-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, C6zpxkscMi/N3pFfo7di0OscSxyjCAc13D/ahoR8tZ/CMlVpq2z2M8BRojnUTN50 gLq9upWJRTLWMZbZJfatfA== 0000006164-94-000008.txt : 19940404 0000006164-94-000008.hdr.sgml : 19940404 ACCESSION NUMBER: 0000006164-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMP INC CENTRAL INDEX KEY: 0000006164 STANDARD INDUSTRIAL CLASSIFICATION: 3679 IRS NUMBER: 230332575 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-04235 FILM NUMBER: 94519720 BUSINESS ADDRESS: STREET 1: 470 FRIENDSHIP RD CITY: HARRISBURGH STATE: PA ZIP: 17105 BUSINESS PHONE: 7175640100 MAIL ADDRESS: STREET 1: PO BOX 3608 M.S. 176-41 CITY: HARRISBURG STATE: PA ZIP: 17105 FORMER COMPANY: FORMER CONFORMED NAME: AMP INC & PAMCOR INC DATE OF NAME CHANGE: 19890410 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN METAL PRODUCTS CO DATE OF NAME CHANGE: 19661211 10-K 1 10K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 10-K [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 1993 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 No. 1-4235 AMP Incorporated, A Pennsylvania corporation --------------------------------------------------------------------- (Exact name of registrant as specified in its charter, and state of incorporation) Employer Identification No. 23-0332575 Harrisburg, Pennsylvania 17105-3608 ---------------------------------- (Address of principal executive offices of registrant) (717) 564-0100 - ---------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Exchange on which Registered Common Stock (without Par Value) New York (Outstanding at 3/15/94 - 104,926,021 shares) Securities registered pursuant to Section 12(g) of the Act: None - ---------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all 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 [ ] . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 11, 1994: $6,721,292,170 (104,004,521 shares at $64.625 per share). For purposes of the foregoing calculation, all directors and/or executive officers have been deemed to be affiliates, but the Company disclaims that all such directors and/or executive officers are affiliates. ========================================================== Documents Incorporated by Reference: 1. Cited portions of the Annual Report to shareholders for fiscal year ended December 31, 1993 (Parts I, II, IV) 2. Cited portions of the Proxy Statement for the AMP Incorporated 1994 Annual Shareholders' Meeting (Part III) 10-K REPORT FOR YEAR ENDED DECEMBER 31, 1993 PART I. Item 1. BUSINESS The following sections of the Annual Report to shareholders for the year ended December 31, 1993 are hereby incorporated by reference: i) the entire "Corporate Profile" section found on the front side of the fold-out page, including the "No Boundaries", center, and "Highlights" columns; ii) within the portion of the "Historical Data" table found on the reverse side of the fold-out page, items "Net Sales" down to and including "Cash Dividends Per Share" under the "For the Year" column for years 1988 through 1993, and all items under the "At December 31" column for years 1988 through 1993; iii) the right hand column of page 1, entitled "Diversification of AMP Worldwide Sales" (reference item (1) of the Appendix for a description of the graphic material contained therein); iv) all narrative text found on pages 2-5, 7, 9, 11, 13-15, 17-24, excluding all pictures and their captions; v) the right hand column of page 21, including the section at the top entitled "Sales Dollar Use" and the section at the bottom entitled "Key Ratios" (reference item (2) of the Appendix for a description of the graphic material contained therein); vi) the left hand column of page 22, stating the sources and uses, in the aggregate, of cash flow during the period 1991 to 1993 (reference item (3) of the Appendix for a description of the graphic material contained therein); and vii) Notes 13, 14 and 15 to the Consolidated Financial Statements, found on pages 33 and 34 of the Annual Report. The business in which the Company is engaged is highly competitive. The Company believes it is the leading producer of electrical/electronic connection devices, and associated application tools and machines. Over 90% of its business is in this single business segment. Within this segment there is great variety: well over 100,000 types and sizes are included in nearly 300 product families. These product families generally involve the same or very similar basic technology, materials, production processes and marketing approaches. Over 60% of sales are of products provided in strip form on reels and applied by customers with special AMP tools. The balance of sales is of pre-assembled devices that do not require application tools or machines. Over 90% of sales are of products in just three Standard Industrial Classification 4-digit codes -- Electronic Connectors, Electronic Components - NEC, and Current Carrying Wiring Devices. In all cases, the Company's products are subject to direct and indirect competition. Generally speaking, most of the Company's products involve technical competence in development and manufacture and are subject to active competition with products manufactured and sold by many other companies. The Company competes primarily through offering high-quality, technical products and associated application tooling, with emphasis on product performance and service, and only secondarily competes on a price basis. The Company has over 3000 patents issued or pending in the U.S. and over 11,000 patents issued or pending in 37 other countries, with no one patent considered significant. The number of competitors is estimated at over 1500. The Company feels it has adequate sources of supply and does not expect the cost and availability of materials to have a significant overall effect on its total current operations. The Company's backlog of unfilled orders decreased from $506,000,000 at year-end 1992 to $493,000,000 at year-end 1993, due partially to currency effects, but has risen by approximately $65,000,000 so far in 1994. A majority of these orders were for delivery within the next ninety days, and substantially all were scheduled for delivery within 12 months. The Company is not aware of any material claims against its assets. However, it is potentially liable for all or a portion of investigative and environmental clean-up costs at several sites, including three National Priorities List sites in the U.S. At one Company-owned site, which is the subject of a Corrective Action 2 Order under the Resource Conservation and Recovery Act, the Company has incurred costs of approximately $1,600,000 since 1984 and anticipates incurring additional costs of $150,000 - $210,000 per year for at least the next five years. At another site, for which the Company shares potential liability with at least seven other parties, the Company spent approximately $350,000 in 1991-1993. The U.S. EPA is expected to issue a decision on the required clean-up during 1994. The Company expects the final amount it will be required to pay for the clean-up to be less than $4,000,000, to be incurred primarily in 1995-1996. The Company also just recently received notice from the U.S. EPA regarding potential liability at a third site. Because this matter is in its early stages, potential liability to the Company is difficult to estimate, although a preliminary review indicates potential liability could amount to as much as $750,000. During 1993 the Company resolved its liability at two sites in settlement agreements reached with the government, and remains involved in six other clean-up actions in the U.S. at which it is considered a "de minimus" contributor. Several additional sites are in the investigative stage, and the Company anticipates being named as a potentially responsible party at some of those sites. The Company is also voluntarily undertaking remediation activities at approximately 16 of its own present or former facilities in the U.S., having spent approximately $12,500,000 in this type of effort since 1984. The Company's future environmental compliance costs are not expected to have a material impact on the Company's financial results, liquidity or capital expenditures. Over the five-year period 1989-1993 the Company has spent several million dollars annually for remedial and preventative actions in protection of the environment. The primary seasonal effect generally experienced by the Company is in the third quarter when there usually is a temporary leveling off or modest drop in the rate of new orders and shipments because of the softening of customer demand in certain markets such as appliances, automotive, and home entertainment goods arising from model year changeovers, plant vacations and closedowns, and other traditional seasonal practices. This seasonal effect is most evident in the Company's European and Asia/Pacific regions, compared against sales results of the second quarter. Earnings growth was interrupted in the fourth quarter again this year primarily due to lower than expected U.S., European and Japanese sales and strengthening of the U.S. dollar. In the first quarter the Company usually experiences some seasonal strengthening in domestic sales and orders. Availability of remittances to the parent company by its subsidiaries is subject to exchange controls and other restrictions of the various countries in which the subsidiaries are located. Presently, there are no foreign exchange or currency restrictions in the various countries that would significantly affect the remittance of funds to AMP. Item 2. PROPERTIES The following sections of the Annual Report to shareholders for the year ended December 31, 1993 are hereby incorporated by reference: i) the item "Floor space (sq. ft. in millions)" under the "At December 31" column of the "Historical Data" table found on the reverse side of the fold-out page, for years 1988 through 1993; ii) all narrative text found on pages 7, 9 and 18, excluding all pictures and their captions unless otherwise described below; iii) the picture of the new Singapore plant found on page 7, together with its caption (reference item (4) of the Appendix for a description of the picture and its caption); iv) the pictures of the automotive connector plant under construction in Greensboro, N.C. and the new CFC-free cleaning system at the Rapho Park, Manheim, PA facility, found on page 9, together with their respective captions (reference items (5) and (6) of the Appendix for a description of these pictures and their captions); and v) the back cover (reference item (7) of the Appendix for a description of two pictures included on the back cover, and their respective captions). The Company has approximately 10,100,000 sq. ft. of floor space in 175 facilities in the U.S. and 35 other countries, representing an increase of over 600,000 sq. ft. in 1993. This expansion occurred primarily in the U.S., Argentina, China, Singapore and Spain. U.S. manufacturing, warehousing and administrative facilities are located in Pennsylvania (50), North Carolina (19), Arizona (1), California (14), Connecticut (2), Delaware (1), Florida (3), Georgia (1), Massachusetts (3), New Jersey (1), Oregon (2), Texas (8), and Virginia (4). Nearly half of these facilities are manufacturing plants. The 3 Company's operations in the 35 countries other than the U.S. involve 32 major facilities, 19 of which perform manufacturing and 13 of which have marketing/warehousing/engineering functions. Facilities are generally modern, well maintained and diversified geographically within regions, with the typical size of major facilities in the 50,000-100,000 sq. ft. range. No single facility is material to the Company's business. The Company owns over 85% of its floor space and leases the balance. The Company owns most of its major facilities. Most of the leases on the other major manufacturing and administrative facilities provide the right to buy or renew. Capital expenditures were $330,400,000 in 1993, up from $312,500,000 in 1992 and $313,300,000 in 1991, and are expected to be somewhat higher in 1994 compared to 1992-1993 levels. The current rate of capacity utilization is estimated at 70-75% in domestic and 75-80% in international operations. Item 3. LEGAL PROCEEDINGS In the opinion of management of the Company, there are no material legal proceedings pending other than ordinary routine litigation incident to the kind of business conducted by the Company, and no such proceedings are known to be contemplated by governmental authorities. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT Elected: James E. Marley (58)* Ted L. Dalrymple (61) Javad K. Hassan (53) Chairman of the Board Vice President, Vice President, Global Marketing Global Strategic William J. Hudson, Jr. (59)* Businesses Chief Executive Officer Charles W. Goonrey (57) and President, and Vice President, General David C. Cornelius (50) Director Legal Counsel Controller Benjamin Savidge (64)* Jean Gorjat (63) Joseph C. Overbaugh (48) Executive Vice President Vice President, Treasurer and Chief Financial Asia/Pacific Officer, and Director David F. Henschel (43) Corporate Secretary Philip G. Guarneschelli (61) Vice President, Global Human Resources John E. Gurski (53) Vice President, Europe Appointed: Merrill A. Yohe (59) Vice President - Public Affairs *Member of the Executive Committee of the Board. 4 The inside-back cover of the Annual Report to shareholders for the year ended December 31, 1993 lists other officers who are not executive officers and are not subject to Section 16 of the Securities Exchange Act of 1934; the top portion of the inside-back cover where the officers and divisional vice presidents of the Corporation are identified is hereby incorporated by reference. All of the elected executive officers with the exception of Mr. Goonrey and Mr. Hassan have been employed by the Company for 16 years or more. Messrs. Marley, Hudson, Savidge, Dalrymple and Guarneschelli have served as officers for 10 or more years. Prior positions are as follows: Mr. Marley was a divisional Vice President and group director from 1970 to 1979, divisional Vice President, Manufacturing Resources Planning from 1979 to 1980, divisional Vice President, Manufacturing from 1980 to 1981, corporate Vice President, Manufacturing from 1981 to 1983, corporate Vice President, Operations from 1983 to 1986, President from 1986 to 1990, and President and Chief Operating Officer from 1990 to 1993. Mr. Hudson was divisional Vice President, Connector and Electronic Products in 1982, divisional Vice President, Far East Operations from 1983 to 1989, corporate Vice President, Far East Operations in 1989, corporate Vice President, Asia/Pacific Operations from 1990 to 1991, and Executive Vice President, International from 1991 to 1993. Mr. Savidge was Assistant Controller from 1971 to 1979, Controller from 1979 to 1982, Vice President and Controller from 1982 to 1986, and Vice President, Chief Financial Officer from 1986 to 1989. Mr. Dalrymple was divisional Vice President, International Sales from 1980 to 1987. Mr. Goonrey was Assistant Secretary from 1983 to 1986, Assistant Secretary and General Legal Counsel from 1986 to 1989, and divisional Vice President and General Legal Counsel from 1989 to 1992. Mr. Gorjat was divisional Vice President, Latin America Operations from 1986 to 1991, and divisional Vice President, Asia/Pacific from 1991 to 1992. Mr. Guarneschelli was divisional Vice President, Industrial Relations from 1980 to 1989. Mr. Gurski was divisional Vice President, Connector & Electronics Product Group from 1985 to 1987, divisional Vice President, Interconnection and Component Products Group in 1987, divisional Vice President, Operations from 1987 to 1989, corporate Vice President, Operations in 1989, corporate Vice President, Capital Goods Sector from 1989 to 1992, and corporate Vice President, Business and Operations Planning, International from 1992 to 1993. Mr. Hassan was divisional Vice President, Technology from 1989 to 1992, and corporate Vice President, Technology and Strategic Products in 1992. Mr. Cornelius was Assistant Controller from 1979 to 1991. Mr. Overbaugh was Assistant Treasurer from 1987 to 1993. Mr. Henschel was Associate General Legal Counsel from 1990 to 1993. The terms of these offices are of one year duration or until a successor is elected and qualifies. Mr. Yohe, an appointed executive officer, became a divisional Vice President in 1993, having previously been Secretary of the Company from 1989 to 1993. Mr. Yohe has been employed by the Company for more than 25 years. PART II. Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The following sections of the Annual Report to shareholders for the year ended December 31, 1993 are hereby incorporated by reference: i) the items "Cash Dividends" and "Cash Dividends Per Share" under the "For the Year" column of the "Historical Data" table found on the reverse side of the fold-out page, for years 1988 through 1993; ii) the "Stock Price Range" column of the "Historical Data" table found on the reverse side of the fold-out page and the inside front cover, for years 1983 through 1993; and iii) the portion of the Corporate Data set forth on page 36 that is entitled "Stock Information". Annual dividends, which are paid on a quarterly basis, have increased for 40 consecutive years and have increased more than 10% each year for the past 34 years, except in 1972, 1986, 1991, 1992, and 1993. 5 Annual dividends have increased at a compound annual average growth rate of over 14%. The quarterly dividend increased to 40 cents per share on March 1, 1993 and to 42 cents per share on March 1, 1994. If the March 1, 1994 dividend rate continues through 1994, it will result in the 41st consecutive increase in annual dividends. Item 6. SELECTED FINANCIAL DATA Within the portion of the "Historical Data" table found on the reverse side of the fold-out page of the Annual Report to shareholders for the year ended December 31, 1993, items "Net Sales" down to and including "Cash Dividends Per Share" under the "For the Year" column for years 1988 through 1993, and all items under the "At December 31" column for years 1988 through 1993, are hereby incorporated by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pages 20-24 of the Annual Report to shareholders for the year ended December 31, 1993 are hereby incorporated by reference (reference items (2) and (3) of the Appendix for a description of the graphic material contained therein). Subsequent to the mailing of the Annual Report to shareholders for the year ended December 31, 1993, the Company received notice from the U.S. EPA regarding potential liability at a third National Priorities List site. Because this matter is in its early stages, potential liability to the Company is difficult to estimate, although a preliminary review indicates potential liability could amount to as much as $750,000. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and Notes on pages 25-35 of the Annual Report to shareholders for the year ended December 31, 1993 are hereby incorporated by reference. Financial Statement Schedules are filed under Item 14. Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information with respect to the Executive Officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I of this Report. For information with respect to the Directors of the registrant, see "Election of Directors" on pages 2-6 of the Proxy Statement for the AMP Incorporated 1994 Annual Shareholders' Meeting, which are hereby incorporated by reference (reference item (8) of the Appendix for a description of the graphic material contained therein). Item 11. EXECUTIVE COMPENSATION Pages 6-17 and 19-23 of the Proxy Statement for the AMP Incorporated 1994 Annual Shareholders' Meeting are hereby incorporated by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT No person is known to own beneficially more than 5% of the Common Stock of the Company as of March 11, 1994. Page 18 and the right hand column of pages 2-6 (entitled "Shares of Common Stock (5)"), together with footnotes (5) through (9) on page 6, of the Proxy Statement for the AMP Incorporated 1994 Annual 6 Shareholder's Meeting are hereby incorporated by reference as to security ownership of directors and executive officers. There are no arrangements known to the registrant which may at a subsequent date result in a change in control of the registrant. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Footnotes (2) and (3) on page 7 and the section at the bottom of page 23 entitled "Certain Relationships and Related Transactions" of the Proxy Statement for the AMP Incorporated 1994 Annual Shareholders' Meeting are hereby incorporated by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents Filed as a Part of the Form 10-K Report 1. Consolidated Statements of Income, Shareholders' Equity, and Cash Flows, for the years ended December 31, 1991, 1992 and 1993; Consolidated Balance Sheets as of December 31, 1992 and 1993; the accompanying Notes to Consolidated Financial Statements; and the Report of Independent Public Accountants thereon, on pages 25-35 of the Annual Report to shareholders for the year ended December 31, 1993, are hereby incorporated by reference. Statements of the Registrant - Separate financial statements are omitted for AMP Incorporated since it is primarily an operating company and all subsidiaries included in the consolidated financial statements are wholly owned and their restricted net assets are not material in relation to total consolidated net assets at December 31, 1993. 2. Financial Statement Schedules: Schedules included: I - Marketable Securities - Other Security Investments... P. 12 II - Amounts Receivable From Related Parties ............. P. 12 V - Property, Plant and Equipment........................ P. 13 VI - Accumulated Depreciation on Property, Plant and Equipment........................................... P. 14 VIII - Valuation and Qualifying Accounts and Reserves............................................ P. 15 IX - Short-Term Borrowings................................ P. 15 X - Supplementary Income Statement Information........... P. 16 Report of Company's independent public accountants with respect to the Financial Statement Schedules............................. P. 16 7 Schedules Omitted - Schedules III, IV, VII, XI, XII and XIII are omitted as not applicable because the required matter or conditions are not present. 3. EXHIBITS: Exhibit Number Description ------- ------------- 3.(i) - Articles of Incorporation of the Company 3.(ii) - Bylaws of the Company (incorporated by reference to Exhibit 3-b of the 10-K Report for the year ended December 31, 1991) 4.A - Shareholder Rights Plan adopted by the Company's Board of Directors October 25, 1989 (incorporated by reference to Exhibit 4 of the 10-Q Report for the Quarter ended September 30, 1989) 4.B - Amendment Rights Agreement between the Company and Chemical Bank, as Rights Agent for the Shareholder Rights Plan, dated September 4, 1992 (incorporated by reference to Exhibit 4-b of the 10-K Report for the year ended December 31, 1992) 4.C - Instruments defining the rights of holders of long-term debt, including indentures. Upon request of the Securities and Exchange Commission, the Company hereby undertakes to furnish copies of the instruments with respect to its long-term debt, none of which have been registered or authorize securities in a total amount that exceeds 10 percent of the total assets of the Company and its subisidiaries on a consolidated basis 10.A*- Directors' and Officers' Liability Insurance Policies issued by Federal Insurance Company, current policy period commencing September 1, 1993 (basic policy incorporated by reference to Exhibit 10-a of the 10-K Report for the year ended December 31, 1990) 10.B*- Executive Severance Agreements dated October 28, 1981, October 27, 1983, and January 24, 1990 between the Company and certain of the Company's Executive Officers (also see the section entitled "Termination of Employment and Change of Control Arrangements" on Page 23 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (The 1981 and 1983 Agreements are incorporated by reference to Exhibit 10-b of the 10-K Report for the year ended December 31, 1990) 10.C*- AMP Incorporated Bonus Plan (Stock Plus Cash) (also see footnote (1) on Pages 13-14 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-c of the 10-K Report for the year ended December 31, 1992) 10.D*- Supplemental Employee Retirement Plan (summarized on Page 16 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-d of the 10-K Report for the year ended December 31, 1991) 10.E*- Executive life insurance plan (incorporated by reference to Exhibit 10-e of the 10-K Report for the year ended December 31, 1990) 10.F*- Executive secular trust agreement (also see Page 16 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-f of the 10-K Report for the year ended December 31, 1991) 8 10.G*- Retirement plan for outside directors (also see the section entitled "Retirement" on Pages 7-8 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-g of the 10-K Report for the year ended December 31, 1990) 10.H*- Consulting agreement between the Company and Mr. Walter F. Raab, Director and former Chairman of the Board and Chief Executive Officer, dated December 19, 1990 (incorporated by reference to Exhibit 10-h of the 10-K Report for the year ended December 31, 1992) 10.I*- Amendment to the consulting agreement between the Company and Mr. Walter F. Raab, dated December 21, 1992 (also see footnote (3) on Page 7 of the AMP 1994 Proxy Statement incorporated by reference under Item 13, Part III of this Report). (Incorporated by reference to Exhibit 10-i of the 10-K report for the year ended December 31, 1992) 10.J*- Consulting agreement between the Company and Mr. Harold A. McInnes, Director and former Chairman of the Board and Chief Executive Officer, dated December 21, 1992 (also see footnote (2) on Page 7 of the AMP 1994 Proxy Statement incorporated by reference under Item 13, Part III of this Report). (Incorporated by reference to Exhibit 10-j of the 10-K Report for the year ended December 31, 1992) 10.K*- Management Incentive Plan (also see column (d) of the Summary Compensation Table on Page 9 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-i of the 10-K Report for the year ended December 31, 1991) 10.L*- Director and officer indemnification agreements (incorporated by reference to Exhibit 10-j of the 10-K Report for the year ended December 31, 1991) 10.M*- AMP Incorporated 1993 Long-Term Equity Incentive Plan (also see footnote (1) on Page 12 of the 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 4-a of Registration No. 33-65048 on Form S-8 as filed with the Securities and Exchange Commission on June 25, 1993) 10.N*- AMP Incorporated Stock Bonus Unit and Supplemental Cash Bonus Agreement (Incorporated by reference to Exhibit 10.B of the 10-Q Report for the Quarter ended September 30, 1993) 10.O*- AMP Incorporated Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.C of the 10-Q Report for the Quarter ended September 30, 1993) 10.P*- AMP Incorporated Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.D of the 10-Q Report for the Quarter ended September 30, 1993) 13 - Portions of the Annual Report to shareholders for the year ended December 31, 1993 that are specifically incorporated by reference into this Report 21 - List of Subsidiaries 23 - Consent of Independent Public Accountants - ---------------------- * A management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to the requirements of this 10-K Annual Report. 9 THE COMPANY WILL FURNISH ANY EXHIBIT LISTED ABOVE UPON REQUEST. EXCEPT FOR THE ANNUAL REPORT TO SHAREHOLDERS, PAYMENT FOR THE COST OF PROVIDING THE EXHIBIT MAY BE REQUIRED FOR VOLUMINOUS EXHIBITS. (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended December 31, 1993. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 29th day of March, 1994. AMP Incorporated /s/ Benjamin Savidge By_____________________________________ Benjamin Savidge, Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed by the following persons on behalf of the registrant and in the capacities and as of the dates indicated. Signature Title Date /s/ J. E. Marley ___________________ Chairman of the Board and a March 29, 1994 (J. E. Marley) Director /s/ W. J. Hudson ___________________ Chief Executive Officer and March 29, 1994 W. J. Hudson) President and a Director /s/ B. Savidge ___________________ Executive Vice President and March 29, 1994 (B. Savidge) Chief Financial Officer, and a Director /s/ D. C. Cornelius ___________________ Controller March 29, 1994 (D. C. Cornelius) /s/ D. F. Baker ___________________ Director March 29, 1994 (D. F. Baker) /s/ J. J. Burdge ___________________ Director March 29, 1994 (J. J. Burdge) /s/ W.E.C. Dearden ___________________ Director March 29, 1994 (W. E. C. Dearden) /s/ Ralph D. DeNunzio ___________________ Director March 29, 1994 (R. D. DeNunzio) /s/ B. H. Franklin ___________________ Director March 29, 1994 (B. H. Franklin) /s/ J. M. Hixon ___________________ Director March 29, 1994 (J. M. Hixon III) /s/ H. A. McInnes ___________________ Director March 29, 1994 (H. A. McInnes) /s/ John C. Morley ___________________ Director March 29, 1994 (J. C. Morley) /s/ W. F. Raab ___________________ Director March 29, 1994 (W. F. Raab) /s/ P. G. Schloemer ___________________ Director March 29, 1994 (P. G. Schloemer) 11 AMP INCORPORATED & SUBSIDIARIES Schedule I MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS
Amount Included in the Number of Consolidated Balance Sheet as: Value Based Shares or Units -- ------------------------------ on Market Name of Issuer and Principal Amount of Cost of Cash Marketable Quotations at Title of Each Issue Bonds and Notes Each Issue Equivalents Securities Year End ------------------- ------------------- ---------- ----------- ---------- ------------- U.S. Government Securities...$ 88,000,000 $ 88,285,000 $ --- $ 88,283,000 $ 88,275,000 State and Municipal Securities... 51,000,000 50,804,000 34,820,000 15,984,000 50,804,000 Commercial Paper................. 19,000,000 18,867,000 10,317,000 8,550,000 18,867,000 Preferred Stock.............. --- --- --- --- --- Mutual and Money Market funds.................... 156,000,000 155,752,000 119,177,000 36,500,000 155,824,000 Repurchase Agreements........ 12,000,000 11,988,000 11,988,000 --- 11,988,000 ------------ ------------ ------------ ------------ ------------ $326,000,000 $325,696,000 $176,302,000 $149,317,000 $325,758,000 ============ ============ ============ ============ ============ __________ No individual security issue exceeds 2% of total assets. Invested principally in U. S. Government, State, Municipal and high-grade corporate securities. Loans to banks, which are fully collateralized by U. S. Government securities or high-grade commercial paper. Also included in the balance sheet caption "Cash and Cash Equivalents" are cash and time deposits of $81,376,000.
Schedule II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Deductions Balance at ------------------------ Balance at Beginning Amounts Amounts End Name of Debtor of Year Additions Collected Written Off of Year -------------- ---------- ----------- --------- ----------- ----------- Javad K. Hassan Year ended December 31, 1993 $ -- $ -- $ -- $ -- $ -- Year ended December 31, 1992 $ -- $ -- $ -- $ -- $ -- Year ended December 31, 1991 $750,000 $ -- $750,000 $ -- $ -- __________ Vice President-Global Strategic Businesses, AMP Incorporated. Non-interest bearing loan due April 4, 1991 (paid April 8, 1991) secured by personal property. Classified with Investments and Other Assets in the Consolidated Balance Sheet.
12 AMP INCORPORATED & SUBSIDIARIES Schedule V PROPERTY, PLANT AND EQUIPMENT FOR THE THREE YEARS ENDED DECEMBER 31, 1993
Balance at Balance at Beginning Additions Retirements, Translation End Classification of Year at Cost Etc. Adjustments of Year - -------------- -------------- ------------- ------------- ------------ --------------- YEAR ENDED DECEMBER 31, 1993: Land...................... $ 50,783,000 $ 2,142,000 $ 44,000 $ 1,962,000 $ 54,931,000 Buildings and leasehold improvements.... 547,673,000 53,458,000 (68,000) (1,001,000) 600,062,000 Machinery and equipment... 1,777,320,000 239,470,000 (52,537,000) (2,570,000) 1,961,683,000 Machines and tools with customers................. 339,468,000 35,335,000 (32,821,000) (3,722,000) 338,260,000 -------------- ------------ ------------- ------------ -------------- $2,715,244,000 $330,405,000 $(85,382,000) $(5,331,000) $2,954,936,000 ============== ============ ============= ============ ============== YEAR ENDED DECEMBER 31, 1992: Land...................... $ 50,582,000 $ 388,000 $ 28,000 $ (215,000) $ 50,783,000 Buildings and leasehold improvements.... 512,546,000 46,986,000 (4,737,000) (7,122,000) 547,673,000 Machinery and equipment... 1,643,934,000 223,698,000 (45,449,000) (44,863,000) 1,777,320,000 Machines and tools with customers................. 343,344,000 41,391,000 (34,104,000) (11,163,000) 339,468,000 -------------- ------------ ------------- ------------ -------------- $2,550,406,000 $312,463,000 $(84,262,000) $(63,363,000) $2,715,244,000 ============== ============ ============= ============ ============== YEAR ENDED DECEMBER 31, 1991: Land...................... $ 48,766,000 $ 1,249,000 $ 308,000 $ 259,000 $ 50,582,000 Buildings and leasehold improvements.... 479,243,000 39,407,000 (6,779,000) 675,000 512,546,000 Machinery and equipment... 1,451,566,000 227,028,000 (38,331,000) 3,671,000 1,643,934,000 Machines and tools with customers................. 323,753,000 45,650,000 (25,604,000) (455,000) 343,344,000 -------------- ------------ ------------- ----------- -------------- $2,303,328,000 $313,334,000 $(70,406,000) $4,150,000 $2,550,406,000 ============== ============ ============= =========== ==============
13 AMP INCORPORATED & SUBSIDIARIES Schedule VI ACCUMULATED DEPRECIATION ON PROPERTY, PLANT AND EQUIPMENT FOR THE THREE YEARS ENDED DECEMBER 31, 1993
Additions Balance at Charged to Balance at Beginning Costs and Retirements, Translation End Classification of Year Expenses Etc. Adjustments of Year - -------------- -------------- ------------- ------------- ------------ --------------- YEAR ENDED DECEMBER 31, 1993: Buildings and leasehold improvements.... $ 209,736,000 $ 26,372,000 $ (1,699,000) $ (1,066,000) $ 233,343,000 Machinery and equipment... 1,088,970,000 199,332,000 (49,340,000) (8,815,000) 1,230,147,000 Machines and tools with customers................. 237,777,000 36,425,000 (24,649,000) (3,232,000) 246,321,000 -------------- ------------ ------------- ------------- -------------- $1,536,483,000 $262,129,000 $(75,688,000) $(13,113,000) $1,709,811,000 ============== ============ ============= ============= ============== YEAR ENDED DECEMBER 31, 1992: Buildings and leasehold improvements.... $ 187,605,000 $ 26,119,000 $ (1,168,000) $ (2,820,000) $ 209,736,000 Machinery and equipment... 951,943,000 200,486,000 (35,448,000) (28,011,000) 1,088,970,000 Machines and tools with customers................. 230,688,000 40,080,000 (24,969,000) (8,022,000) 237,777,000 -------------- ------------ ------------- ------------- -------------- $1,370,236,000 $266,685,000 $(61,585,000) $(38,853,000) $1,536,483,000 ============== ============ ============= ============= ============== YEAR ENDED DECEMBER 31, 1991: Buildings and leasehold improvements.... $ 167,118,000 $ 23,341,000 $ (2,704,000) $ (150,000) $ 187,605,000 Machinery and equipment... 803,880,000 174,312,000 (29,373,000) 3,124,000 951,943,000 Machines and tools with customers................. 210,786,000 38,836,000 (19,258,000) 324,000 230,688,000 -------------- ------------ ------------- ------------ -------------- $1,181,784,000 $236,489,000 $(51,335,000) $3,298,000 $1,370,236,000 ============== ============ ============= =========== ==============
14 AMP INCORPORATED & SUBSIDIARIES Schedule VIII VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance at Additions Deductions Balance at Beginning Charged to from Translation End Description of Year Expense Reserves Adjustments of Year - ----------- ----------- ---------- ------------ ----------- ----------- RESERVE DEDUCTED IN THE BALANCE SHEET FROM THE ASSET TO WHICH IT APPLIES: Reserve for doubtful accounts-- Year ended December 31, 1993 $11,532,000 $5,544,000 $(3,045,000) $(611,000) $13,420,000 Year ended December 31, 1992 $10,822,000 $5,147,000 $(3,525,000) $(912,000) $11,532,000 Year ended December 31, 1991 $ 9,859,000 $3,470,000 $(2,495,000) $ (12,000) $10,822,000 __________ Uncollectible accounts charged against the reserve, net of recoveries. Schedule IX
SHORT-TERM BORROWINGS
Weighted Maximum Average Weighted Average Amount Amount Average Balance at Interest Rate Outstanding Outstanding Interest Rate Category of Aggregate End of at End of During the During the During the Short-Term Borrowings Year Year Year Year Year - ---------------------------- ------------ -------------- ------------ ------------ ------------- YEAR ENDED DECEMBER 31, 1993 Bank loans ........... $162,485,000 5.7% $255,223,000 $187,277,000 5.9% YEAR ENDED DECEMBER 31, 1992 Bank loans ........... $296,120,000 7.1% $325,484,000 $274,524,000 7.7% YEAR ENDED DECEMBER 31, 1991 Bank loans ........... $304,333,000 9.1% $343,594,000 $313,454,000 10.1% _ These amounts represent borrowings of international subsidiaries that are substantially on an overdraft basis. The average amount outstanding during the period was calculated by dividing the borrowings outstanding at the end of the months by the number of months such amounts were outstanding. The weighted average interest rate during the period was calculated by dividing interest expense on each category of short-term borrowings by the related average amount outstanding during the period.
15 AMP INCORPORATED & SUBSIDIARIES Schedule X SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended December 31, 1993 1992 1991 ------------ ------------ ------------ CHARGED TO COSTS AND EXPENSES Maintenance and repairs $123,499,000 $117,364,000 $108,433,000 Amounts for depreciation and amortization of intangible assets, preoperating costs and similar deferrals, taxes other than payroll and income taxes, royalties and advertising costs are not presented as such amounts are less than 1% of net sales.
--------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To AMP Incorporated: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in AMP Incorporated's annual report to shareholders, incorporated by reference in this Form 10-K, and have issued our report thereon dated February 18, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14-2 are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Philadelphia, PA February 18, 1994 /s/ Arthur Andersen & Co. Arthur Andersen & Co. 16 APPENDIX 10-K Report for Year Ended December 31 ,1993 1) Part I, Item 1, Business. The right hand column of page 1 of the Annual Report to shareholders for the year ended December 31, 1993, entitled "Diversification of AMP Worldwide Sales", sets forth three pie charts. The first pie chart graphically depicts, by color coding, the following geographic diversification of 1993 AMP worldwide sales (by percent): United States 43 Europe 31 Asia/Pacific 21 Americas 5 The second pie chart graphically depicts, by color coding, the following diversification of markets to which 1993 AMP worldwide sales were made (by percent): Aerospace/Military 5 Industrial/Commercial 10 Communications 10 Computer/Office 20 Consumer Goods 10 Transportation/Electrical 30 Distribution, Construction, etc. 15 The third pie chart graphically depicts, by color coding, the following diversification in channels through which the 1993 AMP worldwide sales were made (by percent): Direct 86 Distribution & Co-op Affiliates 14 2) Part I, Item 1, Business. The right hand column of page 21 of the Annual Report to shareholders for the year ended December 31, 1993 includes a pie chart in the section entitled "Sales Dollar Use". This pie chart graphically depicts, by color coding, the following uses to which sales dollar revenues were directed in 1993 (by percent): Wages, benefits 34.2 Materials, services 42.4 Depreciation/amortization 8.2 Interest .6 Taxes 6.0 Dividends 4.9 Reinvested 3.7 __________ 100.0 3) Part I, Item 1, Business. The left hand column of page 22 of the Annual Report to shareholders for the year ended December 31, 1993 sets forth two pie charts. The first pie chart graphically depicts, by color coding, the following sources of cash flow for the period 1991-1993, in the aggregate (stated in millions of dollars): Net Income 847 Depreciation and Other Operating Sources, Net 875 Decrease in Cash and Equivalents 145 __________ 1,867 17 The second pie chart graphically depicts, by color coding, the following uses of cash flow for the period 1991-1993, in the aggregate (stated in millions of dollars): Additions to Property, Plant and Equipment, and Other Investments 1,163 Dividends 481 Purchase of Treasury Stock 82 Reduction of Debt, Net 141 ___________ 1,867 4) Part I, Item 2, Properties. The bottom picture on page 7 of the Annual Report to shareholders for the year ended December 31, 1993 is approximately 2 1/2 inches-by-1 13/16 inches and shows a view of the new plant in Singapore from the front of the building at an angle, showing the front and a portion of the left side (as you face the building) of a newly-constructed 4-story, largely glass and concrete structure with an arched portico over the front entrance. The front face of the building is virtually entirely a bluish- tinted glass, with the front entrance and portico located slightly left of center. The caption for the picture reads: "BOTTOM - Our third plant in Singapore, which began operation in 1993, adds significant capacity for serving the entire rapidly growing Asia/Pacific region." 5) Part I, Item 2, Properties. The middle picture on page 9 of the Annual Report to shareholders for the year ended December 31, 1993 is approximately 1 3/4 inches square and shows three men in hard hats reviewing a blueprint they are holding while standing in the middle of a large, open interior of a structure that is under construction, with construction materials in the foreground and vehicles and other people in the background. The caption for the picture states: "MIDDLE - Plant management/team leader personnel planning layout of large (200,000 sq. ft.) automotive connector plant in Greensboro, N.C. Left to right: Automotive business unit director John Cranford, project manager Robert Marcus, and Chris Mitchell, building contractor." 6) Part I, Item 2, Properties. The bottom picture on page 9 of the Annual Report to shareholders for the year ended December 31, 1993, which is approximately 1 3/4 inches square, shows a female and a male examining both a clipboard that the male is holding and the industrial equipment in the foreground. The industrial equipment consists of a series of large cylinders, approximately 2 feet in diameter and 4 feet long, that rotate while partly submerged in a liquid. The caption for the picture reads: "BOTTOM - Carol Ritter, divisional Vice President - Environmental Programs (left), reviewing with project manager Robert Maier a new CFC-free cleaning system at our Rapho Park facility, Manheim, PA. We continue to move closer to our goal of zero discharge." 7) Part I, Item 2, Properties. The two pictures found on the back cover of the Annual Report to shareholders for the year ended December 31, 1993 consist of the following: 1. The picture to the left is approximately 1 1/8 inches-by-13/16 inch and shows the new AMP S.A. Argentina C.I.Y.F. facility. The view is from the right front as you face the building. The building is a two-story brick and concrete structure. There is a concrete overhang that protects the entrance to the building, which is centered in the front. The concrete rises up from the overhang and extends above the top of the building, on which extension the name "AMP" appears. The windows alternate with concrete sections on the first floor, but on the second floor sets of three windows are offset by one concrete section. The building has a grass border in the front along a sidewalk that extends the length of the front of the building, and there is a fenced-in garden on one side of the entrance, between the sidewalk and the building. The caption below the picture reads: "New AMP Argentina facility". 18 2. The second picture, which is the same size as the picture described above, shows a view of the new AMP Shanghai facility from the front of the building at an angle, showing the front and a portion of the left side (as you face the building). The left part of the building has two stories and is white with continuous brownish-tinted glass windows on both floors and a rounded corner. At an entrance where the 2-story portion of the building interfaces with the remaining 1-story portion, a rounded glass enclosure extends from above the entrance to the top of the second story. The 1-story portion of the building represents the majority of the frontage and has the same appearance as the first floor of the 2-story section. A second entrance is approximately in the middle of the 1-story section and has a portico that protects a driveway and is supported by a dark-colored arch that is about the same size and shape as the white portico itself. A driveway wraps around the building to the extent it is shown in the picture. The caption below the picture reads: "New AMP Shanghai facility". 8) Part III, Item 10, Directors and Executive Officers of the Registrant. Page 2 of the Proxy Statement for the AMP Incorporated 1994 Annual Shareholders' Meeting includes a portrait photograph of Dexter F. Baker, a director and nominee for director. Page 3 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: Jeffrey J. Burdge, William E. Dearden, Ralph D. DeNunzio, and Barbara Hackman Franklin. Page 4 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: Joseph M. Hixon, III, William J. Hudson, Jr., James E. Marley, and Harold A. McInnes. Page 5 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: John C. Morley, Walter F. Raab, Benjamin Savidge, and Paul G. Schloemer. 19 EXHIBIT INDEX Exhibit Number Description ------- ------------- 3.(i) - Articles of Incorporation of the Company 3.(ii) - Bylaws of the Company (incorporated by reference to Exhibit 3-b of the 10-K Report for the year ended December 31, 1991) 4.A - Shareholder Rights Plan adopted by the Company's Board of Directors October 25, 1989 (incorporated by reference to Exhibit 4 of the 10-Q Report for the Quarter ended September 30, 1989) 4.B - Amendment Rights Agreement between the Company and Chemical Bank, as Rights Agent for the Shareholder Rights Plan, dated September 4, 1992 (incorporated by reference to Exhibit 4-b of the 10-K Report for the year ended December 31, 1992) 4.C - Instruments defining the rights of holders of long-term debt, including indentures. Upon request of the Securities and Exchange Commission, the Company hereby undertakes to furnish copies of the instruments with respect to its long-term debt, none of which have been registered or authorize securities in a total amount that exceeds 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis 10.A - Directors' and Officers' Liability Insurance Policies issued by Federal Insurance Company, current policy period commencing September 1, 1993 (basic policy incorporated by reference to Exhibit 10-a of the 10-K Report for the year ended December 31, 1990) 10.B - Executive Severance Agreements dated October 28, 1981, October 27, 1983, and January 24, 1990 between the Company and certain of the Company's Executive Officers (also see the section entitled "Termination of Employment and Change of Control Arrangements" on Page 23 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (The 1981 and 1983 Agreements are incorporated by reference to Exhibit 10-b of the 10-K Report for the year ended December 31, 1990) 10.C - AMP Incorporated Bonus Plan (Stock Plus Cash) (also see footnote (1) on Pages 13-14 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-c of the 10-K Report for the year ended December 31, 1992) 10.D - Supplemental Employee Retirement Plan (summarized on Page 16 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-d of the 10-K Report for the year ended December 31, 1991) 10.E - Executive life insurance plan (incorporated by reference to Exhibit 10-e of the 10-K Report for the year ended December 31, 1990) 10.F - Executive secular trust agreement (also see Page 16 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-f of the 10-K Report for the year ended December 31, 1991) 10.G - Retirement plan for outside directors (also see the section entitled "Retirement" on Pages 7-8 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-g of the 10-K Report for the year ended December 31, 1990) 10.H - Consulting agreement between the Company and Mr. Walter F. Raab, Director and former Chairman of the Board and Chief Executive Officer, dated December 19, 1990 (incorporated by reference to Exhibit 10-h of the 10-K Report for the year ended December 31, 1992) 10.I - Amendment to the consulting agreement between the Company and Mr. Walter F. Raab, dated December 21, 1992 (also see footnote (3) on Page 7 of the AMP 1994 Proxy Statement incorporated by reference under Item 13, Part III of this Report). (Incorporated by reference to Exhibit 10-i of the 10-K report for the year ended December 31, 1992) 10.J - Consulting agreement between the Company and Mr. Harold A. McInnes, Director and former Chairman of the Board and Chief Executive Officer, dated December 21, 1992 (also see footnote (2) on Page 7 of the AMP 1994 Proxy Statement incorporated by reference under Item 13, Part III of this Report). (Incorporated by reference to Exhibit 10-j of the 10-K Report for the year ended December 31, 1992) 10.K - Management Incentive Plan (also see column (d) of the Summary Compensation Table on Page 9 of the AMP 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10-i of the 10-K Report for the year ended December 31, 1991) 10.L - Director and officer indemnification agreements (incorporated by reference to Exhibit 10-j of the 10-K Report for the year ended December 31, 1991) 10.M - AMP Incorporated 1993 Long-Term Equity Incentive Plan (also see footnote (1) on Page 12 of the 1994 Proxy Statement incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 4-a of Registration No. 33-65048 on Form S-8 as filed with the Securities and Exchange Commission on June 25, 1993) 10.N - AMP Incorporated Stock Bonus Unit and Supplemental Cash Bonus Agreement (Incorporated by reference to Exhibit 10.B of the 10-Q Report for the Quarter ended September 30, 1993) 10.O - AMP Incorporated Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.C of the 10-Q Report for the Quarter ended September 30, 1993) 10.P - AMP Incorporated Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.D of the 10-Q Report for the Quarter ended September 30, 1993) 13 - Portions of the Annual Report to shareholders for the year ended December 31, 1993 that are specifically incorporated by reference into this Report 21 - List of Subsidiaries 23 - Consent of Independent Public Accountants EX-3.(I) 2 RESTATED ARTICLES OF INCORPORATION EX-3.(i) COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU Restated Articles of Incorporation Domestic Business Corporation In compliance with the requirements of the Pennsylvania Business Corporation Law of 1988, Act of December 21, 1988, P.L. 1444, No. 177, as amended, and specifically Section 1914(c)(4) thereof, the undersigned, desiring to restate without change all of the operative provisions of the Articles of Incorporation as heretofore amended, hereby certifies that the Articles of Incorporation are the following: ARTICLE I The name of the Corporation is AMP INCORPORATED. ARTICLE II The address of its registered office in the Commonwealth of Pennsylvania is 470 Friendship Road, Harrisburg, Dauphin County, Pennsylvania 17111. ARTICLE III The Corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania, Act of May 5, 1933, P.L. 364, as amended. The purposes for which the Corporation is incorporated are that the Corporation shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations now or at any time hereafter may be incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania, Act of May 5, 1933, P.L. 364, as amended and under all amendments and supplements thereto, or any revision or restatement thereof or any statute enacted to take the place thereof (hereinafter the "Business Corporation Law"), including but not limited to manufacturing, processing, fabricating, assembling and research and development, and also including without limiting the generality of the foregoing: 1. To engage in any such activities directly or through a subsidiary or subsidiaries and to take any and all acts deemed appropriate to promote the interest of such subsidiary or subsidiaries, including without limiting the foregoing, the following: making contracts and incurring liabilities for the benefit of such subsidiary or subsidiaries; transferring or causing to be transferred to any such subsidiary or subsidiaries assets of this Corporation; guaranteeing dividends on any shares of the capital stock of any such subsidiary; guaranteeing the principal and interest or either of the bonds, debentures, notes or other evidences of indebtedness issued or obligations incurred by any such subsidiary or subsidiaries; securing said bonds, debentures, notes or other evidences of indebtedness so guaranteed by mortgage of or security interest in the property of the Corporation; and contracting that said bonds, debentures, notes or other evidences of indebtedness so guaranteed, whether secured or not, may be convertible into shares of the Corporation upon such terms and conditions as may be approved by the Board of Directors; and 2. To exercise as a purpose or purposes each power granted to corporations by the Business Corporation Law insofar as such powers authorize or may hereafter authorize corporations to engage in activities; and to guarantee the bonds, debentures, notes or other evidences of indebtedness issued, or obligations incurred, by any corporation, partnership, limited partnership, joint venture or other association in which the Corporation at the time such guarantee is made has a substantial interest or where such guarantee is otherwise in furtherance of the interests of the Corporation. ARTICLE IV The aggregate number of shares which the Corporation shall have authority to issue is 350,000,000 shares of Common Stock without par value. The Corporation may issue and deliver unissued or treasury shares, or option rights, or securities having conversion or option rights, whether presently or hereafter authorized, in such manner and for such considerations as from time to time may be fixed by the Board of Directors, without first offering them to existing shareholders. ARTICLE V The duration of the Corporation shall be perpetual. The stock of the Corporation shall not be assessed, nor shall the holders thereof or their property be liable for the debts of the Corporation, to any extent whatever. ARTICLE VI 1. The number of directors of the Corporation shall be such number not less than three as may be fixed from time to time by the By-Laws or in the manner prescribed in the By-Laws. 2. The Board of Directors may determine from time to time to what extent and at what places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders, and no shareholder shall have any right to inspect any account, book or documents of the Corporation, except as conferred by statute or by the Board of Directors. ARTICLE VII Except as otherwise provided by statute or by these Articles of Incorporation as the same may be amended from time to time or by By-Laws as the same may be amended from time to time, all corporate powers may be exercised by the Board of Directors. Without limiting the foregoing, the Board of Directors shall have power, without shareholder action: 1. To authorize the Corporation to purchase, acquire, hold, lease, mortgage, pledge, sell and convey such property, real, personal and mixed, without as well as within the Commonwealth of Pennsylvania, as the Board of Directors may from time to time determine, and in payment for any property purchased to issue, or cause to be issued, shares of the Corporation, or bonds, debentures, notes or other obligations or evidences of indebtedness thereof secured by pledge, security interest or mortgage, or unsecured. 2. To authorize the borrowing of money; the issuance of bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation, secured or unsecured, and the inclusion of provisions as to redeemability and convertibility into shares of stock of the Corporation or otherwise; and, as security for money borrowed or bonds, debentures, notes and other obligations or evidences of indebtedness issued by the Corporation, the mortgaging or pledging of any property, real, personal or mixed, then owned or thereafter acquired by the Corporation. ARTICLE VIII The shareholders of the Corporation shall not have cumulative voting in the election of directors. ARTICLE IX Any action that may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting if proper consent is made to the action. Any such action may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote were present and voting. ARTICLE X Except as provided in subparagraph 2 below, no corporate action of a character described in subparagraph 1 below, and no agreement, plan or resolution providing therefor, shall be valid or binding upon the Corporation unless such corporate action shall have been approved in compliance with all applicable provisions of the Business Corporation Law and these Articles and shall have been authorized by the affirmative vote of at least sixty-six and two-thirds (66-2/3%) percent of the votes cast by all shareholders entitled to vote thereon. 1. Corporate actions subject to the voting requirements of this Article X shall be: (i) any merger, consolidation or share exchange to which the Corporation is a party; (ii) any sale, lease, exchange or other disposition of all or substantially all of the properties or assets of the Corporation; (iii) any voluntary dissolution of the Corporation; or (iv) any amendment of these Articles. 2. The voting requirements of this Article X shall not apply to any transaction of a character described in subparagraph 1 above should either of the following apply with respect to the transaction: (i) the Business Corporation Law permits corporate action with respect to any such transaction to be taken by the Board of Directors, or any committee thereof, and does not require a vote of shareholders; or (ii) the transaction shall be a "business combination" as defined in Section 2554 of the Business Corporation Law and shall be subject to a vote of shareholders in the manner prescribed by Section 2555 of the Business Corporation Law. IN WITNESS WHEREOF, the Secretary of the Corporation has signed and sealed these Articles of Incorporation this 28th day of July, 1993. AMP Incorporated /s/ M. A. Yohe By: ______________________ Secretary EX-10.B 3 EXECUTIVE SEVERANCE AGREEMENT DATED 1/24/90 EX-10.B EXECUTIVE SEVERANCE AGREEMENT dated January 24, 1990 The Board of Directors ("Board") of AMP Incorporated (the "Corporation") and the Compensation and Management Development Committee ("Committee") of the Board have determined that it is in the best interests of the Corporation and its shareholders for the Corporation to agree, as provided herein, to pay you termination compensation in the event you should leave the employ of the Corporation under the circumstances described below. The Board and the Committee recognize that the continuing possibility of an unsolicited tender offer or takeover bid, or a tender offer solicited by the Corporation in response to or in connection with an unsolicited tender offer (or any similar transaction) for the Corporation, is unsettling to you and other executives of the Corporation. Therefore, these arrangements are being made to help assure a continuing dedication by you to your duties to the Corporation notwithstanding the occurrence of such an event. In particular, the Board believes it important, should the Corporation receive proposals with respect to its future, to enable you, without being influenced by the uncertainties of your own situation, to assess and advise the Board whether such proposals would be in the best interests of the Corporation and its shareholders and to take such other action regarding such proposals as the Board might determine to be appropriate. The Board also wishes to demonstrate to you and other executives of the Corporation that the Corporation is concerned with the welfare of its executives and intends to see that the executives are treated fairly. 1. (a) In view of the foregoing and in further consideration of your continued employment with the Corporation, the Corporation will promptly pay you upon your request as termination compensation a lump sum amount, determined as provided below, in the event that anytime within two years after a "change of control" (as defined below) of the Corporation your employment with the Corporation (i) is terminated by the Corporation for any reason, other than death, disability, continuous willful misconduct substantially to the detriment of the Corporation (including entering the employment of a competitor of the Corporation), or retirement at or after your normal retirement date under the Corporation's Pension Plan, or (ii) is terminated by you for "good reason" (also as defined below). The termination compensation so payable in a lump sum amount shall be equal to the sum of your highest annual base salary rate in effect during the year of your termination plus incentive compensation paid or payable by the Corporation to you for the year prior to your termination multiplied by the number of whole years and any fractions thereof remaining from the first day of the month following the date of your termination to the first day of the month following your 65th birthday, provided that such multiplier shall not be more than three. (b) For the purpose of this agreement, a "change of control" ("Change of Control") shall mean: (i) the acquisition of beneficial ownership (other than from the Corporation) by any person, entity or "group," within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), excluding, for this purpose, the Corporation or its subsidiaries that acquires beneficial ownership of voting securities of the Corporation (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of 30% or more of either the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) a change in the persons constituting the Board as it exists at the date hereof (the "Incumbent Board") such that the directors of the Incumbent Board no longer constitute a majority of the Board; provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the Corporation's shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this agreement, considered as though such person were a member of the Incumbent Board; or (iii) approval by the stockholders of the Corporation of a reorganization, merger, consolidation in each case with respect to which persons who were the stockholders of the Corporation immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation's then outstanding voting securities, or a liquidation or dissolution of the Corporation or of the sale of all or substantially all of the assets of the Corporation. (c) For the purpose of this agreement, "good reason" shall mean: (i) the assignment to you of any duties inconsistent in any respect with your position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately before the Change of Control, any other action by the Corporation that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Corporation promptly after receipt of notice thereof given by you; (ii) the Corporation's requiring you to be based at any office or location other than that immediately before the Change of Control, except for travel reasonably required in the performance of your responsibilities; or (iii) any diminution in your rate of annual base salary or rate of incentive compensation immediately before the Change of Control. For purposes of this agreement, any good faith determination of "good reason" made by you shall be conclusive. 2. In addition to the lump sum payment provided in Section 1(a) above, in the event your employment with the Corporation so terminates within two years after such a Change of Control of the Corporation: (a) All outstanding Bonus Units awarded to you under the Bonus Plan (Stock plus Cash) ("Bonus Plan") with respect to which a Stock and Cash bonus has not been previously computed and distributed to you, including any Bonus Plan awards granted to you subsequent to the date of any change of control, shall fully and irrevocably vest and shall be computed and distributed to you in cash as if your termination date were a Bonus Computation Date with respect to all of such outstanding Bonus Units; and the Market Value applicable to such computation shall be the greater of (i) the highest price offered for an endorsed share of the common stock of the Corporation on a nationally-recognized securities exchange in the course of a change of control, or (ii) the closing price on such exchange prior to your date of termination. (b) All pension benefits credited to you under the provisions of the Corporation's tax-qualified Pension Plan in effect immediately prior to the Change of Control shall thereupon fully vest together with an annual future service benefit calculated on your highest annual base salary rate in effect during the year of your termination, but not including any incentive compensation, multiplied by the number of whole years and fractions thereof (but not more than three years) remaining from the date of your termination to the earliest of: (i) your 65th birthday, (ii) your elected early retirement date, or (iii) your eligibility to join a successor employer's pension plan; such pension shall be payable to you in accordance with the provisions of the Pension Plan, including the election, at the time of your retirement date, of a joint annuity option; provided that the amounts provided for under this Section 2(b) shall be provided on an unfunded basis, are not intended to meet the qualification requirements of section 401 of the Internal Revenue Code of 1986, as amended ("Code"), and shall be payable solely from the general assets of the Corporation. (c) The principal amount of your group term life insurance, under the provisions of the Corporation's group contract for such insurance in effect immediately prior to the Change of Control, will be immediately converted in a like principal amount to a fully paid-up permanent life insurance policy incorporating your designation of owner and beneficiary at the sole cost of the Corporation. (d) You shall be entitled to a continuation of all hospital, major medical, medical, dental and other insurance or benefits not otherwise addressed in this agreement in the same manner and amount as you were entitled at the time of your employment with the Corporation, at the sole cost of the Corporation, until the earliest of (i) a period of 36 months after termination, (ii) your reaching normal retirement age under the Corporation's Pension Plan, or (iii) your eligibility for similar benefits with a new employer. (e) You shall retain in confidence any confidential information known to you concerning the Corporation and its business so long as such information is not publicly disclosed. 3. (a) Anything in this agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Corporation to or for your benefit pursuant to Section 1(a) or Section 2(a), whether paid or payable or distributed or distributable pursuant to the terms of this agreement or otherwise (a "payment"), would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "excise tax"), then you shall be entitled to receive an additional payment (a "gross-up payment") in an amount such that after payment by you of all taxes (including any interest or penalties imposed with respect to such taxes), including any excise tax, imposed upon the gross-up payment, you retain an amount of the gross-up payment equal to the excise tax imposed upon the payments. (b) Subject to the provisions of Section 3(c), all determinations required to be made under this Section 3, including whether a gross-up payment is required and the amount of such gross-up payment, shall be made by Arthur Andersen & Co. (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Corporation and you within 15 business days after your date of employment termination, if applicable, or such earlier time as is requested by the Corporation. The initial gross-up payment, if any, as determined pursuant to this Section 3(b), shall be paid to you within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no excise tax is payable by you, it shall furnish you with an opinion that you have substantial authority not to report any excise tax on your federal income tax return. Any determination by the Accounting Firm shall be binding upon the Corporation and you. As a result of the uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that gross-up payments that will not have been made by the Corporation should have been made ("underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 3(c) and you thereafter are required to make a payment of any excise tax, the Accounting Firm shall determine the amount of the underpayment that has occurred and any such underpayment shall be promptly paid by the Corporation to or for your benefit. (c) You shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the gross-up payment. Such notification shall be given as soon as practicable but no later than 10 business days after you know of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim, (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation, (iii) cooperate with the Corporation in good faith in order effectively to contest such claim, and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any excise tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 3(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided further, however, that if the Corporation directs you to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to you, on an interest-free basis, and shall indemnify and hold you harmless, on an after-tax basis, from any excise tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation's control of the contest shall be limited to issues with respect to which a gross-up payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by you of an amount advanced by the Corporation pursuant to Section 3(c), you become entitled to receive any refund with respect to such claim, you shall (subject to the Corporation's complying with the requirements of Section 3(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Corporation pursuant to Section 3(c), a determination is made that you are not entitled to any refund with respect to such claim and the Corporation does not notify you in writing of its intent to contest such denial or refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of gross-up payment required to be paid. 4. (a) In the event of termination of employment under the circumstances described above, the arrangements provided for by this agreement, or any other agreement between the Corporation and you in effect at the time, and by any other applicable plan of the Corporation shall constitute the entire obligation of the Corporation to you and performance thereof shall constitute full settlement of any claim that you might otherwise assert against the Corporation on account of such termination. (b) The Corporation's obligation to pay you under this agreement shall be absolute and unconditional and shall not be affected by any circumstances, including without limitation any set-off, counterclaim, defense or other rights the Corporation may have against you or anyone else. 5. In the event you are required to engage an attorney or sue in law or equity in order to enforce any provision of this agreement or to receive any benefit or distribution or right under this agreement or any other agreement or arrangement contemplated by this agreement, the Corporation shall indemnify and hold you harmless against any loss or damage and reimburse your for costs, including reasonable attorney fees, you may incur in the enforcement of any provision, right or arrangement herein contained or contemplated by this agreement. The Corporation further agrees to pay interest on any amounts unpaid to you from seven days after the date of your demand for payment, calculated at the prime rate of The Chase Manhattan Bank N.A. for its most credit-worthy customers in effect from time to time. 6. This agreement shall be binding upon and inure to the benefit of you and your estate, and the Corporation and any successor of the Corporation, but neither this agreement nor any rights arising hereunder may be assigned or pledged by you. 7. Any provision in this agreement that is prohibited or unenforceable in any jurisdiction where it is sought to be enforced, shall be ineffective only to the extent of such prohibition or unenforceability, without invalidating or affecting the remaining provisions of this agreement or invalidating or rendering unenforceable such provision in any other jurisdiction. 8. This agreement shall be governed and construed in accordance with the laws of Pennsylvania. If you are in agreement with the foregoing, please so indicate by signing and returning to the Corporation the enclosed copy of this letter, whereupon this letter shall constitute a binding agreement between you and the Corporation and our mutual intention to be legally bound as of the day and year first above written. Very truly yours, AMP Incorporated By: Agreed: Schedule to EX-10.B Agreements identical to the "Executive Severance Agreement dated January 24, 1990" but containing the indicated multiplier, as provided for at the end of the second paragraph of Section 1(a) of the Agreement, were entered into with the following executive officers: Name Date of Agreement Multiplier W. J. Hudson, Jr. January 24, 1990 4 T. L. Dalrymple January 24, 1990 4 C. W. Goonrey January 24, 1990 3 P. G. Guarneschelli January 24, 1990 3 J. E. Gurski January 24, 1990 3 M. A. Yohe January 24, 1990 3 J. K. Hassan February 15, 1993 4 D. C. Cornelius February 15, 1993 3 J. C. Overbaugh February 15, 1993 3 EX-13 4 ANNUAL REPORT INCORPORATED BY REFERENCE EX-13 ------ AMP INCORPORATED ANNUAL REPORT 1993 to the extent specifically incorporated by reference into the Annual Report on Form 10-K for the year ended December 31, 1993 [the front side of the fold-out page of Annual Report: the left column:] No Boundaries From sockets for next-generation semiconductor devices to printed circuit boards, networking units and electro-optic devices, AMP's involvement in electronics is steadily broadening as computer and communications technologies converge. Many new electronic systems are on the horizon -- including the much-publicized interactive, multimedia "Information Superhighway." Connections are increasingly critical to the performance of these systems. Building on our leadership in connectors, we are steadily expanding into total interconnection systems, related components, and connector-intensive assemblies. We see no boundaries in the spread of electronics into all facets of society, and in the opportunities for AMP arising from this pervasive growth. [the center column of the front side of the fold-out page:] CORPORATE PROFILE The world leader in electrical/electronic connection devices, AMP has an 18-19% market share in this $17-19 billion market. Headquartered in Harrisburg, PA, it employs 26,900 in 175 facilities in 36 countries. Well over 100,000 types and sizes of units, splices, connectors, cable and panel assemblies, networking units, sensors, switches, electro-optic devices, touch screen data entry systems, and application tooling (52,000 machines; millions of tools) are supplied to over 200,000 original electrical/electronic equipment makers -- and tens of thousands of customers who install and maintain equipment. Virtually all growth was achieved by serving growth markets, developing new products, and entering new markets -- acquisitions have not been a significant factor. New products continue at 15-20% of current sales. Total spending on research, development, and engineering (RD&E) is being maintained at a high rate (nearly 12% of sales) and has risen each year to $406 million in 1993. AMP is pursuing a two-fold strategy of widening its leadership in its core business of connectors while steadily diversifying into total interconnection systems, related components, and connector-intensive assemblies -- increasing the potential size of markets being addressed from nearly $20 billion to over $65 billion. Growth in the last 37 years from sales of $32 million in 1956 (when AMP became publicly owned) to $3.45 billion in 1993 (a 13% compound growth rate) has been directly linked to the growth of the electronics (12%) and electrical/transportation (7%) equipment industries. In the last ten years, a period of recessions, industry corrections, slower market growth, price erosion, and negative currency effects, AMP's compound growth rate was 8.6% - -- well below the Company's goal for the rest of this decade. [the right column of the front side of the fold-out page:] Highlights - - Sales up 3% to record $3.45 billion - - Earnings up 3% to near-record $2.83/share - - Margins -- Operating 15.2%, pretax 14.1%, after tax 8.6% - - ROA 9.7%, ROE 14.8% - - Dividend up 5% in 1994 to indicated $1.68/share (41st annual increase) - - Shareholders' equity increased $113 million to $2.06 billion - - Barbara Hackman Franklin, former U.S. Commerce Secretary, elected to Board of Directors - - Henschel elected corporate secretary; Keizer, Peiffer, Ritter, Timashenka, Walker, Yohe named div. V.P.s; V.P. Gerhard Schmidt retired - - Capital spending $330 million, up from $312 million in 1992 - - Over 600,000 sq. ft. added in U.S., Argentina, China, Singapore, Spain - - New subsidiaries formed in Czech Republic, India, Hungary, Poland, Turkey, and the Philippines - - Acquired Smart American Home Centers, ATM Div. of Net Express, Elf Atochem Sensors, JWP Businessland Japan, MCS Div. of Fischer & Porter, and Microwave Electronics Div. of COMSAT - - Made minority equity investments in LANart, MicroModule Systems, New Media, and WiSE Communications - - Formed subsidiaries ACSYS, Connectware, and Microwave Signal - - Formed more strategic business units - - Gained market share in all regions - - Highest customer satisfaction ratings - - ISO 9000 quality certification complete by mid-1994; MRP II Class A certification by late 1995 - - ICCP Div. won top North Carolina quality award; one of final four for Malcolm Baldrige National Quality Award in manufacturing category - - Good growth expected in 1994 [the reverse side of the fold-out page of Annual Report:]
HISTORICAL DATA - ---------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 - ---------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR (dollars in millions except per share data) Net Sales....................... $3,450.6 $3,337.1 $3,095.0 $3,043.6 $2,796.6 $2,669.7 Gross Income.................... 1,141.3 1,118.2 1,025.4 1,031.2 979.8 996.9 Selling, General and Administrative Expenses........................ 616.6 584.9 555.6 543.4 505.2 467.0 Income From Operations.......... 524.7 533.3 469.8 487.8 474.6 529.9 Operating Margin (%)......... 15.2 16.0 15.2 16.0 17.0 19.8 Interest Expense................ (19.5) (29.5) (41.6) (38.3) (21.6) (16.2) Other Income (Deductions), Net............... (19.3) (24.7) (4.6) 12.5 2.3 15.5 Income Before Income Taxes........................... 485.9 479.1 423.6 462.0 455.3 529.2 % of Sales................... 14.1 14.4 13.7 15.2 16.3 19.8 Income Taxes.................... 189.3 188.8 163.9 174.9 174.4 210.1 Effective Tax Rate.............. 39.0 39.4 38.7 37.9 38.3 39.7 Net Income...................... 296.6 290.3 259.7 287.1 280.9 319.1 % of Sales................... 8.6 8.7 8.4 9.4 10.0 12.0 Net Income Per Share ....... $2.83 $2.75 $2.45 $2.70 $2.63 $2.96 Cash Dividends.................. 167.8 160.4 152.4 144.7 128.1 107.8 Cash Dividends Per Share .................. $1.60 $1.52 $1.44 $1.36 $1.20 $1.00 - --------------------------------------------------------------------------------------------------------------------------- AT DECEMBER 31 (dollars in millions except per share data) Working Capital................. $ 892.0 $ 768.7 $ 738.0 $ 665.2 $ 711.7 $ 700.9 Property, Plant and Equipment, Net.................. 1,245.1 1,178.8 1,180.2 1,121.5 953.8 894.6 Total Assets.................... 3,117.9 3,005.1 3,006.9 2,928.6 2,529.8 2,375.5 % Return on Assets ..... 9.7 9.7 8.8 10.5 11.5 14.3 Long-Term Debt.................. 131.0 42.9 53.0 61.1 69.5 82.8 Total Debt...................... 314.6 353.8 389.7 439.7 284.0 224.8 Shareholders' Equity............ 2,056.4 1,943.3 1,913.0 1,792.8 1,625.4 1,521.3 % Return on Equity ..... 14.8 15.1 14.0 16.8 17.9 22.2 Shareholders' Equity (Book Value) Per Share....... $19.60 $18.52 $18.04 $16.92 $15.27 $14.16 Backlog......................... $ 493.0 $ 506.0 $ 525.0 $ 514.0 $ 489.0 $ 475.0 Number of Employees............. 26,900 25,100 25,000 24,700 24,400 24,100 Floor Space (sq. ft. in millions)........... 10.1 9.5 9.2 9.2 9.0 9.0 Shares of Stock Outstanding (millions)...... 104.9 104.9 106.0 105.9 106.5 107.4 - -------------------------------------------------------------------------------------------------------------------------- Stock Price Range First Quarter.............61 3/8-54 5/8 68 3/4-56 54 3/4-40 7/8 53 5/8-42 1/8 49 3/8-41 54 1/4-40 1/2 Second Quarter............63 7/8-59 1/8 63 1/2-53 1/2 55 1/2-47 55 1/4-46 7/8 44 1/8-40 1/4 52 -42 7/8 Third Quarter.............67 1/4-59 3/4 61 3/4-52 5/8 55 3/4-50 52 1/4-38 47 1/4-40 1/2 52 -40 1/2 Fourth Quarter............66 3/8-57 65 7/8-54 5/8 60 -47 5/8 46 1/8-39 3/8 47 1/2-40 45 3/4-40 5/8 Stock Price/Earnings Ratio, High-Low ...... 24-19 25-19 24-17 20-14 19-15 18-14 -------------------------------------------------------------------------------------------------------- 1987 1986 1985 1984 1983 -------------------------------------------------------------------------------------------------------- Stock Price Range (cont'd.) First Quarter.............55 3/8-36 1/8 42 1/2-33 3/8 37 7/8-29 3/4 39 1/2-30 3/4 28 3/4-22 Second Quarter............61 1/4-50 45 -35 1/4 34 1/2-28 5/8 35 3/8-31 1/2 35 3/8-26 5/8 Third Quarter.............71 1/2-55 42 1/4-32 7/8 35 1/2-29 3/8 38 1/2-26 1/8 36 1/8-30 1/2 Fourth Quarter............70 1/4-34 1/8 40 5/8-35 5/8 37 1/2-27 1/2 34 1/2-28 5/8 39 -32 1/2 Stock Price/Earnings Ratio, High-Low ...... 31-15 30-22 38-28 21-14 26-14 - ---------- Share data has been adjusted for the 3-for-1 stock split in 1984. On January 26, 1994 a regular quarterly dividend of 42(cents symbol) per share was declared -- an indicated annual rate of $1.68 per share. Computed on average total assets and shareholders' equity in each year. High and low stock price divided by reported earnings per share for calendar year.
[the right column of page 1 of Annual Report, including three pie charts:] Diversification of AMP Worldwide Sales 1993 Geographic (percent) [reference Appendix, 1)] 1993 1983 1973 - - United States 43 61 52 - - Europe 31 22 31 - - Asia/Pacific 21 12 13 - - Americas 5 5 4 1993 Markets (percent) [reference Appendix, 1)] 1993 1983 1973 - - Aerospace/Military 5 5 5 - - Industrial/Commercial 10 10 15 - - Communications 10 15 5 - - Computer/Office 20 30 20 - - Consumer Goods 10 10 20 - - Transportation/Electrical 30 20 20 - - Distribution, Construction, etc. 15 10 15 1993 Channels (percent) [reference Appendix, 1)] 1993 1983 1973 - - Direct 86 94 99 - - Distribution & Co-0p Affiliates 14 6 1 [page 2 of Annual Report:] TO OUR SHAREHOLDERS (headline) Excellence has no national boundaries (text) Redefining AMP as a world-class leader in the interconnection systems business continues to be an exciting and promising undertaking. Our global vision for the year 2000 and our achievements in 1993 energize us. The vision pins the growth of AMP to totally satisfying our customers, exploiting the still untapped potential of both our core connector business and the emerging strategic businesses, and earning the number one or two positions in all markets. Our challenge is to make the vision a global reality. As we meet that challenge, we remain strongly committed to those who have a stake in AMP: TO SHAREHOLDERS, we are committed to building the value of your investment in AMP through steady growth in earnings, dividends and stock value. We believe AMP sales and earnings can increase to more than one and one-half times the 6-9% growth rate expected for the connector industry. In addition, we are striving to achieve 18% pre-tax and better than 10% after-tax margins, as well as a 20% return on equity. Boosting the prospects of success in this regard are our strong balance sheet and very good cash flow. TO EMPLOYEES, we commit as senior management to growing the company worldwide, which will grow your career opportunities and financial rewards. TO CUSTOMERS, we commit to providing you with the highest quality products whenever you want them and wherever in the world you want them. TO LEADERS in countries where AMP operates, we commit to advancing your country and region's financial success through our profitability and long-term investments in your economies. TO ALL OF US who are concerned about the environment, we recommit to our long-standing policy against jeopardizing the environment in the name of profit. AMP can best fulfill these commitments by being an integrated global leader. Of course, AMP has been operating internationally since the early 1950s. Yet, to be truly global, to be truly world class, is different. No longer can we think of ourselves as a Harrisburg-based U.S. corporation reaching around the world. We must be borderless geographically and virtually limitless in business possibilities. Our major customers expect us to think globally; opportunities demand that we act globally. We know that to be world class requires new thinking. Just about every dimension of the company has to be reassessed, from product design to the environmental impact of those products, from how we exchange technology among countries to how we anticipate and capitalize on emerging markets, and from how much we standardize our systems globally to how much risk we should encourage. As we work through this thought process, we are committed to one principle: We refuse to serve up second best anywhere. When customers buy a product from AMP, whether they are in India, Hungary, China, Russia, the United States, Argentina or Brazil, our products will be of uniformly high quality and performance. To back up this claim, the quality systems at most of our locations worldwide have now been certified under the international standard, ISO 9000. By mid-1994, all should attain that goal. The more rigorous MRP (Manufacturing Requirements Planning) II, Class A rating should be reached at all locations in 1995. Conforming to ISO 9000 and MRP II requires a sizeable investment of capital and human resources but, inevitably, the result will be a bigger pipeline of orders. Customer satisfaction still drives our company. For overall customer satisfaction, AMP was number one for the third 2 [narrative text on page 3 of Annual Report:] consecutive year in independent surveys. Quality is a major ingredient in that satisfaction. In fact, quality now ranks above price, delivery and service in customer needs surveys. Our Integrated Circuit Connector Products Division set out to demonstrate their quality by pushing for the prestigious Malcolm Baldrige National Quality Award. ICCP earned one of four "manufacturing category" site visits and then turned to the North Carolina Annual Quality Award, for which they took top honors. Not just in North Carolina but everywhere we do business, we are measuring virtually every aspect of our performance. Continuous improvement is woven into the fabric of AMP. We call it our Plan for Excellence. Excellence has no national boundaries. Our global expansion builds on our core expertise and innovation in the connector business. That expertise and innovation can be found wherever AMP operates. We continue to extrapolate our engineering and manufacturing mastery of connector technology vertically and horizontally, finding new uses for connector products and new applications for interconnection systems, as well as providing a broader array of related products such as printed circuit boards, sensors, switches, and transceivers. Teaming with customers on product design and application is the lifeblood of our success. AMP has shown repeatedly that we can be a strategic global partner with virtually any manufacturing customer anywhere. We are determined to get in sync with more customers early in their design phase, and then to manufacture the product wherever they need it. To aid this effort, global account management is being introduced. Focusing an AMP marketing team on individual global customers should help us anticipate needs and respond quicker when and wherever those needs materialize. Speed is essential to the customer partnership. We are investing over $50 million to replace or upgrade systems that let us move even more rapidly from design to full manufacturability anywhere in the world -- and do so at a lower cost. Computerized, just-in-time systems have helped ship products to U.S. customers 95% on time in 1993. Our inventory turnover rate has significantly increased in recent years. Meeting customers' "time-to-market" and "time-to-volume" needs is quickly becoming a top priority that we are meeting successfully. In the electronics industry, determining when a customer will accept a new AMP product idea is, itself, uncertain, but calculating volume requirements can be very unpredictable. The sale of the many electronic products made by our customers is difficult to gauge. Few market analysts, for example, anticipated the boom in model 486 personal computer purchases in 1993. AMP thus needs enormous flexibility to respond to surges in high-volume orders. In 1993, we continued to be aggressive in locating manufacturing and sales operations where positive investment climates and growth economies exist. We expanded our ability to produce closer to customers' operations and markets. At the same time, our expansion capitalizes on the opportunities of the emerging business in local and regional markets. To serve the Indian market, for example, AMP has to manufacture in India -- and we are planning a second manufacturing plant there. The same is true in China, in Hungary and elsewhere. AMP is there. Since 1990, we have started subsidiaries in India, China, Hungary, the Philippines, Thailand, the Czech Republic, Poland and Turkey. Several more subsidiaries will follow in 1994. 3 [narrative text on page 4 of Annual Report: the left column:] Goals - - Provide customers with superior products and services - - Maintain undisputed leadership in the connector industry - - Provide complete interconnection systems and value-added assemblies - - Become a totally integrated global organization - - Implement the worldwide Plan for Excellence continuous improvement program - - Achieve full ISO 9000 and MRP II Class A certification - - Achieve a longer-term compound annual growth rate more than 1 1/2 times better than the 6-9% expected growth rate of the connector industry and the markets we serve - - Achieve profitability of 18% pretax; 10% or better after tax - - Achieve return on average shareholders' equity of 20% - - Steadily build longer-term value for shareholders through adding economic value, dividend payments, and price appreciation - - Improve the business climate for AMP and other technology companies through a proactive external relations program [the center and right columns of page 4:] We have further enhanced our geographic reach and flexibility through a variety of business endeavors. Several dozen acquisitions, minority investments, joint ventures and other strategic alliances have surfaced in just three years. For example, to gain the lead in the fast-growing market for PCMCIA (Personal Computer Memory Card International Association) cards used in laptop computers, AMP holds a minority interest in a small design firm, joint development contracts with several semiconductor companies and a manufacturing subcontract with another company. Likewise, AMP stretches its expertise and market penetration through research consortia, research and development contracts, licensing, and marketing agreements. Geographic flexibility can work to our advantage when various economies and currencies turn soft. However, we can do little when, essentially, the world economy is soft, as it was in 1993. Despite our strong market share in some countries, we could not generate the sales and revenue growth we wanted from markets that simply were not growing. In addition, modest price erosion continued in most regions. The frustrating economic drag in 1993 forced us to ask what more we could do. We struggled with the answer, until we realized, once again, it was simple. Do more of what has made AMP world class: more globalizing of the business, more teaming among employees, more partnering with customers and suppliers, more investment in global research, development and engineering, even tighter financial controls -- and more risk-taking. As we push harder in these areas, we also push harder for increased and broader product sales. We also have forced down costs. In 1993, we learned even better ways to lower the cost of materials, upgrade distribution systems, boost productivity and improve quality. Corralling indirect costs is more of a challenge. They keep rising as a proportion of total costs. Included are employee benefits and training, environmental protection, regulatory compliance, safety and health, legal, insurance, marketing services, and administrative activities, as well as research, development and engineering. Likewise, depreciation and amortization have doubled over the last six years because we spent more on capital expenditures and acquisitions. We continued to strengthen our organization. At the board level we added Barbara Hackman Franklin, former U.S. Secretary of Commerce, who was named one of the top 50 corporate directors in 4 [narrative text on page 5 of Annual Report: the left and center columns:] 1990. We also elected David Henschel as corporate secretary, and named six new divisional vice presidents -- Alan Keizer, Howard Peiffer, Carol Ritter, Paul Timashenka, Larry Walker, and Merrill Yohe. Corporate Vice President Gerhard Schmidt retired after 37 years of excellent service, the last five as head of our European operations. We expect good growth in sales and earnings in 1994. U.S. sales should grow at a similar or better rate than the 10% in 1993. We also expect strong growth in Canada, South America, and in Asia/Pacific outside of Japan. We expect European economic conditions to improve later this year. Although we may have to wait until 1995 for a pickup in the Japanese economy, we expect some sales growth in Japan in 1994 in local currency after a modest decline in 1993. Prospects look good for continued sales growth in 1995 as economic recovery spreads throughout the world. Assuming fairly constant currency rates, earnings could set a new high this year -- exceeding the $2.96/share in 1988. Our challenge for the future is an enviable one: how to capitalize on the upswing in the world's economic health, on the rapid-fire opportunities in the electronics industry, and the increasingly critical role of AMP interconnections in the performance of electrical and electronic equipment and systems. Our ability to deploy resources throughout world markets -- to work interdependently, ignoring geographic borders and organizational seams -- reflects a current strength that will be even more essential to our success as a world-class global leader. Focusing on worldwide opportunities and developing strategies to capitalize on these opportunities is fast becoming a trademark of AMP employees. We thank all AMP employees worldwide for your commitment to be the best. Thank you to our customers who demand excellence from us, and to our suppliers who enable us to achieve that excellence. /s/ W. J. Hudson William J. Hudson President and Chief Executive Officer /s/ J. E. Marley James E. Marley Chairman of the Board Harrisburg, PA March 1, 1994 [the right column of page 5:] Policies - - Grow primarily through new products and markets - - Broaden into total interconnection systems and value-added assemblies, while maintaining leadership in core connector business - - Maintain a high level of technical spending; parallel development of products and application tooling - - Maintain a "systems" marketing approach which emphasizes quality, service, and total installed cost of products to customers - - Rely primarily on direct selling, supplemented by distributors and other channels responsive to customer buying preferences - - Use a global approach to managing activities and meeting customer requirements - - Fully empower, enable and develop employees through Plan for Excellence via leadership, organizational changes, communications, training and teaming approach - - Use conservative financial/accounting policies and practices - - Adhere to a written ethical conduct code - - Maintain full compliance with and responsiveness to government, public, community requirements on environmental protection, conservation of resources, safety and health, and other business-related social/economic issues globally 5 [narrative text on page 7 of Annual Report, together with the bottom picture and its caption: the left and center columns:] OPERATIONS (headline) World-class performance is evidenced by national, state, customer recognition; external certifications; highest ratings on customer satisfaction surveys (text) We continue to steadily strengthen and broaden our manufacturing capabilities. Capital expenditures rose to a near-record $330 million from $312 million in 1992. Over two-thirds was to expand capacity on existing and many new products, improve productivity and quality, and add new technical capabilities. We constructed, acquired, or enlarged a dozen facilities -- adding over 600,000 sq. ft. of floor area to a record 10.1 million sq. ft. New plants began operation in Argentina, China, and Singapore. Plants will soon start up in North Carolina, Hungary, and South Korea. Construction has begun on a large engineering facility in the Harrisburg area. Plans are underway for second plants in China and India, and for expansion in Great Britain, Japan, and Spain. Good progress on regional management of manufacturing resources, better methods and equipment, and higher quality is providing improved output per sq. ft. and per production employee, and reduced unit costs. Manufacturing employment increased 400 in 1993 to over 14,000 people utilizing 6.2 million sq. ft. in 93 plants in 20 countries. AMP's basic connector manufacturing capabilities -- high speed metal stamping, precision metal plating, plastic molding, automated assembly of small metal and plastic parts -- are being leveraged into related components and connector-intensive assemblies. For better use of assets and technical skills, certain AMP business units and subsidiaries have been designated "Regional Centers of Competency" in specific product/market categories. Acquisitions, equity investments, strategic alliances, and research consortiums are also providing access to new manufacturing technologies. During the 1980s we launched a series of programs to improve quality, productivity, delivery, service, engineering skills, and many other key aspects of our business. In early 1990 these successful programs came together under the Plan for Excellence - - - a comprehensive program seeking continuous, never-ending improvement in all areas. It uses techniques such as "process mapping," "value analysis," and "best demonstrated practices." Extensive benchmarking is also being done to compare specific functions against other well performing companies. This rising emphasis on continuous improvement -- meeting ever-higher performance standards -- has led to: - - On-time shipment on 150,000 U.S. orders/month up from 65% in 1987 to 95% in 1993 - - Warehousing, shipping, and other distribution costs reduced while handling higher volume with fewer people - - Inventory turnover up significantly in recent years - - Scrap rates, defects/million, error rates, returned materials down significantly - - Response times on inquiries, order placement, and sample/literature requests sharply reduced, e.g., customer calls answered in less than five seconds - - Stamping, plating, molding, assembly rates up several-fold in last decade - - Greater use of proprietary computer based-systems -- including unique Scorecard and Supplier Performance Index reporting on key factors. [the bottom picture and its caption in the right column of page 7:] [reference Appendix, 4)] [narrative text on page 9 of Annual Report, together with middle and bottom pictures and their respective captions: the left and center columns:] (headline) Dramatic improvements made in on-time shipments, quality, productivity, and other key factors (text) Confirmation of our progress includes hundreds of quality/service awards, approvals, and certifications. Formal third party awards and certifications have become much more important. Our Integrated Circuit Connector Products Division won the top quality award from the state of North Carolina, and was one of four entrants receiving a site visit for the Malcolm Baldrige National Quality Award. Our Williamstown/Tower City, PA facilities were in the top 15 in Industry Week's "10 best U.S. manufacturing plants" competition. Our Automotive/Consumer Business Group received a special award as best appliance industry supplier after winning the top spot for five consecutive years over 500 other suppliers. AMP was named best or outstanding by customers such as Abbott Laboratories, AT&T, Ford, GE, IBM, Northern Telecom, Raytheon, Siemens, and UNISYS. We now have nearly 60 quality management systems, covering almost 90% of production volume, certified to ISO (International Standards Organization) 9000 standards -- with the remaining systems to be done this year. We are on schedule toward a late 1995 goal on the much more rigorous MRP II Class A certification of manufacturing requirements planning systems. Most important in our drive for continuous improvement is far better use of human resources. This includes empowerment of people through delegation of more authority and responsibility, enablement through more training and development, organizational changes to reduce layers and speed decisions, employee teams to unleash creativity and "ownership" of the assigned function, pay linked to performance, recognition of outstanding achievements, and greater opportunity for transfer and advancement. Hundreds of product/project/task-oriented teams throughout the world are generating many thousands of improvement recommendations, shortening cycle times, reducing costs, and improving responsiveness. We are spending more on employee development and training, with a current goal of 40 hours minimum training per employee per year. Thousands of employees are involved in hundreds of courses, workshops, conferences, and related activities. Accompanying this is rising expenditures to provide employees with the equipment required to fully leverage their efforts -- tens of millions of dollars annually on the latest computers, communication systems, business machines, and engineering/scientific equipment. Environmental protection, recycling, packaging, safety, and health have become increasingly important in our business. We started an aggressive environmental program over ten years ago -- emphasizing preventive measures, audits, prompt and complete corrective action, heavy investment in the latest systems, and full reporting. Because of this, AMP has been widely recognized for its proactive program. AMP recently received the top environmental rating in the electrical equipment industry by the Council on Economic Priorities. In May 1993 we reached our goal of elimination of Class I ozone-depleting chemicals, and we are working steadily toward attainment of our zero discharge goal through installation of closed-loop systems, recycling systems, and other means. We are also redesigning product packaging and shipping containers to use less (and more environmentally friendly) materials, and facilitate recycling. [the middle and bottom pictures, and their respective captions, in the right column of page 9:] [reference Appendix, 5) and 6)] [narrative text on page 11 of Annual Report: the left and center columns:] MARKETING (headline) Expansion into assemblies and related components expands market to over $65 billion. (text) Worldwide sales rose 3% to a record $3.45 billion. Continued good growth in the U.S. (up 10%) and in the Americas (up 15%) was offset by recession-affected performance in Europe and Japan. Europe was up 1% in local currencies; down 10% in U.S. dollars. Asia/Pacific was up 2% in local currencies; up 11% in U.S. dollars. Through our thrust into related components and value-added assemblies, we are enlarging the potential size of the markets being addressed to over $65 billion. Our two-fold strategy of expanding our core connector business while carefully diversifying into logically related areas presents distinct marketing challenges. We serve over 250,000 customers in over 50 countries with over 500,000 part numbers in nearly 300 product families. Customers are steadily shrinking their supplier lists - -- retaining only those few meeting ever-higher performance requirements. Multinational customers are using global sourcing contracts -- selecting only those suppliers meeting these rising requirements uniformly at hundreds of customer locations. The increasingly critical role of connectors in electrical/electronic system performance, growing implementation of just-in-time manufacturing systems, and more outsourcing and alliances require ever closer relationships between manufacturers and key suppliers. In this far more demanding environment, our strong marketing capabilities are playing a significant role in gaining market share and leveraging resources into related areas. We have: - - The broadest product range by far in the connector industry -- from sockets for semiconductor devices to power connectors for buildings and utilities - - Nearly 3,000 marketing and sales personnel throughout the world - - A worldwide network of over 1,500 distributor locations (14% of sales) - - A growing list of ACES (AMP Cooperative Electronic Subcontractors) who use AMP connectors to fabricate cable and panel assemblies - - A growing fleet of AMPLIVERSAL sales vans that bring AMP products to maintenance and repair customers - - A just-launched Global Account Management program to better serve our large multinational customers - - A unique consulting service that provides computer simulation of proposed interconnection systems - - Industry-first service innovations such as the Product Information Center and customer service departments (25,000 calls monthly); automated fax service (27,000 literature and drawing requests monthly); thousands of AMP engineering data computer disks used in customer CAD/CAM systems; Electronic Data Interchange order system now used on over half our U.S. sales; and customer support services (e.g., 24-hour turnaround on 98% of 400,000 sample requests in 1993). These and other innovative capabilities have led to market share gains and the top rating on customer satisfaction in independent customer surveys. Our expansion into related components and value-added assemblies, and renewed emphasis on markets such as the building and utility fields, pose new marketing challenges being met by specialized AMP marketing organizations, marketing alliances, and innovations such as demonstration vans, SMART HOUSE regional service centers, and new training services for networking/premises wiring customers. [narrative text on page 13 of Annual Report: the left and center columns:] TECHNOLOGY (headline) Acquisitions and strategic alliances play a key role in our product/market diversification. (text) For more than five decades AMP's growth has been driven by new products. Currently 15-20% of sales are new products introduced in the last five years; our near-term goal is 25%. In 1993 we added about two dozen new product families and 25,000 new product part numbers (100 per day). Total spending on all research, development, and engineering continued at nearly 12% of sales, and has risen each year in dollars. This high level of technical spending ($406 million in 1993; over $3 billion in the last ten years) has been the foundation -- the wellspring -- of our growth since the early years. From the introduction of the first successful pre-insulated terminals and splices for the aircraft and marine markets in the early 1940s, we have steadily broadened our product and market range. This continued strong commitment to expanding our technical capabilities has led to a steady stream of new products and patents. Although 148th on the Fortune 500 sales ranking, AMP is 20th among U.S. corporations and 50th worldwide in patents received in 1993. A recent study ranked AMP 24th in the world on "Technological Strength" based on the number and importance of patents. Today AMP has over 3,000 patents issued or pending in the U.S. and over 11,000 in 37 other countries. This extremely strong patent position, reflecting our diligence in both obtaining and defending our patents, is a crucial factor in our growth through new products. Only a few percent of current sales are from acquisitions, which have been made primarily to gain access to new technologies and markets, not to add significant immediate sales volume. However, we have recently stepped up the pace of acquisitions, minority interest investments, and strategic alliances. Most of this activity is being done through our Global Strategic Businesses Group, and is an essential part of our diversification into related components and value-added assemblies. By targeting large, emerging, fast-growing markets, we expect the new non-connector part of our business will grow much faster than our core connector business, and thus become a steadily increasing portion of total sales. However, the bulk of our technical spending will continue to be devoted to widening our leadership in the connector industry. [narrative text on page 14 of Annual Report: the right column:] (headline) AMP has the widest range of networking/premises wiring interconnection products of any manufacturer, and has also become a leading supplier of cable assemblies. (text) Success in our aggressive drive to step up the creation of new products, strengthen our patent position, widen our leadership in our core connector business, and diversify into related components and assemblies rests squarely on a number of key technology factors. We are addressing, both in our core business and in our product and market diversification, the faster growing sectors and major trends in the electrical and electronic markets -- such as miniaturization, higher speed circuitry, networking, wireless transmission, electro-optics, conversion to digital, software integration with hardware, and the convergence of computer and communications technologies. For example, AMP sockets will be widely used to connect the far more powerful next-generation semiconductor devices now coming into use -- such as Intel Pentium (registered trademark symbol), DEC ALPHA (registered trademark symbol), and Apple/IBM/Motorola Power P.C. (registered trademark symbol) processors. Much of our technical efforts center around how AMP can play a growing role in the multimedia, interactive Information Superhighway of the near future. [narrative text on page 15 of Annual Report: the left and center columns:] We are using a rapidly widening range of resources to identify and participate in these sectors and trends. Our unique capabilities in connection technology are being leveraged by acquisitions, minority equity investment positions, joint ventures, alliances, research contracts, subcontracting, licensing, etc., with dozens of customers, suppliers and other companies, consortiums, universities, and research institutes. Increasingly, a company's success in an environment of intense global competition, higher performance, and accelerating rate of technological change depends as much on its network of external strategic relationships as on its internal capabilities. The new AMP of the 1990s is using its strong financial and technical resources to forge the steadily broader network of relationships essential to success in our ventures into new component and assembly areas. For example, the one-year-old business unit that has just entered the emerging PCMCIA card market has alliances with a half dozen semiconductor companies who are leaders in their specific fields. Recently we have taken a number of organizational actions to strengthen our internal technical capabilities -- such as formation of the Global Strategic Businesses Group, which now has nearly a dozen business units, and establishment of the Global Engineering and Manufacturing Assurance Department to coordinate worldwide efforts in such activities as best practices, value analysis, cycle-time reduction, and simultaneous engineering. We have also created hundreds of multidisciplinary technical teams, task forces, and steering committees. Our Global Quality organization coordinates very extensive activities in performance measurement, process mapping and benchmarking. [narrative text on page 17 of Annual Report: the left and center columns:] (headline) Our standards-setting capabilities are increasingly important. Renewed emphasis on outdoor plant/utility markets. (text) We are also steadily broadening our education, training, and professional development programs. Our unique AMP Engineering Education Program has now grown to 38 courses, and a cumulative total of 9,000 enrollments. New courses include a four-hour training unit, Design for the Environment, believed to be one of the first in the U.S. that is being taken by thousands of AMP employees to raise awareness of the environmental aspects of product, process, and packaging design. The new regional training center in Singapore will be followed by one in Europe. A top priority of the last few years is globalization of our activities to manage resources more effectively, bring products to market sooner, and better serve multinational customers. We have expanded corporate and regional staffs, transferred dozens of experienced people between regions, accelerated the implementation of our Plan for Excellence by our international companies, formed a number of global product and function-oriented teams and task forces, and are streamlining intercompany procedures. The goal is a "seamless" organization that identifies worldwide opportunities, then quickly and efficiently designs, produces, and markets products to meet global standards and customer requirements. AMP has become a leader in the development of industry standards. Product standards are rapidly evolving from country-based to a regional and worldwide basis, are broadening in scope, and are playing an increasingly important role in the development of new products. Recognizing this, we have greatly strengthened our standards activities -- building a strong corporate group of standards professionals and a global organization involving hundreds of AMP people in over 450 industry associations and standards-setting bodies. We have developed a unique training course that has gained significant customer and national recognition, and which will be the basis for a national program by the American National Standards Institute. [narrative text on page 18 of Annual Report: the right column:] (headline) AMP is the leader in application tooling. Over 60% of sales are tool and machine-applied products. (text) Perhaps the most visible evidence of our commitment to excellence in technology on a global basis, along with the high level of annual technical spending, is our rising capital expenditures. We continue to equip the nearly 4,000 AMP scientists, engineers, technicians, and support personnel with the modern facilities and advanced equipment they need to be effective -- over 1.5 million sq. ft. of floor space and well over $100 million in equipment. We have the most extensive interconnection technology facilities in the world. During this decade we will spend over $50 million for a new, more powerful worldwide CAD/CAM/CAE computer workstation network system -- our third generation of equipment in the past 15 years. In recent years we have established advanced development centers in Europe and Japan. We have just broken ground for a 155,000 sq. ft. technical facility in the Harrisburg, PA area. Installation of a multimillion dollar global general communications network will soon be underway. A recent article on AMP, "Empowering People Through Technology," describes how we are leveraging AMP employees' efforts under the Plan for Excellence. [narrative text on page 19 of Annual Report: the left and center columns:] Application tooling has always played a key role in AMP's growth. Over 50% of AMP sales are products applied by the nearly 52,000 machines we have provided to customers to apply AMP products to wires, cables, printed circuit boards, and flexible circuitry. Another 10% of sales are products applied by the millions of AMP manual and power tools now in use. Several hundred AMP field service engineers throughout the world install this equipment, train customer personnel, and provide emergency service. In the past decade we have introduced over 150 new types of machines and tools ranging from hand tools for maintenance and repair to computer controlled machines that make thousands of connections per hour and continuously monitor the quality of the connections as they are being made. We are the leader -- with perhaps as many machines in use as the rest of the industry combined. As we get deeper into the networking/premises wiring market and step up our activity in the utility markets, we are expanding the role of our worldwide field service engineering force into providing much more customer training. In 1993 an estimated 20,000 customer personnel received training at AMP or customer facilities. AMP has always marketed products on the basis of total installed cost -- not product price alone -- and this approach is increasingly relevant as concerns for productivity, quality, and system performance continue to rise. Through this approach we can demonstrate that customers' warranty costs decrease. A new aspect in our drive to provide customers with lower total installed costs is a far more extensive customer training program on the steadily widening range of AMP products for the rapidly growing networking/premises wiring market. Another is our Source Reduction Program for packaging materials. Design changes on packaging of products sold in the U.S. reduced the materials usage by a million pounds in the fourth quarter of 1993 alone. [page 20 of Annual Report:] MANAGEMENT'S DISCUSSION & ANALYSIS Results of Operations 1993 compared with 1992 Sales for the year were $3.45 billion, up 3% from 1992's $3.34 billion. The overall effect of exchange rates reduced sales by $73 million as weakening of the U.S. dollar against the Japanese yen was more than offset by the strengthening of the dollar against European currencies. Recessionary conditions in Europe and Japan impacted sales growth again in 1993, as was the case in 1992. Customer order backlog ended 1993 at $493 million, down slightly from 1992's $506 million. The portion of the backlog scheduled for delivery in the current and immediately following month continues to be high. This reflects customer emphasis on shorter delivery lead times and lower component inventories and tends to make absolute dollar amounts of backlog less important. Net income per share increased from $2.75 in 1992 to $2.83 in 1993. Exchange rate movements that adversely affected sales in 1993 reduced net income by approximately 8(cents symbol) per share. Average shares outstanding changed little during the year as stock repurchases were not significant. The decline in operating margin from 16.0% in 1992 to 15.2% in 1993 was strongly influenced by the recessionary conditions that existed in Europe and Japan throughout the year. The Company experienced modest price erosion on commodity products for the computer market. Costs such as employee benefits, safety and health, employee training, regulatory compliance, marketing, customer service, engineering and administrative continued to increase in absolute dollars and as a percent of total costs. Selling, General and Administrative Expenses were 17.9% of sales, up slightly from 1992's 17.5%. Since 1988, SG&A costs expressed as a percentage of sales have been within the narrow range of 17.5% to 18.0%. Depreciation and amortization expense amounted to $282 million in 1993, down slightly from $288 million in the previous year. Depreciation is expected to increase in 1994 in response to higher capital spending in the United States. The year-to-year pretax income margin decline, 14.4% in 1992 to 14.1% in 1993, was less than the decrease in operating income margin due to reduced interest expense and lower deductions in Other Income (Deductions), net. Interest expense decreased $9.9 million through a combination of lower interest rates and reduced outstanding debt. Other Income (Deductions), net, which is a combination of numerous unrelated nonoperating items of both income and expense, provided a deduction in 1993 that was lower by $5.5 million than in 1992. Gains on sales from the investment portfolio, including the November 1993 sale of a portion of the Company's holdings in the stock of BroadBand Technologies, Inc., more than offset larger translation losses in Brazil, whose economy is defined as highly inflationary under accounting rules. The income tax rate on pretax income decreased from 39.4% in 1992 to 39.0% in 1993. Effective tax planning offset the 5(cents symbol) per share reduction resulting from the increase in the U.S. corporate income tax rate retroactive to the beginning of the year. The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in the first quarter of 1993. Adoption resulted in additional income tax expense in the Asia/Pacific segment and reduced income tax expense in the European segment. In the aggregate, adoption of SFAS No. 109 did not materially affect net income. The Company continued to expend nearly 12% of its sales revenues on the functions of research, development and engineering. Of this expenditure, $258 million qualified as that for the creation and application of new and improved products and processes in conformance with the requirements of SFAS No. 2, "Accounting for Research and Development Costs." In order to measure the effectiveness of RD&E activity related to new product development, the Company measures new product sales as a percent of total sales. Another indication of effectiveness of the Company's technology and new product focus is the number of new patents it is awarded. The Company is among the leaders in patents issued in the U.S. U.S. segment sales to unaffiliated customers benefited from broad-based sales growth, with the strongest growth in automotive and networking/premise wiring. The slowdown in the incoming orders experienced in the computer and other capital goods markets from mid-October through November ended in December. U.S. sales in 1993 were $1.49 billion, up 10% from 1992's $1.36 billion. Pretax income increased 10% to $281.9 million and reflected a margin to sales of 15.7%, similar to 1992's 15.9%. U.S. segment sales growth in 1993 was not significantly influenced by acquisitions during the current year. European segment sales to unaffiliated customers were up 1% in local currencies in 1993 despite difficult economic conditions throughout the region. However, due to the strengthening of the U.S. dollar, European sales were down 10% in U.S. dollars. Sales growth in Europe was strongest in the computer and networking/premise wiring markets. The introduction of new products, together with the increasing electronic content, enabled sales to the automotive market to decline less than the reduction in unit production during the year. Reflecting price erosion and excess manufacturing capacity, European pretax margins declined from 12.2% in 1992 to 11.5% in 1993. Asia/Pacific segment sales to unaffiliated customers grew 2% in local currencies and 11% in U.S. dollars in 1993. Sales in Japan were down modestly in local currency due to the recession; however, favorable exchange rate effects resulted in increased sales in Japan in U.S. dollars. Sales growth outside of Japan was very strong and broad-based. Asia/Pacific pretax margins declined .4% to 9.4% in 1993 as a result of Japan experiencing lower local currency sales and because of modest price erosion in this highly competitive, fast-growing market. [narrative text on page 21 of Annual Report, including a pie chart: the left and center columns:] The Americas segment sales to unaffiliated customers increased 15% in 1993 with strong growth in Argentina and Brazil. However, the ongoing exchange rate deterioration of the Brazilian cruzeiro against the U.S. dollar resulted in large translation losses. As a result, the 1993 pretax profit margin for the segment was only 1%, down from 3% in 1992 when the currency situation was much the same. The Company's outlook varies with economic conditions in each of the regions where it does business. The Company's stated goal is to grow more than 1.5 times the average growth of the markets it serves. Capital spending in recent years, along with new and improved products, should support profitable market share growth. The United States economy is expected to continue to strengthen in 1994. Continued low inflation, together with low interest rates and improved industrial productivity, should produce an improved business climate, with 1994 equal to or stronger than 1993. The outlook for Europe and Japan in the near term is cautious. The Company anticipates some economic recovery in Europe in the second half of 1994, but may have to wait until 1995 for recovery to begin in Japan. In spite of these unsettled conditions, the Company continues to move forward with its geographic expansion into Eastern Europe and Asia/Pacific. In recent years, approximately 60% of the Company's unaffiliated customer sales have originated outside the United States. Therefore, the exchange value of the U.S. dollar has a significant impact on both sales and earnings. Results of Operations 1992 compared with 1991 After improving sequentially and year-to-year through the first nine months of 1992, quarterly sales and earnings dipped modestly in the fourth quarter due to a strengthening U. S. dollar and a decline in orders from the European automotive market. Nonetheless, for the entire year, sales rose 7.8% to a record $3.34 billion. After adjusting for the positive effects of exchange rate changes and acquisitions, the real rate of growth was 4.4%. Net income per share increased 12.2% to $2.75. Lower shares outstanding as a result of the repurchase of 1,166,000 shares of stock in 1992 had the effect of adding 2(cents symbol) to earnings per share. Sales gains were achieved in each of the four geographic segments, but net income increased in only the United States and European segments. Despite continuing pressure on selling prices, particularly in the computer/office market, gross and operating margins improved in 1992. Productivity gains, stable commodity prices and effective cost controls were the primary contributing factors. Selling, General and Administrative Expenses declined to 17.5% of sales, matching the level last achieved in the peak earnings year of 1988. Capital expenditures exceeded $300 million in 1992 for the third consecutive year. This level of expenditures, together with the Company's conservative accounting practices, caused depreciation and amortization expense to increase to 8.6% of sales in 1992 from 8.2% in 1991 and 7.2% in 1990. This percentage has more than doubled in the past decade as the Company targeted spending for continued broadening of its technical capabilities and improvement in productivity and quality. Pretax margins improved somewhat less than operating margins as a decrease in interest expense was more than offset by higher other deductions, primarily attributable to translation losses in Brazil and a decline in passive investment income. The effective income tax rate increased from 38.7% in 1991 to 39.4% in 1992. The Company's composite effective tax rate would have been unchanged from 1991 if the effects of 1992's non-deductible translation losses were excluded. Research and development expense, as reported, increased from $265 million in 1991 to $272 million in 1992, but decreased as a percentage of sales from 8.6% to 8.2%. Although not reflected in the reported numbers, expenditures in technical [the right column of page 21, including the pie chart:] Sales Dollar Use (percent) [reference Appendix, 2)] 1993 1993 1992 1991 1990 1989 - - Wages, benefits 34.2 33.0 32.5 31.6 31.5 - - Materials, services 42.4 42.5 43.7 44.1 44.4 - - Depreciation/ amortization 8.2 8.6 8.2 7.2 6.4 - - Interest .6 .9 1.3 1.3 .8 - - Taxes 6.0 6.3 5.8 6.3 6.7 - - Dividends 4.9 4.8 4.9 4.8 4.6 - - Reinvested 3.7 3.9 3.6 4.7 5.6 ------------------------------------ 100.0 100.0 100.0 100.0 100.0 Key Ratios 1993 1992 Current Ratio (Current Assets (divided-by symbol) Current Liabilities) 2.19 to 1 1.91 to 1 Long-Term Debt as a percentage of Shareholders' Equity 6.4% 2.2% Total Debt as a percentage of Shareholders' Equity 15.3% 18.2% [narrative text on page 22 of Annual Report: the left column, including two pie charts:] 1991-1993 Cash Flow (dollars in millions) [reference Appendix, 3)] Sources - - Net Income $ 847 - - Depreciation and Other Operating Sources, Net 875 - - Decrease in Cash and Equivalents 145 ------ $1,867 [reference Appendix, 3)] Uses - - Additions to Property, Plant and Equipment, and Other Investments $1,163 - - Dividends 481 - - Purchase of Treasury Stock 82 - - Reduction of Debt, Net 141 -------- $1,867 [the center and right columns of page 22:] functions continued to keep pace with the Company's sales growth. Restructuring of development and engineering functions, including retention within such functions of certain manufacturing and marketing activities that fail to meet the SFAS No. 2 definition of R&D, makes year-to-year comparisons less meaningful. U. S. segment sales were up 11%, with 2-3% of this growth due to inclusion of Precision Interconnect following its acquisition in December 1991. Strongest sales growth in 1992 was in the automotive and appliance markets, followed by computer and certain industrial/commercial markets such as medical electronics. Sales to the aerospace/military market were down modestly. Pretax income rose 32%, with most of the improvement attributable to increased manufacturing capacity utilization. European sales were up 8% in U. S. dollars and 4% in local currencies, despite an economic slowdown late in the year. Growth in sales to the automotive market was strong in both 1991 and through most of 1992. Pretax profits increased in line with sales. Asia/Pacific sales increased 1% in U. S. dollars, but were down 4% in local currencies. In 1992, segment sales grew in virtually all countries outside Japan, while Japanese sales were down modestly. Segment pretax profit fell 21% from 1991 primarily due to the economic conditions in Japan and capacity underutilization in start-up operations elsewhere in the region. In the Americas segment, pretax profits fell 61% despite sales growth of 6%. The most significant declines in profitability were in Brazil, where exchange rate deterioration produced large translation losses, and in Canada, where economic conditions continued to be sluggish. Prices and Costs During the years 1991-1993, the Company experienced moderately increasing costs for labor and services and relatively stable costs for materials. Sales prices generally declined in 1993. In the aggregate, the Company estimates annual price erosion at 2-3% during the 1991-1993 period. Wage rate increases moderated slightly in 1993 in conjunction with declining rates of inflation in many of the countries in which the Company operates. Raw material prices were fairly stable in 1993. While prices for copper, brass, zinc and other industrial metals were generally lower, precious metals prices were higher. The Company's exposure to sharp movements in metals prices is somewhat mitigated by contractual arrangements with certain suppliers and customers. Due in part to declining petroleum prices, plastic resin prices were also marginally lower in 1993. Although rising commodity prices would have an adverse effect, the Company should be able to capitalize on its significant size advantage over other companies in the connector industry. The Company believes the availability of the materials and labor skills it requires will remain adequate during 1994. Each year the Company reviews the key economic assumptions used in the determination of net periodic pension cost as prescribed by SFAS No. 87, "Employers' Accounting for Pensions." Selection of an end-of-year settlement or discount rate for pension plans is required to reflect the movement in long-term interest rates during the year. Consideration is limited to fixed income investments that receive one of the two highest ratings given by a recognized rating agency. The Company reduced the year-end discount rate assumption for its U.S. plan from 8.25% in 1992 to 7.00% in 1993. The Company also changed the assumption for the expected long-term rate of return for the U.S. plan in 1993. This assumption focuses on longer-term expectations and is therefore less susceptible to annual fluctuations. The investment profile of the U.S. plan is weighted significantly toward equities, both domestic and international, with the fund return averaging 11.6% annually for the past five years. As a result, the Company raised the expected long-term rate of return from 9.00% in 1992 to 9.50% in 1993. Reflecting recent trends in U.S. salary movements, the assumption for the rate of increase in compensation. [page 23 of Annual Report:] levels was reduced from 5.00% to 4.50%. International pension plan assumptions are also reviewed each year by country and appropriately adjusted. Changes in pension plan assumptions will reduce reported earnings in 1994 by several cents per share, but will not have a material effect on the Company's financial condition. In the first quarter of 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires expensing of such benefits over the working lives of eligible employees. Adoption did not have a significant impact on 1993's net income, as the Company limits postretirement medical benefits to eligible early retirees for the period between their retirement date and the normal retirement age. Prior to adoption of SFAS No. 106, the Company established liabilities sufficient to cover all future benefits payable to qualifying employees who had retired and not attained age 65. SFAS No. 112, "Employers' Accounting for Postemployment Benefits," will be adopted in the first quarter of 1994. Similar to SFAS No. 106, this standard requires use of the accrual method for benefits such as salary continuation, severance pay and health care continuation provided during the period after employment and before the normal retirement age. Worker's Compensation Insurance is the most significant postemployment benefit provided by the Company. The estimated future costs of benefits provided under this insurance have been voluntarily accounted for using the accrual method prior to 1994, therefore adoption will not have a significant impact on 1994's net income. Another accounting standard, SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," also will be adopted in the first quarter of 1994. This standard requires that certain debt and equity securities be adjusted to market value at the end of each accounting period. Differences between cost and market value are to be charged against earnings if the securities are bought and sold for short-term profit. Otherwise, such differences will be charged or credited to a separate component of Shareholders' Equity. Based on the Company's past investment strategies, charges against earnings are not anticipated to have a material effect on reported results. Liquidity Cash and equivalents and marketable securities exceeded total debt by $92 million at December 31, 1993. This represents a decrease from a net cash position of $124 million at year-end 1992 and is due primarily to a decline in cash provided by operating activities as a result of higher Accounts Receivable and Inventory balances at year-end 1993. Receivable balances were up 11% over year-end 1992's abnormally low balances, reflecting more normal historical levels. Although inventory increased 6%, inventory turns nearly doubled since 1980. The Company's current ratio improved from 1.91 at year-end 1992 to 2.19, its highest level since 1983, primarily as a result of a shift of a significant portion of short-term debt to term financing. The first quarter 1994 report will reflect a further shift from short to long-term debt via a private placement borrowing of six billion Japanese yen with bullet repayment in 20 years. Nearly all of the Company's debt has been incurred by its international companies. Total debt at year-end 1993 was equal to 15.3% of Shareholders' Equity, down from 18.2% at year-end 1992. Long-term debt as a percent of equity increased from 2.2% to 6.4%. During 1994, internal cash flows should be sufficient to finance working capital needs, dividends and expansion. The Company maintains bank credit lines and can also issue commercial paper, which when used in the past has carried the highest possible rating. In addition, the Company's low debt-to-equity ratio would permit it substantially more leverage in the event there were good business reasons for additional debt financing. Although only 67,500 shares of stock were repurchased in 1993, the Company has repurchased over 5,300,000 shares since a repurchase plan was announced in 1988. The Company plans to continue repurchasing its outstanding stock, depending upon current market conditions and the absence of a higher priority for the use of its cash resources. The Company has a comprehensive program for managing current and emerging environmental issues. During 1992-1993, the Company commissioned benchmarking reviews of its emergency response and audit programs and its entire environmental management system. Recommendations from these studies were implemented in 1993 and additional steps will be taken in 1994. These enhancements include establishment and training of business unit and country environmental coordinators, initiation of a global environmental training program, revisions to the existing environmental procedures manual to apply to operations worldwide, and incorporation of environmental matters in business unit and international operations' strategic plans. These measures are intended to enhance a uniform, worldwide environmental management system that ensures all self-imposed and required environmental responsibilities are met, thereby minimizing financial and other risks. Audits and assessments conducted in 1993 under the comprehensive program described above identified various matters that required follow-up action by facilities and business units. In 1993 the Company also initiated a "baseline" program for conducting environmental studies of existing facilities as part of its proactive approach of evaluating the environmental impact of the Company's operations and other pre-existing conditions, and taking corrective action where necessary. All facilities reviewed under this baseline program will become part of an annual groundwater monitoring program beginning in 1994. The costs associated with implementing all of the above programs and addressing audit items are not expected to have a material effect on the Company's financial results, liquidity, or capital expenditures. [narrative text on page 24 of Annual Report: the left and center columns:] Potential liabilities exist for investigative and remedial costs at several sites, including two National Priorities List (NPL) sites in the U.S. At one Company-owned site, which is subject to a Corrective Action Order under the Resource Conservation and Recovery Act, the Company has spent approximately $1.6 million since 1984. Future costs are expected to be $150,000-$210,000 annually for at least the next five years. At another site, the Company shares liability as a "generator" of wastes with at least seven other parties. Approximately $350,000 was spent by the Company in connection with this latter site during 1991-1993. The United States EPA is expected to issue a decision on the required cleanup during 1994. Currently, the Company expects the final amount it will be required to pay for the cleanup to be less than $4 million, to be incurred primarily in 1995-1996. The Company is also involved in six other cleanup actions in the U.S., where it is considered a "de minimis" contributor. Costs incurred for these sites were minimal in 1993. During 1993, the Company also resolved its liability at two sites in settlement agreements reached with the government. Several additional sites are in the investigative stage and liability and cost assessments have not been made, although the Company anticipates being named as a potentially responsible party at some of those sites. In addition, the Company has been working voluntarily on investigation and remediation at approximately sixteen of its own current or former facilities in the U.S. The Company has spent approximately $12.5 million on these sites since 1984. Future costs are expected to be $1-2 million annually for the next several years. Several of these sites are believed to have been impacted by third parties, and the Company is taking appropriate legal action. All cleanups are conducted in coordination with appropriate governmental agencies to the maximum extent possible. It is the Company's policy to accrue future remedial expenses to the extent known and determinable. Capital Resources Capital expenditures were $330 million in 1993, exceeding $300 million for the fourth consecutive year. As has been the pattern for the last several years, 80-85% of the spending was for machinery and equipment intended to increase productivity, quality of manufacturing and support activities. Floor space increased to 10.1 million square feet from 9.5 million square feet at year-end 1992. About 13% of this space is leased. The Company's facilities are maintained in excellent condition and are capable of supporting higher sales volumes, especially through more extensive use of multi-shift operations. Capital expenditures are expected to be in the $350-$375 million range in 1994, exceeding the previous record high of $338 million in 1990. Major projects include completion of new facilities in North Carolina and Pennsylvania, South Korea, China, India, Great Britain and Spain, as well as plant expansion in Japan. During 1993, the Company made ten small acquisitions or new minority interest investments, which consumed $28 million of free cash. [the right column of page 24:] ---------------------- Financial Table of Contents 25 Consolidated Statements of Income 25 Consolidated Statements of Shareholders' Equity 26 Consolidated Balance Sheets 27 Consolidated Statements of Cash Flows 28 Notes to Consolidated Financial Statements 35 Statement of Management Responsibility 35 Report of Independent Public Accountants [page 25 of Annual Report:] FINANCIAL
- ------------------------------------------------------------------------------------------------------------------ CONSOLIDATED Year Ended December 31, STATEMENTS OF -------------------------------------- INCOME (dollars in thousands except per share data) 1993 1992 1991 ----------------------------------------------------------------------------------------------- AMP Incorporated Net Sales................................................$3,450,586 $3,337,145 $3,094,951 and subsidiaries Cost of Sales............................................ 2,309,256 2,218,898 2,069,526 ----------- ----------- ----------- Gross income........................................... 1,141,330 1,118,247 1,025,425 Selling, General and Administrative Expenses............. 616,568 584,913 555,662 ----------- ----------- ----------- Income from operations................................. 524,762 533,334 469,763 Interest Expense......................................... (19,549) (29,489) (41,561) Other Income (Deductions), net........................... (19,277) (24,737) (4,608) ----------- ----------- ----------- Income before income taxes............................. 485,936 479,108 423,594 Income Taxes............................................. 189,280 188,770 163,850 ----------- ----------- ----------- Net Income...............................................$ 296,656 $ 290,338 $ 259,744 =========== =========== =========== Net Income Per Share..................................... $2.83 $2.75 $2.45 =========== =========== ===========
- -------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF Cumulative Treasury Stock SHAREHOLDERS' Common Other Translation Retained ------------------ EQUITY (in thousands) Stock Capital Adjustments Earnings Shares Amount ------------------------------------------------------------------------------------------------------------ AMP Incorporated Balance at January 1, 1991......... $ 12,480 $ 77,766 $114,108 $1,765,396 6,389 $176,992 and subsidiaries Net income......................... 259,744 Cash Dividends -- $1.44 per share... (152,443) Purchases of treasury stock........ 260 12,618 Distributions of treasury stock under Bonus Plans............. 329 (47) (2,063) Treasury stock issued for purchase of business.......... 1,938 (316) (14,667) Translation adjustments............ 6,605 -------- -------- --------- ----------- ------- --------- Balance at December 31, 1991....... 12,480 80,033 120,713 1,872,697 6,286 172,880 Net income......................... 290,338 Cash dividends -- $1.52 per share... (160,417) Purchases of treasury stock........ 1,166 65,773 Distributions of treasury stock under Bonus Plans............. 1,233 (62) (2,665) Translation adjustments............ (37,807) -------- -------- --------- ----------- ------- --------- Balance at December 31, 1992....... 12,480 81,266 82,906 2,002,618 7,390 235,988 Net income......................... 296,656 Cash dividends -- $1.60 per share... (167,838) Purchases of treasury stock........ 68 3,771 Distributions of treasury stock under Bonus Plans............ 134 (44) (2,431) Translation adjustments............ (14,539) -------- -------- -------- ----------- ------- --------- Balance at December 31, 1993....... $ 12,480 $ 81,400 $ 68,367 $2,131,436 7,414 $237,328 ======== ======== ========= =========== ======= =========
25 [page 26 of Annual Report:]
CONSOLIDATED ---------------------------- BALANCE SHEETS ASSETS ---------------------------- AMP Incorporated December 31, and subsidiaries ----------------------- (dollars in thousands) 1993 1992 ------------------------------------------------------------------------ Current Assets: Cash and cash equivalents.................$ 257,678 $ 370,753 Marketable securities..................... 149,317 107,224 Receivables............................... 625,180 561,038 Inventories............................... 459,302 435,091 Deferred income taxes..................... 88,483 85,204 Other current assets...................... 64,398 54,794 ----------- ----------- Total current assets.................... 1,644,358 1,614,104 ----------- ----------- Property, Plant and Equipment............... 2,954,936 2,715,244 Less -- Accumulated depreciation.......... 1,709,811 1,536,483 ----------- ----------- Property, plant and equipment, net..... 1,245,125 1,178,761 ----------- ----------- Investments and Other Assets................ 228,436 212,264 ----------- ----------- Total Assets................................$ 3,117,919 $ 3,005,129 =========== ===========
---------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY ---------------------------------------- Current Liabilities: Short-term debt........................$ 183,625 $ 310,944 Payables, trade and other.............. 236,697 234,177 Accrued payrolls and employee benefits............................. 115,461 109,729 Accrued income taxes................... 164,154 143,835 Other accrued liabilities.............. 52,426 46,767 ----------- ----------- Total current liabilities............ 752,363 845,452 Long-Term Debt.............................. 130,982 42,870 Deferred Income Taxes....................... 53,719 75,153 Other Liabilities........................... 124,500 98,372 ----------- ----------- Total liabilities.................... 1,061,564 1,061,847 ----------- ----------- Shareholders' Equity: Common stock, without par value Authorized 350,000,000 shares, issued 112,320,000 shares............ 12,480 12,480 Other capital.......................... 81,400 81,266 Cumulative translation adjustments..... 68,367 82,906 Retained earnings...................... 2,131,436 2,002,618 Treasury stock, at cost................ (237,328) (235,988) ------------ ------------- Total shareholders' equity........... 2,056,355 1,943,282 ------------ ------------- Total Liabilities and Shareholders' Equity..$ 3,117,919 $ 3,005,129 ============ =============
26 [page 27 of Annual Report:]
CONSOLIDATED Year Ended December 31, STATEMENTS OF ------------------------------------ CASH FLOWS (dollars in thousands) 1993 1992 1991 ------------------------------------------------------------------------------------ AMP Incorporated Cash and Cash Equivalents at January 1...... $ 370,753 $ 370,829 $414,493 and subsidiaries ----------- ---------- --------- Operating Activities: Net income............................. 296,656 290,338 259,744 Noncash adjustments -- Depreciation and amortization........ 282,217 288,001 255,219 Deferred income taxes................ (21,155) (2,423) (14,185) Increase to other liabilities........ 18,554 29,081 36,672 Other, net........................... 21,523 32,510 32,098 Changes in operating assets and liabilities net of effects of acquisitions of businesses..... (65,061) (2,869) (14,589) ----------- ---------- --------- Cash provided by operating activities........................ 532,734 634,638 554,959 ----------- ---------- --------- Investing Activities: Additions to property, plant and equipment........................... (330,405) (312,463) (313,334) Increase in marketable securities...... (41,593) (27,057) (34,493) Acquisitions of businesses, less cash acquired.................. (16,230) (10,582) (1,113) Other, net............................. (23,361) (23,640) (28,945) ----------- ---------- --------- Cash used for investing activities. (411,589) (373,742) (377,885) ----------- ---------- --------- Financing Activities: Changes in short-term debt............. (138,839) (21,657) (48,059) Proceeds from long-term debt........... 107,265 4,808 13,368 Repayments of long-term debt........... (22,341) (13,430) (22,405) Purchases of treasury stock............ (3,771) (65,773) (12,618) Dividends paid......................... (167,838) (160,417) (152,443) ----------- ---------- --------- Cash used for financing activities. (225,524) (256,469) (222,157) ----------- ---------- --------- Effect of Exchange Rate Changes on Cash...... (8,696) (4,503) 1,419 ----------- ---------- --------- Cash and Cash Equivalents at December 31..... $ 257,678 $ 370,753 $370,829 =========== ========== ========= Changes in Operating Assets and Liabilities: Receivables............................ $ (51,971) $ 6,447 $(29,825) Inventories............................ (24,367) (4,985) 43,824 Other current assets................... (14,672) (10) (4,842) Payables, trade and other.............. (9,126) (6,968) 5,606 Accrued payrolls and employee benefits. 14,487 (8,770) (12,709) Other accrued liabilities.............. 20,588 11,417 (16,643) ---------- ---------- --------- $ (65,061) $ (2,869) $(14,589) ========== ========== =========
27 [page 28 of Annual Report:] - --------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------- [1]-------------------------------------------------------------------------- SUMMARY OF PRINCIPLES OF CONSOLIDATION -- The consolidated financial ACCOUNTING statements include the accounts of the Company and its PRINCIPLES wholly owned subsidiaries. Investments representing ownership of 20% to 50% in affiliates and corporate joint ventures are accounted for using the equity method. Asia/Pacific and Americas subsidiaries are included on the basis of years ending November 30. CASH AND CASH EQUIVALENTS -- Cash and cash equivalents are comprised of cash in banks, time deposits and marketable securities having maturities of 91 days or less on their acquisition date. Securities with original maturities of more than 91 days are classified as marketable securities. All marketable securities are carried at the lower of cost or market value. INVENTORIES -- Inventories, consisting of material, labor and overhead, are stated at the lower of first-in, first-out (FIFO) cost or market. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION -- Property, plant and equipment is stated at cost, adjusted to current exchange rates where applicable. Depreciation is computed by applying principally the straight-line method to individual items. Depreciation rate ranges are substantially as follows: Buildings........................ 5% Leasehold improvements........... Life of lease Machinery and equipment.......... 7 1/2% to 33 1/3% Machines and tools with customers. 20% to 33 1/3% Where different depreciation methods or lives are used for tax purposes, deferred income taxes are recorded. Maintenance and repairs are charged to expense as incurred. Major repairs and improvements are capitalized and depreciated at applicable straight-line rates. The cost and accumulated depreciation of items of plant and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to operating income. GOODWILL -- The excess of cost over the fair value of assets acquired is amortized over periods not exceeding 15 years. PER SHARE DATA -- The weighted average number of shares outstanding used to compute net income per share was 104,898,122 in 1993, 105,496,092 in 1992 and 105,882,591 in 1991. The effect of shares issuable under stock options is not significant. [2]---------------------------------------------------------------------------- PAMCOR On September 4, 1992, the Company terminated the Pamcor Stock Trust Agreement among the Company, Pamcor, Inc. and Bankers Trust Company. As a result, Pamcor, formerly an affiliate of the Company by way of common shareholders, became a wholly owned subsidiary. Certificates for shares of the Company's common stock no longer represent a proportional interest in the shares of Pamcor, nor bear the endorsement of Trustee to that effect. The termination of the Trust has been accounted for in a manner similar to a pooling of interests and, accordingly, the financial statements for all prior periods have been restated to reflect the elimination of $20,000 of par value of Pamcor common stock previously held in trust. The transaction had no impact upon previously reported net income of the combined entities. [3]---------------------------------------------------------------------------- INTERNATIONAL Net income from international operations was $117,898,000 in OPERATIONS 1993, $127,768,000 in 1992 and $144,105,000 in 1991. Availability of remittances to the parent company is subject to exchange controls and other restrictions of the various countries. Foreign currency transaction gains and losses, after adjustment for income taxes to the extent appropriate, decreased net income by $2,665,000 (3(cents symbol) per share) in 1993; $1,507,000 (1(cents symbol) per share) in 1992 and $3,332,000 (3(cents symbol) per share) in 1991. [4]---------------------------------------------------------------------------- INVENTORIES At December 31, inventories were comprised of the following: (dollars in thousands) 1993 1992 ------------------------------------------------------------- Finished goods and work in process...... $255,472 $243,450 Purchased and manufactured parts........ 153,643 145,670 Raw materials........................... 50,187 45,971 --------------------- $459,302 $435,091 ======== ======== 28 [page 29 of Annual Report:] [5]---------------------------------------------------------------------------- PROPERTY, At December 31, property, plant and equipment was comprised of PLANT AND the following: EQUIPMENT (dollars in thousands) 1993 1992 -------------------------------------------------------------- Land.................................. $ 54,931 $ 50,783 Buildings and leasehold improvements.. 600,062 547,673 Machinery and equipment............... 1,961,683 1,777,320 Machines and tools with customers..... 338,260 339,468 ----------- ----------- $2,954,936 $2,715,244 =========== ========== [6]----------------------------------------------------------------------------
DEBT At December 31, debt was comprised of the following: 1993 1992 --------------------- ---------------------- Long- Due Within Long- Due Within (dollars in thousands) Term One Year Term One Year ------------------------------------------------------------------------------------------ International bank loans, 5.5% weighted interest rate (1992 -- 7.2%), repayable in varying amounts through 2007.............$130,551 $ 20,321 $41,575 $ 11,268 Mortgages and other indebtedness, 8.7% weighted interest rate (1992 -- 7.0%), repayable through 1996...... 431 819 1,295 3,556 International overdrafts and demand loans, 5.7% weighted interest rate (1992 -- 7.1%).. --- 162,485 --- 296,120 -------- -------- -------- -------- $130,982 $183,625 $42,870 $310,944 ======== ======== ======= ========
The payment schedule of debt due after one year is as follows: $10,167,000 in 1995, $14,318,000 in 1996, $11,474,000 in 1997, $36,662,000 in 1998 and $58,361,000 in 1999 and beyond. The majority of the Company's domestic bank credit lines are on a fee basis of 1/8% per year. The Company did not borrow against the lines during 1993. Under informal agreements, the Company maintains compensating balances for certain of its international operations. These balances averaged $10,537,000 during 1993. [7]---------------------------------------------------------------------------- INTEREST The Company capitalizes interest costs associated with the construction of certain assets. These costs are not significant. Interest paid during the periods was approximately equal to amounts charged to expense. Interest income for the year ended December 31 was $15,677,000 in 1993, $17,703,000 in 1992 and $21,895,000 in 1991. [8]---------------------------------------------------------------------------- LEASES The Company leases certain buildings and transportation and other equipment. Capital leases are not significant. Total rental expense under operating leases was $55,906,000 in 1993, $52,261,000 in 1992 and $47,750,000 in 1991. Minimum rental commitments at December 31, 1993, under leases with initial terms in excess of one year were: 1994...................$31,020,000 1995...................$23,376,000 1996...................$11,122,000 1997...................$ 6,752,000 1998...................$ 3,208,000 1999 and beyond........$16,718,000 29 [page 30 of Annual Report:] [9]---------------------------------------------------------------------------- EMPLOYEE EMPLOYEE RETIREMENT PLANS -- The Company has defined benefit RETIREMENT pension plans for substantially all U.S. employees. During PLANS AND the reported period, pension benefits were based on the higher RETIREE of an employee's career earnings or years of service and MEDICAL earnings near retirement. Assets of the plans are comprised BENEFITS principally of equity securities and fixed income investments. The U.S. plan includes a provision to increase benefit obligations in the event of a change in control of the Company, as defined. It is the Company's policy to fund at least the minimum amounts required by Federal law and regulation. During 1992, the Company settled a portion of its retirement benefit obligation to certain retirees through the purchase of annuity contracts. Certain international subsidiaries also have pension plans. In most cases, the plans are defined benefit in nature. Assets of the plans are comprised of insurance contracts and equity securities -- or book reserves are maintained. Benefit formulas are similar to those used by the U.S. plans. It is the policy of these subsidiaries to fund at least the minimum amounts required by local law and regulation. EMPLOYEE SAVINGS AND THRIFT PLAN -- U.S. employees may participate in the defined contribution 401(k) plan which has been established as a supplemental retirement program. Under this program, the Company contributes 60(cents symbol) for each dollar contributed by an employee up to 4% of an employee's base pay. At December 31, 1993 approximately 12,000 employees were participating in the program out of the 15,000 who were eligible. RETIREE MEDICAL BENEFITS -- In addition to providing pension and 401(k) benefits, the Company also provides health care coverage continuation for qualifying U.S. retirees from date of retirement to age 65. On January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106). SFAS No. 106 requires that the Company accrue the cost of benefits which may become payable to employees, over their related service periods. Prior to adoption of SFAS No. 106, the Company established liabilities sufficient to cover all future benefits payable to qualifying employees who had retired and not attained age 65. SFAS No. 106 was adopted on a prospective basis and its impact on 1993 earnings was not significant. Components of net periodic pension and retiree medical costs for the year ended December 31 were:
Retirement Plans Retiree -------------------------------------------------------------------- Medical U.S. Plans International Plans Plan ------------------------------- --------------------------------- --------- (dollars in thousands) 1993 1992 1991 1993 1992 1991 1993 -------------------------------------------------------------------------------------------------------------- Service cost -- benefits earned during the period................ $ 17,690 $ 16,575 $ 14,098 $ 12,988 $ 11,544 $ 9,840 $ 1,957 Interest cost on projected benefit obligation................ 34,813 33,049 34,819 13,293 12,864 10,772 2,245 Actual return on plan assets............... (69,507) (27,299) (98,605) (15,457) (13,700) (10,271) --- Net amortization and deferral.............. 22,759 (14,313) 54,389 3,339 1,990 (719) 1,071 --------- --------- --------- --------- --------- --------- -------- Net periodic plan cost................. $ 5,755 $ 8,012 $ 4,701 $ 14,163 $ 12,698 $ 9,622 $ 5,273 ======== ========= ========= ========= ========= ========= =========
30 [page 31 of Annual Report:] The funded status of these plans at December 31 was:
Retirement Plans Retiree ----------------------------------------------- Medical U.S. Plans International Plans Plan ------------------- ------------------ --------- (dollars in thousands) 1993 1992 1993 1992 1993 ----------------------------------------------------------------------------------------------------------- Plan assets at fair value................... $ 523,972 $ 468,065 $ 201,697 $ 173,057 $ --- ========== ========== ========== ========== ========= Actuarial present value of benefit obligations: Vested benefits......................... 384,946 323,300 145,490 121,606 --- Nonvested benefits...................... 50,467 35,161 25,393 24,805 --- Retirees................................ --- --- --- --- 11,712 Employees eligible to retire............ --- --- --- --- 4,546 Employees not eligible to retire........ --- --- --- --- 15,132 ---------- ---------- ---------- ---------- --------- Accumulated benefit obligation.............. 435,413 358,461 170,883 146,411 31,390 Additional benefits based on projected future salary increases................... 110,606 64,832 21,113 34,190 --- ---------- ---------- ---------- ---------- --------- Projected benefit obligation................ $ 546,019 $ 423,293 $ 191,996 $ 180,601 $ 31,390 ========== ========== ========== ========== ========= Plan assets greater (less) than projected benefit obligation.............. $ (22,047) $ 44,772 $ 9,701 $ (7,544) $(31,390) ========== ========== ========== ========== ========= Accrued liability at year end.............. $ (54,264) $ (46,794) $ (12,440) $ (13,558) $ (8,733) Unrecognized net gain.................... 28,277 65,016 34,921 18,941 (2,309) Unrecognized prior service cost.......... (12,792) 9,109 (99) (110) --- Unrecognized transition amount, net of amortization............ 16,732 17,441 (12,681) (12,817) (20,348) ---------- ---------- ---------- ---------- --------- Plan assets greater (less) than projected benefit obligation............. $ (22,047) $ 44,772 $ 9,701 $ (7,544) $(31,390) ========== ========== ========== ========== =========
Key economic assumptions used in these determinations were:
Retirement Plans --------------------------------------- U.S. Plans International Plans --------------- ------------------- 1993 1992 1993 1992 ------------------------------------------------------------------------------------- Settlement rate -- January 1................................ 8.25% 8.25% 7.25% 8.00% December 31.............................. 7.00% 8.25% 6.25% 7.25% Rates of increase in compensation levels... 4.50% 5.00% 4.25% 5.50% Expected long-term rate of return.......... 9.50% 9.00% 6.50% 7.25%
Retiree medical benefits expense was computed using a medical cost trend rate of 14% graded to 5.5% in year 2002 and later. For each increase of 1% in the medical cost trend rate the benefit obligation and annual expense would increase by approximately 6%. The settlement rate used to compute the obligation was 8.25% at January 1, 1993 and 7.00% at December 31, 1993. Expenses for these plans for the year ended December 31 were: (dollars in thousands) 1993 1992 1991 ------------------------------------------------------------- Pension...................... $19,918 $20,710 $14,323 Savings and Thrift........... 8,903 8,245 6,609 Retiree Medical Benefits..... 5,273 1,999 1,916 31 [page 32 of Annual Report:] [10]--------------------------------------------------------------------------- BONUS PLANS In April of 1993, the shareholders approved the 1993 Long-Term Equity Incentive Plan (the "Plan"). The Plan provides for the continuation, with certain modifications, of the Company's Stock Plus Cash Plan and establishes a stock option plan whereby Incentive Stock Options ("ISOs") and/or Non-Qualified Stock Options ("NQSOs") may be issued to key employees. Awards of up to 5,000,000 shares of the Company's Common Stock may be made under the Plan. STOCK OPTION PLAN -- The Board of Directors determines the terms and conditions applicable to each Stock Option award. The option price per share of Common Stock will not be less than 100% of the fair value of the stock on the award date. Options expire no later than ten years from date of grant and may not be exercised earlier than twelve months from such date. At December 31, 1993, 279,000 options were outstanding at an option price of $60.50 per share and none are exercisable until July 27, 1996. STOCK BONUS UNITS -- Stock Bonus Units may be granted to participants with or without a Supplemental Cash Bonus, at the discretion of the Board of Directors. The designated value of each Stock Bonus Unit may not be less than 95% of the average fair value of the stock over the 10 days preceding the award date. Awards are computed by multiplying vested Bonus Units by the excess of the market price of the Company's Common Stock over the designated value of the Stock Bonus Unit. Approximately 102,000 shares would be distributed in the years 1994 through 1999 for Stock Bonus Units granted before and outstanding at December 31, 1993, based on the market price at that date. CASH (OR STOCK) PLAN -- Key employees, designated by the Board of Directors, participate in the Cash (or Stock) Plan. Compensation under the plan is related to the achievement of specified performance objectives. Payments are made in cash or in shares of the Company's Common Stock, at the election of the participant. Charges to income before income taxes for current and future distributions under the aforementioned Plans totaled $12,194,000 in 1993, $12,534,000 in 1992 and $8,924,000 in 1991. [11]--------------------------------------------------------------------------- SHAREHOLDER On October 25, 1989, the Board of Directors adopted a RIGHTS PLAN Shareholder Rights Plan and declared a dividend of one Common Stock Purchase Right (a "Right") for each outstanding share of Common Stock. Such Rights only become exercisable, or transferable apart from the Common Stock, ten business days after a person or group (an "Acquiring Person") acquires beneficial ownership of, or commences a tender or exchange offer for, 20% or more of the Company's Common Stock. Each Right then may be exercised to acquire one share of the Company's Common Stock at an exercise price of $175, subject to adjustment. Thereafter, upon the occurrence of certain events (for example, if the Company is the surviving corporation of a merger with an Acquiring Person), the Rights entitle holders other than the Acquiring Person to acquire Common Stock having a value of twice the exercise price of the Rights. Alternatively, upon the occurrence of certain other events (for example, if the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation), the Rights would entitle holders other than the Acquiring Person to acquire Common Stock of the Acquiring Person having a value twice the exercise price of the Rights. The Rights may be redeemed by the Company at a redemption price of $.01 per Right at any time until the tenth business day following public announcement that a 20% position has been acquired or ten business days after commencement of a tender or exchange offer. The Rights will expire on November 6, 1999. 32 [page 33 of Annual Report:] [12]--------------------------------------------------------------------------- INCOME TAXES On January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting For Income Taxes" (SFAS No. 109). SFAS No. 109 requires that the Company change its method of accounting for income taxes from the deferred method to the liability method. The liability method attempts to recognize the future tax consequences of temporary differences between the book and tax bases of assets and liabilities. SFAS No. 109 was adopted prospectively, and its impact on 1993 earnings was not significant. Components of income tax expense for the year ended December 31 were:
(dollars in thousands) 1993 1992 1991 ------------------------------------------------------------------------------- U. S. Federal: Taxes currently payable..................... $103,656 $ 75,946 $ 61,646 Deferred taxes.............................. (14,414) 271 (8,260) Foreign: Taxes currently payable..................... 85,549 94,417 96,868 Deferred taxes.............................. (2,166) (2,115) (4,099) Other: Taxes currently payable..................... 21,230 20,830 19,521 Deferred taxes.............................. (4,575) (579) (1,826) --------- --------- --------- $189,280 $188,770 $163,850 ========= ========= =========
At December 31, 1993, gross deferred tax assets were approximately $126,292,000 comprised mainly of Inventories - $70,588,000 and Pensions - $19,586,000. Gross deferred tax liabilities were approximately $91,528,000 comprised mainly of Depreciation - $55,756,000 and U. S. taxes provided on undistributed earnings of subsidiaries - $21,940,000. There was no valuation reserve for deferred tax assets. The Company's effective tax rate varied from the U. S. Federal income tax rate for the following reasons:
1993 1992 1991 ------------------------------------------------------------------------------- U. S. Federal income tax rate................... 35.0% 34.0% 34.0% State income taxes, net of federal tax benefit.. 2.6 2.8 2.7 Foreign income taxes............................ 2.7 3.5 2.9 Other items not individually significant........ (1.3) (0.9) (0.9) ----- ----- ----- Effective tax rate.............................. 39.0% 39.4% 38.7% ===== ===== ===== Income before income taxes, after allocation of eliminations, is as follows: 1993 1992 1991 ------------------------------------------------------------------------------- United States operations........................ $284,769 $258,790 $186,664 International operations........................ 201,167 220,318 236,930 -------- -------- -------- Worldwide income before income taxes............ $485,936 $479,108 $423,594 ======== ======== ========
Income tax payments were $174,073,000 in 1993, $162,105,000 in 1992 and $188,536,000 in 1991. [13]---------------------------------------------------------------------------- RESEARCH AND Research and development expenditures for the creation and DEVELOPMENT application of new and improved products and processes were $258,000,000 in 1993, $272,000,000 in 1992 and $265,000,000 in 1991. 33 [page 34 of Annual Report:] [14]---------------------------------------------------------------------------- BUSINESS The Company's business is concentrated almost entirely in one SEGMENTS product area--electrical and electronic connection, switching and programming devices--which are sold throughout many diverse markets. It is not possible, therefore, to divide AMP's business into meaningful industry segments. However, the Company's operations are worldwide and can be grouped into several geographic segments. Operations outside the United States are conducted through wholly owned subsidiary companies that function within assigned, principally national, markets. The subsidiaries manufacture locally where required by market conditions and/or customer demands, and where permitted by economies of scale. Most are also self-financed. However, while they operate fairly autonomously, there are substantial intersegment and intrasegment sales. Pertinent financial data by major geographic segments for 1993, 1992 and 1991 are:
Sales to Inter- Unaffiliated segment Total Pretax Net Total (dollars in thousands) Customers Sales Sales Income Income Assets ------------------------------------------------------------------------------------------------------------ United States: 1993......... $1,490,798 $ 306,448 $ 1,797,246 $ 281,888 $ 179,360 $ 1,963,136 1992......... 1,357,936 258,768 1,616,704 256,962 161,471 1,759,348 1991......... 1,221,433 255,286 1,476,719 195,124 121,699 1,672,865 Europe: 1993......... $1,053,125 $ 34,706 $ 1,087,831 $ 125,360 $ 81,914 $ 655,813 1992......... 1,164,634 29,808 1,194,442 145,553 87,637 702,748 1991......... 1,073,937 24,629 1,098,566 134,726 84,902 769,340 Asia/Pacific: 1993......... $ 741,187 $ 44,767 $ 785,954 $ 73,681 $ 35,313 $ 755,840 1992......... 670,324 39,026 709,350 69,410 39,041 671,318 1991......... 663,630 26,064 689,694 88,339 53,606 649,510 Americas: 1993......... $ 165,476 $ 9,206 $ 174,682 $ 2,126 $ 671 $ 87,152 1992......... 144,251 12,816 157,067 5,355 1,090 79,517 1991......... 135,951 15,351 151,302 13,865 5,597 83,912 Eliminations: 1993......... $ -- $ (395,127) $ (395,127) $ 2,881 $ (602) $ (344,022) 1992......... -- (340,418) (340,418) 1,828 1,099 (207,802) 1991......... -- (321,330) (321,330) (8,460) (6,060) (168,732) Total: 1993......... $3,450,586 $ -- $ 3,450,586 $ 485,936 $ 296,656 $ 3,117,919 1992......... 3,337,145 -- 3,337,145 479,108 290,338 3,005,129 1991......... 3,094,951 -- 3,094,951 423,594 259,744 3,006,895
Transfers between geographic segments are generally priced at "large quantity customer prices less a discount" for items not requiring further manufacture and at "cost plus a percentage" for items subject to further processing. Included in the assets of the United States segment are short-term investments at December 31: 1993--$325,618,000; 1992--$389,298,000 and 1991--$379,779,000; which generated interest income of approximately $11,465,000, $13,449,000 and $17,542,000, respectively. [15]---------------------------------------------------------------------------
SUMMARIZED For the 3 Months Ended QUARTERLY -------------------------------------------------------- FINANCIAL (dollars in thousands DATA except per share data) March 31 June 30 September 30 December 31 (unaudited) ------------------------------------------------------------------------------------------ 1993: Net sales................. $837,956 $882,737 $857,439 $872,454 Gross income.............. 278,146 296,830 286,636 279,718 Net income................ 72,523 75,738 77,402 70,993 Net income per share...... 69(cents 72(cents 74(cents 68(cents symbol) symbol) symbol) symbol) 1992: Net sales................. $818,576 $826,980 $847,075 $844,514 Gross income.............. 274,538 278,252 290,578 274,879 Net income................ 70,157 72,050 77,817 70,314 Net income per share...... 66(cents 68(cents 74(cents 67(cents symbol) symbol) symbol) symbol)
34 [page 35 of Annual Report:] - ------------------------------------------------------------------------------- STATEMENT OF The financial statements and other financial information MANAGEMENT contained in this Annual Report are the responsibility of RESPONSIBILITY management. They have been prepared in accordance with generally accepted accounting principles applied on a materially consistent basis and are deemed to present fairly the consolidated financial position of AMP Incorporated and subsidiaries, and the consolidated results of their operations. Where necessary, management has made informed judgements and estimates of the outcome of events and transactions, with due consideration given to materiality. As a means of fulfilling its responsibility for the integrity of financial information included in this Annual Report, management relies on the Company's system of internal controls. This system has been established to ensure, within reasonable limits, that assets are safeguarded, that transactions are properly recorded and executed in accordance with management's authorization and that the accounting records provide a solid foundation from which to prepare the financial statements. It is recognized that no system of internal controls can detect and prevent all errors and irregularities. Management believes that the established system provides an acceptable balance between benefits to be gained and their related costs. It has always been the policy and practice of the Company to conduct its affairs ethically and in a socially responsible manner. Employee awareness of these objectives is achieved through regular and continuing key written policy statements. Management maintains a systematic program to ensure compliance with these policies. As part of their audit of the financial statements, the Company's independent public accountants review and assess the effectiveness of selected internal accounting controls to establish a basis for reliance thereon in determining the nature, timing and extent of audit tests to be applied. In addition, the Company maintains a staff of internal auditors who work with the independent public accountants to ensure adequate auditing coverage of the Company and who conduct operational audits of their own design. Management emphasizes the need for constructive recommendations as part of the auditing process and implements a high proportion of their suggestions. The Audit Committee of the Board of Directors meets with the independent public accountants, internal auditors and management periodically, to review their respective activities and the discharge of each of their responsibilities. Both the independent public accountants and the internal auditors have free access to the Audit Committee, with or without management, to discuss the scope of their audits and the adequacy of the system of internal controls. - ------------------------------------------------------------------------------- REPORT OF To the Shareholders and Board of Directors of AMP Incorporated: INDEPENDENT PUBLIC We have audited the accompanying consolidated balance sheets ACCOUNTANTS of AMP INCORPORATED (a Pennsylvania Corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMP Incorporated and subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Philadelphia, PA February 18, 1994 Arthur Andersen & Co. 35 [Stock Information section of the Corporate Data set forth on page 36 of Annual Report:] [columns one and two of the Stock Information section:] - -------------------------------------------------------------------------- STOCK INFORMATION LISTED STATE OF INCORPORATION NY Stock Exchange Pennsylvania STOCK TRADED PRINCIPAL TRANSFER NY, Boston, Cincinnati, Midwest, AGENT/REGISTRAR Pacific, Philadelphia Exchanges Chemical Bank J.A.F. Building OPTIONS TRADED P.O. Box 3068 Chicago Exchange New York, NY 10116-3068 SYMBOL Information on stockholdings, AMP dividends, Dividend Reinvestment Plan, write: Chemical Bank SHAREHOLDERS OF RECORD Securityholder Relations Dept. 9200 or AMP Incorporated, Shareholder Over 80% of shares held by Services, P.O. Box 3608, MS 176-042 over 500 institutions Harrisburg, PA 17105-3608 Phone: 717-780-4869. STOCK CERTIFICATE CUSIP NUMBER 031897101 [columns three and four of the Stock Information section:] DIVIDENT REINVESTMENT PLAN Available are: Permits cost-free invesment Annual and quarterly reports; of dividends; voluntary cash article reprints from publications payments of $50 to $5,000 in including ELECTRONIC BUSINESS, any month. ELECTRONIC BUYERS NEWS, BUSINESS WEEK, CENTRAL PENN BUSINESS JOURNAL, INFORMATION, REPORTS, REPRINTS DESIGN NEWS, FORTUNE, INDUSTRY WEEK, AMP Incorporated THE QUALITY EXECUTIVE, STANDARD & Investor Relations Dept. POORS, WALL STREET TRANSCRIPT, VALUE Mail Stop 176-043 LINE; broker reports; and a new P.O. Box 3608 AMP publication, "ENVIRONMENTAL Harrisburg, PA 17105-3608 PROGRESS REPORT" which describes our Phone: 717-780-4483 widely recognized environmental FAX: 717-780-6348 protection program. - ----------------------------------------------------------------------------- 36 [the top two-thirds of the inside-back cover of Annual Report, where the officers and divisional vice presidents are identified:] CORPORATE DIRECTORY [columns one, two and three of the OFFICERS section of page 37:] - ----------------------------------------------------------------------------- OFFICERS William J. Hudson Ted L. Dalrymple Philip G. Guarneschelli President and Chief Vice President, Vice President, Global Executive Officer, Global Marketing Human Resources and Director Charles W. Goonrey John E. Gurski James E. Marley Vice President, Vice President, Europe Chairman of the Board General Legal Counsel Javad K. Hassan Benjamin Savidge Vice President, Global Executive Vice President Jean Gorjat Strategic Businesses and Chief Financial Vice President, Officer, and Director Asia/Pacific [column four of the OFFICERS section of page 37:] David C. Cornelius Controller David F. Henschel Secretary Joseph C. Overbaugh Treasurer [columns one, two and three of the DIVISIONAL VICE PRESIDENTS section of page 37:] - ------------------------------------------------------------------------------ DIVISIONAL VICE PRESIDENTS CORPORATE SERVICES Merrill A. Yohe MARKETING John H. Kegel Public Affairs G. Russell Knerr, Jr. Logistics Global Sales and Anthony Zettlemoyer Marketing, Strategic Lincoln S. Miller, Jr. Global Planning Businesses Supplier Relations BUSINESS UNITS Joseph L. Maher, Jr. Howard R. Peiffer Herbert M. Cole Industrial Sales Technology Capital Goods Business Group Neal J. Spatz Carol A. Ritter Distributor Marketing Environmental Programs, Rudolf Gassner General Services Capital Goods INTERNATIONAL Business Unit J. Keith Drysdale Paul Timashenka Business and Operations Global Quality Earl Hennenhoefer Planning, Europe Cable Interconnections Larry C. Walker Arthur Gerlinger Taxes August P. Kastel Latin American and Aerospace/Government Canadian Operations Paul E. Workinger Systems Operations and General Services H. Chester Timmins Automotive/Consumer [column four of the DIVISIONAL VICE PRESIDENTS section of page 37:] Hermann Gilissen Development Engineering, Europe Peter Glaser Manufacturing, Europe Jurgen Gromer Central Europe Alan S. Keizer Strategic Businesses, Europe Nazario Proietto Marketing, Europe Richard D. Seall International Finance and Administration J. C. Tan Asia/Pacific South - ----------------------------------------------------------------------------- [the back cover page of Annual Report:] - -----------------------------AMP COMPANIES------------------------------------ All subsidiaries and branches included in consolidated results. All wholly owned except AMP Shanghai Ltd. which is majority owned. [columns one and two of the back cover:] THE AMERICAS EUROPE - -------------------------------------------------------------------- REGIONAL CENTER REGIONAL CENTER AMP AMP Harrisburg, PA, USA 17105 Stoke Poges SL2-4JL, England - ----------------------------- --------------------------------- AMP S.A. ARGENTINA C.I.Y.F. AMP OSTERREICH HANDELSGES.m.b.H. Buenos Aires, Argentina Vienna, Austria AMP DO BRASIL Ltda. AMP BELGIUM Sao Paulo, Brazil Brussels, Belgium AMP OF CANADA, Ltd. AMP CZECH s.r.o. Toronto, Canada Brno, Czech Republic AMP DE MEXICO, S.A. AMP DANMARK Mexico City, D.F. Mexico Viby, Denmark AMP FINLAND Oy [reference Appendix, 7)] Helsinki, Finland AMP De FRANCE S.A. Paris France AMP DEUTSCHLAND G.m.b.H. Frankfurt, Germany AMP OF GREAT BRITAIN LIMITED London, England AMP-HOLLAND B.V. 's-Hertogenbosch, The Netherlands AMP HUNGARY CO. Ltd. Budapest, Hungary AMP IRELAND LIMITED Dublin, Ireland AMP ITALIA S.p.A. Turin, Italy CORPORATE AMP NORGE A/S HEADQUARTERS Oslo, Norway - ----------------------- AMP INCORPORATED AMP POLSKA Sp.z.o.o. Harrisburg, PA 17105-3608 Poznan, Poland Phone: 717-564-0100 AMP PORTUGAL, Lda. TWX: 510-657-4110 Lisbon, Portugal FAX: 717-780-6348 AMP ESPANOLA, S.A. Barcelona, Spain AMP SVENSKA AB Stockholm, Sweden AMP (SCHWEIZ) A.G. Steinach, Switzerland DECOLLETAGE S.A. ST.-MAURICE St.-Maurice, Switzerland AMP TURKEY Istanbul, Turkey [columns three and four of the back cover:] ASIA/PACIFIC - ------------------------------------ REGIONAL CENTER AMP Kawasaki, Kanagawa 213, Japan - ------------------------------------- AUSTRALIAN AMP Pty. Ltd. Sydney, Australia AMP SHANGHAI Ltd. Shanghai, Peoples Republic of China AMP PRODUCTS PACIFIC Ltd. Hong Kong AMP INDIA PRIVATE LIMITED Bangalore, India AMP (JAPAN), Ltd. Kawasaki-shi, Japan UNITED STATES CARROLL TOUCH INTERNATIONAL, Ltd. ---------------------------------- Japan Branch, Tokyo ACSYS Incorporated Burlington, MA JWP BUSINESSLAND JAPAN K.K. Tokyo, Japan AMP Packaging Systems, Inc. Austin, TX AMP KOREA LIMITED Seoul, South Korea Carroll Touch, Inc. Austin, TX AMP PRODUCTS (MALAYSIA) Sdn. Bhd. Kuala Lumpur, Malaysia Connectware, Inc. Richardson, TX NEW ZEALAND AMP Ltd. Auckland, New Zealand Kaptron, Inc. Palo Alto, CA AMP PHILIPPINES Inc. Manila, Philippines Matrix Science Corporation Torrance, CA AMP SINGAPORE Pte. Ltd. Singapore Microwave Signal, Inc. Clarksburg, MD AMP TAIWAN B.V. Taipei, Taiwan Precision Interconnect Corporation Portland, OR AMP (THAILAND) LIMITED Bangkok, Thailand The Whitaker Corporation Wilmington, DE [referenence Appendix, 7)] JOINT VENTURE ------------------------------------ AMP-AKZO Company Chadds Ford, PA (recycle symbol) Printed on recycled paper. EX-21 5 SUBSIDIARY LISTING EX-21 SUBSIDIARIES AND BRANCHES OF AMP INCORPORATED (all wholly owned and included in consolidated results) ACSYS Incorporated AMP do Brasil Ltda. Burlington, Massachusetts Sao Paulo, Brazil (Delaware, U.S.A.) AMP de Mexico, SA. AMP Investments, Inc. Mexico City, D.F. Mexico Wilmington, Delaware AMP Osterreich Handelsgesellschaft .m.b.H. AMP Packaging Systems, Inc. Vienna, Austria Round Rock, Texas (Delaware, U.S.A.) AMP Belgium Brussels, Belgium Carroll Touch, Inc. (Branch of AMP Holland B.V.) Round Rock, Texas (Illinois, U.S.A.) AMP Czech s.r.o. Brno, Czech Republic Emerald Computers, Inc. Portland, Oregon AMP Danmark Viby, Denmark Connectware, Inc. (Branch of AMP-Holland B.V.) Richardson, Texas (Delaware, U.S.A.) AMP Finland Oy Helsinki, Finland Kaptron, Inc. Palo Alto, California AMP de France S.A. Paris, France Matrix Science Corporation Torrance, California AMP Deutschland G.m.b.H. (Delaware, U.S.A.) Frankfurt, Germany Microwave Signal, Inc. AMP of Great Britain Limited Clarksburg, Maryland London England (Delaware, U.S.A.) AMP Hungary Manufacturing Co. Ltd. Precision Interconnect Corporation Esztergom, Hungary Portland, Oregon (Delaware, U.S.A.) AMP Hungary Trading Co. Ltd. Budapest, Hungary RL Acquistion Corp. d/b/a/ Raylan AMP Ireland Limited Palo Alto, California Dublin, Ireland (Delaware, U.S.A.) AMP Italia S.p.A. The Whitaker Corporation Collegno, Italy Wilmington, Delaware AMP Italia SUD S.p.A. AMP of Canada, Ltd. Pozzilli, Italy Toronto, Canada (Delaware, U.S.A.) AMP Italia Products S.p.A. San Salvo, Italy AMP S.A. Argentina C.I.Y.F. Buenos Aires, Argentina AMP-Holland B.V. 's-Hertongenbosch, The Netherlands 1 AMP Norge A/S Carroll Touch International, Ltd. Oslo, Norway Tokyo, Japan (Delaware, U.S.A.) AMP Polska Sp.z.o.o. Poznan, Poland Businessland Japan Company, Ltd. Tokyo, Japan AMP Portugal, Lda. Lisbon, Portugal AMP Korea Limited Seoul, South Korea AMP Espanola, S.A. Barcelona, Spain AMP Manufacturing Korea, Ltd. Seoul, South Korea AMP Svenska AB Stockholm, Sweden AMP Products (Malaysia) Sdn. Bhd. Kuala Lumpur, Malaysia AMP (Schweiz) A.G. Steinach, Switzerland New Zealand AMP Ltd. Auckland, New Zealand Decolletage S.A. St.-Maurice St.-Maurice, Switzerland AMP Philippines Inc. Manila, Philippines Australian AMP Pty. Ltd. Sydney, Australia AMP Singapore Pte. Ltd. Singapore AMP Products Pacific Ltd. Hong Kong AMP Manufacturing Singapore Pte., Ltd. Singapore AMP India Private Limited Bangalore, India AMP Taiwan B.V. Taipei, Taiwan AMP Tools (India) Pvt. Ltd. (The Netherlands) Cochin, India AMP Manufacturing Taiwan, Ltd. AMP (Japan), Ltd. Taipei, Taiwan Tokyo, Japan AMP (Thailand) Limited AMP Technology Japan Ltd. Bangkok, Thailand Tokyo, Japan AMP Elektrik-Elektronik Baglanti Sistemleri Ticaret Limited Sirketi Istanbul, Turkey 2 JOINT VENTURES AMP-AKZO Company AMP Shanghai Ltd. Chadds Ford, Pennsylvania Shanghai, Peoples Republic of China (New York, U.S.A. general partnership) Building Technology Associates Wilmington, Delaware AMP-AKZO Corporation Newark, Delaware AMP-AKZO LinLam VoF Arnhem, The Netherlands (Dutch vof partnership) Note: Subsidiaries and joint ventures are incorporated in the country/state of location except where indicated otherwise. 3 EX-23 6 CONSENT OF OUTSIDE INDEPENDENT PUBLIC ACCOUNTANTS EX-23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To AMP Incorporated: As independent public accountants, we hereby consent to the incorporation of our report dated February 18, 1994 incorporated by reference in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements, Registration Nos. 33-22676, 33-55318 and 33-65048. /s/ Arthur Andersen & Co. Arthur Andersen & Co. Philadelphia, PA March 29, 1994 -----END PRIVACY-ENHANCED MESSAGE-----