Back to GetFilings.com
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2002
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 Identification
Incorporation or organization) Number)
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 31, 2002, the total number of shares outstanding of Class A
Common Stock was 42,533,344.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMPHENOL CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PAGE
--------
Part I Financial Information
Item 1. Financial Statements:
3
Condensed Consolidated Balance Sheet September 30, 2002 and
December 31, 2001...........................................
4
Consolidated Statement of Income three and nine months ended
September 30, 2002 and 2001.................................
5
Consolidated Statement of Changes in Shareholders' Equity
nine months ended September 30, 2002........................
6
Consolidated Statement of Changes in Shareholders' Equity
nine months ended September 30, 2001........................
7
Condensed Consolidated Statement of Cash Flow nine months
ended September 30, 2002 and 2001...........................
8
Notes to Consolidated Financial Statements..................
Item 2. Management's Discussion and Analysis of Financial Condition 12
and
Results of Operations.......................................
Item 3. Quantitative and Qualitative Disclosures About Market 14
Risk........................................................
Item 4. Controls and Procedures..................................... 14
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.................................................................... 18
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002...... 19
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- ------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and short-term cash investments...................... $ 25,204 $ 27,975
Accounts receivable, less allowance for doubtful accounts
of $7,378 and $5,191, respectively...................... 129,128 113,370
Inventories............................................... 197,078 208,316
Prepaid expenses and other assets......................... 18,817 20,596
---------- ----------
Total current assets........................................ 370,227 370,257
---------- ----------
Land and depreciable assets, less accumulated depreciation
of $271,655 and $251,201, respectively.................... 158,299 164,887
Deferred debt issuance costs................................ 4,737 5,795
Goodwill.................................................... 474,234 460,442
Other assets................................................ 21,139 25,362
---------- ----------
$1,028,636 $1,026,743
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 83,185 $ 80,501
Accrued interest.......................................... 10,617 8,499
Accrued salaries, wages and employee benefits............. 28,193 24,700
Other accrued expenses.................................... 39,249 29,995
Current portion of long-term debt......................... 83,373 59,705
---------- ----------
Total current liabilities................................... 244,617 203,400
---------- ----------
Long-term debt.............................................. 557,316 660,614
Deferred taxes and other liabilities........................ 47,807 58,796
Shareholders' Equity:
Common stock.............................................. 43 42
Additional paid-in deficit................................ (275,082) (280,224)
Accumulated earnings...................................... 499,958 442,096
Accumulated other comprehensive loss...................... (46,023) (57,981)
---------- ----------
Total shareholders' equity.............................. 178,896 103,933
---------- ----------
$1,028,636 $1,026,743
========== ==========
See accompanying notes to consolidated financial statements.
3
AMPHENOL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales..................................... $ 268,115 $ 252,581 $ 794,956 $ 843,399
Costs and expenses:
Cost of sales, excluding depreciation and
amortization.............................. 176,063 161,659 525,283 533,331
Depreciation and amortization expense....... 9,072 8,302 26,012 24,467
Selling, general and administrative
expense................................... 38,780 36,398 114,156 119,200
Amortization of goodwill.................... -- 3,648 -- 10,688
---------- ---------- ---------- ----------
Operating income.............................. 44,200 42,574 129,505 155,713
Interest expense.............................. (11,482) (14,042) (37,178) (42,361)
Other expenses, net........................... (1,167) (1,218) (3,988) (4,404)
---------- ---------- ---------- ----------
Income before income taxes.................... 31,551 27,314 88,339 108,948
Provision for income taxes.................... (10,885) (10,681) (30,477) (41,274)
---------- ---------- ---------- ----------
Net income.................................... $ 20,666 $ 16,633 $ 57,862 $ 67,674
========== ========== ========== ==========
Net income per common share-Basic............. $ .49 $ .40 $ 1.36 $ 1.62
========== ========== ========== ==========
Average common shares outstanding--Basic...... 42,525,620 42,000,308 42,407,895 41,793,158
========== ========== ========== ==========
Net income per common share--Diluted.......... $ .48 $ .39 $ 1.33 $ 1.58
========== ========== ========== ==========
Average common shares outstanding--Diluted.... 43,420,506 43,031,178 43,438,952 42,848,102
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
4
AMPHENOL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
STOCK DEFICIT INCOME EARNINGS LOSS EQUITY
-------- ---------- ------------- ----------- ------------- -------------
Beginning balance at
December 31, 2001........... $42 $(280,224) $442,096 $(57,981) $103,933
Comprehensive income:
Net income.................. $ [57,862] 57,862 57,862
---------
Other comprehensive income,
net of tax:
Translation
adjustments........... 4,854 4,854 4,854
Revaluation of interest
rate derivatives...... 7,104 7,104 7,104
---------
Other comprehensive income.. 11,958
---------
Comprehensive income.......... $ [69,820]
=========
Exercise of stock options,
including tax benefit....... 1 5,021 5,022
Other adjustments............. 121 121
--- --------- -------- -------- --------
Ending balance at
September 30, 2002 $43 $(275,082) $499,958 $(46,023) $178,896
=== ========= ======== ======== ========
5
AMPHENOL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
STOCK DEFICIT INCOME EARNINGS LOSS EQUITY
-------- ---------- ------------- ----------- ------------- -------------
Beginning balance at
December 31, 2000........... $42 $(305,464) $358,386 $(23,730) $ 29,234
Comprehensive income:
Net income.................. $ [67,674] 67,674 67,674
---------
Other comprehensive loss,
net of tax:
Translation adjustments... (7,143) (7,143) (7,143)
Revaluation of interest
rate derivatives........ (5,251) (5,251) (5,251)
---------
Other comprehensive
loss.................... (12,394)
---------
Comprehensive income.......... $ [55,280]
=========
Issuance of 606,796 shares of
common stock related to
acquisition................. 25,000 25,000
Other adjustments............. 180 180
--- --------- -------- -------- --------
Ending balance at
September 30, 2001 $42 $(280,284) $426,060 $(36,124) $109,694
=== ========= ======== ======== ========
See accompanying notes to consolidated financial statements.
6
AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2002 2001
-------- --------
Net income.................................................. $ 57,862 $ 67,674
Adjustments for cash from operations:
Depreciation and amortization............................. 26,012 24,467
Amortization of goodwill.................................. -- 10,688
Amortization of deferred debt issuance costs.............. 1,058 1,675
Net change in non-cash components of working capital...... 28,039 (22,314)
-------- --------
Cash flow provided by operations............................ 112,971 82,190
-------- --------
Cash flow from investing activities:
Capital additions, net.................................... (13,848) (28,397)
Investments in acquisitions............................... (13,996) (57,822)
-------- --------
Cash flow used by investing activities...................... (27,844) (86,219)
-------- --------
Cash flow from financing activities:
Net change in borrowings under revolving credit
facilities.............................................. (25,215) 52,793
Decrease in borrowings under Bank Agreement............... (58,205) (30,000)
Net change in receivables sold............................ (9,500) (20,600)
Proceeds from exercise of stock options................... 5,022 --
-------- --------
Cash flow (used by) provided by financing activities........ (87,898) 2,193
-------- --------
Net change in cash and short-term cash investments.......... (2,771) (1,836)
Cash and short-term cash investments balance, beginning of
period.................................................... 27,975 24,585
-------- --------
Cash and short-term cash investments balance, end of
period.................................................... $ 25,204 $ 22,749
======== ========
Cash paid during the period for:
Interest.................................................. $ 36,234 $ 39,237
Income taxes paid, net of refunds......................... 22,288 44,665
See accompanying notes to consolidated financial statements.
7
AMPHENOL CORPORATION
NOTES TO 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, 2002 and
December 31, 2001, and the related consolidated statements of income for the
three and nine months ended September 30, 2002 and 2001 and the consolidated
statements of changes in shareholders' equity and the condensed consolidated
statement of cash flow for the nine months ended September 30, 2002 and 2001
include the accounts of Amphenol Corporation (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, 2002 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
2001 Annual Report on Form 10-K.
NOTE 2--INVENTORIES
Inventories consist of:
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- ------------
(UNAUDITED)
Raw materials and supplies.......................... $ 38,416 $ 35,808
Work in process..................................... 105,771 119,627
Finished goods...................................... 52,891 52,881
-------- --------
$197,078 $208,316
======== ========
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 interconnect products and assemblies, primarily for the communications,
aerospace, industrial and automotive markets. The cable products segment
primarily produces coaxial and flat ribbon cable mainly 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, 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 September
30, 2002 and 2001 are as follows:
INTERCONNECT PRODUCTS
AND ASSEMBLIES CABLE PRODUCTS TOTAL
--------------------- ------------------- -------------------
2002 2001 2002 2001 2002 2001
--------- --------- -------- -------- -------- --------
Net sales................................
--external............................. $227,354 $212,523 $40,761 $40,058 $268,115 $252,581
--intersegment......................... 580 213 2,368 1,007 2,948 1,220
Segment operating income................. 40,733 40,910 5,702 6,407 46,435 47,317
8
AMPHENOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--REPORTABLE BUSINESS SEGMENTS (UNAUDITED) (CONTINUED)
The segment results for the nine months ended September 30, 2002 and 2001
are as follows:
INTERCONNECT PRODUCTS
AND
ASSEMBLIES CABLE PRODUCTS TOTAL
--------------------- ------------------- -------------------
2002 2001 2002 2001 2002 2001
--------- --------- -------- -------- -------- --------
Net sales
--external.............................. $663,443 $686,190 $131,513 $157,209 $794,956 $843,399
--intersegment.......................... 1,320 1,086 6,530 5,876 7,850 6,962
Segment operating income.................. 112,313 141,440 21,701 31,644 134,014 173,084
Reconciliation of segment operating income to consolidated income before
taxes for the third quarter and nine months ended September 30, 2002 and 2001:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2002 2001 2002 2001
-------- -------- -------- --------
Segment operating income............................. $ 46,435 $ 47,317 $134,014 $173,084
Amortization of goodwill............................. -- (3,648) -- (10,688)
Interest expense..................................... (11,482) (14,042) (37,178) (42,361)
Other net expenses................................... (3,402) (2,313) (8,497) (11,087)
-------- -------- -------- --------
Consolidated income before income taxes.............. $ 31,551 $ 27,314 $ 88,339 $108,948
======== ======== ======== ========
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
position or results of operations.
Subsequent to the acquisition of Amphenol from Allied Signal Corporation in
1987 (Allied Signal merged with Honeywell International Inc. in December 1999
("Honeywell")), Amphenol and Honeywell have been named jointly and severally
liable as potentially responsible parties in relation to several environmental
cleanup sites. Amphenol and Honeywell 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 three sites is apportioned between Amphenol and
Honeywell based on an agreement entered into in connection with the acquisition
in 1987. 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,
Honeywell is currently obligated to pay 80% of the costs up to $30,000 and 100%
of the costs in excess of $30,000. At September 30, 2002, approximately $28,000
of costs have been incurred applicable to this agreement. Honeywell
representatives work closely with the Company in addressing the most significant
environmental liabilities. 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.
9
AMPHENOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--COMMITMENTS AND CONTINGENCIES (CONTINUED)
A subsidiary of the Company has an agreement with a financial institution
whereby the subsidiary can sell an undivided interest of up to $85,000 in a
designated pool of qualified accounts receivable. The agreement expires in May
2004 with respect to $60,000 of accounts receivable and expires in July 2003
with respect to an additional $25,000 of 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. Program 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
September 30, 2002 and December 31, 2001, approximately $64,700 and $74,200,
respectively, of receivables were sold under the agreement and are therefore not
reflected in the accounts receivable balance in the accompanying Condensed
Consolidated Balance Sheet.
NOTE 5--NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted Financial Accounting Standard
("FAS") No. 142, "Goodwill and Other Intangible Assets". The standard changes
the accounting for goodwill and intangible assets with an indefinite life
whereby such assets will no longer be amortized; however, the standard does
require evaluation for impairment and a corresponding write down, if
appropriate. FAS No. 142 requires an initial evaluation of impairment upon
adoption and annual evaluations thereafter. Such evaluations were performed as
of January 1, 2002 and June 30, 2002, resulting in the conclusions that there
was no impairment in the value of the Company's goodwill and other intangible
assets.
Pro forma information as if goodwill had not been amortized for the third
quarter and nine months of 2001 is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2001
------------------ -----------------
Net income as reported.................................... $16,633 $67,674
Add back: goodwill amortization........................... 3,648 10,688
------- -------
Adjusted net income....................................... $20,281 $78,362
======= =======
Net income per common share--Basic:
Net income as reported.................................... $ 0.40 $ 1.62
Goodwill amortization..................................... 0.08 .25
------- -------
Adjusted net income per share............................. $ 0.48 $ 1.87
======= =======
Net income per common share--Diluted:
Net income as reported.................................... $ 0.39 $ 1.58
Goodwill amortization..................................... 0.08 .25
------- -------
Adjusted net income per share............................. $ 0.47 $ 1.83
======= =======
10
Effective January 1, 2002, the Company adopted FAS No. 143, "Accounting for
Asset Retirement Obligations" and FAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". FAS No. 143 addresses the recognition and
remeasurement of obligations associated with the retirement of tangible
long-lived assets. FAS No. 144 addresses accounting and reporting for the
impairment or disposal of long-lived assets, including discontinued operations.
There was no effect to the Company's financial statements as a result of such
adoption.
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 (FAS 146), "Accounting for Costs
Associated with Exit or Disposal Activities". The statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and requires that a liability for such costs be recognized and measured in the
period in which a liability is incurred. The statement is effective beginning
January 1, 2003, and is not expected to have a material impact on the Company's
consolidated financial statements.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 2. RESULTS OF OPERATIONS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 2001
Net sales for the third quarter of 2002 increased approximately 6% to
$268,115 compared to sales of $252,581 for the same period in 2001. Net sales
for the nine months of 2002 decreased approximately 6% to $794,956 compared to
sales of $843,399 for the same period in 2001. The increase in sales for the
third quarter of 2002 is attributable to increased sales of interconnect and
cable products in all of the Company's major markets of military/aerospace,
industrial/automotive, and communications. The decrease in sales for the nine
months of 2002 is attributable to decreased sales of interconnect and cable
products for communications markets, and to a lesser extent decreased sales of
interconnect products for industrial applications. Such decreases were partially
offset by increased sales of interconnect products for aerospace and defense
applications. Currency translation had the effect of increasing sales by
approximately $7.7 million and $5.7 million in the third quarter and nine month
period of 2002, respectively, when compared to exchange rates for the comparable
2001 periods.
The gross profit margin as a percentage of net sales (including depreciation
in cost of sales) was 31% for the third quarter and nine months of 2002 compared
to 33% and 34%, respectively, for the same periods in 2001. The decrease in
gross profit margin is generally attributable to product mix and market
conditions, particularly in the communications markets, partially offset by cost
reduction activities, and for the nine month period, to the adverse effects of
lower sales volume.
Selling, general and administrative expenses as a percentage of net sales
remained relatively constant at approximately 14% for the third quarter and nine
months 2002 and 2001.
Goodwill amortization expense was nil in both the third quarter and nine
months of 2002, as a result of adopting FAS No. 142; whereas goodwill
amortization was $3,648 and $10,688 in the third quarter and nine months of
2001, respectively.
Interest expense for the third quarter and nine months of 2002 decreased to
$11,482 and $37,178 compared to $14,042 and $42,361 for the 2001 periods,
respectively. The decrease in both periods is attributable to lower average debt
levels and lower interest rates.
The provision for income taxes for the nine months of 2002 was at an
effective rate of 35% compared to 38% in the 2001 period. For the nine months of
2001, the effective tax rate, excluding non-deductible goodwill amortization,
was 35%.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $112,971 in the nine months of
2002 compared to $82,190 in the 2001 period. The increase in cash flow relates
primarily to a net decrease in non-cash components of working capital offset in
part by a decrease in net income.
For the nine months of 2002, cash from operating activities and cash on hand
were used to repay $83,420 in bank debt, fund capital expenditures of $13,848,
fund acquisitions of $13,996, and reduce the sales of receivables by $9,500. In
the 2001 period, cash from operating activities and cash on hand were used to
fund capital expenditures of $28,397, and acquisitions of $57,822; and
borrowings of $52,793 under the Company's credit facilities were used to fund a
reduction in sales of receivables of $20,600 and Term Loan amortization of
$30,000 under the Company's bank loan agreement (the "Bank Agreement").
12
The Company has a bank loan agreement, which includes a Term Loan,
encompassing a Tranche A and B, and a $150 million revolving credit facility. At
September 30, 2002 the Tranche A had a balance of $184.5 million and matures
over the period 2003 to 2004, and the Tranche B had a balance of $284.5 million
and matures over the period 2005 and 2006. The revolving credit facility expires
in 2004; availability under the facility at September 30, 2002 was $142.8
million, after reduction of $7.2 million for outstanding letters of credit. 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 the 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, indebtedness and restricted
payments, including dividends on the Company's common stock.
The Company's EBITDA, as defined in the Bank Agreement was $156 million and
$200.5 million for the nine months ended September 30, 2002 and 2001,
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
cash requirements.
The Company's primary ongoing cash requirements will be for operating and
capital expenditures, product development activities and debt service. The
Company's debt service requirements consist primarily of principal and interest
on bank borrowings and interest on its 9 ( 7)/(8)% Senior Subordinated Notes due
2007. The Company had an interest rate swap agreement that fixed the interest
rate on $300 million of bank loans; such swap agreement expired in October 2002,
and accordingly, the Company's interest expense will decline in the fourth
quarter 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 operating and capital expenditures, product
development activities and debt service will be funded by internally-generated
cash flow and availability under the Company's revolving credit facility. The
Company 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 (Allied Signal merged with Honeywell International Inc. in December 1999
("Honeywell")), Amphenol and Honeywell have been named jointly and severally
liable as potentially responsible parties in relation to several environmental
cleanup sites. Amphenol and Honeywell 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 three sites is apportioned between Amphenol and
Honeywell based on an agreement entered into in connection with the acquisition
in 1987. 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,
Honeywell is currently obligated to pay 80% of the costs up to $30 million and
100% of the costs in excess of $30 million. At September 30, 2002, approximately
$28 million of costs have been incurred applicable to this agreement. Honeywell
representatives work closely with the Company in addressing the most significant
environmental liabilities. 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.
13
SAFE HARBOR STATEMENT
Statements in this report that are not 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, competition, pricing and cost factors are set forth in the Company's
2001 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's assessment of its
sensitivity to market risk since its presentation set forth, in Item 7A.
"Quantitative and Qualitative Disclosures About Market Risk," in its 2001 Annual
Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, the Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures within 90 days of the filing date of
this quarterly report, and, based on their evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that these disclosure
controls and procedures are effective. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's 2001 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).**
3.3 Amended and Restated Certificate of Incorporation, dated
April 24, 2000 (filed as Exhibit 3.1 to the April 28, 2000
Form 8-K).**
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).**
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).**
15
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).**
10.4 2000 Amphenol Incentive Plan (filed as Exhibit 10.6 to the
December 31, 1999 10-K).**
10.5 2001 Amphenol Incentive Plan (filed as Exhibit 10.5 to the
December 31, 2001 10-K).**
10.6 2002 Amphenol Incentive Plan (filed as Exhibit 10.6 to the
December 31, 2001 10-K).**
10.7 Pension Plan for Employees of Amphenol Corporation as
amended and restated effective January 1, 2002 (filed as
Exhibit 10.7 to the December 31, 2001 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).**
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 (filed as Exhibit 10.19 to the June 30, 1998
10-Q).**
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).**
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).**
16
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 Second Amendment to Amended and Restated Receivables
Purchase Agreement dated as of June 30, 2000 (filed as
Exhibit 10.27 to the June 30, 2000 10-Q).**
10.25 Third Amendment to Amended and Restated Receivables Purchase
Agreement dated as of June 28, 2001 (filed as Exhibit 10.27
to the September 30, 2001 10Q).**
10.26 Fourth Amendment to Amended and Restated Receivables
Purchase Agreement dated as of September 30, 2001 (filed as
Exhibit 10.28 to the September 30, 2001 10Q).**
10.27 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).**
10.28 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).**
10.29 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).**
10.30 2000 Stock Purchase and Option Plan for Key Employees of
Amphenol and Subsidiaries (filed as Exhibit 10.30 to the
June 30, 2001 10Q).**
10.31 Management Stockholders' Agreement entered into as of
June 6, 2000 between the Company and Martin H. Loeffler
(filed as Exhibit 10.31 to the December 31, 2001 10-K).**
10.32 Management Stockholders' Agreement entered into as of
June 6, 2000 between the Company and Edward G. Jepsen (filed
as Exhibit 10.32 to the December 31, 2001 10-K).**
10.33 Management Stockholders' Agreement entered into as of
June 6, 2000 between the Company and Timothy F. Cohane
(filed as Exhibit 10.33 to the December 31, 2001 10-K).**
10.34 Non-Qualified Stock Option Agreement between the Company and
Martin H. Loeffler dated as of June 6, 2000 (filed as
Exhibit 10.34 to the December 31, 2001 10-K).**
10.35 Non-Qualified Stock Option Agreement between the Company and
Edward G. Jepsen dated as of June 6, 2000 (filed as
Exhibit 10.35 to the December 31, 2001 10-K).**
10.36 Non-Qualified Stock Option Agreement between the Company and
Timothy F. Cohane dated as of June 6, 2000 (filed as
Exhibit 10.36 to the December 31, 2001 10-K).**
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
- ------------------------
* Filed herewith
** Previously filed
(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, 2002.
17
SIGNATURE
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, 2002 By: /s/ EDWARD G. JEPSEN
---------------------------------------------
Edward G. Jepsen
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
18
AMPHENOL CORPORATION
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Martin H. Loeffler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Amphenol
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge , the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: November 14, 2002
/s/ MARTIN H. LOEFFLER
Martin H. Loeffler
CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
19
CERTIFICATION
I, Edward G. Jepsen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Amphenol
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge , the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of director (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
DATE: November 14, 2002
/s/ EDWARD G. JEPSEN
Edward G. Jepsen
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
20