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 March 31, 1997 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 April 1, 1997, the total number of shares outstanding of Class A Common Stock was 44,719,954. 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 March 31, 1997 and December 31, 1996 3 Condensed Consolidated Statement of Income Three months ended March 31, 1997 and 1996 5 Condensed Consolidated Statement of Cash Flow Three months ended March 31, 1997 and 1996 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Part II Other Information Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security-Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
Part I. Financial Information Item 1. Financial Statements AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (dollars in thousands) March 31, December 31, 1997 1996 ------------ ------------ (Unaudited) A S S E T S Current Assets: Cash and short-term cash investments......... $ 6,822 $ 3,984 Accounts receivable, less allowance for doubtful accounts of $2,004 and $1,868, respectively................... 82,212 64,904 Inventories.................................. 161,010 153,283 Prepaid expenses and other assets............ 12,350 11,611 -------- -------- Total current assets........................... 262,394 233,782 -------- -------- Land and depreciable assets, less accumulated depreciation of $164,366 and $163,110, respectively.......... 101,824 102,075 Deferred debt issuance costs................... 3,524 3,717 Excess of cost over fair value of net assets acquired.............................. 347,634 346,583 Other assets................................... 16,399 24,505 -------- -------- $731,775 $710,662 ________ ________ See accompanying notes to condensed consolidated financial statements.
AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (dollars in thousands) March 31, December 31, 1997 1996 ----------- ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable.............................. $ 62,154 $ 49,484 Accrued interest.............................. 8,191 2,481 Other accrued expenses........................ 48,420 37,194 Current portion of long-term debt............. 9,962 7,759 -------- -------- Total current liabilities....................... 128,727 96,918 -------- -------- Long-term debt.................................. 197,091 219,484 Accrued pension and post employment benefit obligations........................... 12,604 15,016 Deferred taxes and other liabilities............ 21,119 18,696 Shareholders' Equity: Common stock.................................. 47 47 Additional paid-in capital.................... 265,446 265,425 Accumulated earnings.......................... 169,131 151,634 Cumulative valuation adjustment............... (9,719) (3,887) Treasury stock, at cost....................... (52,671) (52,671) -------- -------- Total shareholders' equity...................... 372,234 360,548 -------- -------- $731,775 $710,662 ________ ________ See accompanying notes to condensed consolidated financial statements.
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) (dollars in thousands, except per share data) Three months ended March 31, ---------------------- 1997 1996 -------- -------- Net sales....................................... $211,773 $194,822 Costs and expenses: Cost of sales, excluding depreciation and amortization............................. 137,522 123,928 Depreciation and amortization expense......... 7,695 7,186 Selling, general and administrative expense... 30,467 28,699 -------- -------- Operating income................................ 36,089 35,009 Interest expense................................ (6,422) (6,052) Other expense, net.............................. (1,217) (724) -------- -------- Income before income taxes...................... 28,450 28,233 Provision for income taxes...................... 10,953 11,293 -------- -------- Net income...................................... $ 17,497 $ 16,940 ________ ________ Net income per common and common equivalent share.............................. $.39 $.36 ____ ____ Average common and common equivalent shares outstanding................. 44,720,024 47,320,536 __________ __________ See accompanying notes to condensed consolidated financial statements.
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) (dollars in thousands) Three Months Ended March 31, ---------------------- 1997 1996 -------- -------- Net income....................................... $17,497 $16,940 Adjustments for cash from operations: Depreciation and amortization.................. 7,695 7,186 Amortization of deferred debt issuance costs... 173 174 Net change in non-cash components of working capital............................... 2,833 (4,908) ------- ------- Cash provided from operations.................... 28,198 19,392 ------- ------- Cash flow from investing activities: Capital additions, net......................... (4,555) (5,499) ------- ------- Cash flow used by investing activities........... (4,555) (5,499) ------- ------- Cash flow from financing activities: Net change in borrowings under revolving credit facilities.......................... (20,805) 2,338 ------- ------- Cash flow from (used by) financing activities.... (20,805) 2,338 ------- ------- Net change in cash and short-term cash investments............................... 2,838 16,231 Cash and short-term cash investments balance, beginning of period................... 3,984 12,028 ------- ------- Cash and short-term cash investments balance, end of period......................... $ 6,822 $28,259 _______ _______ 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 March 31, 1997 and December 31, 1996, and the related condensed consolidated statements of income and of cash flow for the three months ended March 31, 1997 and 1996 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, 1997 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 1996 Annual Report on Form 10-K, as amended by Amendment No. 1 thereto on Form 10-K/A. Note 2 - Inventories - -------------------- Inventories consist of: March 31, December 31, 1997 1996 --------- ------------ (Unaudited) Raw materials and supplies......... $ 21,871 $ 21,648 Work in process.................... 98,349 92,771 Finished goods..................... 40,790 38,864 -------- -------- $161,010 $153,283 ________ ________ 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. Subsequent to the acquisition of Amphenol from Allied Signal Corporation ("Allied") in 1987, Amphenol and Allied have been named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Allied have jointly consented to perform certain investigations and remedial and monitoring activities at two sites and they have been jointly ordered to perform work at another site. The responsibility for costs incurred relating to these sites is apportioned between Amphenol and Allied based on an agreement entered into in connection with the acquisition.
For sites covered by this agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, the first $13,000 of costs are borne by Amphenol and have been incurred as of December 31, 1996. Allied is obligated to pay 80% of the excess over $13,000 and 100% of the excess over $30,000. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company's financial position or results of operations. In December 1993, a subsidiary of the Company entered into a four year agreement with a financial institution whereby the subsidiary would sell an undivided interest of up to $50,000 in a designated pool of qualified accounts receivable. 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 expense, 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 will be adequate to absorb the expense of any such liability. At March 31, 1997 and December 31, 1996, approximately $50,000 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable balance in the accompanying Consolidated Balance Sheet at that date. Note 4 - Proposed Merger Transaction - ------------------------------------ The Company has established May 14, 1997 as the date for a Special Meeting of Shareholders for the purpose of considering and voting on the previously announced Agreement and Plan of Merger ("Merger Agreement") between Amphenol and NXS Acquisition Corp., a wholly owned subsidiary of KKR 1993 Fund L.P. and KKR 1996 Fund L.P., limited partnerships formed at the direction of Kohlberg Kravis Roberts & Co. L.P. Proxy materials containing a full description of the Merger Agreement and related matters were mailed to stockholders on April 16, 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (dollars in thousands, except per share data) Results of Operations - --------------------- Three months ended March 31, 1997 compared to three months ended March 31, 1996 - ------------------------------------------------------------------------------- Net sales increased approximately 9% to $211,773 in the first quarter of 1997 compared to sales of $194,822 for the same period in 1996. The increase is attributable to increased sales of interconnect products particularly in the communications, aerospace and industrial markets. Currency translation had the effect of reducing sales in the first quarter 1997 by approximately $4.7 million when compared to exchange rates for the 1996 period. The gross profit margin as a percentage of net sales (including depreciation in cost of sales) decreased to 33% for the three months ended March 31, 1997 compared to 34% for the three months ended March 31, 1996. The decrease is generally attributable to margin pressure in the Company's coaxial cable business and certain European interconnect product operations. Selling, general and administrative expenses as a percentage of net sales remained relatively constant at approximately 14.5% for the three months ended March 31, 1997 compared to the 1996 period. Interest expense for the first quarter of 1997 was $6,422 compared to $6,052 for the first quarter of 1996. The increase is primarily attributable to increased average debt levels in 1997. Other income and expense for the three months ended March 31, 1997 was $1,217 compared to $724 in 1996. The increase in 1997 relates to the absence in the 1997 period of nonrecurring income in 1996 associated with the settlement of certain claims relating to an asset sale. The provision for income taxes for the three months ended March 31, 1997 was $10,953 compared to $11,293 in 1996. The 1997 estimated effective tax rate of approximately 38.5% reflects federal, state and foreign taxes. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities was $28,198 in the quarter ended March 31, 1997 compared to $19,392 in the 1996 period. The increase in cash flow relates primarily to a net decrease in non-cash components of working capital. 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.
Environmental Matters - --------------------- Subsequent to the acquisition of Amphenol from Allied Signal Corporation ("Allied") in 1987, Amphenol and Allied have been named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Allied have jointly consented to perform certain investigations and remedial and monitoring activities at two sites and they have been jointly ordered to perform work at another site. The responsibility for costs incurred relating to these sites is apportioned between Amphenol and Allied based on an agreement entered into in connection with the acquisition. For sites covered by this agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, the first $13,000 of costs are borne by Amphenol and have been incurred as of December 31, 1996. Allied is obligated to pay 80% of the excess over $13,000 and 100% of the excess over $30,000. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company's financial position or results of operations. Future Accounting Changes - ------------------------- In June 1996 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125 (FAS 125), "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." The Company adopted the Statement effective January 1, 1997. Adoption of the Statement had no effect on the Company's financial position or results of operations. In February 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings per Share." Management has reviewed the statement and believes that implementation of the statement will not have a material effect on the Company's results of operations. The Company is required to adopt the statement effective December 15, 1997. Proposed Merger Transaction - --------------------------- The Company has established May 14, 1997 as the date for a Special Meeting of Shareholders for the purpose of considering and voting on the previously announced Agreement and Plan of Merger ("Merger Agreement") between Amphenol and NXS Acquisition Corp., a wholly owned subsidiary of KKR 1993 Fund L.P. and KKR 1996 Fund L.P., limited partnerships formed at the direction of Kohlberg Kravis Roberts & Co. L.P. Proxy materials containing a full description of the Merger Agreement and related matters were mailed to stockholders on April 16, 1997. Safe Harbor Statement - --------------------- Statements in this report that are not strictly historical are "forward-looking" statements which should be considered as subject to the many uncertainties that exist in the Company's operations and business environment. These uncertainties which include, among other things, economic and currency conditions, market demand and pricing and competitive and cost factors are set forth in the Company's 1996 Annual Report on Form 10-K, as amended by Amendment No. 1 thereto on Form 10-K/A.
PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Reference is made to the Company's 1996 Annual Report on Form 10-K, as amended by Amendment No. 1 thereto on Form 10-K/A, (the "10-K"). As described in greater detail in the 10-K, in December 1995, the Company and Allied received a letter from the United States Environ- mental Protection Agency (the "EPA"), demanding that the Company and Allied accept responsibility for the investigation and cleanup of the Sidney Center Landfill, a "Superfund" site (the "Sidney Site"). The Sidney Center Landfill was a municipal landfill site utilized by the Company's Sidney facility and other local towns and businesses. The Company has acknowledged that it sent general plant refuse but no hazardous waste to the Sidney Center Landfill site. Allied and the Company offered to prepare a remedial design and to assist the EPA in identifying other potentially responsible parties for the Sidney Center Landfill site. In July 1996, the Company and Allied received a unilateral order from the EPA directing the Company and Allied to perform certain investigation, design and cleanup activities at the Sidney Site. The Company and Allied responded to the unilateral order by agreeing to undertake certain remedial design activities. In March 1997, the EPA filed a lawsuit by which it seeks to recover from Allied and the Company $2.7 million in alleged past response costs relating to the Sidney Site. To date the Company and Allied have not accepted any responsibility for the cleanup of the Sidney Site. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports filed on Form 8-K A current report on Form 8-K dated January 23, 1997 was filed with the Securities and Exchange Commission on January 29, 1997, reporting information under Items 5 and 7 thereof and providing copies of the Agreement and Plan of Merger dated as of January 23, 1997 between NXS Acquisition Corp. and Amphenol Corporation, the Stockholders Agreement dated as of January 23, 1997 by and between NXS I, L.L.C. and the other parties signatory thereto and the Press Release of Amphenol Corporation dated January 23, 1997.
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: May 5, 1997 /s/Edward G. Jepsen --------------- --------------------------- Edward G. Jepsen Executive Vice President and Chief Financial Officer