SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________to _________________ Commission File Number 1-10879 AMPHENOL CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 22-2785165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 358 Hall Avenue, Wallingford, Connecticut 06492 203-265-8900 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Indicate by check mark whether the Registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ As of October 1, 1996, the total number of shares outstanding of Class A Common Stock was 46,241,853. There are no shares outstanding of Class B Common Stock.
AMPHENOL CORPORATION Index to Quarterly Report on Form 10-Q Page ____ Part I Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheet September 30, 1996 and December 31, 1995 3 Condensed Consolidated Statement of Income Three and nine months ended September 30, 1996 and 1995 5 Condensed Consolidated Statement of Cash Flow Nine months ended September 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Part II Other Information Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security-Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
Part I. Financial Information Item 1. Financial Statements AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (dollars in thousands) September 30, December 31, 1996 1995 ------------ ------------ (Unaudited) A S S E T S Current Assets: Cash and short-term cash investments......... $ 2,941 $ 12,028 Accounts receivable, less allowance for doubtful accounts of $1,657 and $1,758, respectively................... 71,668 67,419 Inventories.................................. 151,901 134,753 Prepaid expenses and other assets............ 11,364 11,516 -------- -------- Total current assets........................... 237,874 225,716 -------- -------- Land and depreciable assets, less accumulated depreciation of $159,142 and $150,560, respectively.......... 100,949 94,659 Deferred debt issuance costs................... 3,888 4,332 Excess of cost over fair value of net assets acquired.............................. 347,661 342,624 Other assets................................... 19,269 22,593 -------- -------- $709,641 $689,924 ________ ________ See accompanying notes to condensed consolidated financial statements.
AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (dollars in thousands) September 30, December 31, 1996 1995 ------------ ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable.............................. $ 46,288 $ 51,684 Accrued interest.............................. 8,128 2,701 Other accrued expenses........................ 38,418 47,348 Current portion of long-term debt............. 5,842 2,670 -------- -------- Total current liabilities....................... 98,676 104,403 -------- -------- Long-term debt.................................. 200,544 195,195 Accrued pension and post employment benefit obligations........................... 19,128 27,486 Deferred taxes and other liabilities............ 18,968 18,755 Shareholders' Equity: Common stock.................................. 47 47 Additional paid-in capital.................... 265,347 265,193 Accumulated earnings.......................... 135,101 84,056 Cumulative valuation adjustments.............. (6,487) (5,211) Treasury stock, at cost....................... (21,683) - -------- -------- Total shareholders' equity...................... 372,325 344,085 -------- -------- $709,641 $689,924 ________ ________ See accompanying notes to condensed consolidated financial statements.
<TABLE> AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) (dollars in thousands, except per share data) <CAPTION> Three months ended Nine months ended September 30, September 30, --------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- <S> <C> <C> <C> <C> Net sales....................................... $184,876 $189,012 $578,619 $594,571 Costs and expenses: Cost of sales, excluding depreciation and amortization............................. 117,136 120,409 367,942 386,656 Depreciation and amortization expense......... 7,134 6,905 21,463 21,024 Selling, general and administrative expense... 27,107 27,762 85,359 86,315 -------- -------- -------- -------- Operating income................................ 33,499 33,936 103,855 100,576 Interest expense................................ (6,097) (6,342) (18,240) (19,565) Other expense, net.............................. (989) (777) (2,616) (3,717) -------- -------- -------- -------- Income before income taxes...................... 26,413 26,817 82,999 77,294 Provision for income taxes...................... 9,716 10,727 31,954 30,918 -------- -------- -------- -------- Net income...................................... $ 16,697 $ 16,090 $ 51,045 $ 46,376 ________ ________ ________ ________ Net income per common and common equivalent share.............................. $.36 $.34 $1.08 $.98 ____ ____ _____ ____ Average common and common equivalent shares outstanding................. 46,853,784 47,308,919 47,166,444 47,299,907 __________ __________ __________ __________ <FN> See accompanying notes to condensed consolidated financial statements. </TABLE>
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) (dollars in thousands) Nine Months Ended September 30, --------------------- 1996 1995 -------- -------- Net income....................................... $ 51,045 $ 46,376 Adjustments for cash from operations: Depreciation and amortization.................. 21,463 21,024 Amortization of deferred debt issuance costs... 518 487 Net change in non-cash components of working capital............................... (27,118) (7,563) -------- -------- Cash provided from operations.................... 45,908 60,324 -------- -------- Cash flow from investing activities: Capital additions, net......................... (16,177) (15,597) Cost of acquisition............................ (21,280) - Other.......................................... - (1,030) -------- -------- Cash flow used by investing activities........... (37,457) (16,627) -------- -------- Cash flow from financing activities: Net change in borrowings under revolving credit facilities.......................... 5,812 640 Treasury stock purchases....................... (21,350) - Net change in receivables sold................. (2,000) - Decrease in long-term debt..................... - (45,368) -------- -------- Cash flow used by financing activities........... (17,538) (44,728) -------- -------- Net change in cash and short-term cash investments............................... (9,087) (1,031) Cash and short-term cash investments balance, beginning of period................... 12,028 4,582 -------- -------- Cash and short-term cash investments balance, end of period......................... $ 2,941 $ 3,551 ________ ________ See accompanying notes to condensed consolidated financial statements.
AMPHENOL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1 - Principles of Consolidation and Interim Financial Statements - --------------------------------------------------------------------- The condensed consolidated balance sheet as of September 30, 1996 and December 31, 1995 and the related condensed consolidated statements of income for the three and nine months ended September 30, 1996 and 1995 and of cash flow for the nine months ended September 30, 1996 and 1995 include the accounts of the Company and its subsidiaries. The interim financial statements included herein are unaudited. In the opinion of management all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such interim financial statements have been included. The results of operations for the three and nine months ended September 30, 1996 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 1995 Annual Report to Shareholders of Amphenol Corporation. Note 2 - Inventories - -------------------- Inventories consist of: September 30, December 31, 1996 1995 ------------- ------------ (Unaudited) Raw materials and supplies......... $ 21,919 $ 21,094 Work in process.................... 92,276 79,971 Finished goods..................... 37,706 33,688 -------- -------- $151,901 $134,753 ________ ________ Note 3 - Commitments and Contingencies - -------------------------------------- In the course of pursuing its normal business activities, the Company is involved in various legal proceedings and claims. Management does not expect that amounts, if any, which may be required to be paid by reason of such proceedings or claims will have a material effect on the Company's financial position or results of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (dollars in thousands, except per share data) Results of Operations - --------------------- Quarter and nine months ended September 30, 1996 compared to the quarter and - ---------------------------------------------------------------------------- nine months ended September 30, 1995 - ------------------------------------ Net sales in the third quarter of 1996 decreased approximately 2% from the comparable 1995 quarter to $184,876. For the nine months ended September 30, 1996, net sales decreased approximately 3% to $578,619. The decrease in sales for both the quarter and nine month period is primarily attributable to lower sales of coaxial cable products substantially offset by increased sales of interconnect products particularly in the aerospace, automotive safety and communications markets. Currency translation and the relatively stronger U.S. dollar had the effect of decreasing sales by approximately $2.9 million in the third quarter and approximately $8.6 million in the nine month period 1996 when compared to exchange rates for the comparable 1995 periods. The gross profit margin as a percentage of net sales (including depreciation in cost of sales) was 34% for both the 1996 third quarter and nine month period compared to 34% and 33% for the 1995 third quarter and nine month period, respectively. The increase in the gross profit margin in the nine month period is generally attributable to increased sales of higher margin application specific interconnect products and continuing programs of cost control. Selling, general and administrative expenses as a percentage of net sales remained relatively constant at approximately 15% for the quarter and nine months ended September 30, 1996 compared to the 1995 periods. Interest expense for the third quarter and nine months decreased to $6,097 and $18,240 in 1996 from $6,342 and $19,565 in 1995, respectively. The reduction in both periods is primarily attributable to decreased debt levels. Other expense for the third quarter and nine months was $989 and $2,616 in 1996 compared to $777 and $3,717 in 1995, respectively. The decrease in the 1996 nine month amount relates to an increase in interest income on higher levels of short-term cash investments in 1996 and the absence in the 1996 periods of certain nonrecurring expenses in 1995 including expenses associated with the 1995 secondary stock offering. The provision for income taxes for the nine months ended September 30, 1996 was $31,954 compared to $30,918 in 1995. The 1996 estimated effective tax rate of approximately 38.5% reflects federal, state and foreign taxes. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities was $45,908 in the nine months ended September 30, 1996 compared to $60,324 in the 1995 period. The decrease in cash flow relates primarily to a net increase in non-cash components of working capital offset in part by an increase in net income. On July 15, 1996, the Company's Board of Directors authorized an open market stock repurchase program of up to two million shares of its common stock during the period ending December 31, 1997. As of September 30, 1996, the Company repurchased 1,098,200 shares under the program. The Company's primary ongoing cash requirements will be for debt service, capital expenditures and product development activities. The Company's debt service requirements consist primarily of interest on Senior Notes due 2001 and Senior Subordinated Notes due 2002. The Company has not paid, and does not have any present intention to commence payment of, cash dividends on its Common Stock. The Company expects that ongoing requirements for debt service, capital expenditures and product development activities will be funded by internally-generated cash flow and availability under the Company's $150 million Revolving Credit facility.
Environmental Matters - --------------------- The Company is subject to various environmental laws, regulations and proceedings regarding discharge of pollutants and the handling and disposal of solid and hazardous wastes. In conjunction with the acquisition of Amphenol from Allied Corporation in 1987, Allied agreed to provide substantial indemnification for potential environmental liabilities identified within a period of seven years following the acquisition that arose out of events, conditions or circumstances that occurred or existed at the time of or prior to the acquisition to the extent that such liability exceeds $13.0 million. In such event, Allied is obligated to pay 80% of the excess over $13.0 million and 100% of the excess over $30.0 million. The Company has been named as a defendant in various legal actions and as a potentially responsible party in relation to several environmental clean-up sites in which the associated costs are subject to the Allied indemnification agreement. The Company believes that it has provided adequate reserves for unindemnified costs that may be incurred with respect to known environmental liabilities. Management does not believe that the costs associated with resolution of these matters, net of indemnification from Allied, will have a material adverse effect on the Company's financial position.
PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Reference is made to the Company's 1995 Form 10-K with respect to certain pending legal proceedings. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None Item 5. OTHER INFORMATION On September 27, 1996 the Company completed its acquisition of The Sine Companies, Inc. The acquisition has been accounted for under the purchase method of accounting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports filed on Form 8-K - There were no reports on Form 8-K filed for or during the three months ended September 30, 1996.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMPHENOL CORPORATION DATE: November 14, 1996 /s/Edward G. Jepsen ------------------- --------------------------- Edward G. Jepsen Executive Vice President and Chief Financial Officer