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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

(Mark One)  

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

or

o

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
(State or other jurisdiction of
incorporation or organization)
  22-2785165
(I.R.S. Employer
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 ý    No o

        Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of June 30, 2003, the total number of shares outstanding of Class A Common Stock was 42,628,626.





AMPHENOL CORPORATION

Index to Quarterly Report
on Form 10-Q

 
   
  Page

Part I

 

Financial Information

 

 
 
Item 1.

 

Financial Statements:

 

 

 

 

Condensed Consolidated Balance Sheet June 30, 2003 and December 31, 2002

 

3

 

 

Condensed Consolidated Statement of Income three and six months ended June 30, 2003 and 2002

 

4

 

 

Condensed Consolidated Statement of Changes in Shareholders' Equity six months ended June 30, 2003

 

5

 

 

Condensed Consolidated Statement of Changes in Shareholders' Equity six months ended June 30, 2002

 

6

 

 

Condensed Consolidated Statement of Cash Flow six months ended June 30, 2003 and 2002

 

7

 

 

Notes to Condensed Consolidated Financial Statements

 

8
 
Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

13
 
Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

17
 
Item 4.

 

Controls and Procedures

 

17

Part II

 

Other Information

 

 
 
Item 1.

 

Legal Proceedings

 

18
 
Item 2.

 

Changes in Securities

 

18
 
Item 3.

 

Defaults upon Senior Securities

 

18
 
Item 4.

 

Submission of Matters to a Vote of Security-Holders

 

18
 
Item 5.

 

Other Information

 

18
 
Item 6.

 

Exhibits and Reports on Form 8-K

 

18

Signatures

 

20

Exhibit Index

 

21

2



Part I. Financial Information

Item 1. Financial Statements


AMPHENOL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET

(dollars in thousands)

 
  June 30,
2003

  December 31,
2002

 
 
  (Unaudited)

   
 
ASSETS  
Current Assets:              
  Cash and short-term cash investments   $ 22,328   $ 20,659  
  Accounts receivable, less allowance for doubtful accounts of $8,861 and $8,812, respectively     158,817     131,252  
  Inventories     211,535     205,643  
  Prepaid expenses and other assets     34,865     31,610  
   
 
 
Total current assets     427,545     389,164  
   
 
 
Land and depreciable assets, less accumulated depreciation of $314,587 and $285,427, respectively     171,260     160,690  
Deferred debt issuance costs     7,769     4,382  
Goodwill     501,414     486,841  
Deferred taxes and other assets     39,674     37,831  
   
 
 
    $ 1,147,662   $ 1,078,908  
   
 
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Current Liabilities:              
  Accounts payable   $ 94,426   $ 88,533  
  Accrued interest     3,199     4,957  
  Accrued salaries, wages and employee benefits     30,370     24,568  
  Other accrued expenses     47,858     39,493  
  Current portion of long-term debt     10,255     78,363  
   
 
 
Total current liabilities     186,108     235,914  
   
 
 
Long-term debt     624,663     565,885  
Accrued pension and post employment benefit obligations     107,184     102,418  
Deferred taxes and other liabilities     10,801     7,709  
Shareholders' Equity:              
  Common Stock     43     43  
  Additional paid-in capital (deficit)     (272,954 )   (274,282 )
  Accumulated earnings     565,232     522,440  
  Accumulated other comprehensive loss     (73,415 )   (81,219 )
   
 
 
    Total shareholders' equity     218,906     166,982  
   
 
 
    $ 1,147,662   $ 1,078,908  
   
 
 

See accompanying notes to condensed consolidated financial statements.

3



AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

(dollars in thousands, except per share data)

 
  Three months ended
June 30,

  Six months ended
June 30,

 
 
  2003
  2002
  2003
  2002
 
Net sales   $ 304,893   $ 270,865   $ 582,667   $ 526,841  
Costs and expenses:                          
  Cost of sales, excluding depreciation and amortization     203,200     178,485     385,853     349,220  
  Depreciation and amortization expense     9,566     8,542     18,374     16,940  
  Selling, general and administrative expense     42,868     38,806     84,010     75,376  
   
 
 
 
 
Operating income     49,259     45,032     94,430     85,305  
Interest expense     (7,694 )   (12,858 )   (15,818 )   (25,696 )
Other expenses, net     (1,685 )   (1,635 )   (3,409 )   (2,821 )
Expense for early extinguishment of debt     (10,367 )         (10,367 )      
   
 
 
 
 
Income before income taxes     29,513     30,539     64,836     56,788  
Provision for income taxes     (10,034 )   (10,536 )   (22,044 )   (19,592 )
   
 
 
 
 
Net income   $ 19,479   $ 20,003   $ 42,792   $ 37,196  
   
 
 
 
 
Net income per common share—Basic   $ .46   $ .47   $ 1.00   $ .88  
   
 
 
 
 
Average common shares outstanding—Basic     42,624,274     42,394,252     42,598,619     42,348,057  
   
 
 
 
 
Net income per common share—Diluted   $ .45   $ .46   $ .98   $ .86  
   
 
 
 
 
Average common shares outstanding—Diluted     43,672,305     43,454,235     43,592,119     43,448,329  
   
 
 
 
 

See accompanying notes to condensed consolidated financial statements.

4



AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
for the six months ended June 30, 2003
(Unaudited)

(dollars in thousands)

 
  Common
Stock

  Additional
Paid-in
Deficit

  Comprehensive
Income

  Accumulated
Earnings

  Accumulated
Other
Comprehensive
Loss

  Total
Shareholders'
Equity

 
Beginning balance at December 31, 2002   $ 43   $ (274,282 )       $ 522,440   $ (81,219 ) $ 166,982  
Comprehensive income:                                      
  Net income               [$ 42,792 ]   42,792           42,792  
               
                   
    Other comprehensive income, net of tax:                                      
    Translation adjustments                 10,556           10,556     10,556  
    Revaluation of interest rate derivatives                 (2,752 )         (2,752 )   (2,752 )
               
                   
    Other comprehensive income                 7,804                    
               
                   
Comprehensive income               [$ 50,596 ]                  
               
                   
Exercise of stock options, including tax benefit           1,208                       1,208  
Other adjustments           120                       120  
   
 
       
 
 
 
Ending balance at June 30, 2003   $ 43   $ (272,954 )       $ 565,232   $ (73,415 ) $ 218,906  
   
 
       
 
 
 

See accompanying notes to condensed consolidated financial statements.

5



AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
for the six months ended June 30, 2002
(Unaudited)

(dollars in thousands)

 
  Common
Stock

  Additional
Paid-in
Deficit

  Comprehensive
Income

  Accumulated
Earnings

  Accumulated
Other
Comprehensive
Loss

  Total
Shareholders'
Equity

Beginning balance at December 31, 2001   $ 42   $ (280,224 )       $ 442,096   $ (57,981 ) $ 103,933
Comprehensive income:                                    
  Net income               [$ 37,196 ]   37,196           37,196
               
                 
  Other comprehensive income, net of tax:                                    
    Translation adjustments                 8,233           8,233     8,233
    Revaluation of interest rate derivatives                 4,530           4,530     4,530
               
                 
    Other comprehensive income                 12,763                  
               
                 
Comprehensive income               [$ 49,959 ]                
               
                 
Exercise of stock options, including tax benefit     1     4,522                       4,523
Other adjustments           61                       61
   
 
       
 
 
Ending balance at June 30, 2002   $ 43   $ (275,641 )       $ 479,292   $ (45,218 ) $ 158,476
   
 
       
 
 

See accompanying notes to condensed consolidated financial statements.

6



AMPHENOL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)

(dollars in thousands)

 
  Six Months Ended June 30,
 
 
  2003
  2002
 
Net income   $ 42,792   $ 37,196  
Adjustments for cash from operations:              
  Depreciation and amortization     18,374     16,940  
  Amortization of deferred debt issuance costs     718     704  
  Expense for early extinguishment of debt     10,367      
  Net change in non-cash components of working capital     (3,521 )   20,118  
  Other long term assets and liabilities     1,353     (1,135 )
   
 
 
Cash flow provided by operations     70,083     73,823  
   
 
 
Cash flow from investing activities:              
  Capital additions, net     (12,862 )   (7,948 )
  Investment in acquisitions     (29,766 )   (11,939 )
   
 
 
      Cash flow used by investing activities     (42,628 )   (19,887 )
   
 
 
Cash flow from financing activities:              
  Net change in borrowings under revolving credit facilities     3,742     2,873  
  Decrease in borrowings under Bank Agreement     (61,543 )   (58,205 )
  Retirement of debt: old Bank Agreement     (439,500 )      
    senior subordinated notes     (148,740 )      
    fees and expenses related to refinancing     (8,453 )      
  Borrowings under new Bank Agreement     625,000        
  Net change in receivables sold     2,500     (10,300 )
  Proceeds from exercise of stock options     1,208     2,959  
   
 
 
      Cash used by financing activities     (25,786 )   (62,673 )
   
 
 
Net change in cash and short-term cash investments     1,669     (8,737 )
Cash and short-term cash investments balance, beginning of period     20,659     27,975  
   
 
 
Cash and short-term cash investments balance, end of period   $ 22,328   $ 19,238  
   
 
 
Cash paid during the period for:              
  Interest   $ 17,627   $ 27,109  
  Income taxes paid, net of refunds     17,671     13,590  

See accompanying notes to condensed consolidated financial statements.

7



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 June 30, 2003 and December 31, 2002, and the related consolidated statements of income for the three and six months ended June 30, 2003 and 2002 and of changes in shareholders' equity and of cash flow for the six months ended June 30, 2003 and 2002 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 six months ended June 30, 2003 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 2002 Annual Report on Form 10-K/A.

Note 2—Refinancing and New Credit Agreement

        In May 2003, the Company completed a refinancing of its senior credit facilities and redeemed all of its outstanding Senior Subordinated Notes ("Notes"). The new credit facilities consist of: (1) a $125,000 five year revolving credit facility, (2) a $125,000 Tranche A loan which will amortize over the five year period through May 2008, and (3) a $500 million Tranche B loan with $5 million per year amortization through 2009 and a final maturity in 2010. In connection with the refinancing, the Company incurred one-time expenses for the early extinguishment of debt of $10,367 (less tax effects of $3,525) or $.16 per share after tax. Such one-time expenses include the call premium on the Notes, write-off of unamortized deferred debt issuance costs and other related costs.

        In conjunction with entering into the new Bank Agreement the Company entered into interest rate swap agreements that fixed the Company's LIBOR interest rate on $250 million and $150 million of floating rate bank debt at 2.44% and 1.24%, expiring in 2006 and 2004, respectively.

Note 3—Inventories

        Inventories consist of:

 
  June 30,
2003

  December 31,
2002

Raw materials and supplies   $ 43,693   $ 38,133
Work in process     113,257     111,337
Finished goods     54,585     56,173
   
 
    $ 211,535   $ 205,643
   
 

8


Note 4—Reportable Business Segments

        The Company has two reportable business segments: interconnect products and assemblies and cable products. The interconnect products and assemblies segment produces connectors and connector assemblies primarily for the communications, aerospace, industrial and automotive markets. The cable products segment produces coaxial and flat ribbon cable and related products primarily for communication markets, including cable television. The Company evaluates the performance of business units on, among other things, profit or loss from operations before interest expense, 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 June 30, 2003 and 2002 are as follows:

 
  Interconnect products and
assemblies

  Cable products
  Total
 
  2003
  2002
  2003
  2002
  2003
  2002
Net sales                                    
  —external   $ 265,449   $ 225,756   $ 39,444   $ 45,109   $ 304,893   $ 270,865
  —intersegment     495     478     3,318     1,907     3,813     2,385
Segment operating income     48,497     38,088     4,296     7,840     52,793     45,928

        The segment results for the six months ended June 30, 2003 and 2002 are as follows:

 
  Interconnect products and
assemblies

  Cable products
  Total
 
  2003
  2002
  2003
  2002
  2003
  2002
Net sales                                    
  —external   $ 507,994   $ 436,089   $ 74,673   $ 90,752   $ 582,667   $ 526,841
  —intersegment     878     740     6,675     4,162     7,553     4,902
Segment operating income     90,807     71,580     9,706     15,999     100,513     87,579

        Reconciliation of segment operating income to consolidated income before taxes for the second quarter and six months ended June 30, 2003 and 2002:

 
  Three months ended
June 30,

  Six months ended
June 30,

 
 
  2003
  2002
  2003
  2002
 
Segment operating income   $ 52,793   $ 45,928   $ 100,513   $ 87,579  
Interest expense     (7,694 )   (12,858 )   (15,818 )   (25,696 )
Other net expenses     (5,219 )   (2,531 )   (9,492 )   (5,095 )
Expense for early extinguishment of debt     (10,367 )       (10,367 )    
   
 
 
 
 
Consolidated income before income taxes   $ 29,513   $ 30,539   $ 64,836   $ 56,788  
   
 
 
 
 

9


Note 5—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 costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement entered into in connection with the acquisition in 1987. For all 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 reimburse Amphenol 100% of such costs. Honeywell representatives work closely with the Company in addressing the most significant environmental liabilities covered by the Agreement. 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. The environmental cleanup matters identified by the Company, including those referred to above, are covered under the Honeywell agreement.

        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. 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. At June 30, 2003 and December 31, 2002, approximately $65,700 and $63,200, 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 6—New Accounting Pronouncements

        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 was effective beginning January 1, 2003, and did not have a material impact on the Company's Consolidated Financial Statements.

        In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". The Interpretation addresses the disclosures to be made by a guarantor in its financial statements about its obligations under guarantee. In addition, it also clarifies

10



the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure provisions became effective December 15, 2002 and did not have a material impact on the Company's Consolidated Financial Statements.

        In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148 (FAS 148), "Accounting for Stock-Based Compensation—Transition and Disclosure". FAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of FAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has elected to continue to apply APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for stock options, and the disclosures required by FAS Nos. 123 and 148 are included in Note 7 herein.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities". It requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the company that has controlling financial interest. It also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. This Interpretation is effective July 1, 2003, and is not expected to have a material impact on the Company's Consolidated Financial Statements.

        In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149 (FAS 149), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under FAS 133, "Accounting for Derivative Instruments and Hedging Activities". This statement is effective for contracts entered into or modified after June 30, 2003, and is not expected to have a material impact on the Company's Consolidated Financial Statements.

        In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (FAS 150), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. This statement is effective for financial instruments entered into or modified after May 31, 2003, and did not have a material impact on the Company's Consolidated Financial Statements.

11


Note 7—Stock Options

        The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for stock options. Accordingly, no compensation cost has been recognized for the stock options. Had compensation cost for stock options been determined based on the fair value of the option at date of grant consistent with the provisions of FAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share for the three and six months ended June 30, 2003 and 2002 would have been reduced to the pro forma amounts indicated below:

 
  Three months ended
June 30,

  Six months ended
June 30,

 
 
  2003
  2002
  2003
  2002
 
Net Income   $ 19,479   $ 20,003   $ 42,792   $ 37,196  
Less: Total stock based compensation expense determined under Black-Scholes option pricing model, net of related tax effect     (1,354 )   (1,640 )   (2,481 )   (3,280 )
   
 
 
 
 
Pro forma net income   $ 18,125   $ 18,363   $ 40,311   $ 33,916  
   
 
 
 
 
Earnings Per Share:                          
  Basic-as reported   $ .46   $ .47   $ 1.00   $ .88  
  Basic-pro forma   $ .43   $ .43   $ .95   $ .80  
  Diluted-as reported   $ .45   $ .46   $ .98   $ .86  
  Diluted-pro forma   $ .42   $ .42   $ .92   $ .78  

12


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in millions, unless otherwise noted, except per share data)

Item 2. Results of Operations

Quarter and Six months ended June 30, 2003 compared to the quarter and six months ended June 30, 2002

        Net sales increased approximately 13% to $304.9 and 11% to $582.7 in the second quarter and six months of 2003, respectively, compared to sales of $270.9 and $526.8, respectively, for the same periods in 2002. External sales of interconnect products and assemblies increased 18% in the second quarter 2003 compared to 2002 ($265.5 in 2003 versus $225.8 in 2002) and 16% in the six months 2003 compared to 2002 ($508.0 in 2003 versus $436.0 in 2002). Sales increased in the Company's major end markets including the military/aerospace, industrial/automotive and wireless handset markets, and to a lesser extent in the wireless infrastructure and internet equipment markets. The increases occurred in all major geographic regions, with approximately half of the increase attributable to the effect of currency translation, as detailed below. The remaining increase resulted primarily from new acquisitions and the continuing development of new application specific and value added products. External sales of cable products decreased 13% in the second quarter 2003 compared to 2002 ($39.4 in 2003 versus $45.1 in 2002) and 18% in the six months of 2003 compared to 2002 ($74.7 in 2003 versus $90.8 in 2002.) Such decrease is primarily attributable to decreased sales of coaxial cable products for the broadband communications market resulting from the slowdown in capital spending by both domestic and international cable operators for network upgrades and expansion. Geographically, sales in the U.S. in the second quarter and six months 2003 increased 5% and 3%, respectively, compared to the same periods in 2002 ($139.4 and $261.6 in 2003 versus $132.6 and $254.6 in 2002) and 4% and 2%, respectively, in local currency compared to 2002. International sales for the second quarter and six months 2003 increased approximately 20% and 18%, respectively, in U.S. dollars ($165.5 and $321.1 in 2003 versus $138.3 and $272.2 in 2002) and increased 8% and 6%, respectively, in local currency compared to 2002. Currency translation had the effect of increasing sales in the second quarter and six months of 2003 by approximately $17.9 and $34.7, respectively, when compared to exchange rates for the 2002 period.

        The gross profit margin as a percentage of net sales (including depreciation in cost of sales) was 30% and 31% for the second quarter and six months of 2003, respectively, compared to 31% and 30%, respectively, for the 2002 periods. The changes in gross margin are generally attributable to an increase in margins in the interconnect products and assemblies segment offset by a decline in margins in the cable products segment. The operating margin for interconnect products and assemblies in both the second quarter and six months increased approximately 1% compared to the prior year. The increase in operating profit margin is generally attributable to the effects of higher sales volume and cost reduction activities relating to purchased materials and a shift in headcount to low cost labor areas. This increase was offset by a decline in operating profit margins for cable products of approximately 7% and 5% in the second quarter and six months, respectively, due primarily to the reduction in sales and higher material costs.

        Selling, general and administrative expenses increased to $42.9 and $84.0 (14.1% and 14.4% of net sales) for the second quarter and six months of 2003, respectively, from $38.8 and $75.4 (14.3% of net sales) for the second quarter and six months of 2002, respectively. The increase in 2003 is attributable to increases in selling expense resulting from higher sales volume, increases in research and development costs resulting from increased spending relating to new product development, and increased administrative costs for insurance and pensions.

        Other expense, net, for the second quarter is comprised primarily of foreign currency transaction gains and losses ($.7 loss in 2003 and $.8 loss in 2002), reflecting weakness of the U.S. dollar in both

13


2003 and 2002, program fees on sale of accounts receivable ($.4 in 2003 and $.5 in 2002),due to lower receivable sales and fee rates in 2003, minority interests ($.5 in 2003 and $.4 in 2002) and agency and commitment fees on the Company's credit facilities ($.3 in 2003 and $.1 in 2002).

        Other expense, net, for the six months is comprised primarily of foreign currency transaction gains and losses ($1.1 loss in 2003 and $.9 loss in 2002), reflecting weakness of the U.S. dollar in both 2003 and 2002, program fees on sale of accounts receivable ($.7 in 2003 and $.9 in 2002), reflecting lower receivable sales and fee rates in 2003, minority interests ($.9 in 2003 and $.7 in 2002) and agency and commitment fees on the Company's credit facilities ($.4 in 2003 and $.3 in 2002).

        Expenses for early extinguishment of debt totaling $10.4 relate to the refinancing of the Company's senior credit facilities. Such one-time expenses include the call premium related to the redemption of the Company's Senior Subordinated Notes of $4.7, write-off of unamoritized deferred debt issue costs of $3.9 and other related fees and expenses of $1.8.

        Interest expense for the second quarter and six months of 2003 was $7.7 and $15.8 compared to $12.9 and $25.7 for the 2002 periods. The decrease is attributable to lower average debt levels and lower interest rates.

        The provision for income taxes for the 2003 periods was at an effective rate of 34% compared to 34.5% in the 2002 period.

        Cash provided by operating activities was $70.1 in the first six months of 2003 compared to $73.8 in the 2002 period. The decrease in cash flow relates primarily to an increase in non-cash components of working capital offset in part by an increase in net income. The non-cash components of working capital increased $3.5 in the first six months of 2003, due primarily to an operating increase of $17.1 in accounts receivable resulting from increased sales volume, partially offset by an operating reduction of $5.9 in inventory and an increase of $9.6 in accrued expenses relating primarily to an increase in liabilities for income taxes. The non-cash components of working capital decreased $20.1 in the first six months of 2002, due primarily to a $10.0 decrease in inventory as inventory levels were reduced in response to lower sales levels and an increase of $7.2 in accrued liabilities resulting from increases in liabilities for income taxes and interest.

        Accounts receivable increased $27.6, primarily due to increased sales volume, $6.5 of accounts receivable from acquired companies, and a $6.5 increase due to translation resulting from the relatively weaker U.S. dollar at June 30, 2003 compared to December 31, 2002, partially offset by an increase in receivables sold of $2.5. Days sales outstanding, computed before sales of receivables, remained constant at 66 days. Inventory increased $5.9 to $211.5. Such increase was attributable to the $6.6 impact of translation resulting from the relatively weaker U.S. dollar at June 30, 2003 compared to December 31, 2002, $5.2 of inventory from acquired companies partially offset by an operating reduction of $5.9. Inventory turnover increased to 3.8x in 2003 from 3.5x in 2002. Goodwill increased $14.6 to $501.4 as a result of acquisitions completed in 2003. Land and depreciable assets, net, increased $10.6 to $171.3, reflecting capital expenditures of $12.9, assets from acquisitions of approximately $8.7, an increase of $7.1 due to translation resulting from relatively weaker U.S. dollar at June 30, 2003 compared to December 31, 2002, and depreciation of $18.1.

        For the first six months of 2003, cash from operating activities of $70.1, proceeds from the refinancing of $28.3, additional sales of receivables of $2.5, and proceeds from exercise of stock options of $1.2 was used primarily to fund capital expenditures of $12.9, acquisitions of $29.8 and for a net debt reduction of $57.8. For the first six months of 2002, cash from operating activities of $73.8 cash on hand of $8.7 and proceeds from exercise of stock options of $2.9 were used to fund capital

14



expenditures of $7.9, acquisitions of $11.9, a reduction in sales of receivables of $10.3 and a net reduction in bank debt of $55.3.

        During the second quarter the Company completed a refinancing of its senior credit facilities. Borrowings of $625.0 under a new bank loan agreement (Bank Agreement), described below, were used to repay $439.5 outstanding under the Company's previous bank agreement, redeem all outstanding notes totaling $148.7 (including the call premium on the notes of $4.7) and to pay other fees and expenses associated with the refinancing of $8.5. A prepayment of the new bank loan of $37.0 was made in June with excess borrowing proceeds and cash flow from operations. The refinancing had the effect of extending the maturity of the Company's debt coming due in 2003 through 2007.

        In conjunction with entering into the new Bank Agreement the Company entered into interest rate swap agreements that fixed the Company's LIBOR interest rate on $250.0 and $150.0 of floating rate bank debt at 2.44% and 1.24%, expiring in 2006 and 2004, respectively.

        The Company's new Bank Agreement includes a Term Loan, consisting of a Tranche A and B, and a $125.0 revolving credit facility. At June 30, 2003, the Tranche A had a balance of $125.0 and matures over the period 2003 to 2008, and the Tranche B had a balance of $463.0 and matures over the period of 2003 to 2010. The revolving credit facility expires in 2008; availability under the facility at June 30, 2003 was $114.7, after reduction of $7.7 for outstanding letters of credit. The Company's interest rate on the revolving credit facility, Tranche A and Tranche B is LIBOR plus 2.0%, 2.0%, and 2.5%, respectively. The Bank Agreement is secured by a first priority pledge of 100% of the capital stock of the Company's direct domestic subsidiaries and 65% of the capital stock of direct material foreign subsidiaries, as defined in the Bank Agreement. In addition, if the Company's credit rating as assigned by Standard & Poor's or Moody's were to decline to BB- or Ba3, respectively, the Company would be required to perfect liens in favor of participants in the Bank Agreement in substantially all of the Company's U.S. based assets. At June 30, 2003, the Company's credit rating from Standard and Poor's was BB+ and from Moody's was Ba2. The Bank Agreement requires that the Company satisfy certain financial covenants including an interest coverage ratio of higher than 3x (EBITDA divided by interest expense) and a leverage test (Debt divided by EBITDA) lower than 3.8x. At June 30, 2003, such ratios as defined in the Bank Agreement, were 5.97x and 3.15x, respectively. The Bank Agreement also includes limitations with respect to, among other things, indebtedness in excess of $50 for capital leases, $200 for general indebtedness and $200 for acquisition indebtedness, of which approximately $1.9, $0 and $0 were outstanding at June 30, 2003, and restricted payments, including dividends on the Company's Common Stock, in excess of 50% of consolidated cumulative net income, or approximately $8.4 at June 30, 2003.

        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.

        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.

        A subsidiary of the Company has an agreement with a financial institution whereby the subsidiary can sell an undivided interest of up to $85 in a designated pool of qualified accounts receivable. The Company services, administers and collects the receivables on behalf of the purchaser. The agreement provides certain covenants and provides for various events of termination. The agreement expires in May 2004. At June 30, 2003, approximately $65.7 of receivables were sold under the agreement and are therefore not reflected in the accounts receivable balance in the accompanying Condensed Consolidated Balance Sheet.

15


        Management believes that the Company's working capital position, ability to generate strong cash flow from operations and access to credit markets will allow it to meet its obligations for the next twelve months and the foreseeable future.

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 costs incurred relating to these three sites are currently reimbursed by Honeywell based on an agreement entered into in connection with the acquisition in 1987. For all 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 reimburse Amphenol 100% of such costs. Honeywell representatives work closely with the Company in addressing the most significant environmental liabilities covered by the Agreement. 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. The environmental cleanup matters identified by the Company, including those referred to above, are covered under the Honeywell agreement.

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 and pricing and competitive and cost factors are set forth in the Company's 2002 Annual Report on Form 10-K/A.

16


Item 3. Quantitative and Qualitative Disclosures About Market Risk

        There has been no material change in the Company's assessment of its sensitivity to foreign currency exchange rate risk since its presentation set forth, in Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in its 2002 Annual Report on Form 10-K/A. Relative to interest rate risk, the Company completed a refinancing of its senior credit facilities during the second quarter as discussed in liquidity and capital resources above. In conjunction with the refinancing, the Company entered into interest rate swap agreements that fixed the Company's LIBOR interest rate on $250 million and $150 million of floating rate debt at 2.44% and 1.24%, expiring in 2006 and 2004, respectively. At June 30, 2003, the Company's average LIBOR rate was 1.75%. A 10% change in the LIBOR interest rate at June 30, 2003 would have the effect of increasing or decreasing interest expense by approximately $.2 million. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2003, although there can be no assurances that interest rates will not significantly change.

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" (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by 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.

17



PART II
OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

        Reference is made to the Company's 2002 Annual Report on Form 10-K/A.

Item 2. CHANGES IN SECURITIES

        None

Item 3. DEFAULTS UPON SENIOR SECURITIES

        None

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

Item 5. OTHER INFORMATION

        None

Item 6. EXHIBITS AND REPORTS ON FORM 8-K



10.1

 

Credit Agreement dated as of May 6, 2003 among Amphenol Corporation, the Lenders listed therein, Fleet National Bank and Royal Bank of Canada, as Co-Documentation Agents, UBS Warburg LLC, as Syndication Agent and Deutsche Bank Trust Company Americas as Administrative Agent and Collateral Agent (filed as an Exhibit to the Form 8-K filed on June 13, 2003)**
     

18



31.1

 

Certification Pursuant to Exchange Act Rules 13a-14 and 15d-14; as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

 

Certification Pursuant to Exchange Act Rules 13a-14 and 15d-14; as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

 

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

        A Form 8-K was filed on April 22, 2003 under Item. 9 furnishing Amphenol Corporation's April 16, 2003, Press Release setting forth the Company's first quarter 2003 earnings.

        A Form 8-K was filed on May 12, 2003 under Item. 5 furnishing Amphenol Corporation's May 6, 2003, Press Release announcing the completion of a refinancing of the Company's senior credit facilities and the call for redemption of all the Company's outstanding senior subordinated notes.

        A Form 8-K was filed on June 13, 2003 under Item. 5 describing the details of the Company's recently completed $750 million credit facility. Such filing included the Credit Agreement as an exhibit.

        A Form 8-K was filed on July 22, 2003 under Item 9 furnishing Amphenol Corporation's July 16, 2003, Press Release setting forth the Company's second quarter 2003 earnings.

19



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

 

 

By:

/s/  
EDWARD G. JEPSEN      
Edward G. Jepsen
Executive Vice President
and Chief Financial Officer

DATE: August 5, 2003

20



EXHIBIT INDEX

Exhibit Number

  Description

10.1

 

Credit Agreement dated as of May 6, 2003 among Amphenol Corporation, the Lenders listed therein, Fleet National Bank and Royal Bank of Canada, as Co-Documentation Agents, UBS Warburg LLC, as Syndication Agent and Deutsche Bank Trust Company Americas as Administrative Agent and Collateral Agent (filed as an Exhibit to the Form 8-K filed on June 13, 2003)**

31.1

 

Certification Pursuant to Exchange Act Rules 13a-14 and 15d-14; as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

 

Certification Pursuant to Exchange Act Rules 13a-14 and 15d-14; as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

 

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

21




QuickLinks

AMPHENOL CORPORATION
Part I. Financial Information
AMPHENOL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (dollars in thousands)
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) (dollars in thousands, except per share data)
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY for the six months ended June 30, 2003 (Unaudited) (dollars in thousands)
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY for the six months ended June 30, 2002 (Unaudited) (dollars in thousands)
AMPHENOL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) (dollars in thousands)
AMPHENOL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data)
PART II OTHER INFORMATION
SIGNATURE
EXHIBIT INDEX