SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number 1-10879 AMPHENOL CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 22-2785165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 358 Hall Avenue, Wallingford, Connecticut 06492 203-265-8900 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Indicate by check mark whether the Registrant (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of October 1, 1998, the total number of shares outstanding of Class A Common Stock was 17,860,837.
AMPHENOL CORPORATION Index to Quarterly Report on Form 10-Q Page ---- Part I Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets September 30, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Income Three and nine months ended September 30, 1998 and 1997 5 Condensed Consolidated Statement of Changes in Shareholders' Deficit Nine months ended September 30, 1998 6 Condensed Consolidated Statement of Changes in Shareholders' Equity (Deficit) Nine months ended September 30, 1997 7 Condensed Consolidated Statements of Cash Flow Nine months ended September 30, 1998 and 1997 8 Notes to Condensed Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II Other Information Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security-Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 19 2
Part I. Financial Information Item 1. Financial Statements AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 30, December 31, 1998 1997 ------------ ------------ (Unaudited) A S S E T S Current Assets: Cash and short-term cash investments.......... $ 2,276 $ 4,713 Accounts receivable, less allowance for doubtful accounts of $1,421 and $1,633, respectively.................... 94,699 70,037 Inventories................................... 179,257 167,010 Prepaid expenses and other assets............. 17,072 13,020 -------- -------- Total current assets............................ 293,304 254,780 -------- -------- Land and depreciable assets, less accumulated depreciation of $185,244 and $169,784, respectively........... 126,692 111,592 Deferred debt issuance costs.................... 17,368 19,377 Excess of cost over fair value of net assets acquired............................... 362,119 339,223 Other assets.................................... 10,948 12,182 -------- -------- $810,431 $737,154 See accompanying notes to condensed consolidated financial statements. 3
AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 30, December 31, 1998 1997 ----------- ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities: Accounts payable.............................. $ 66,959 $ 64,255 Accrued interest.............................. 18,628 11,442 Other accrued expenses........................ 43,785 41,345 Current portion of long-term debt............. 1,792 212 -------- -------- Total current liabilities....................... 131,164 117,254 -------- -------- Long-term debt.................................. 957,181 937,277 Deferred taxes and other liabilities............ 23,056 25,748 Shareholders' Deficit: Common stock.................................. 20 20 Additional paid-in deficit.................... (499,975) (511,584) Accumulated earnings.......................... 206,591 178,351 Cumulative translation adjustment............. (7,606) (9,912) -------- -------- Total shareholders' deficit..................... (300,970) (343,125) -------- -------- $810,431 $737,154 See accompanying notes to condensed consolidated financial statements. 4
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (dollars in thousands, except per share data) <TABLE> <CAPTION> Three months ended Nine months ended September 30, September 30, ---------------------- ---------------------- 1998 1997 1998 1997 -------- -------- -------- -------- <S> <C> <C> <C> <C> Net sales....................................... $229,018 $223,494 $685,501 $662,263 Costs and expenses: Cost of sales, excluding depreciation and amortization............................. 150,601 144,697 447,494 428,682 Depreciation and amortization expense......... 5,944 5,156 17,181 15,490 Selling, general and administrative expense... 33,210 31,671 98,191 93,697 Amortization of goodwill...................... 2,995 2,829 8,653 8,488 -------- -------- -------- -------- Operating income................................ 36,268 39,141 113,982 115,906 Interest expense................................ (20,453) (22,991) (60,745) (43,662) Expenses relating to Merger and Recapitalization.......................... - - - (2,500) Other income (expense), net..................... (1,040) (1,046) (3,022) 638 -------- -------- -------- -------- Income before income taxes and extraordinary item........................ 14,775 15,104 50,215 70,382 Provision for income taxes...................... 6,563 6,545 21,975 28,552 -------- -------- -------- -------- Income before extraordinary item................ 8,212 8,559 28,240 41,830 Extraordinary item: Loss on early extinguishment of debt, net of income taxes................. - - - (12,845) -------- -------- -------- -------- Net income...................................... $ 8,212 $ 8,559 $ 28,240 $ 28,985 Income per common share before extraordinary charge.......................... $.46 $.49 $1.60 $1.34 Extraordinary charge............................ - - - (.41) ---- ---- ----- ---- Net income per common share..................... $.46 $.49 $1.60 $.93 Average common shares outstanding............... 17,716,592 17,519,781 17,596,608 31,269,159 ---------- ---------- ---------- ---------- Income per common share before extraordinary charge - assuming dilution.................... $.46 $.48 $1.58 $1.33 Extraordinary charge - assuming dilution........ - - - (.41) ---- ---- ----- ---- Net income per common share - assuming dilution. $.46 $.48 $1.58 $.92 Average common shares outstanding assuming dilution............................. 17,917,861 17,793,239 17,927,434 31,410,910 ---------- ---------- ---------- ---------- </TABLE> See accompanying notes to condensed consolidated financial statements. 5
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT Nine months ended September 30, 1998 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Accumulated Additional Other Total Common Paid-in Comprehensive Accumulated Comprehensive Shareholders' Stock Deficit Income Earnings Loss Deficit -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> Beginning balance at December 31, 1997........... $20 ($511,584) $178,351 ($9,912) ($343,125) Comprehensive income: Net income..................... [ $28,240 ] 28,240 28,240 ------- Other comprehensive income, net of tax: Foreign currency translation adjustment................. 2,306 2,306 2,306 ------- Comprehensive income............. [ $30,546 ] ======= Issuance of 320,809 shares of Common Stock related to acquisition.................... 11,449 11,449 Other adjustments................ 160 160 -------- -------- -------- -------- -------- Ending balance at Sept. 30, 1998. $20 ($499,975) $206,591 ($7,606) ($300,970) ======== ======== ======== ======== ======== </TABLE> See accompanying notes to condensed consolidated financial statements. 6
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) Nine months ended September 30, 1997 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Accumulated Total Additional Other Treasury Shareholders' Common Paid-in Comprehensive Accumulated Comprehensive Stock Equity Stock Capital Income Earnings Loss at Cost (Deficit) -------- -------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> <C> <C> Beginning balance at December 31, 1996........... $47 $265,425 $151,634 ($3,887) ($52,671) $360,548 Comprehensive income: Net income..................... [ $28,985 ] 28,985 28,985 Other comprehensive loss, net of tax: Foreign currency translation adjustment................. (5,751) (5,751) Reclassification adjustment for gain on securities realized in net income............... (3,687) (3,687) Other comprehensive loss....... (9,438) (9,438) ------- Comprehensive income............. [ $19,547 ] ======= Stock subscription proceeds...... 448 448 Sale of 13,116,955 shares of Common Stock.................... 13 341,028 341,041 Purchase of 40,325,240 shares of Common Stock.................... (40) (1,048,450) (1,048,490) Fees and other expenses related to the Merger and Recapitalization (17,644) (17,644) Retirement of Treasury Stock..... (52,671) 52,671 - Other adjustments................ 196 196 -------- -------- -------- -------- -------- -------- Ending balance at Sept. 30, 1997. $20 ($511,668) $180,619 ($13,325) $ - ($344,354) ======== ======== ======== ======== ======== ======== </TABLE> See accompanying notes to condensed consolidated financial statements. 7
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (dollars in thousands) Nine Months Ended September 30, ---------------------- 1998 1997 -------- -------- Net income....................................... $ 28,240 $28,985 Adjustments for cash from operations: Depreciation and amortization.................. 25,834 23,978 Amortization of deferred debt issuance costs... 2,059 2,033 Net loss on early extinguishment of debt....... - 12,845 Expenses relating to the Merger and Recapitalization - 2,500 Gain on sale of marketable securities.......... - (3,917) Net change in non-cash components of working capital............................... (20,454) 4,253 ------- ------- Cash flow provided by operations................. 35,679 70,677 ------- ------- Cash flow from investing activities: Capital additions, net......................... (20,753) (17,471) Proceeds from the sale of marketable securities - 7,351 Investments in acquisitions.................... (30,373) - ------- ------- Cash flow used by investing activities........... (51,126) (10,120) ------- ------- Cash flow from financing activities: Net change in borrowings under revolving credit facilities.......................... 18,010 (19,782) Repurchase of senior notes and subordinated debt - (211,153) Payment of fees and other expenses related to Merger and Recapitalization.................. - (53,469) Borrowings under New Credit Facility........... - 750,000 Net change in receivables sold................. - 10,000 Decrease in borrowings under New Credit Facility (5,000) (65,000) Proceeds from the issuance of senior notes..... - 240,000 Purchase of Amphenol Common Stock.............. - (1,048,490) Equity proceeds related to Merger.............. - 341,041 ------- ------- Cash flow provided by (used by) financing activities........................... 13,010 (56,853) ------- ------- Net change in cash and short-term cash investments............................... (2,437) 3,704 Cash and short-term cash investments balance, beginning of period................... 4,713 3,984 ------- ------- Cash and short-term cash investments balance, end of period......................... $ 2,276 $ 7,688 Cash paid during the period for: Interest....................................... $51,879 $27,561 Income taxes paid, net of refunds.............. 20,747 18,162 See accompanying notes to condensed consolidated financial statements. 8
AMPHENOL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1 - Principles of Consolidation and Interim Financial Statements - --------------------------------------------------------------------- The Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997, and the related Condensed Consolidated Statements of Income for the three and nine months ended September 30, 1998 and 1997 and of Changes in Shareholders' Equity (Deficit) and of Cash Flow for the nine months ended September 30, 1998 and 1997 include the accounts of the Company and its subsidiaries. The interim financial statements included herein are unaudited. In the opinion of management all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such interim financial statements have been included. The results of operations for the three and nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes included in the Company's 1997 Annual Report on Form 10-K. In June 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 (FAS 130), "Reporting Comprehensive Income" which requires a statement of comprehensive income to be included in the financial statements for fiscal years beginning after December 15, 1997. The Company has adopted the statement and the appropriate disclosure is reflected in the accompanying Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit). Note 2 - Inventories - -------------------- Inventories consist of: September 30, December 31, 1998 1997 ----------- ------------ (Unaudited) Raw materials and supplies......... $ 24,174 $ 21,115 Work in process.................... 112,592 96,833 Finished goods..................... 42,491 49,062 -------- -------- $179,257 $167,010 Note 3 - Commitments and Contingencies - -------------------------------------- In the course of pursuing its normal business activities, the Company is involved in various legal proceedings and claims. Management does not expect that amounts, if any, which may be required to be paid by reason of such proceedings or claims will have a material effect on the Company's financial condition or results of operations. 9
Subsequent to the acquisition of Amphenol from Allied Signal Corporation ("Allied") in 1987, Amphenol and Allied have been named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Allied have jointly consented to perform certain investigations and remedial and monitoring activities at two sites and they have been jointly ordered to perform work at another site. The responsibility for costs incurred relating to these sites is apportioned between Amphenol and Allied based on an agreement entered into in connection with the acquisition. For sites covered by this agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, the first $13,000 of costs were borne by Amphenol and had been incurred as of December 31, 1996. Allied is obligated to pay 80% of the excess over $13,000 and 100% of the excess over $30,000. Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company's financial condition or results of operations. A subsidiary of the Company has an agreement with a financial institution whereby the subsidiary can sell an undivided interest of up to $60,000 in a designated pool of qualified accounts receivable. The agreement expires in 2004. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The Company services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other income (expense), net, in the accompanying Condensed Consolidated Statements of Income. The agreement contains certain covenants and provides for various events of termination. In certain circumstances the Company is contingently liable for the collection of the receivables sold; management believes that its allowance for doubtful accounts is adequate to absorb the expense of any such liability. During 1997, the Company adopted SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." Adoption had no effect on the Company's financial statements. At September 30, 1998 and December 31, 1997, approximately $60,000 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable balance in the accompanying Condensed Consolidated Balance Sheets at those dates. Note 4 - Merger and Recapitalization - ------------------------------------ On May 19, 1997, the Company merged with NXS Acquisition Corp., a wholly owned subsidiary of KKR 1996 Fund L.P., KKR Partners II, L.P., and NXS Associates, L.P., limited partnerships formed at the direction of Kohlberg Kravis Roberts & Co. L.P. ("KKR"). The Merger had the effect of affiliates of KKR investing $341,041 in exchange for 13,116,955 shares, or 75% of the Company's common stock. Such equity proceeds, along with $240,000 of proceeds from the sale of 9 7/8% Senior Subordinated Notes due 2007 and borrowings of $750,000 under a $900,000 bank loan agreement ("Bank Agreement") were used to repurchase 40,325,240 shares of the Company's common stock for $1,048,490, purchase all of the Company's outstanding 10.45% Senior Notes and substantially all of the Company's 12 3/4% Subordinated Debentures for $211,153 and pay fees and expenses of $59,436, including $18,000 paid to KKR and $39,292 relating to the issuance of new debt. The Merger and related transactions were recorded as a Recapitalization ("Merger and Recapitalization"). Expenses of $17,644 related to the repurchase of the Company's common stock were reflected as a reduction of additional paid-in capital; other expenses of approximately $2,500, primarily relating to the buyout of certain stock options, were reflected in the 1997 Consolidated Statement of Income. Supplemental earnings per share assuming the Merger and Recapitalization were completed at the beginning of the nine months ended September 30, 1997 but excluding the impact of non-recurring expenses relating to the Merger and Recapitalization, was $1.44 for the nine months. 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands, except per share data) Results of Operations - --------------------- Quarter and nine months ended September 30, 1998 compared to the quarter - ------------------------------------------------------------------------ and nine months ended September 30, 1997 - ---------------------------------------- Net sales for the third quarter of 1998 were $229,018 compared to $223,494 for the third quarter of 1997. Net sales for the nine months ended September 30, 1998 were $685,501 compared to $662,263 for the comparable 1997 period. The increase in sales is primarily attributable to increased sales of interconnect products in the industrial market for the third quarter and in the aerospace, industrial and communications markets for the nine months, partially offset by a decline in sales of coaxial cable for cable television applications. Currency translation had the effect of reducing sales in the third quarter 1998 by approximately $1.2 million and by approximately $10.2 million in the nine month period 1998 when compared to exchange rates for the comparable 1997 periods. The gross profit margin as a percentage of net sales (including depreciation in cost of sales) was 32% for the 1998 third quarter and nine month period compared to 33% for the 1997 third quarter and nine month period, respectively. The decrease in the gross profit margin in both the 1998 quarter and nine month period is generally attributable to product mix and pricing pressure in both the connector and coaxial cable businesses. Selling, general and administrative expenses as a percentage of net sales remained relatively constant at approximately 14% for the third quarter and nine months ended September 30, 1998 and 1997, respectively. Interest expense for the 1998 third quarter decreased to $20,453 from $22,991 in the comparable 1997 period. The decrease is primarily attributable to a prepayment of term loan borrowings under the Company's Bank Agreement, partially offset by increased borrowings under the Company's revolving credit facility. Interest expense for the nine month period increased to $60,745 in 1998 from $43,662 in 1997. The increase in the nine month period is due to increased debt levels resulting from the Merger and Recapitalization which closed on May 19, 1997 (Note 4). Other income (expense), net for the third quarter and nine months was ($1,040) and ($3,022) in 1998 compared to ($1,046) and $638 in 1997, respectively. The nine month 1997 period includes a gain on sale of marketable securities of $3,917. The provision for income taxes for the third quarter and nine months was $6,563 and $21,975 in 1998 compared to $6,545 and $28,552 in 1997, respectively. The 1998 estimated effective tax rate of approximately 44% reflects federal, state and foreign taxes and non-deductible goodwill amortization. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities was $35,679 in the nine months ended September 30, 1998 compared to $70,677 in the 1997 period. The decrease in cash flow relates primarily to increased interest payments ($51,879 in 1998 and $27,561 in 1997) on borrowings resulting from the Merger and Recapitalization (Note 4) and to a net increase in non-cash components of working capital. 11
In 1998, cash from operating activities and borrowings under the credit facility were used to fund capital expenditures of $20,753 and acquisitions of $30,373. In 1997, cash from operating activities, proceeds from the sale of marketable securities of $7,351 and net funds available from the Merger and Recapitalization (Note 4) of $17,929 were used to fund capital expenditures of $17,471 and debt reduction of $84,782 (of which $65 million represented a prepayment of term loan borrowings under the Company's Bank Agreement). In conjunction with the Merger and Recapitalization, the Company entered into a $900 million Bank Agreement with a syndicate of financial institutions, comprised of a $150 million revolving credit facility that expires in 2004 and a $750 million term loan facility - $350 million (Tranche A) maturing over a 7 year period ending 2004, $200 million (Tranche B) maturing in 2005 and $200 million (Tranche C) maturing in 2006. In October 1997, the Company negotiated an amendment to the term loan under the Bank Agreement. The amendment extinguished the Tranche B and C indebtedness with borrowings under a new $375 million Term Loan Tranche B. The new Term Loan Tranche B has required amortization in 2005 and 2006. At September 30, 1998 the Company had prepaid $70 million of the term loan. The credit agreement requires the maintenance of certain interest coverage and leverage ratios, and includes limitations with respect to, among other things, indebtedness, and restricted payments, including dividends on the Company's common stock. At September 30, 1998 there were $680 million of borrowings outstanding under the term loan facility and there were $23 million of borrowings outstanding under the revolving credit facility. In July 1997, the Company entered into interest rate protection agreements that effectively fix the Company's interest cost on $450 million of borrowings under the Bank Agreement to the extent that LIBOR interest rates remain below 7% for $300 million of borrowings and below 8% for $150 million of borrowings. The Company's EBITDA as defined in the Bank Agreement was $142.1 million and $141.5 million for the nine months ended September 30, 1998 and 1997, respectively. EBITDA is not a defined term under Generally Accepted Accounting Principles (GAAP) and is not an alternative to operating income or cash flow from operations as determined under GAAP. The Company believes that EBITDA provides additional information for determining its ability to meet future debt service requirements; however, EBITDA does not reflect cash available to fund debt requirements. The Company's primary ongoing cash requirements will be for debt service, capital expenditures and product development activities. The Company's debt service requirements consist primarily of principal and interest on bank borrowings and interest on Senior Subordinated Notes due 2007. The Company has not paid, and does not have any present intention to commence payment of, cash dividends on its Common Stock. The Company expects that ongoing requirements for debt service, capital expenditures and product development activities will be funded by internally-generated cash flow and availability under the Company's revolving credit facility. Environmental Matters - --------------------- Subsequent to the acquisition of Amphenol from Allied in 1987, Amphenol and Allied have been named jointly and severally liable as potentially responsible parties in relation to several environmental cleanup sites. Amphenol and Allied have jointly consented to perform certain investigations and remedial and monitoring activities at two sites and they have been jointly ordered to perform work at another site. The responsibility for costs incurred relating to these sites is apportioned between Amphenol and Allied based on an agreement entered into in connection with the acquisition. For sites covered by this agreement, to the extent that conditions or circumstances occurred or existed at the time of or prior to the acquisition, the first $13,000 of costs were borne by Amphenol and had been incurred as of December 31, 1996. Allied is obligated to pay 80% of the excess over $13,000 and 100% of the excess over $30,000. 12
Management does not believe that the costs associated with resolution of these or any other environmental matters will have a material adverse effect on the Company's financial condition or results of operations. Future Accounting Changes - ------------------------- In June 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of an Enterprise and Related Information" which requires disclosure of certain information about operating segments and about products and services, the geographic areas in which a company operates and their major customers. Any resulting change in disclosure will be reflected in the year ended December 31, 1998 Consolidated Financial Statements. In February 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132 (FAS 132), "Employers' Disclosures about Pensions and Other Postretirement Benefits" which revises and standardizes the disclosure requirements for pensions and other postretirement benefits, requires additional information on changes in the benefit obligations and fair values of the plan assets and eliminates certain disclosures that are considered no longer useful. The disclosure changes resulting from this standard will be reflected in the year ended December 31, 1998 Consolidated Financial Statements. In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging Activities" which establishes accounting and reporting standards for derivative instruments and hedging activities. The Company is required to adopt the statement for all fiscal quarters of fiscal years beginning after June 15, 1999. Year 2000 Issue - --------------- The Year 2000 issue is primarily the result of computer programs using a two digit format, as opposed to four digits, to indicate the year. Such computer systems will be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to a disruption in the operation of such systems. In 1996, the Company began a systematic review of all of its business information systems to ensure that the systems now in use worldwide will be Year 2000 compliant before the turn of the century. The Company has established a Year 2000 Program Management Group to provide overall guidance and direction for this compliance mission. Communications were initiated to all of the Company's business units focusing on the critical nature of this project and the Program Management Group has continually monitored the progress and status of each business unit. The Program Management Group has focused its efforts on four main areas: (1) information systems software and hardware; (2) non-information technology systems; (3) facilities equipment; and (4) customer and vendor relationships. Based on current estimates, the Company expects to complete its Year 2000 project in early 1999. Risks/Contingency Plans. Based on the assessment efforts to date, the Company does not believe that the Year 2000 issue will have a material adverse effect on its financial condition or results of operations. The Company operates a number of business units worldwide and has a large supplier base and believes that this will mitigate any adverse impact. The Company's beliefs and expectations, however, are based on certain assumptions and expectations that ultimately may prove to be inaccurate. Potential sources of risk include (a) the inability of principal suppliers to be Year 2000 ready, which could result in delays in product deliveries from such suppliers, and (b) disruption of the product distribution channel, including ports, transportation vendors, and the Company's own shipping departments as a result of a general 13
system failure and necessary infrastructure such as electricity supply. The development of a Year 2000 contingency plan is currently in process. The Company does not expect the costs associated with its Year 2000 efforts to be substantial. The estimated cost for this project could range as high as $3.0 million, including the cost of new systems and upgrades some of which will be capitalized. The cost is being funded through operating cash flows. The Company's aggregate cost estimate does not include time and costs that may be incurred by the Company as a result of the failure of any third parties, including suppliers, to become Year 2000 ready or costs to implement any contingency plans. Safe Harbor Statement - --------------------- Statements in this report that are not strictly historical are "forward-looking" statements which should be considered as subject to the many uncertainties that exist in the Company's operations and business environment. These uncertainties which include, among other things, economic and currency conditions, market demand and pricing and competitive and cost factors are set forth in the Company's 1997 Annual Report on Form 10-K. 14
PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Reference is made to the Company's 1997 Annual Report on Form 10-K, (the "10-K"). Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Listing of Exhibits 2.1 Agreement and Plan of Merger dated as of January 23, 1997 between NXS Acquisition Corp. and Amphenol Corporation (incorporated by reference to Current Report on Form 8-K dated January 23, 1997).** 2.2 Amendment, dated as of April 9, 1997, to the Agreement and Plan of Merger between NXS Acquisition Corp. and Amphenol Corporation, dated as of January 23, 1997 (incorporated by reference to the Registration Statement on Form S-4 (registration No. 333-25195) filed on April 15, 1997).** 3.1 Certificate of Merger, dated May 19, 1997 (including Restated Certificate of Incorporation of Amphenol Corporation)(filed as Exhibit 3.1 to the June 30, 1997 10-Q).** 3.2 By-Laws of the Company as of May 19, 1997 - NXS Acquisition Corp. By-Laws (filed as Exhibit 3.2 to the June 30, 1997 10-Q).** 4.1 Indenture between Amphenol Corporation and IBJ Schroeder Bank and Trust Company, as Trustee, dated as of May 19, 1997, relating to Senior Subordinated Notes due 2007 (filed as Exhibit 4.1 to the June 30, 1997 10-Q).** * Filed herewith ** Previously filed 15
10.1 Amended and Restated Receivables Purchase Agreement dated as of May 19, 1997 among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital Corporation and Nesbitt Burns Securities, Inc., as Agent (filed as Exhibit 10.1 to the June 30, 1997 10-Q).** 10.2 Amended and Restated Purchase and Sale Agreement dated as of May 19, 1997 among the Originators named therein, Amphenol Funding Corp. and the Company (filed as Exhibit 10.2 to the June 30, 1997 10-Q).** 10.3 Credit Agreement dated as of May 19, 1997 among the Company, Amphenol Holding UK, Limited, Amphenol Commercial and Industrial UK, Limited, the Lenders listed therein, The Chase Manhattan Bank, as Syndication Agent, the Bank of New York, as Documentation Agent and Bankers Trust Company, as Administrative Agent and Collateral Agent (filed as Exhibit 10.3 to the June 30, 1997 10-Q).** Management Contracts and Compensatory Plans (Exhibits 10.4 through 10.11). 10.4 1997 Amphenol Incentive Plan (filed as Exhibit 10.13 to the 1996 10-K).** 10.5 1998 Amphenol Incentive Plan (filed as Exhibit 10.5 to the December 31, 1997 10-K).** 10.6 Amended and Restated Salaried Employees Pension Plan of Amphenol Corporation (filed as Exhibit 10.12 to the 1994 10-K).** 10.7 Amended and Restated LPL Technologies Inc. Retirement Plan for Salaried Employees (filed as Exhibit 10.13 to the 1994 10-K).** 10.8 Amphenol Corporation Supplemental Employee Retirement Plan formally adopted effective January 25, 1996 (filed as Exhibit 10.18 to the 1996 10-K).** 10.9 LPL Technologies Inc. and Affiliated Companies Employee Savings/401(k) Plan, dated and adopted January 23, 1990 (filed as Exhibit 10.19 to the 1991 Registration Statement).** 10.10 Management Agreement between the Company and Dr. Martin H. Loeffler, dated July 28, 1987 (filed as Exhibit 10.7 to the 1987 Registration Statement).** 10.11 Amphenol Corporation Directors' Deferred Compensation Plan (filed as Exhibit 10.11 to the December 31, 1997 10-K).** * Filed herewith ** Previously filed 16
10.12 Agreement and Plan of Merger among Amphenol Acquisition Corporation, Allied Corporation and the Company, dated April 1, 1987, and the Amendment thereto dated as of May 15, 1987 (filed as Exhibit 2 to the 1987 Registration Statement).** 10.13 Settlement Agreement among Allied Signal Inc., the Company and LPL Investment Group, Inc. dated November 28, 1988 (filed as Exhibit 10.20 to the 1991 Registration Statement).** 10.14 Registration Rights Agreement dated as of May 19, 1997, among NXS Acquisition Corp., KKR 1996 Fund L.P., NXS Associates L.P., KKR Partners II, L.P. and NXS I, L.L.C. (filed as Exhibit 99.5 to Schedule 13D, Amendment No. 1, relating to the beneficial ownership of shares of the Company's Common Stock by NXS I, L.L.C., KKR 1996 Fund, L.P., KKR Associates (1996) L.P., KKR 1996 GP LLC, KKR Partners II, L.P., KKR Associates L.P., NXS Associates L.P., KKR Associates (NXS) L.P., and KKR-NXS L.L.C. dated May 27, 1997).** 10.15 Management Stockholders' Agreement entered into as of May 19, 1997 between the Company and Martin H. Loeffler (filed as Exhibit 10.13 to the June 30, 1997 10-Q).** 10.16 Management Stockholders' Agreement entered into as of May 19, 1997 between the Company and Edward G. Jepsen (filed as Exhibit 10.14 to the June 30, 1997 10-Q).** 10.17 Management Stockholders' Agreement entered into as of May 19, 1997 between the Company and Timothy F. Cohane (filed as Exhibit 10.15 to the June 30, 1997 10-Q).** 10.18 1997 Option Plan for Key Employees of Amphenol and Subsidiaries (filed as Exhibit 10.16 to the June 30, 1997 10-Q).** 10.19 Amended 1997 Option Plan for Key Employees of Amphenol and Subsidiaries.** 10.20 Non-Qualified Stock Option Agreement between the Company and Martin H. Loeffler dated as of May 19, 1997 (filed as Exhibit 10.17 to the June 30, 1997 10-Q).** 10.21 Non-Qualified Stock Option Agreement between the Company and Edward G. Jepsen dated as of May 19, 1997 (filed as Exhibit 10.18 to the June 30, 1997 10-Q).** * Filed herewith ** Previously filed 17
10.22 Non-Qualified Stock Option Agreement between the Company and Timothy F. Cohane dated as of May 19, 1997 (filed as Exhibit 10.19 to the June 30, 1997 10-Q).** 10.23 First Amendment to Amended and Restated Receivables Purchase Agreement dated as of September 26, 1997 (filed as Exhibit 10.20 to the September 30, 1997 10-Q).** 10.24 Canadian Purchase and Sale Agreement dated as of September 26, 1997 among Amphenol Canada Corp., Amphenol Funding Corp. and Amphenol Corporation, individually and as the initial servicer (filed as Exhibit 10.21 to the September 30, 1997 10-Q).** 10.25 Amended and Restated Credit Agreement dated as of October 3, 1997 among the Company, Amphenol Holding UK, Limited, Amphenol Commercial and Industrial UK, Limited, the Lenders listed therein, The Chase Manhattan Bank, as Syndication Agent, the Bank of New York, as Documentation Agent and Bankers Trust Company, as Administrative Agent and Collateral Agent (filed as Exhibit 10.22 to the September 30, 1997 10-Q).** 10.26 First Amendment dated as of May 1, 1998 to the Amended and Restated Credit Agreement dated as of October 3, 1997 among the Company, Amphenol Holding UK, Limited, Amphenol Commercial and Industrial UK, Limited, the Lenders listed therein, The Chase Manhattan Bank, as Syndication Agent, the Bank of New York, as Documentation Agent and Bankers Trust Company, as Administrative Agent and Collateral Agent (filed as Exhibit 10.25 to the March 31, 1998 10-Q).** 27 Financial Data Schedule.* (b) Reports filed on Form 8-K There were no reports on Form 8-K filed for or during the third quarter ended September 30, 1998. * Filed herewith ** Previously filed 18
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMPHENOL CORPORATION DATE: November 12, 1998 /s/ Edward G. Jepsen ----------------- --------------------------- Edward G. Jepsen Executive Vice President and Chief Financial Officer 19