma .92 .95 .45
</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>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Risk free interest rate........................ 5.6% 5.1% 5.4%
Expected life.................................. 4 years 4 years 4 years
Expected volatility............................ 40.0% 30.0% 30.0%
Expected dividend yield........................ -- -- --
</TABLE>
The weighted-average fair values of options granted during 1999, 1998 and
1997 were $7.51, $8.35 and $4.18, respectively.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6--SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Activity in the Company's Accumulated Other Comprehensive Income accounts
for 1997, 1998 and 1999 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, 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)
Translation adjustments.................... (5,820) (5,820)
-------- ------- ------- --------
Balance December 31, 1999.................... $(13,028) -- -- $(13,028)
======== ======= ======= ========
</TABLE>
In December 1999, the Company issued 5.5 million shares of common stock in a
public offering.
At December 31, 1999, KKR and its affiliates owned 63.9% of the Company's
outstanding common stock.
NOTE 7--LEASES
At December 31, 1999, the Company was committed under operating leases which
expire at various dates through 2008. Total rent expense under operating leases
for the years 1999, 1998, and 1997 was $15,895, $13,927 and $11,495,
respectively.
Minimum lease payments under non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
2000.............................................. $11,766
2001.............................................. 8,186
2002.............................................. 5,945
2003.............................................. 4,598
2004.............................................. 3,528
Beyond 2004....................................... 913
-------
Total minimum obligation........................ $34,936
=======
</TABLE>
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
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 8--REPORTABLE BUSINESS SEGMENTS AND INTERNATIONAL OPERATIONS (CONTINUED)
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
------------------------------ ------------------------------ --------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales
--external................. $769,967 $718,109 $679,887 $240,636 $200,768 $204,461 $1,010,603 $918,877 $884,348
--intersegment............. 569 358 102 9,417 7,189 5,037 9,986 7,547 5,139
Depreciation and
amortization............... 21,953 18,235 15,029 3,446 3,039 2,960 25,399 21,274 17,989
Segment operating
income..................... 135,721 135,739 132,520 47,585 31,880 39,313 183,306 167,619 171,833
Segment assets............... 347,844 311,892 256,380 53,554 55,119 58,743 401,398 367,011 315,123
Additions to property,
plant and equipment........ 21,321 22,483 21,275 2,032 3,834 2,666 23,353 26,317 23,941
</TABLE>
Reconciliation of segment operating income to consolidated income before taxes
and extraordinary item:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Segment operating income.................................... $183,306 $167,619 $171,833
Amortization of goodwill.................................... (12,371) (11,701) (11,316)
Interest expense............................................ (79,297) (81,199) (64,713)
Headquarters' expense and other net expenses................ (15,468) (10,736) (8,630)
-------- -------- --------
Consolidated income before taxes and extraordinary item..... $ 76,170 $ 63,983 $ 87,174
======== ======== ========
</TABLE>
Reconciliation of segment assets to consolidated total assets:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Segment assets.............................................. $401,398 $367,011 $315,123
Goodwill.................................................... 360,999 360,265 339,223
Other unallocated assets.................................... 73,979 80,125 82,808
-------- -------- --------
Consolidated total assets................................... $836,376 $807,401 $737,154
======== ======== ========
</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
-------------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States.................. $ 627,699 $591,377 $581,278 $ 65,536 $ 70,072 $ 64,020
Europe......................... 268,815 245,057 230,923 39,811 43,301 36,519
Other.......................... 199,426 155,350 133,355 14,603 13,406 11,053
Eliminations................... (85,337) (72,907) (61,208)
---------- -------- -------- -------- -------- --------
Total...................... $1,010,603 $918,877 $884,348 $119,950 $126,779 $111,592
========== ======== ======== ======== ======== ========
</TABLE>
Revenues by geographic area are based on origin of shipment. The Company had
export sales from the United States operations of approximately $81,000, $58,000
and $88,000 in 1999, 1998 and 1997, respectively.
NOTE 9--OTHER EXPENSES, NET
Other income (expense) is comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest income............................................. $ 541 $ 121 $ 234
Foreign currency transaction gains.......................... 499 1,445 1,283
Program fees on sale of accounts receivable................. (3,851) (4,121) (3,671)
Minority interests.......................................... (2,220) (849) (1,042)
Gain on sale of marketable securities....................... 3,917
Agency and commitment fees.................................. (701) (705) (678)
Other....................................................... 470 (436) (1,104)
------- ------- -------
$(5,262) $(4,545) $(1,061)
======= ======= =======
</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 costs up to $30,000 and 100% of
the costs in excess of $30,000. At December 31, 1999, approximately $20,000 of
total costs have been incurred applicable to this agreement. Management does not
believe
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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, 1999 and 1998, 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, 1999 and 1998, 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, 1999 and 1998, 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, 1999 and
1998 would have resulted in a pretax gain of $3,543 and a pretax loss of
$12,829, respectively. Due to the volatility of interest rates, these estimated
results may or may not be realized.
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, 1999 and 1998 approximates fair
value.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
1999
Net sales........................................ $237,164 $247,438 $256,857 $269,144
Gross profit, including depreciation............. 73,323 78,509 81,804 86,448
Income before extraordinary items................ 8,239 10,463 11,586 14,007
Income per share before extraordinary
item--Basic.................................... .23 .29 .32 .38
Income per share before extraordinary
item--Diluted.................................. .23 .29 .32 .37
Net income....................................... 8,239 10,463 11,586 5,333
Net income per share--Basic...................... .23 .29 .32 .14
Net income per share--Diluted.................... .23 .29 .32 .14
Stock price--High................................ 19 1/4 20 3/16 28 5/16 35 3/4
--Low................................... 14 23/32 17 1/4 19 21/32 22 7/8
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--Basic...................... .28 .30 .23 .23
Net income per share--Diluted.................... .27 .29 .23 .23
Stock price--High................................ 32 30 13/16 22 1/16 17 17/32
--Low................................... 26 5/8 19 1/2 14 29/32 13 3/4
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--Basic.................................... .20 .25 .24 .27
Income per share before extraordinary
item--Diluted.................................. .20 .25 .24 .26
Net income (loss)................................ 17,497 2,929 8,559 (2,268)
Net income (loss) per share--Basic............... .20 .05 .24 (.06)
Net income (loss) per share--Diluted............. .20 .05 .24 (.06)
Stock price--High................................ 13 19 7/16 21 3/4 28
--Low................................... 10 7/8 12 1/16 19 17/32 22
</TABLE>
NOTE 13--SUBSEQUENT EVENT
On March 14, 2000, the Board of Directors approved a two-for-one split of
the Company's common stock to be paid to shareholders of record as of March 23,
2000. On April 24, 2000, the Company's shareholders approved an increase in the
number of authorized shares from 40,000,000 to 100,000,000. On April 24, 2000,
each shareholder received one additional share of common stock for each share of
stock then held. All share and per-share amounts in the financial statements and
footnotes have been restated to reflect the split.
F-22
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Net sales................................................... $ 300,049 $ 237,164
Costs and expenses:
Cost of sales, excluding depreciation and amortization.... 197,176 157,289
Depreciation and amortization expense..................... 7,039 6,885
Selling, general and administrative expense............... 41,873 34,262
Amortization of goodwill.................................. 3,275 3,078
---------- ----------
Operating income............................................ 50,686 35,650
Interest expense............................................ (15,843) (19,812)
Other expenses, net......................................... (1,904) (1,233)
---------- ----------
Income before income taxes.................................. 32,939 14,605
Provision for income taxes.................................. (12,675) (6,366)
---------- ----------
Net income.................................................. $ 20,264 $ 8,239
========== ==========
Net income per common share--Basic.......................... $ .49 $ .23
========== ==========
Average common shares outstanding--Basic.................. 41,465,756 35,724,682
Net income per common share--Diluted........................ $ .48 $ .23
========== ==========
Average common shares outstanding--Diluted................ 42,580,344 36,062,650
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term cash investments...................... $ 12,560 $ 12,898
Accounts receivable, less allowance for doubtful accounts
of $2,419 and $2,232, respectively...................... 135,218 111,711
Inventories............................................... 184,683 189,433
Prepaid expenses and other assets......................... 20,599 21,137
--------- ---------
Total current assets........................................ 353,060 335,179
--------- ---------
Land and depreciable assets, less accumulated depreciation
of $213,645 and $206,923, respectively.................... 129,552 119,950
Deferred debt issuance costs................................ 9,709 10,267
Excess of cost over fair value of net assets acquired....... 388,832 360,999
Other assets................................................ 13,566 9,981
--------- ---------
$ 894,719 $ 836,376
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 81,696 $ 71,495
Accrued interest.......................................... 12,671 9,779
Other accrued expenses.................................... 61,694 47,824
Current portion of long-term debt......................... 16,741 16,829
--------- ---------
Total current liabilities................................... 172,802 145,927
--------- ---------
Long-term debt.............................................. 751,218 745,658
Deferred taxes and other liabilities........................ 27,174 25,957
Shareholders' Deficit:
Common stock.............................................. 21 21
Additional paid-in deficit................................ (311,044) (318,641)
Accumulated earnings...................................... 270,746 250,482
Accumulated translation adjustment........................ (16,198) (13,028)
--------- ---------
Total shareholders' deficit................................. (56,475) (81,166)
--------- ---------
$ 894,719 $ 836,376
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED TOTAL
COMMON PAID-IN COMPREHENSIVE ACCUMULATED TRANSLATION SHAREHOLDERS'
STOCK DEFICIT INCOME EARNINGS ADJUSTMENT DEFICIT
-------- ---------- ------------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance at
December 31, 1999............. $21 ($318,641) $250,482 ($13,028) ($ 81,166)
Comprehensive income:
Net income.................... [$20,264] 20,264 20,264
-------------------------
Other comprehensive loss, net
of tax:
Foreign currency translation
adjustment................ (3,170) (3,170) (3,170)
-------------------------
Comprehensive income............ [$17,094]
=========================
Issuance of 226,414 shares of
common stock related to
acquistion.................... 7,500 7,500
Other adjustments............... 97 97
--- --------- -------- -------- ---------
Ending balance at March 31, 2000 $21 ($311,044) $270,746 ($16,198) ($ 56,475)
=== ========= ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED TOTAL
COMMON PAID-IN COMPREHENSIVE ACCUMULATED TRANSLATION SHAREHOLDERS'
STOCK DEFICIT INCOME EARNINGS ADJUSTMENT 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.................... [$8,239] 8,239 8,239
-------------------------
Other comprehensive loss,
net of tax:
Foreign currency translation
adjustment.................... (4,853) (4,853) (4,853)
-------------------------
Comprehensive income............ [$3,386]
=========================
Other adjustments............... 45 45
--- --------- -------- -------- ---------
Ending balance at March 31, 1999 $18 ($499,883) $223,100 ($12,061) ($288,826)
</TABLE>
F-25
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Net income.................................................. $20,264 $ 8,239
Adjustments for cash from operations:
Depreciation and amortization............................. 10,314 9,963
Amortization of deferred debt issuance costs.............. 558 691
Net change in non-cash components of working capital 11,280 (6,365)
------- -------
Cash flow provided by operations............................ 42,416 12,528
------- -------
Cash flow from investing activities:
Capital additions, net.................................... (10,267) (5,595)
Investment in acquisitions................................ (33,565) (1,416)
------- -------
Cash flow used by investing activities...................... (43,832) (7,011)
------- -------
Cash flow from financing activities:
Net change in borrowings under revolving credit
facilities................................................ 1,078 (4,821)
------- -------
Cash flow provided (used) by financing activities........... 1,078 (4,821)
------- -------
Net change in cash and short-term cash investments (338) 696
Cash and short-term cash investments balance, beginning of
period 12,898 3,095
------- -------
Cash and short-term cash investments balance, end of period $12,560 $ 3,791
======= =======
Cash paid during the period for:
Interest.................................................. $12,393 $14,058
Income taxes paid (refunded), net......................... 5,940 (110)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--PRINCIPLES OF CONSOLIDATION AND INTERIM FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of March 31, 2000 and December
31, 1999, and the related condensed consolidated statements of income and of
changes in shareholders' deficit and of cash flow for the three months ended
March 31, 2000 and 1999 include the accounts of the Company and its
subsidiaries. The interim financial statements included herein are unaudited. In
the opinion of management all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such interim financial
statements have been included. The results of operations for the three months
ended March 31, 2000 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
1999 Annual Report on Form 10-K.
NOTE 2--INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials and supplies........................... $ 29,064 $ 28,022
Work in process...................................... 115,333 115,231
Finished goods....................................... 40,286 46,180
-------- --------
$184,683 $189,433
======== ========
</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 three
months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
INTERCONNECT PRODUCTS CABLE
AND ASSEMBLIES PRODUCTS TOTAL
--------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
--------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales
-- external............... $225,347 $178,008 $74,702 $59,156 $300,049 $237,164
-- intersegment........... 75 156 3,582 2,150 3,657 2,306
Segment operating income.... 42,378 29,623 15,147 10,910 57,525 40,533
</TABLE>
F-27
<PAGE>
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 three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Segment operating income.................................. $57,525 $40,533
Amortization of goodwill.................................. (3,275) (3,078)
Interest expense.......................................... (15,843) (19,812)
Headquarters' expense and other net expenses.............. (5,468) (3,038)
------- -------
Consolidated income before income taxes................... $32,939 $14,605
======= =======
</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 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 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
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 Condensed
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 March 31, 2000 and December 31, 1999,
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 Sheet at those dates.
NOTE 5--STOCK SPLIT
On March 14, 2000, the Board of Directors approved a two-for-one split of
the Company's common stock to be paid to shareholders of record as of March 23,
2000. On April 24, 2000, the Company's shareholders approved an increase in the
number of authorized shares from 40,000,000 to 100,000,000. On April 24, 2000,
each shareholder received one additional share of common stock for each share of
stock then held. All share and per-share amounts in the financial statements and
footnotes have been restated to reflect the split.
F-28
<PAGE>
Picture of a connector and connector components used in industrial applications.
Picture of seven different cable assemblies used for automotive safety
applications, including airbag and seatbelt pretensioner interconnect systems,
antilock braking systems, automatic transmission equipment and audio systems.
Picture of three highly engineered fiber optic cable assemblies used in hostile
environments including aerospace equipment.
Picture of a variety of coaxial cable used for transmission of video, voice and
data signals including cable television signals.
Picture of a variety of coaxial cable connectors used to connect coaxial cables
and transmit radio frequency.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
AMPHENOL CORPORATION
6,000,000 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............................................ $110,663
Legal fees and expenses*....................................
Blue Sky fees and expenses.................................. 30,500
Accounting fees and expenses*...............................
Transfer agent and expenses*................................
Printing and duplicating expenses*..........................
Miscellaneous expenses*.....................................
--------
Total*.................................................. $
========
</TABLE>
- ------------------------
* To be filed by amendment.
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.
II-1
<PAGE>
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
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 May 1, 2000.
<TABLE>
<S> <C> <C>
AMPHENOL CORPORATION
By: /s/ MARTIN H. LOEFFLER
-----------------------------------------
Martin H. Loeffler
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Amphenol Corporation, do
hereby constitute and appoint Edward G. Jepson and Edward C. Wetmore, or either
of them, our true and lawful attorneys and agents, each with the power of
substitution to do any and all acts and things in our name and on our behalf in
our capacities as directors and officers and to execute any and all instruments
for us and in our names in the capacities indicated below, which said attorneys
and agents, or either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act and any rules, regulations and
requirements of the Commission, in connection with this Registration Statement,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto and any additional
Registration Statement related hereto permitted by Rule 462(b) promulgated under
the Securities Act (and all amendments, including post-effective amendments,
thereto) and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, or their respective substitute or substitutes, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed on May 1, 2000 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARTIN H. LOEFFLER Chairman, Chief Executive Officer and
------------------------------------------- President (Principal Executive Officer)
Martin H. Loeffler
/s/ EDWARD G. JEPSEN Chief Financial Officer (Principal Financial
------------------------------------------- and Accounting Officer)
Edward G. Jepsen
/s/ ANDREW CLARKSON Director
-------------------------------------------
Andrew Clarkson
/s/ G. ROBERT DURHAM Director
-------------------------------------------
G. Robert Durham
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ HENRY R. KRAVIS Director
-------------------------------------------
Henry R. Kravis
/s/ MARC S. LIPSCHULTZ Director
-------------------------------------------
Marc S. Lipschultz
/s/ MICHAEL W. MICHELSON Director
-------------------------------------------
Michael W. Michelson
/s/ GEORGE R. ROBERTS 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 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K dated April 28, 2000).
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.*
23.3 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
+ To be filed by amendment
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Amphenol Corporation on
Form S-3 of our report dated January 18, 2000 (April 26, 2000 as to Note 13),
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
April 28, 2000