-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NWUXemErIJXJXTM6Vh9/snbwLgzsq2reX/gd0JJgUGe4Bybr7oK2Ms+9VwQl8SKg 3Qt1Wo682AG6hvwNX7vDhg== 0000006164-96-000012.txt : 19960401 0000006164-96-000012.hdr.sgml : 19960401 ACCESSION NUMBER: 0000006164-96-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMP INC CENTRAL INDEX KEY: 0000006164 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 230332575 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04235 FILM NUMBER: 96541764 BUSINESS ADDRESS: STREET 1: P O 3608 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, 1995 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 3/08/96 - 219,313,134 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 8, 1996: $9,104,311,834 (217,416,402 shares at $41.875 per share). For purposes of the foregoing calculation, all directors and members of the Global Strategic Planning Committee of the registrant have been deemed to be affiliates, but such assumption should not be construed as a determination by the registrant that all such individuals are in fact affiliates of the registrant. ========================================================== Documents Incorporated by Reference: 1. Cited portions of the Annual Report to shareholders for fiscal year ended December 31, 1995(Parts I, II, IV) 2. Cited portions of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting, specifically excluding the Performance Graph and the Compensation and Management Development Committee Report on Executive Compensation (Part III) 10-K REPORT FOR YEAR ENDED DECEMBER 31, 1995 PART I. ITEM 1. BUSINESS NOTE: All financial amounts and per share data have been restated to account for the pooling-of-interests with M/A-COM, Inc. on June 30, 1995. AMP Incorporated designs, manufactures and markets a broad range of electronic, electrical and electro-optic connection devices and an expanding number of interconnection systems and connector-intensive assemblies. The Company's products have potential uses wherever an electronic, electrical, computer or telecommunications system is involved, and are becoming increasingly critical to the performance of these systems as voice, data and video communications converge. The Company's customers are as diverse as the products themselves, and include such differing types of accounts as original equipment manufacturers (OEMs) and their subcontractors, utilities, government agencies, distributors, value-added resellers, and customers who install, maintain and repair equipment. The industries covered by these accounts include Computer/Office, Industrial/Commercial, Communications, Consumer Goods, Transportation (including automotive)/Electrical, Aerospace/ Military, and Construction. The Company markets its products worldwide primarily through its own direct sales force, but also through distributors and value-added resellers to respond to customer buying preferences. In 1995, 85 percent of product was sold through direct channels to market and 15 percent through distribution and co-op affiliate channels. Sales and/or manufacturing operations have been established in 212 Company facilities located in 43 countries to serve customers in the current and emerging markets throughout the world. The Company is positioning itself to be a market-driven, "GLOBE-ABLE" organization. The Company was incorporated in 1941 as a New Jersey corporation under the name Aircraft-Marine Products, Inc. At that time the focus of the Company's operations was the terminal business. In 1952 the Company established its first international operations, located in Canada and France. In 1956 the Company changed its name to AMP Incorporated and became publicly owned. During the 1960s and 1970s the Company expanded its focus to varying types of connectors, including those required in the computer industry. The Company reincorporated in Pennsylvania in 1989. The world leader in electronic/electrical connection devices and associated application tools and machines, the Company is now diversifying into total interconnection systems, related components, and connector-intensive assemblies. At the end of 1995 the Company employed approximately 40,800 people worldwide, up 6,800 from year-end 1994. Markets ------- The Company serves over 250,000 customer locations in over 104 countries, covering many diverse markets. Key financial measures charting the development of the Company's business during the past 5 years are set forth in the "Historical Data" table of the Company's 1995 Annual Report to shareholders, and are also shown in Item 6, entitled "Selected Financial Data", of this Report. Sales to trade customers by each of the Company's geographic segments and sales or transfers between the Company's various geographic segments during 1993-1995, together with pre-tax income and identifiable assets attributable to each geographic segment for those years, are shown in Footnote No. 17 to the Consolidated Financial Statements, found on page 45 of the Company's 1995 Annual Report to shareholders and incorporated herein by reference. The Company's diversification of worldwide sales is evidenced by the following table: GEOGRAPHIC SEGMENTS 1995 1994 1993 (percent) Americas 47 50 50 Europe/Middle East/Africa 33 30 30 Asia/Pacific 20 20 20 For 1995, the Company's sales were distributed across general markets as follows: MARKETS (percent) Aerospace/Military 5 Industrial/Commercial 13 Communications 21 Computer/Office 18 Consumer Goods 7 Transportation/Electrical 24 Distribution, Construction, etc. 12 The business in which the Company is engaged is highly competitive. The number of competitors is estimated at over 1,500 worldwide, and in all products the Company is subject to active direct and indirect competition. The markets available to the Company have generally been growing as a whole, although the 10 years ending in 1993 saw slower growth due to recessions, industry corrections and price erosion. Most of the Company's products involve technical competence in their development and manufacture. Generally speaking, the Company competes primarily through offering high-quality, technical products and associated application tooling, with an emphasis on product performance, timely delivery and service, and only secondarily competes on a price basis. The Company's broad range of products, worldwide sales and marketing presence, and service innovations such as the computer-equipped product information and order handling departments, the automated fax service, the use of computer disks to communicate engineering and drawing data, an Internet product catalog, the expedited sample request delivery system, global account management, and the EDI order system have served to differentiate the Company from its competitors and allowed the Company to become a supplier of choice to many customers as they reduce their supplier lists and seek global sourcing contracts. The Company is also realigning its organizational structure to free marketing and sales people from operational ties and permit them to focus on customers and markets. This will make it easier for sales people to choose the right products for their customers from anywhere in the world, and will encourage industry-driven product solutions and shared responsibility for innovation across organizational boundaries, without jeopardizing the established customer interface. In addition, the Company has distinguished itself by its development of new and improved products and technologies. The Company has over 15,100 patents or utility models issued or pending throughout the world. AMP ranks 20th among U.S. corporations and 43rd among all patentees for U.S. patents granted during 1995. The Company aggressively enforces its patents to preserve its proprietary technological advantages. The Company's backlog of unfilled orders increased in 1995 to $1 billion at year-end compared to $825 million at year-end 1994 as the result of the robust economic recovery that occurred throughout the world during the first nine months of the year and the Company's resulting good sales growth in each geographic segment and virtually all market categories during that period. A majority of these orders were for delivery within the next 90 days, and all were scheduled for delivery within 12 months. The primary seasonal effect generally experienced by the Company is in the 3rd quarter when there usually is a temporary leveling off or modest drop in the rate of new orders and shipments. This seasonal decline in new orders and shipments is caused by 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 effect is usually most evident in the Company's Europe/Middle East/Africa and Asia/Pacific regions, compared against sales results of the 2nd quarter. In the 1st quarter the Company usually experiences some seasonal strengthening in domestic sales and orders compared with the prior 4th quarter performance as customers resume operations after the holidays and replenish inventories following the year-end close. In 1995 the Company's 2nd quarter earnings, before including M/A-COM's results, of 61 cents per share set a new high for the Company. However, as restated to account for the pooling-of-interests with M/A-COM, the Company's 2nd quarter earnings were 45 cents per share, reduced by the one-time merger costs and the dilutive effect from issuing AMP shares in exchange for all M/A-COM stock. The Company's 3rd quarter earnings were 51 cents per share, having been negatively impacted by the seasonal dip in sales, as well as currency effects and a charge for consolidating our US military/ aerospace connector operations, inclusion of the full loss of our AMP-AKZO printed circuit board business because we acquired 100% control of the AMP-AKZO joint venture and a higher effective tax rate. For the year, the Company's earnings per share, accounting for the merger special charge and dilutive effect, were a record $1.96 per share. The Company's normal terms of sale are net 30 days, and the average days outstanding for accounts receivable is typically 45 days in the U.S. and 72 days on a global basis. The Company warrants most of its products against defects in materials and workmanship under normal use for periods of up to 1 year. The Company's warranty experience is generally favorable, with a low rate of product return. An extensive distributor network, together with the Company's own highly automated regional distribution center system, is utilized to provide timely delivery of products to the customers. Products -------- The Company manufactures and sells more than 100,000 types and sizes of products, including terminals; fiber-optic, printed circuit board and cable connectors and assemblies; connectorized printed circuit boards; cable and cabling systems; sensors; wide and local area network products and systems; and related application tools and machines. These products represent over 500,000 active part numbers in over 430 global product lines. Nearly 90% of the Company's business is in electronic/electrical connection, switching and programming devices and associated application tools and machines. Included within this product area is a great variety of types and sizes. These product families generally involve the same or very similar basic technology, materials, production processes and marketing approaches. The common manufacturing capabilities, which have become core competencies of the Company, include connectivity technology, high speed precision metal stamping, precision metal plating, plastic molding, and automated assembly of small metal and plastic parts. Over 50% of the Company's sales are of products provided in strip form or on reels and applied by customers with special application machines, and an additional 8% are of products that are applied with special tools. The balance of sales is of pre-assembled devices and other products that do not require application tools or machines. Over 90% of sales are of products in just three Standard Industrial Classification (SIC) 4-digit codes: Electronic Connectors; Electronic Components - NEC; and Current Carrying Wiring Devices. Application tooling has been and remains an integral part of the Company's sales strategy and growth. The Company has provided over 50,000 machines to customers on either a lease or purchase basis, and millions of manual and power tools have been sold to customers, to apply the Company's products to wires, cables, printed circuit boards, and flexible circuitry. In the past decade the Company has 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. The Company has always marketed products on the basis of total installed cost -- not product price alone -- and the Company's concentration on providing fast and reliable application methods should give the Company an advantage as concerns for productivity, quality and system performance continue to rise. Hundreds of field service engineers throughout the world install this applicating equipment, train customer personnel to operate, maintain and service it, and provide emergency service. While the Company is seeking to widen its leadership in the terminal and connector product area, it is also steadily diversifying into total interconnection systems and higher value assemblies. This is increasing the potential markets being addressed by the Company from approximately $25 billion to around $80 billion. Part of this new breadth of potential business will come from cables, fiber-optic and signal conditioning products, and flexible circuitry based connectors and sensors that expand the Company's connector and interconnection technology. Another source for expansion is into interconnection solutions, such as cable and board assemblies, that are logically related to those connector and interconnection competencies. The final thrust toward new opportunities for growth addresses needs for home automation, PC cards, microwave technologies, and networking/premise wiring hardware, software and related services. The Company is accomplishing this growth by new product development as well as numerous small, strategic acquisitions, minority interest investments, joint ventures and other strategic alliances. Acquisitions provide technologies that are key to entering or enhancing the Company's participation in the respective markets and will form a cornerstone for the Company's expansion of its potential business. New products (representing products introduced during the last 5 years) continue to represent nearly 20% of current sales. In 1995 the Company added about 20 new product families and over 50,000 new part numbers, representing both new product part numbers and part numbers for extensions of existing products. Much of this growth, whether by new product development or acquisitions and alliances, focuses on the fastest growing sectors and major trends in the electronic and electrical markets -- such as miniaturization, high speed circuitry, networking, wireless transmission, electro-optics, conversion to digital, software integration with hardware, and the convergence of computer and communications technologies. On June 30, 1995 a subsidiary of the Company merged into M/A-COM, Inc., a Massachusetts corporation, which caused M/A-COM, Inc. to become a wholly-owned subsidiary of the Company. M/A-COM, a world leader in the design and manufacture of microwave, millimeter wave, wireless telephone and radio frequency interconnection components to the wireless data and telecommunications industries, will enhance the Company's strategic presence in the high-growth market for advanced wireless components. Operations ---------- While the Company's principal offices are located in Harrisburg, Pennsylvania, the Company is realigning its operations into a seamless global organization that lends regional governance and support to horizontally interdependent businesses that act locally but think globally. The regions are identified as the Americas, Asia/Pacific and Europe/Middle East/Africa (EMEA), and the current businesses are the terminal and connector business and the Global Interconnect Systems Business. The terminal and connector business constitutes the Company's more traditional lines of products. The Global Interconnect Systems Business embraces the Company's efforts to broaden its market opportunities into subsystems, electro- optic products and complete interconnection systems and services for OEMs and end-use customers. During 1995 the Global Interconnect Systems Business realigned regionally, paralleling the global structure of the Company's terminal and connector business and positioned itself to benefit by the regional support organization. The Company's efforts to integrate both regionally and globally should allow it to capitalize on the regionalization of the customers' production operations and trade that is being seen to one degree or another in all three geographic regions. Regional strategies within each business have been developed to gain market share and improve profitability, involving a decoupling of sales and marketing into a market- driven function that profitably satisfies customers and anticipates their needs, and a comprehensive integration of all aspects of operations and business administration to better support sales and marketing. At the same time the organizational realignment should enable the Company to quickly and effectively assimilate its geographic expansion into newly emerging markets. The Company has been aggressively locating manufacturing and sales operations where customers' operations and local market opportunities coincide to make it a positive investment climate. Since 1990 the Company has either finalized plans for or actually started sales or manufacturing operations in India, China, Hungary, the Philippines, Thailand, the Czech Republic, Poland, Turkey, Ireland, Israel, South Africa and Slovenia, and marketing activities have been extended into Indonesia, Vietnam, Pakistan, Eastern Europe, South Africa and the Middle East. Broadened capabilities are being developed around the world for the personal computer, wireless products, networking, telecommunications, power utility and transportation markets to augment regional efforts to provide products that support infrastructure advances in developing nations. Acquisitions have become an integral part of the Company's growth and diversification strategy. In 1995 the Company acquired M/A-COM, Inc. and POWERFLOR, and acquired 100% control of the AMP-AKZO joint venture in printed circuit boards. POWERFLOR's modular flooring technology will facilitate installation of AMP interconnection systems and networking/premises wiring in existing solid floor buildings. In addition to these acquisitions, in February 1996 the Company acquired Madison Cable Corporation, a leader in high performance, engineered electronic cables, and Parm Tool, which affords the Company greater capabilities in mold design and mold making. Acquisitions enable the Company to enhance existing capabilities and fill niches in our rapidly expanding range of interconnection products. The Company's Journey to Excellence is a comprehensive program seeking continuous improvement in all phases of its business. It uses techniques such as "process mapping," "value analysis," "successfully demonstrated practices" and extensive "benchmarking," and has become an integral part of the fabric of the Company's operations. Goals include increased flexibility in global programs to adapt to changing business dynamics, and the program is being updated to incorporate growth and profitability issues such as the anticipation of customer needs. This program continues to raise the standard of performance in terms of quality, productivity, delivery, service, engineering skills and many other key aspects of the Company's business, and is being tailored to fit into each region's strategies for the future. Extensive efforts are also being undertaken to maximize the utilization of the Company's human resources. Training, development, education, empowerment through the delegation of more authority and responsibility, employee teams, performance- linked pay, centralized recruiting, and programs to encourage recognition of outstanding achievements are being promoted to increase the involvement and effectiveness of employees. A broad-based program for improving leadership quality and diversity includes succession planning and expatriate, executive and organizational development programs. The employees also are being provided with the computers, communication systems, business machines and scientific/engineering equipment necessary for them to realize their full potential. The Company is implementing a global wide area network, expanding electronic mail and video conferencing capabilities worldwide, and instituting a business enterprise information system to support global decision making. Regional training centers are in the process of being established to facilitate the distribution of these learning and awareness methods throughout the world. For better leveraging of the Company's basic manufacturing capabilities into all areas of production, certain business units and subsidiaries have also been designated as "Regional Centers of Competency" in specific product/market categories. The Company is nearing the culmination of a 6-year effort to certify its quality management systems to the rigorous International Organization for Standardization (ISO) 9000 standard. Worldwide, the quality management systems of 36 business units and their associated facilities, representing virtually all of the Company's operations, have either received or have been recommended for ISO certification. Qualification to this common standard should help ensure that the Company's products and services will be of uniformly high quality wherever they are manufactured, sold or provided throughout the world. The Company is also aggressively pursuing the certification of its locations to the more rigorous Manufacturing Requirements Planning (MRP) II, Class A standards for manufacturing requirements planning systems. Manufacturing employment increased by over 9,000 in 1995 to more than 25,000 people. Product standards are playing an increasingly important role in the development and marketing of new products and the shaping of new markets. The Company takes an active role in the development of industry standards that affect its products and development activities. A capable corporate group of standards professionals and a global network of Company employees in over 500 industry associations and standards-setting bodies are involved in laying the groundwork for the acceptance of the Company's products under applicable standards. The Company has developed a unique training course that has gained significant customer and national recognition, and that is becoming the basis for a national program by the American National Standards Institute. The Company has a corporate-wide program for managing current and emerging environmental issues. Sound environmental practices are promoted by adoption and implementation of strict internal standards that meet or exceed known and anticipated regulatory, industry and customer-driven environmental requirements worldwide. These practices include compliance audits and environmental assessments conducted for new and existing properties, engineering support provided to operations staff to minimize wastes and other regulatory impacts, training programs, recycling programs, maintenance of a mainframe-based computer data base, and resources to provide support to operations staff in achieving environmental compliance generally. In 1995 the Company formalized its global approach for managing environmental matters through the recently created corporate group known as Global Environmental Services, with staff in Harrisburg, London and Singapore. Global Environmental Services coordinates global environmental programs and works closely with other units of the Company to further compliance with the Companies environmental policies. The Company has positioned itself to timely respond to possible customer requirements in 1996 for certification under the new ISO 14000 environmental standard. The Company is not aware of any material claims against its assets relating to environmental matters, based on current information. The costs to the Company of compliance with known and anticipated legal, regulatory, industry and corporate environmental requirements are not expected to have a material effect on capital expenditures, earnings and the competitive position of the Company. However, the Company is potentially liable for investigative and environmental clean-up costs at a number of sites the Company owns and at sites owned by third parties. The Company has been identified as a Potentially Responsible Party at 5 National Priorities List ("NPL")sites in the U.S. owned by third parties pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). In addition, the Company is identified as an alleged source of waste at 3 sites owned by third parties at which a state has jurisdiction over the response action. The Company has spent a total of approximately $500,000 to date at these sites, and future costs could be in the range of $2.2 to $6.7 million or more. The Company also is investigating potential liability at 22 of its current or former facilities, including facilities associated with its subsidiaries. One of these sites is listed on the NPL and is subject to a corrective action consent order under the Resource Conservation and Recovery Act. The Company has spent approximately $1.9 million since 1984 to remediate this property. Cleanup has progressed to the point where the Company filed a petition in 1995 to have the site removed from the NPL. Future costs associated with this site are expected to total approximately $1 million dollars over the next 5 years. Additionally, the Company has incurred approximately $1.7 million in costs to remediate conditions at its current facility in Williamstown, PA and an additional $2.8 million in costs are expected. Two properties formerly occupied by M/A-COM in Sunnyvale, CA and New Brunswick, NJ are also undergoing remediation, with expected future costs of approximately $1.5 million. The Company has spent approximately $12.2 million on the remaining 17 current or former properties since 1984 and future costs are anticipated to be $1 to $2 million annually for the next several years. Several of these facilities are believed to have been impacted by third parties and the Company is taking appropriate legal action. The Company believes it has adequate sources of supply and does not expect the cost or availability of raw materials to have a significant overall effect on its total current operations. 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 the Company. In view of the significant portion of the Company's customer sales that originate outside of the U.S. (approximately 60%), fluctuations in the exchange value of the U.S. dollar have an impact on sales and earnings. Product Development ------------------- The Company is committed to an ongoing program of new product development and a continual expansion of its technical capabilities. This broadening of products and capabilities is made possible through both internal development efforts and external strategic relationships such as acquisitions, minority equity investment positions, joint ventures, alliances, research contracts, teaming arrangements, licensing and the like with dozens of customers, suppliers, consortiums, universities and research institutes. In recent years advanced development centers have been established in Europe and Japan in addition to those already existing in the U.S. A new, more powerful worldwide CAD/CAM computer workstation network system was installed during 1995 to assist the nearly 5,600 engineers, scientists and technicians employed by the Company. Research and development expenditures for the creation and application of new and improved products and processes were $351 million in 1995, $287 million in 1994, and $277 million in 1993. Total spending on research, development and engineering (RD&E) was $568 million, $478 million, and $425 million in 1995, 1994, and 1993 respectively, representing 10.9%, 10.9% and 11.2% respectively, of consolidated net sales. This strong financial commitment to reinvestment into technology has resulted in a steady stream of new products, patents and new product sales. Cautionary Statements for Purposes of the "Safe Harbor" -------------------------------------------------------- Statements made by AMP Incorporated in written or oral form to various persons, including statements made in filings with the SEC, that are not strictly historical facts are "forward-looking" statements. Such statements should be considered as subject to uncertainties that exist in the Company's operations and business environment. The following includes some, but not all, of the factors or uncertainties that could cause AMP to miss its projections: * The effects of extreme changes in monetary and fiscal policies, in the U.S. and abroad. This would include extreme currency fluctuations in the Yen and Mark, and unforeseen inflationary pressure. * The threat of a global economic slowdown in any one, or all, of our market segments. * Drastic and unforeseen price pressure throughout the business. Currently the most noticeable pressure is in the personal computer industry where the OEMs are passing the price pressure on to their suppliers. Similar price pressure can also be seen in the cellular/mobile phone industry. * Increased difficulties in obtaining a consistent supply of basic materials like copper, gold, or plastic resins at stable pricing levels. * Unpredictable difficulties or delays in the development of key new product programs, particularly in some of our non- traditional businesses. * Rapid escalation of the cost of regulatory compliance and litigation. * Unexpected governmental policies and actions including, but not limited to, growing protectionism, sourcing requirements, and confiscation of assets. * Unforeseen intergovernmental conflicts or actions, including but not limited to, armed conflict and trade wars. For example, the conflict between China and Taiwan could escalate and have a substantial impact on our business in Asia/Pacific. * During an unforeseen business downturn, underutilization of AMP's factories and plants could become an issue. * Unanticipated startup expenses and delays related to bringing new plants on-line could impact our projections. * The difficulties and unanticipated expense of assimilating newly-acquired businesses into our business portfolio. * Any difficulties in obtaining the human resource competencies that AMP needs to achieve its business objectives; includes skilled-labor shortages in the U.S. and abroad. This also assumes that we will be able to retain key talent, both managerial and technical. * Risks associated with any disruptive changes in our customer, supplier, and competitor relations as a consequence of AMP's and others' movement along the vertical product chain. * The risks associated with any technological shifts away form AMP technologies or core competencies. * The risk of not recovering research and development expenses relating to a limited ability to enforce patents and copyright laws in certain parts of the world. * While AMP has traditionally been a leader in environmental compliance, unforeseen and drastic changes to governmental environmental policies and related government action could impact our projections. * Standardization, while often viewed as a positive for AMP, could have a substantial impact on our business. * Risks associated with market acceptance of our customers' end-products. For example, new technological innovations in the computer industry. * Unforeseen interruptions to AMP business with our largest customers, resulting from, but not limited to, strikes, financial flow, or inventory problems at the account. ITEM 2. PROPERTIES The Company has approximately 14.6 million sq. ft. of utilized floor space in 212 facilities located in the United States and 42 other countries. Facilities were enlarged or added in over a dozen countries in 1995, representing an increase of approximately 2.6 million sq. ft. During 1995, construction included a new 200,000 sq. ft. engineering building and expansion of our global training and development center, both in the Harrisburg, Pennsylvania area. International construction projects included new production facilities or expansion of existing facilities in France, the Czech Republic, Germany, Hungary, Italy, Scotland, Spain, Switzerland, Malaysia and China. Facilities are being added in North Carolina for greater production capacity in cable and cable assemblies, and operations in Tower City and Williamstown, Pennsylvania will be consolidated in a large manufacturing plant to be built northeast of Harrisburg, Pennsylvania to support the Company's growth in the consumer goods market. Also planned for 1996 are 3 new manufacturing facilities. Reflecting the Company's efforts to consolidate into more efficient integrated production operations, total floor space in terms of sq. ft. decreased slightly from 1985 to 1986 and remained relatively constant until 1992. Since 1992 floor space has increased to 11.4 million sq. ft. in 1993, 12.0 million sq. ft. in 1994, and 14.6 million sq. ft. in 1995. These increases are the result of increased production to support higher sales, efforts to insource work from outside vendors in order to lower cost and improve delivery, and acquisitions. Increases in floor space have been moderated, however, by a movement toward a maximization of multi-shift operations where required and feasible and, more recently, a closer regional management of the deployment of manufacturing resources. Worldwide, approximately 9.1 million sq. ft. of floor space in 113 plants located in 22 countries is devoted to production operations, and approximately an additional 2.9 million sq. ft. in 64 plants located in 18 countries is utilized for engineers, scientists, technicians, researchers, and office support personnel. U.S. manufacturing, warehousing and administrative facilities are located in Pennsylvania (51), North Carolina (21), California (17), Texas (6), Virginia (4), Florida (3), Massachusetts (2), Connecticut (2), Oregon (2), Arizona (1), Delaware (1), Georgia (1), Illinois (1) and New Jersey (1). Nearly half of these facilities are manufacturing plants. The Company's operations in the 42 countries other than the U.S. involve 70 major facilities (5,000 sq. ft. or larger) located throughout the world, 36 of which perform manufacturing functions and 34 of which have office/marketing/ engineering/research functions, and 10 which perform warehousing functions. The Company's facilities are generally modern, well maintained and diversified geographically within regions, with the typical size of major facilities in the 70,000 to 100,000 sq. ft. range. No single facility is material to the Company's business. The Company owns over 85% of its floor space, free of encumbrances except as hereinafter described, 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 renew or purchase. In connection with construction of an engineering building in the Harrisburg, Pennsylvania area, in 1995 the Company received a low interest loan totaling approximately $2 million from the Pennsylvania Industrial Development Authority (PIDA). PIDA provides low interest loans to businesses in the Harrisburg area for land and building acquisition and facility construction. Capital expenditures were $713 million in 1995, up from $473 million in 1994 and $370 million in 1993. Capital expenditures for 1996 are expected to remain relatively consistent with the 1995 level as the Company continues to expand into new product areas and geographic markets and to provide for additional production capability to meet anticipated increased demand. Approximately three quarters of the 1995 capital expenditures were for machinery, equipment and systems to add capacity on many existing products, tool up new products, and improve quality, productivity and delivery. The current rate of capacity utilization is estimated at 70% in the Americas, 85-90% in EMEA and 80% in Asia/Pacific. Increased manufacturing capacity has generally kept pace with increased use of the available capacity, particularly in the U.S., although greater use of multi-shift operations and regionalized coordination of production resources has tended to increase utilization in EMEA and Asia/Pacific. 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 Set forth below are the executive officers of the Company and their respective ages as of March 15, 1996 and positions held with the Company. All executive officers are elected to serve in their current office for one year or until their successors have been duly elected and qualified. All such officers with the exception of Messrs. Horowitz, Ripp and Urkiel have been employed by the Company for more than 8 years. Messrs. Marley, Hudson, Dalrymple, Goonrey, Guarneschelli, Gurski and Hassan have been executive officers for more than the past 6 years. Name Age Office ---- --- ------ James E. Marley *.......... 60 Chairman of the Board since 1993. Mr. Marley was a divisional Vice President and group director from 1970 to 1979, divisional Vice President, Manufacturing Resource Planning from 1979 to 1980, divisional Vice President, Manufacturing from 1980 to 1981, Vice President, Manufacturing from 1981 to 1983, Vice President, Operations from 1983 to 1986, President from 1986 to 1990, and President and Chief Operating Officer from 1990 to 1993. William J. Hudson, Jr. *... 61 Chief Executive Officer and President since 1993, and a Director. Mr. Hudson was divisional Vice President, Connector and Electronic Products in 1982, divisional Vice President, Far East Operations from 1983 to 1989, Vice President, Far East Operations in 1989, Vice President, Asia/Pacific Operations from 1990 to 1991, and Executive Vice President, International from 1991 to 1993. Robert Ripp .............. 54 Vice President and Chief Financial Officer since 1994. Mr. Ripp joined the Company in 1994 in the position of Vice President, Finance. Herbert M. Cole............ 59 President, Asia/Pacific and Vice President since 1995. Mr. Cole was divisional Vice President, Communications and Assemblies Group from 1984 to 1987, divisional Vice President, Operations, Automotive/Consumer Business Group from 1987 to 1988, divisional Vice President, Group Director, Integrated Circuit Connector Group from 1988 to 1991, divisional Vice President, Capital Goods Business Group from 1991 to 1994, Vice President, Business Planning, Asia/Pacific from 1994 to 1995, and Vice President Asia/Pacific in 1995. Ted L. Dalrymple........... 63 Vice President, Global Marketing since 1987. Mr. Dalrymple was divisional Vice President, International Sales from 1980 to 1987. Charles W. Goonrey........ 59 Vice President, General Legal Counsel since 1992. 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. Philip Guarneschelli...... 63 Vice President and Chief Human Resource Officer since 1996. Mr. Guarneschelli was divisional Vice President, Industrial Relations from 1980 to 1989, and Vice President, Global Human Resources from 1989 to 1996. John E. Gurski............ 55 President, AMP EMEA (Europe, Middle East, Africa) and Vice President since 1995. Mr. Gurski was divisional Vice President, Connector & Electronics Products Group from 1985 to 1987, divisional Vice President, Interconnection and Component Products Group in 1987, divisional Vice President, Operations from 1987 to 1989, Vice President, Operations in 1989, Vice President, Capital Goods Sector from 1989 to 1992, and Vice President, Business and Operations Planning, International from 1992 to 1993 and Vice President, Europe from 1993-1995. Javad K. Hassan........... 55 President, Global Interconnect Systems Businesses and Vice President since 1995. Mr. Hassan was divisional Vice President, Technology from 1989 to 1992, Vice President, Technology and Strategic Products in 1992, and Vice President, Global Interconnect Systems Business Group from 1992 to 1995. Dennis Horowitz........... 49 President, Americas and Vice President since 1995. Mr. Horowitz joined the Company in 1994 in the position of Vice President, Americas and served in that position until 1995. David F. Henschel......... 45 Corporate Secretary and Associate General Legal Counsel since 1993. Mr. Henschel was Associate General Legal Counsel from 1990 to 1993. Joseph C. Overbaugh....... 50 Treasurer since 1993. Mr. Overbaugh was Assistant Treasurer from 1987 to 1993. William S. Urkiel......... 50 Controller since 1995 when he first joined the Company. * Member of the Executive Committee of the Board of Directors. PART II. Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITYHOLDER MATTERS The Company's common stock, no par value, is listed on the New York Stock Exchange and is traded on the New York, Boston, Cincinnati, Midwest, Pacific and Philadelphia Exchanges under the symbol "AMP". Options in the Company's common stock are traded on the Chicago Exchange. As of March 8, 1996 there were approximately 13,860 holders of record of the Company's common stock. Over 80% of the outstanding shares of the Company's common stock are held by over 500 institutions. The following table sets forth the high and low sales prices for the Company's common stock for each full quarterly period during the calendar years ended December 31, 1994 and 1995, as reported on the New York Stock Exchange Composite Tape. In 1995 the Company effected a 2-for-1 stock split and all sales prices are adjusted to reflect such stock split. For the Year Stock Price Range ------------ ----------------- 1994 - First Quarter 32 3/4 - 29 5/8 - Second Quarter 34 3/4 - 28 13/16 - Third Quarter 39 1/8 - 34 3/8 - Fourth Quarter 39 11/16 - 33 11/16 1995 - First Quarter 38 - 35 3/16 - Second Quarter 45 - 36 1/2 - Third Quarter 44 - 37 7/8 - Fourth Quarter 40 7/8 - 37 1/8 Annual dividends, which are paid on a quarterly basis, have increased for 42 consecutive years. The compound annual growth rate for the Company's annual dividends for the 5-year period ended December 31, 1995 is approximately 6.2%. Annual dividends on a per share basis, taking into account the 2-for-1 stock split in 1995, were $.84 in 1994 and $.92 in 1995. The quarterly dividend increased to $.23 on March 1, 1995 and $.25 on March 1, 1996. If the March 1, 1996 dividend rate continues through 1996, it will result in the 43rd consecutive increase in annual dividends. ITEM 6. SELECTED FINANCIAL DATA Set forth below is certain selected consolidated financial data for the Company and its subsidiaries covering the five calendar year period ended December 31, 1995. This summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements and Supplementary Data provided in Items 7 and 8, respectively, of this Report on Form 10-K. All financial amounts and per share data have been restated to account for the pooling- of-interests with M/A-COM, Inc. on June 30, 1995.
AMP Incorporated and subsidiaries Historical Data (Dollars in millions except per 1995 1994 1993 1992 1991 share data) For the Year Net Sales $5,227.2 $4,369.1 $3,790.5 $3,725.0 $3,486.3 Gross Income 1,687.5 1,484.9 1,248.7 1,244.2 1,149.3 Selling, General and Administrative Expenses 969.5 824.9 744.1 692.1 661.7 Income from Operations 718.0 660.0 504.6 552.1 487.6 Operating Margin 13.7% 15.1% 13.3% 14.8% 14.0% Interest Expense (36.8) (29.2) (28.0) (39.5) (47.5) Other Deductions, net (13.4) (32.0) (15.4) (21.9) (2.2) Income Before Income Taxes 667.7 598.8 461.2 490.7 437.8 Pretax Margin 12.8% 13.7% 12.2% 13.2% 12.6% Income Taxes 240.4 225.0 176.9 191.4 167.8 Effective Tax Rate 36.0% 37.6% 38.4% 39.0% 38.3% Income from Continuing Operations $427.3 $373.8 $284.4 $299.3 $270.0 Per Share $1.96 $1.72 $1.31 $1.38 $1.23 Discontinued Operations -- -- -- 3.1 20.9 Per Share -- -- -- $0.01 $0.10 Cumulative Effect of Changes in Accounting -- -- 33.1 -- -- Per Share -- -- $0.15 -- -- Net Income 427.3 373.8 317.4 302.4 290.8 Per Share $1.96 $1.72 $1.46 $1.39 $1.33 Cash Dividends 196.5 176.2 167.8 160.4 152.4 Per Share $0.92 $0.84 $0.80 $0.76 $0.72 Capital Expenditures 713.0 472.6 369.8 329.2 331.1 Depreciation and Amortization 361.4 324.5 306.4 315.0 280.8 Total Research, Development, and Engineering Expense 567.7 477.7 425.4 408.6 385.5 At December 31 Working Capital $1,011.8 $1,067.4 $937.6 $822.5 $806.7 Property, Plant and Equipment 1,938.3 1,574.7 1,351.8 1,271.6 1,292.8 Total Assets 4,504.7 4,092.6 3,448.9 3,332.4 3,364.2 % Return on Assets 9.9% 9.9% 8.4% 8.9% 8.1% Long-Term Debt 212.5 278.8 199.3 112.0 135.4 Total Debt 530.7 461.2 389.7 428.3 473.0 Shareholders' Equity 2,768.0 2,495.8 2,206.5 2,071.1 2,029.2 % Return on Shareholders' Equity 16.2% 15.9% 13.4% 14.6% 13.8% Book Value Per Share $12.71 $11.50 $10.19 $9.51 $9.28 Backlog $1,000.0 $825.0 $707.0 $719.0 $777.0 Number of Employees 40,800 34,000 30,800 29,500 29,900 Floor Space (sq. ft. in millions) 14.6 12.0 11.4 11.0 10.8 Weighted Average Shares Outstanding (in millions) 217.7 217.0 216.6 217.7 218.7 Stock Price Range First Quarter 38 -35 3/16 32 3/4 -29 5/8 30 11/16-27 5/16 34 3/8 -28 27 3/8-20 7/16 Second Quarter 45 -36 1/2 34 3/4 -28 13/16 31 15/16-29 9/16 31 3/4 -26 3/4 27 3/4-23 1/2 Third Quarter 44 -37 7/8 39 1/8 -34 3/8 33 5/8 -29 7/8 30 7/8 -26 5/16 27 7/8-25 Fourth Quarter 40 7/8-37 1/8 39 1/16-33 11/16 33 3/16 -28 1/2 32 15/16-27 5/16 30 -23 13/16 Stock Price/Earnings Ratio, High-Low 23-18 23-17 26-21 25-19 24-17 Share data has been adjusted for the 2-for-1 stock split in 1995. On January 24, 1996, a regular quarterly dividend of 25 cents per share was declared - an indicated annual rate of $1.00. Computed based on income from continuing operations divided by average total assets or shareholders' equity, as applicable, each year. High and low stock price divided by reported income from continuing operations per share for the year. For years 1991 to 1994, M/A-COM, Inc.'s fiscal year ended the Saturday closest to September 30th is included with AMP Incorporated's calendar year end. Cash dividends per share were not restated for the pooling-of-interests with M/A-COM, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information appearing under "Management's Discussion & Analysis" on pages 26-29 of the Company's 1995 Annual Report to shareholders is hereby incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and the related notes thereto, together with the report thereon of Arthur Andersen LLP dated February 16, 1996, appearing on pages 30-46 of the Annual Report to shareholders for the year ended December 31, 1995 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 Company, see "Executive Officers of the Registrant" at the end of Part I of this Report. For information with respect to the Directors of the Company, see "Election of Directors" on pages 2-5 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting, which are hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION Pages 7-18 and pages 24-25 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting are hereby incorporated by reference. These pages set forth information on: i) compensation for directors; ii) benefit and retirement oriented plans for directors; iii) Board of Directors committees and meetings; iv) compensation for named executive officers; v) option/SAR grants in 1995; vi) options/SAR exercises in 1995 and fiscal year-end values; vii) executive officers' retirement benefits; viii) termination of employment and change of control arrangements; and ix) certain other relationships and related transactions. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pages 5-7 and pages 18-19 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting are hereby incorporated by reference as to security ownership of executive officers and directors. Page 25 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting is hereby incorporated by reference as to principal shareholders beneficially owning more than 5% of the outstanding Common Stock of the Company as of March 8, 1996. There are no arrangements known to the Company that may at a subsequent date result in a change in control of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Footnote (4) on page 7 and the section on page 25 entitled "Certain Relationships and Related Transactions" of the Proxy Statement for the AMP Incorporated 1996 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, 1995, 1994 and 1993; Consolidated Balance Sheets as of December 31, 1995 and 1994; the accompanying Notes to Consolidated Financial Statements; and the Report of Independent Public Accountants thereon, on pages 30-46 of the Annual Report to shareholders for the year ended December 31, 1995, 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, 1995. 2. Financial Statement Schedules: Schedules Included: II - Valuation and Qualifying Accounts and Reserves Report of Company's Independent Public Accountants with respect to the Financial Statement Schedules Schedules Omitted: Schedules I, III, IV, and V are omitted as not applicable because the required matter or conditions are not present. 3. EXHIBITS: Exhibit Number Description ------- ------------- 3.(i) - Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.(i).B of the Report on Form 8-K filed on January 31, 1995) 3.(ii) - Bylaws of the Company (incorporated by reference to Exhibit 3.(ii) of the Report on Form 10-K for the year ended December 31, 1994) 4.A - Shareholder Rights Plan adopted by the Company's Board of Directors October 25, 1989 (incorporated by reference to Exhibit 4.A of the Report on Form 10-K for the year ended December 31, 1994) 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 Report on Form 10-K 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* - AMP Incorporated Stock Option Plan for Outside Directors (incorporated by reference to Exhibit 4.A of Registration No. 33-54277 on Form S-8 as filed with the Securities Exchange Commission on June 24, 1994) 10.B* - Executive Severance Agreements dated 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 Pages 24-25 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (The 1983 Agreement is incorporated by reference to Exhibit 10-b of the Report on Form 10-K for the year ended December 31, 1990, and the 1990 Agreement is incorporated by reference to Exhibit 10.B of the Report on Form 10-K for the year ended December 31, 1993) 10.C* - AMP Incorporated Bonus Plan (Stock Plus Cash) (also see footnote (1) on Pages 14-15 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10c of the Report on Form 10-K for the year ended December 31, 1992) 10.D* - AMP Incorporated Pension Restoration Plan (January 1, 1995 Restatement), a supplemental employee retirement plan (summarized on Page 16-17 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report) (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.E* - Executive life insurance plan (incorporated by reference to Exhibit 10-e of the Report on Form 10-K for the year ended December 31, 1990) 10.F* - Amendments dated March 1, 1995 to executive life insurance agreements in the form dated October 1990 (incorporated by reference to Exhibit 10.A of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.G* - Executive split-dollar life insurance agreements in the form dated January 1995 (incorporated by reference to Exhibit 10.B of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.H* - AMP Incorporated Deferred Compensation Plan effective January 1, 1995 for selected management and highly compensated employees (incorporated by reference to Exhibit 10.D of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.I* - Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.F of the Report on Form 10-K for the year ended December 31, 1994) 10.J* - Retirement plan for outside directors (also see the section entitled "Retirement" on Pages 8-9 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10g of the 10-K Report for the year ended December 31, 1990) 10.K* - Outside Directors Deferred Stock Accumulation Plan (see also the section entitled "Retirement" on Pages 8-9 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' meeting incorporated by reference under Item II, Part III of this Report). 10.L* - 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 (incorporated by reference to Exhibit 10-j of the Report on Form 10-K for the year ended December 31, 1992) 10.M* - Amendment to the consulting agreement between the Company and Mr. Harold A. McInnes, and dated November 8, 1995 (also see footnote (4) on Page 7 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item II, Part III of this Report). 10.N* - Management Incentive Plan (also see column (d) of the Summary Compensation Table on Page 11 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10.A of the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.O* - Director and officer indemnification agreements (incorporated by reference to Exhibit 10-j of the Report on Form 10-K for the year ended December 31, 1991) 10.P* - AMP Incorporated 1993 Long-Term Equity Incentive Plan (also see footnote (1) on Pages 13-14 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10.B the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.Q* - AMP Incorporated Stock Bonus Unit and Supplemental Cash Bonus Agreement (incorporated by reference to Exhibit 10.B of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.R* - AMP Incorporated Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.S* - AMP Incorporated Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.D of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.T* - AMP Incorporated Performance Restricted Share Agreement (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.U* - Restricted stock agreement between the Company and Mr. Dennis Horowitz, Vice President, Americas, dated as of September 12, 1994 (incorporated by reference to Exhibit 10.Q of the Report on Form 10-K for the year ended December 31, 1994) 10.V* - Restricted stock agreement between the Company and Mr. Robert Ripp, Vice President and Chief Financial Officer, dated as of August 15, 1994 (incorporated by reference to Exhibit 10.R of the Report on Form 10-K for the year ended December 31, 1994) 13 - Portions of the Annual Report to shareholders for the year ended December 31, 1995 that are specifically incorporated by reference into this Report 21 - List of Subsidiaries 23 - Consent of Independent Public Accountants 27 - Financial Data Schedule - ---------------------- * 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. 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, 1995. 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 1996. AMP Incorporated /s/ Robert Ripp By______________________________ Robert Ripp, 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, 1996 (J. E. Marley) Director /s/ W. J. Hudson ___________________ Chief Executive Officer and March 29, 1996 (W. J. Hudson) President and a Director /s/ Robert Ripp ___________________ Vice President and March 29, 1996 (R. Ripp) Chief Financial Officer /s/ William S. Urkiel ___________________ Controller March 29, 1996 (W. S. Urkiel) /s/ Dexter F. Baker ___________________ Director March 29, 1996 (D. F. Baker) ___________________ Director March __, 1996 (R. D. DeNunzio) /s/ B. H. Franklin ___________________ Director March 29, 1996 (B. H. Franklin) /s/ Joseph M. Hixon III ___________________ Director March 29, 1996 (J. M. Hixon III) /s/ H. A. McInnes ___________________ Director March 29, 1996 (H. A. McInnes) /s/ J. J. Meyer ___________________ Director March 29, 1996 (J. J. Meyer) /s/ John C. Morley ___________________ Director March 29, 1996 (J. C. Morley) /s/ W. F. Raab ___________________ Director March 29, 1996 (W. F. Raab) ___________________ Director March __, 1996 (P. G. Schloemer) ___________________ Director March __, 1996 (T. Shiina) AMP INCORPORATED & SUBSIDIARIES Schedule II 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, 1995 $22,701,000 $6,549,000 $(5,063,000) $ 352,000 $24,539,000 Year ended December 31, 1994 $15,532,000 $8,962,000 $(2,915,000) $1,122,000 $22,701,000 Year ended December 31, 1993 $13,125,000 $6,063,000 $(3,045,000) $(611,000) $15,532,000 __________ Uncollectible accounts charged against the reserve, net of recoveries.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 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 16, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14-2 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements and, in our opinion, fairly states 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 16, 1996 /s/ Arthur Andersen LLP ---------------------------- Arthur Andersen LLP APPENDIX 10-K Report for Year Ended December 31, 1995 1) Part III, Item 10, Directors and Executive Officers of the Registrant. Page 2 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting includes a portrait photographs of the following directors and nominees for director: Dexter F. Baker and Ralph D. DeNunzio. Page 3 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: Barbara Hackman Franklin; Joseph M. Hixon III; William J. Hudson, Jr.; and James E. Marley. Page 4 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: Harold A. McInnes; Jerome J. Meyer; John C. Morley; and Walter F. Raab. Page 5 of said Proxy Statement includes portrait photographs of the following directors and nominees for director: Paul G. Schloemer and Takeo Shiina. EXHIBIT INDEX Exhibit Number Description ------- ------------- 3.(i) - Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.(i).B of the Report on Form 8-K filed on January 31, 1995) 3.(ii) - Bylaws of the Company (incorporated by reference to Exhibit 3.(ii) of the Report on Form 10-K for the year ended December 31, 1994) 4.A - Shareholder Rights Plan adopted by the Company's Board of Directors October 25, 1989 (incorporated by reference to Exhibit 4.A of the Report on Form 10-K for the year ended December 31, 1994) 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 Report on Form 10-K 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* - AMP Incorporated Stock Option Plan for Outside Directors (incorporated by reference to Exhibit 4.A of Registration No. 33-54277 on Form S-8 as filed with the Securities Exchange Commission on June 24, 1994) 10.B* - Executive Severance Agreements dated 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 Pages 24-25 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (The 1983 Agreement is incorporated by reference to Exhibit 10-b of the Report on Form 10-K for the year ended December 31, 1990, and the 1990 Agreement is incorporated by reference to Exhibit 10.B of the Report on Form 10-K for the year ended December 31, 1993) 10.C* - AMP Incorporated Bonus Plan (Stock Plus Cash) (also see footnote (1) on Pages 14-15 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10c of the Report on Form 10-K for the year ended December 31, 1992) 10.D* - AMP Incorporated Pension Restoration Plan (January 1, 1995 Restatement), a supplemental employee retirement plan (summarized on Page 16-17 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report) (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.E* - Executive life insurance plan (incorporated by reference to Exhibit 10-e of the Report on Form 10-K for the year ended December 31, 1990) 10.F* - Amendments dated March 1, 1995 to executive life insurance agreements in the form dated October 1990 (incorporated by reference to Exhibit 10.A of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.G* - Executive split-dollar life insurance agreements in the form dated January 1995 (incorporated by reference to Exhibit 10.B of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.H* - AMP Incorporated Deferred Compensation Plan effective January 1, 1995 for selected management and highly compensated employees (incorporated by reference to Exhibit 10.D of the Report on Form 10-Q for the Quarter ended March 31, 1995) 10.I* - Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.F of the Report on Form 10-K for the year ended December 31, 1994) 10.J* - Retirement plan for outside directors (also see the section entitled "Retirement" on Pages 8-9 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10g of the 10-K Report for the year ended December 31, 1990) 10.K* - Outside Directors Deferred Stock Accumulation Plan (see also the section entitled "Retirement" on Pages 8-9 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' meeting incorporated by reference under Item II, Part III of this Report). 10.L* - 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 (incorporated by reference to Exhibit 10-j of the Report on Form 10-K for the year ended December 31, 1992) 10.M* - Amendment to the consulting agreement between the Company and Mr. Harold A. McInnes, and dated November 8, 1995 (also see footnote (4) on Page 7 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item II, Part III of this Report). 10.N* - Management Incentive Plan (also see column (d) of the Summary Compensation Table on Page 11 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10.A of the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.O* - Director and officer indemnification agreements (incorporated by reference to Exhibit 10-j of the Report on Form 10-K for the year ended December 31, 1991) 10.P* - AMP Incorporated 1993 Long-Term Equity Incentive Plan (also see footnote (1) on Pages 13-14 of the Proxy Statement for the AMP Incorporated 1996 Annual Shareholders' Meeting incorporated by reference under Item 11, Part III of this Report). (Incorporated by reference to Exhibit 10.B the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.Q* - AMP Incorporated Stock Bonus Unit and Supplemental Cash Bonus Agreement (incorporated by reference to Exhibit 10.B of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.R* - AMP Incorporated Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.S* - AMP Incorporated Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.D of the Report on Form 10-Q for the Quarter ended September 30, 1993) 10.T* - AMP Incorporated Performance Restricted Share Agreement (incorporated by reference to Exhibit 10.C of the Report on Form 10-Q for the Quarter ended September 30, 1995) 10.U* - Restricted stock agreement between the Company and Mr. Dennis Horowitz, Vice President, Americas, dated as of September 12, 1994 (incorporated by reference to Exhibit 10.Q of the Report on Form 10-K for the year ended December 31, 1994) 10.V* - Restricted stock agreement between the Company and Mr. Robert Ripp, Vice President and Chief Financial Officer, dated as of August 15, 1994 (incorporated by reference to Exhibit 10.R of the Report on Form 10-K for the year ended December 31, 1994) 13 - Portions of the Annual Report to shareholders for the year ended December 31, 1995 that are specifically incorporated by reference into this Report 21 - List of Subsidiaries 23 - Consent of Independent Public Accountants 27 - Financial Data Schedule EX-10.K 2 DEFERRED STOCK ACCUM PLAN OUTSIDE DIRECTORS AMP INCORPORATED DEFERRED STOCK ACCUMULATION PLAN FOR OUTSIDE DIRECTORS AMP Incorporated (the "Corporation"), by action of its Board of Directors taken effective as of January 1, 1996, adopted the AMP Incorporated Deferred Stock Accumulation Plan for Outside Directors (the "Plan"), pursuant to which eligible members of its Board of Directors will receive phantom share credits to a Deferred Stock Accumulation Account to be maintained under the Plan. The Plan will be maintained and administered by the Corporation under the terms and conditions hereinafter set forth. 1. Effective Date. The Plan shall be effective as of January 1, 1996. 2. Eligibility. Any member of the Board of Directors of the Corporation who is not and has never been an employee of the Corporation or of a subsidiary or affiliate of the Corporation shall herein be referred to as an Outside Director. Any Outside Director serving as of December 31, 1995 shall be eligible to become a Participant under the Plan by making the election to participate described in Section 3 below. Except as provided in Section 11 below, any Outside Director who first becomes a director of the Corporation on or after January 1, 1996 shall become a Participant hereunder as of the date first elected to so serve. 3. Participation Election. Each Outside Director serving as of December 31, 1995 will be required to make a one time irrevocable election during the first calendar quarter of 1996 either to become a Participant in the Plan for the balance of his or her period of service as a director of the Corporation or to continue during such period as a participant in the AMP Incorporated Retirement Plan for Outside Directors (the "Retirement Plan"). Any such Outside Director who elects to become a Plan Participant thereby waives any and all claim to future benefit payments under the terms of the AMP Incorporated Retirement Plan for Outside Directors, in consideration for which the Outside Director shall receive an opening credit to his or her Deferred Stock Accumulation Account under the Plan determined in accordance with Section 4(b) below. 4. Deferred Stock Accumulation Accounts. A Deferred Stock Accumulation Account shall be established and maintained under the Plan in the name of each Participant as follows: (a) An Outside Director first elected to the Corporation's Board of Directors on or after January 1, 1996 shall have 300 phantom shares of Corporation common stock credited to his or her Deferred Stock Accumulation Account as of the date so elected. Thereafter, on each subsequent January 1 occurring during the Outside Director's continuing Board service, an additional 300 phantom shares of Corporation common stock shall be credited to his or her Deferred Stock Accumulation Account, subject to an overall limitation under the Plan of ten 300-share allocations. (b) An Outside Director serving as of December 31, 1995 who makes the Plan participation election described in Section 3 above shall have an opening phantom share balance in his or her Deferred Stock Accumulation Account as of January 1, 1996 equal to 300 times the lesser of ten or the Outside Director's number of full or partial prior calendar years of Board service (including calendar year 1996). For example, an Outside Director first elected in July 1992, would have an opening balance of 300 times five, or 1500 shares, where five results from counting 1992, 1993, 1994, 1995 and 1996 as full or partial prior calendar years of Board service. An additional 300 phantom shares of Corporation common stock shall be credited on January 1, 1997 and each subsequent January 1 during the Outside Director's continuing Board service, subject to the overall per Participant limitation under the Plan of ten 300-share allocations. (c) Phantom shares in an Outside Director's Deferred Stock Accumulation Account will have no voting rights or other rights of a shareholder, except that such phantom shares will be credited with dividends as further described in Section 4(d) below. (d) As of each of the Corporation's quarterly dividend payment dates commencing with March 1, 1996, a Participant shall be deemed entitled to a cash dividend on each phantom share credited to his or her Deferred Stock Accumulation Account on the related record date equal to the per share cash dividend then payable to the Corporation's shareholders. The aggregate amount of such cash dividend equivalents shall be accounted for under the Plan as having been reinvested by the Participant on the dividend payment date in further phantom shares of Corporation common stock, with the Participant's Deferred Stock Accumulation Account being credited as of the dividend payment date with the additional number of phantom shares attributable to such reinvestment of the dividend equivalents. For this purpose, the mean between the high and the low prices at which Corporation common stock traded on the New York Stock Exchange on the dividend payment date (or, if such date is not a trading date, the most recent prior trading date) shall be the per share price at which the dividend equivalents are reinvested in further phantom shares of Corporation common stock. (e) In the event of any change in the common stock of the Corporation by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or a rights offering to purchase common stock at a price substantially below fair market value, or of any similar change affecting the common stock, the value and attributes of each phantom share under the Plan shall be appropriately adjusted consistent with such change to the same extent as if such phantom shares were, instead, issued and outstanding shares of common stock of the Corporation. 5. Vesting. The value of a Participant's Deferred Stock Accumulation Account shall be fully vested and nonforfeitable upon the earliest of the date the Participant has completed five years of continuous Board service with the Corporation (i.e., on the fifth anniversary of the original date of election as an Outside Director), the date of the Participant's 72nd birthday, or the date of the Participant's death while serving on the Corporation's Board of Directors. The entire value of a Participant's Deferred Stock Accumulation Account shall be forfeited if the Participant terminates Board service with the Corporation (other than on account of death or retirement upon attainment of age 72) prior to completion of five years of continuous Board service with the Corporation. 6. Payment of Deferred Stock Accumulation Account. (a) As of any date, the value of a Participant's Deferred Stock Accumulation Account shall be equal to the number of phantom shares then credited to the account times the mean between the high and the low prices at which Corporation common stock traded on the New York Stock Exchange on the most recent prior trading date. Upon the termination of a Participant's Board service, the value of the Participant's Deferred Stock Accumulation Account, if vested, shall be payable in cash to the Participant either in a single lump sum or in up to ten annual installments, as elected and placed on file with the Corporation by the Participant at the time of first becoming a Plan Participant. This election as to form of payment may be changed by the Participant by filing a new written election with the Corporation at any time prior to a year and a day before the date of termination of Board service. (b) If a single lump sum payment is elected, payment in cash of the vested value of the Deferred Stock Accumulation Account as of the date of termination of Board service shall be made within thirty days of the termination date. (c) If installment payments are elected, the first annual installment payment will be made within 30 days of the date of termination of Board service, and annual installments subsequent to the initial installment shall be made in each succeeding January until completed. The amount of the initial installment payment shall be equal to the value of the account on the date of termination of Board service divided by the number of years in the installment payment period. The amount of each subsequent installment payment shall be equal to the value of the account on the first day of January of the distribution year divided by the then-remaining number of years in the installment payment period. Pending distribution of the second through final installments of any installment distribution, the undistributed balance of the Participant's Deferred Stock Accumulation Account shall continue to be deemed invested in phantom shares of the Corporation's common stock, with quarterly dividends continuing to be reinvested in further phantom shares as during the Participant's active period of Board service. 7. Change in Control. (a) In the event of a "Change in Control" of the Corporation followed by an Outside Director's cessation of service to the Corporation, the entire balance of the Deferred Stock Accumulation Account of the Outside Director under the Plan shall be immediately due and payable to the Outside Director in a single lump sum, notwithstanding the vesting requirements in Section 5 above and form of payment specified pursuant to Section 6 above. (b) The term "Change in 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, as amended (the "Exchange Act"), excluding, for this purpose, the Corporation or its subsidiaries, or any employee benefit plan of 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 of the Corporation 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 of Directors of the Corporation as it existed in the immediately preceding calendar year (the "Incumbent Board") such that the Directors of the Incumbent Board no longer constitute a majority of the Board of Directors; provided that any person becoming a Director in a subsequent year 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 the Plan, considered as though such person were a member of the Incumbent Board; or (iii) approval by the shareholders of the Corporation of a reorganization, merger or consolidation, in each case with respect to which persons who were the shareholders 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 (iv) a liquidation or dissolution of the Corporation or the sale of all or substantially all of the assets of the Corporation. 8. Designation of Beneficiary. If an Outside Director dies prior to receiving the entire balance of his or her Deferred Stock Accumulation Account under the Plan, any balance remaining in his or her account shall be paid in a lump sum as soon as practicable to the Outside Director's designated beneficiary or, if the Outside Director has not designated a beneficiary in writing to the Corporation, to his estate. Any designation of beneficiary may be revoked or modified at any time by the Outside Director. 9. Unsecured Obligation of Company. The Corporation's obligations to establish and maintain accounts for each eligible Outside Director and to make payments to him or her under this Plan shall be general unsecured obligations of the Corporation, and the Outside Directors with an account under the Plan shall at all times be general unsecured creditors of the Corporation. The Corporation shall be under no obligation to establish any separate fund, purchase any annuity contract, or in any other way make special provision or specifically earmark any funds for the payment of any amounts called for under this Plan, nor shall this Plan or any actions taken under or pursuant to this Plan be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any eligible Outside Director, his designated beneficiary, executors or administrators, or any other person or entity. It is the intention of the Corporation that at all times the Plan be unfunded for income tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. If the Corporation chooses to establish a fund or make any other arrangement to provide for the payment of any amounts called for under this Plan, such fund or arrangement shall conform to the terms of the model trust described in Revenue Procedure 92-64 (1992-33 IRB 16). 10. Withholding of Taxes. The rights of an Outside Director to payments under this Plan shall be subject to the Corporation's obligations at any time to withhold income or other taxes from such payments. 11. Designation of Alternate Plan. If, at the time an Outside Director is first elected to serve as a director of the Corporation, he or she requests to be designated a participant in the Retirement Plan rather than the Plan, the Nominating and Governance Committee in its sole and absolute discretion may so designate the requesting Outside Director as a participant in the Retirement Plan. Under such circumstances, the Outside Director will not become a Participant hereunder. 12. Assignability. No portion of an Outside Director's account, right or benefit under the Plan is subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or attachment or garnishment by creditors of the Outside Director, except by will or the laws of descent and distribution or by such other means as the Committee may approve from time to time. 13. Administration. The Plan shall be a administered by the Nominating and Governance Committee of the Corporation's Board of Directors. The Committee shall have full and final authority in its sole and absolute discretion to: (i) interpret the provisions of the Plan and to decide all questions of fact arising in its application, and its interpretation and decisions shall be in all respects final, conclusive and binding; (ii) impose such conditions on the payment of Plan benefits as it deems appropriate; and (iii) make all other determinations, rules and regulations necessary or advisable for the administration of the Plan. No member of the Committee shall be personally liable for any action taken or determination made in respect to the administration of the Plan if made in good faith. 14. Amendments and Termination. This Plan may be amended or terminated at any time by the Board of Directors. No amendment or termination shall affect an Outside Director's Deferred Stock Accumulation Account existing on the date such amendment or termination occurs. 15. Governing Law. The Plan shall be construed in accordance with and governed by the laws of Pennsylvania. To evidence the adoption of the Plan, the Corporation has caused its authorized officers to execute this Plan document this 28th day of March 1996. AMP Incorporated /s/ D. F. Henschel /s/ J. E. Marley Attest: _____________________ By: ______________________ Its: Chairman of the Board director\stkaccplan EX-10.M 3 MR. MCINNES CONSULT AGREE AMEND March 27, 1996 Page 2 November 8, 1995 Harold A. McInnes 260 Winding Way Camp Hill, PA 17011 Dear Hal: The Consulting Agreement dated December 21, 1992, by and between AMP Incorporated ("AMP") and you (the "Agreement") will expire on December 31, 1995. Pursuant to Section 10 of the Agreement, AMP desires to extend the Agreement on the same terms and conditions as are therein contained for an additional period of two (2) years beginning January 1, 1996 and ending December 31, 1997. If you agree to this extension, please sign this letter and the enclosed copy at the line below the word "Agreed". Please return a signed copy in the enclosed, self-addressed, stamped envelope and file a signed copy with your copy of the Agreement. Very truly yours, AMP Incorporated Agreed: /s/ W. J. Hudson /s/ H. A McInnes By: ________________________ By: ______________________________ William J. Hudson Harold A. McInnes Chief Executive Officer SS# ###-##-#### and President agreement/noncomhmc EX-13 4 FINANCIAL SCHEDULES INCLUDED IN ANNUAL REPORT FINANCIAL REVIEW EX.13 TABLE OF CONTENTS ---------------------------------- 26 Management's Discussion and Analysis 30 Consolidated Statements of Income 31 Consolidated Balance Sheets 32 Consolidated Statements of Shareholders' Equity 33 Consolidated Statements of Cash Flows 34 Notes to Consolidated Financial Statements 46 Statement of Management Responsibility 46 Report of Independent Public Accountants 25 FINANCIAL REVIEW Management's Discussion & Analysis AMP merged with M/A-COM, Inc. ("M/A-COM") on June 30, 1995 in an acquisition accounted for as a pooling-of-interests. As a result, all financial amounts and per share data have been restated to include M/A- COM in periods prior to that date. Results of Operations -- 1995 Compared with 1994 Sales for the year were $5.23 billion, increasing 19.6% from $4.37 billion in 1994. The significant increase is attributable to good economic growth in the major countries in which AMP operates throughout the world, with the exception of Japan, as well as increased market share resulting from greater acceptance of AMP products globally. The weakening of the U.S. dollar throughout the year, particularly against the Japanese yen and the German mark, increased 1995 sales by $198 million. Economic growth was more accelerated in the first half of 1995. The more modest growth experienced in the latter part of the year is expected to continue in the first half of 1996; however, faster growth should occur in the second half if, as generally expected, the economies of the U.S., Japan and Europe improve. Net income increased 14% in 1995 to $1.96 per share from $1.72 per share in 1994. Net income without the negative impact of the one-time charges and share dilution associated with the merger with M/A-COM was $2.15 per share in 1995. Exchange rate movements did not have a significant impact on earnings per share. Weighted average shares outstanding increased slightly due to the exercise of stock options resulting from the merger with M/A-COM on June 30, 1995. During 1995, the Company improved its return-on-equity to 16.2% from 15.9% in 1994. Return-on-assets remained consistent with 1994's 9.9%. However, 1995's return-on-equity and return-on-assets excluding the effects of the one-time costs associated with the merger with M/A-COM were 17.3% and 10.6%, respectively. Gross income decreased to 32.3% of sales in 1995 from 34% in the prior year. Most of this decline was due to product mix, principally as a result of the more rapid growth of the Company's newer technology businesses (Global Interconnect Systems Business, "GISB"). Gross margins are lower for GISB businesses since they are in the development stage and have not yet achieved the commercial volumes and efficiencies associated with the Company's mature businesses. Improvements in the gross margin of GISB were achieved in 1995 and further improvements are projected for 1996. Also contributing to the gross margin decline were the AMP-AKZO operating results for the second half of the year, which were included in the consolidated income statement in full due to AMP assuming 100% control on June 30, 1995 of this former 50% joint venture. Selling, General and Administrative Expenses declined as a percentage of sales in 1995 to 18.6% from 18.9% in 1994 due to increases in sales volume without commensurate increases in operating expenses. Offsetting this decline were the one-time charges of $48.7 million (approximately 1% of sales) associated with the M/A-COM merger. Research, Development and Engineering (RD&E) expenditures reached $568 million in 1995, up 18.8% from 1994's $478 million. With this growth, RD&E remained at the historical rate of approximately 11% of revenue. Of the $568 million expended this year, $351 million qualifies for the creation and application of new and improved products and processes as defined by Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs." Other Deductions, net, decreased by $18.6 million in 1995 to $13.4 million primarily as a result of gains on the sales of securities and real property realized in 1995, lower amortization of intangible assets related to acquisitions and the consolidation of AMP-AKZO, previously a 50% joint venture. Interest expense increased by $7.7 million due to higher levels of debt in France, Great Britain, Japan and Korea, as well as debt assumed in the acquisition of Simel in late 1994. Offsetting these increases was a decrease in interest expense incurred by M/A-COM due to the redemption of $66 million in debentures in August of 1995. The effective tax rate decreased to 36% in 1995 from 37.6% in 1994 as a result of the reduction of certain state rates and the change in the overall level and mix of income and dividends from the international companies. Significant sales growth occurred in each of the geographic segments in 1995, a year when, based on the Company's estimates, the connector industry grew approximately 7%. The Americas, which includes the Terminal/Connector, GISB and Wireless business units in the United States and other countries in the Americas, had sales to trade customers of $2.47 billion, reflecting a 13.9% increase over the prior year. The strongest growth was in the automotive, communications, and industrial/commercial equipment markets, along with very robust growth associated with the GISB products. Americas sales were 47.2% of the worldwide total, down from 49.6% in 1994. European segment sales to trade customers increased 18.7% in local currencies and 29.8% in U.S. dollars in 1995. Sales growth was strongest in Germany, Great Britain, The Netherlands, Scandinavia and Spain. Significant industry growth was experienced in the communications, commercial/industrial equipment and, until later in the year, automotive markets. European sales represented 32.5% of the worldwide total in 1995 as compared to 30% in 1994. 26 Asia/Pacific segment sales to trade customers grew 10.5% in local currencies and 18.7% in U.S. dollars. The continued slow economic recovery in Japan resulted in only modest sales growth in that country. Sales in Japan account for over half of the sales in the region. Strong broad-based sales growth continued in the rest of the segment because of economic expansion and further migration of manufacturing activities to the Asia/Pacific region. Markets with the strongest growth were commercial/industrial equipment, computers, and networking equipment and systems. Results of Operations -- 1994 Compared with 1993 Sales for the year reached $4.37 billion, increasing 15% over 1993's $3.79 billion. Improving economic conditions in Europe and Japan contributed to broad-based sales growth throughout the world. In the United States, the Company increased sales in every major market category it serves with the exception of M/A-COM's planned decrease in U.S. Department of Defense related sales, which was more than offset by increased sales in the commercial markets M/A-COM serves. Changes in exchange rates increased sales by $62.7 million as the U.S. dollar weakened throughout the year against the Japanese yen and in the second half against the currencies of Western Europe. Net income increased 31.5% in 1994 to $1.72 per share from $1.31 per share in 1993 before the cumulative effect of 15 cents per share from the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", in 1993. Exchange rate movements that increased sales in 1994 added a few cents per share to net income. Average shares outstanding were slightly lower during 1994 as a result of the Company's share repurchase plan. During 1994, the Company improved its return-on-equity to 15.9% from 13.4% in 1993 while also improving its return-on-assets to 9.9% from 8.4% in 1993 (1993 return computed before cumulative effect of accounting change). Gross income as a percent of sales was 34% in 1994 compared with 32.9% in 1993. This increase is the result of productivity gains and improved utilization of manufacturing capacity. Cost reduction programs and product stratification strategies helped offset the negative impact of new business startups and pricing pressures. Selling, General and Administrative Expenses were 18.9% of sales in 1994 down from 19.6% of sales in 1993. The Company increased its investment in future-oriented SG&A infrastructure and new business startups during 1994 which served to increase expenses. However, this was more than offset by the $26.3 million decrease in M/A-COM's SG&A expense. This decrease was primarily attributable to restructuring charges of $27.5 million recorded in 1993, which were reduced by non-recurring gains resulting from the sale of a product line and insurance recoveries of $5.8 million recognized in the same period. This restructuring was the result of a continued decline in M/A-COM's defense business which in 1994 accounted for 50% of its customer orders. The remaining decrease in SG&A attributable to M/A-COM is mainly the result of efficiencies realized from consolidation and downsizing initiatives over the last two years. Research, Development and Engineering expenditures reached $478 million in 1994, up 12% from 1993's $425 million. Of the $478 million expended this year, $287 million qualifies for the creation and application of new and improved products and processes as defined by Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs." Other Deductions, net, increased $16.6 million in 1994 to $31.9 million. Major changes were non-recurring investment portfolio gains in 1993, write-down of the carrying value of two of the Company's minority- interest investments, continued accelerated amortization of certain intangible assets related to acquisitions and decreased interest income. Interest expense was $29 million, up $1 million from 1993 due to M/A- COM's increased borrowings and higher interest rates. The income tax rate on pretax income declined from 38.4% in 1993 to 37.6% in 1994 reflecting changes in the geographic mix of taxable income. Significant sales growth over 1993 occurred in each of the geographic segments. In 1994, the Company believes the worldwide connector industry grew at an annual rate of 8%. During the same period, the Company increased sales 15%, exceeding the Company's objective of growing 1.5 times the industry growth rate. Sales to trade customers in the Americas, which includes the Terminal/Connector, GISB and Wireless business units in the United States and other countries in the Americas, increased 13.4% in 1994 to $2.17 billion. The strongest growth was in the automotive, communications equipment, industrial/commercial equipment and GISB markets. Sales increased every quarter in the United States in 1994 as the domestic economy continued to perform well. Americas sales were 49.6% of the worldwide total, down from 50.5% in 1993. European segment sales to trade customers increased 15% in local currencies and 17% in U.S. dollars as economic recovery continued throughout the year. Sales growth was broad-based and was strongest in the automotive, computer/business equipment, telecommunications and industrial machinery markets. Geographically, France, Great Britain, Italy and Spain were the leaders. European sales in 1994 were 30% of the worldwide total, unchanged from 1993. 27 Asia/Pacific segment sales to trade customers grew 10% in local currencies and 17% in U.S. dollars. Economic growth outside of Japan continued to be strong as markets expanded and outsourcing of manufacturing from Japan increased. The Company experienced improving business conditions within Japan in 1994 as the recovery continued to slowly gather strength. Strongest market growth in the region was in consumer electronics, computers and communication equipment. Price and Cost Trends The primary raw materials used in the Company's products include industrial metals, such as copper, gold and zinc, as well as plastics. The costs of these materials early in this decade were relatively stable to declining; however, over the last two years prices have increased significantly. Copper prices on average increased 26% in both 1994 and 1995 from $.85 per pound in 1993 to $1.07 in 1994 and $1.35 in 1995. Gold prices stabilized in 1995 at $384 per troy ounce after increasing 7% in 1994. The cost of zinc has been relatively stable, increasing by less than 4% in both 1994 and 1995. Plastic raw materials prices have held relatively steady in 1995 after increasing significantly in 1994 and early 1995. The impact of plastic price increases on the Company was limited to 2% to 4% in 1995 primarily through contractual arrangements with suppliers. The Company's ability to manage the costs of its raw materials is largely dependent on more efficient material usage, and with respect to plastics, its size advantage and volume purchasing capability. The use of protective hedging is a small component of the overall cost containment strategy. Labor and service cost increases were again moderate in 1995, continuing a trend evident since 1990. Wage rate increases were modest and continued to parallel industry, regional and national averages in the countries in which the Company operates. Offsetting both pricing pressures and the negative impact of product mix on margins are productivity improvements and the reduction of the amount of raw materials, particularly metals, used to manufacture products. The marketplace has experienced price declines of about 2% to 3% per annum since 1990. The Company believes the availability of the materials and labor skills it requires should remain adequate during 1996 and for the next several years. Financial Position and Liquidity The Company has over $1 billion of working capital at December 31, 1995. Cash and short-term investments decreased $130 million from the prior year-end as a result of significantly increased capital expenditures, the redemption of $66 million of M/A-COM convertible debentures, and increased accounts receivable and inventory associated with strong sales growth and expansion. Cash provided by operations for 1995 was $747 million, an increase of 9% from the prior year, in spite of the significant increases in both accounts receivable and inventory without offsetting increases in accrued liabilities. Accounts receivable increased $103 million or 11% due to the higher level of sales in the fourth quarter of 1995 as compared to the same period in the prior year. The average number of days sales outstanding in trade accounts receivable at December 31, 1995 held generally steady with the prior year. Inventories increased $121 million to $763 million at December 31, 1995 from $642 million at December 31, 1994. Inventory turns increased only slightly. Approximately half of the Company's operating cash flows are generated overseas. There are currently no material restrictions on the transfer of these funds within the Company; however, certain business decisions result in the permanent investment of a portion of these funds in the international companies. These permanent investments have no significant impact on the Company's ability to fund its cash requirements. In the fourth quarter of 1995, AMP signed an agreement for a $150 million five-year revolving credit facility with a group of U.S. banks primarily to support a $200 million commercial paper program, also established in the fourth quarter. This formal, syndicated credit facility replaced certain existing uncommitted short-term facilities. The commercial paper program has received the highest ratings from Standard & Poor's Ratings Group, Moody's Investors Service, Inc. and Duff & Phelps Credit Rating Co. Neither of these funding sources has been used as of December 31, 1995. In 1996, AMP plans to fund the majority of its working capital needs, dividends and capital expansion using cash flow from operations and, to a lesser extent, investing activities. However, these external sources of funding can be drawn upon if necessary to finance additional growth requirements. AMP's low debt-to-equity ratio of 19.2% affords it considerable leverage for future expansion. Capital Expenditures Because of the Company's need for additional capacity as well as significant expansion into new product areas and geographic markets in 1995, capital expenditures increased to $713 million from $473 million in 1994 and $370 million in 1993. Approximately 75% of this spending was for machinery and equipment for capacity additions, 28 productivity improvements and tooling for new products. The balance of the expenditures was for additional floor space, including new production facilities and/or expansion of existing facilities in France, the Czech Republic, Hungary, Scotland, Switzerland, Malaysia, China and Colorado, USA. In addition, an engineering facility and human resources development center were added in Harrisburg, PA. Capital expenditures for 1996 should remain relatively consistent with the 1995 level. Environmental Matters The Company continued to implement and enhance its corporate-wide program for managing environmental matters. This program, which was established more than ten years ago, has evolved into a truly global effort in response to Company initiatives and worldwide business and regulatory forces. A global approach is necessary as regional and worldwide environmental initiatives gain momentum through our customers, organizations such as the European Union, the Organization for Economic Cooperation and Development (OECD), the International Organization for Standards (ISO), NAFTA and the Company's own strict global standards. The Company also continued to implement various environmental management programs to provide an infrastructure that better ensures environmental compliance on a global basis and to be positioned for timely response to possible customer requirements in 1996 for certification under the new ISO 14000 environmental standard. Led by Global Environmental Services, a corporate governance group with staff in Harrisburg, London and Singapore, the global environmental program involves the efforts of Company employees from a variety of functions and locations, including but not limited to executive management on the Environmental Oversight Committee, a cadre of environmental coordinators in the various Company business units, staff from the Global Engineering and Manufacturing Assurance, Global Products Standards, Government Relations and Materials Engineering groups, and operations staff in connection with the integration of the Company's environmental policies into newly acquired businesses and expanding operations around the world. Despite these proactive efforts in recent years, potential liabilities for investigative and remedial costs are known to exist related to activities conducted in earlier periods. In 1995, as a result of Company site investigations, including those related to the planned closure of the Matrix Science operations in California, and the acquisition of M/A-COM, the Company's environmental contingencies increased. However, the Company continues to expect that the costs associated with such environmental sites will not have a material impact on the Company's financial position, liquidity and capital resources, or competitive position in the next several years. Specifically, the Company has potential liabilities at five National Priorities List (NPL) sites in the U.S. under the U.S. Environmental Protection Agency (EPA) Superfund program as a "generator" of wastes. At one site, the Company faces potential liability for wastes sent to a former municipal landfill. Expenditures to date amount to approximately $360,000, with costs in the $1.5 to $6 million range possible over the next two years. At the four other NPL sites owned by third parties and where the Company allegedly sent wastes in prior years, as well as three other sites in the U.S. that are under state jurisdiction, expenditures to date have not exceeded $150,000 and are not expected to exceed $750,000 in the future. In addition, the Company has also identified potential liabilities at 22 of its current or former facilities, including those of its subsidiaries. Investigations or remediation are ongoing at these properties as required by government regulations or as part of the Company's property management policy. One such site, an NPL site under the EPA Superfund program, is also subject to a corrective action consent order under the Resource Conservation and Recovery Act. The Company has spent approximately $1.9 million since 1984 to remediate this property and cleanup progressed sufficiently enough in 1995 for the Company to petition to have the site removed from the NPL. Future costs associated with this property are expected to total $1 million over the next five years. At the Matrix Science facilities in California, the Company has spent approximately $1.1 million for investigations, remediation and legal expenses since the merger in 1988, and could possibly spend up to $10 million over the next five years based on current information. Additionally, the Company has incurred approximately $1.7 million in costs to remediate conditions at its current facility in Williamstown, PA; an additional $2.8 million in costs are expected. Two properties formerly occupied by M/A-COM in Sunnyvale, CA and New Brunswick, NJ are also undergoing remediation, with expected future costs of approximately $1.5 million. The Company has spent approximately $12.2 million on the remaining 17 current or former properties since 1984 and future costs are anticipated to be $1 to $2 million annually for the next several years. Several of these facilities are believed to have been impacted by third parties and the Company is taking appropriate legal action. At one such site, local citizens have filed a notice of intent to bring a claim against the Company; however, based on current information the Company believes it will not incur additional liability. The Company's accounting policy with respect to environmental costs in general is described in Note 1 to the Consolidated Financial Statements. 29
CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME ----------------------------------------------------------------------------------------------- (dollars in thousands except per share data) Year Ended December 31, ----------------------------------------------------------------------------------------------- 1995 1994 1993 ---------------------------------------------- Net Sales $5,227,226 $4,369,067 $3,790,476 Cost of Sales 3,539,715 2,884,185 2,541,801 ----------------------------------------------------------------------------------------------- Gross income 1,687,511 1,484,882 1,248,675 Selling, General and Administrative Expenses 969,512 824,945 744,131 ----------------------------------------------------------------------------------------------- Income from operations 717,999 659,937 504,544 Interest Expense (36,847) (29,153) (27,961) Other Deductions, net (13,418) (31,972) (15,360) ----------------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of change in accounting principle 667,734 598,812 461,223 Income Taxes 240,400 225,022 176,874 ----------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 427,334 373,790 284,349 Cumulative effect of change in accounting principle (Note 16) -- -- 33,100 ----------------------------------------------------------------------------------------------- Net Income $427,334 $373,790 $317,449 ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- Income per share before cumulative effect of change in accounting principle $ 1.96 $ 1.72 $ 1.31 Cumulative effect of change in accounting principle per share -- -- .15 ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- Net Income Per Share $ 1.96 $ 1.72 $ 1.46 ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
30
CONSOLIDATED BALANCE SHEETS December 31, December 31, (dollars in thousands) 1995 1994 - ----------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 212,538 $ 244,568 Securities available for sale 58,197 156,708 Receivables 1,011,460 908,390 Inventories 762,803 641,953 Deferred income taxes 137,043 135,498 Other current assets 95,867 87,183 - ----------------------------------------------------------------------------------------------- Total current assets 2,277,908 2,174,300 - ----------------------------------------------------------------------------------------------- Property, Plant and Equipment 4,352,026 3,713,660 Less - Accumulated depreciation 2,413,760 2,138,978 - ----------------------------------------------------------------------------------------------- Property, plant and equipment, net 1,938,266 1,574,682 - ----------------------------------------------------------------------------------------------- Investments and other assets 288,565 343,564 - ----------------------------------------------------------------------------------------------- Total Assets $ 4,504,739 $4,092,546 - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity Current Liabilities: Short-term debt $ 318,169 $ 182,338 Payables, trade and other 460,892 403,947 Accrued payrolls and employee benefits 168,667 156,322 Accrued income taxes 196,417 247,997 Other accrued liabilities 121,948 116,318 - ----------------------------------------------------------------------------------------------- Total current liabilities 1,266,093 1,106,922 - ----------------------------------------------------------------------------------------------- Long-Term Debt 212,485 278,843 Deferred Income Taxes 45,768 34,249 Other Liabilities 212,365 176,777 - ----------------------------------------------------------------------------------------------- Total liabilities 1,736,711 1,596,791 - ----------------------------------------------------------------------------------------------- Shareholders' Equity: Common stock, without par value- Authorized 700,000,000 shares, issued 232,491,889 shares 79,580 70,135 Other capital 83,454 80,105 Deferred compensation (2,489) (4,568) Cumulative translation adjustments 156,837 129,612 Net unrealized investment gains 19,423 21,585 Retained earnings 2,667,755 2,442,317 Treasury stock, at cost (236,532) (243,431) - ----------------------------------------------------------------------------------------------- Total shareholders' equity 2,768,028 2,495,755 - ----------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 4,504,739 $4,092,546 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
31
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Net Cumulative Unrealized Common Other Deferred Translation Investment Retained Treasury Stock (amounts in thousands) Stock Capital Compensation Adjustments Gains, net Earnings Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1993 $62,003 $78,992 $(5,806) $ 81,804 $ -- $2,090,132 (14,781) $(235,988) Net income 317,449 Cash dividends-80 cents per share (167,838) Purchases of treasury stock (135) (3,771) Distributions of treasury stock under bonus plans 134 88 2,431 Issuance of common stock under bonus plans 3,403 (1,822) Amortization of deferred compensation 2,026 Translation adjustments (16,587) Other (32) - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 65,406 79,126 (5,602) 65,217 -- 2,239,711 (14,828) (237,328) Net income 373,790 Cash dividends - 84 cents per share (176,177) Change in subsidiaries' year-ends 5,034 Purchases of treasury stock (336) (10,800) Distributions of treasury stock under bonus plans 979 160 4,697 Issuance of common stock under bonus plans 4,729 (606) Amortization of deferred compensation 1,640 Translation adjustments 64,395 Net unrealized investment gains 21,585 Other (41) - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 70,135 80,105 (4,568) 129,612 21,585 2,442,317 (15,004) (243,431) Net income 427,334 Cash dividends - 92 cents per share (196,521) Change in subsidiary's year-end (5,375) Purchases of treasury stock (87) (3,439) Distributions of treasury stock under bonus plans 1,075 (3,734) 209 7,228 Issuance of common stock under bonus plans 9,445 Amortization of deferred compensation 5,813 Translation adjustments 27,225 Net unrealized investment losses (2,162) ESOP termination 2,274 Acquisition of business 83 3,110 - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 $79,580 $83,454 $(2,489) $156,837 $19,423 $2,667,755 (14,799) $(236,532) - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
32
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Year Ended December 31, - ------------------------------------------------------------------------------------------------------------- 1995 1994 1993 --------------------------------------------------- CASH AND CASH EQUIVALENTS at January 1 $ 244,568 $ 267,702 $ 406,889 - ------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income 427,334 373,790 317,449 Noncash adjustments- Depreciation and amortization 361,394 324,509 306,435 Deferred income taxes 35,460 (43,565) (64,911) Increase to other liabilities 41,688 17,334 18,554 Other, net 42,292 43,693 35,773 Changes in operating assets and liabilities net of effects of acquisitions of businesses (164,356) (25,777) (63,393) Change in subsidiaries' year-ends 3,164 (4,568) -- - --------------------------------------------------------------------------------------------------------- Cash provided by operating activities 746,976 685,416 549,907 - --------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions to property, plant and equipment (712,976) (472,612) (369,819) Decrease (increase) in securities available for sale 97,545 24,323 (43,843) Acquisitions of businesses, less cash acquired (299) (56,377) (16,230) Increase in investments (71,423) (47,619) (37,059) Other, net 28,626 (3,813) 13,698 - --------------------------------------------------------------------------------------------------------- Cash used for investing activities (658,527) (556,098) (453,253) - --------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Changes in short-term debt 139,968 (37,515) (137,177) Proceeds from long-term debt 36,773 71,343 107,265 Repayments of long-term debt (99,748) (13,347) (23,120) Purchases of treasury stock (3,439) (10,800) (3,771) Dividends paid (196,521) (176,177) (167,838) Other, net 1,188 1,333 (1,490) - --------------------------------------------------------------------------------------------------------- Cash used for financing activities (121,779) (165,163) (226,131) - --------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,300 12,711 (9,710) - --------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS at December 31 $ 212,538 $ 244,568 $267,702 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- CHANGES IN OPERATING ASSETS AND LIABILITIES: Receivables $ (78,348) $(117,789) $(57,851) Inventories (103,359) (70,125) (23,857) Other current assets 19,818 5,577 (18,923) Payables, trade and other 14,460 59,547 (5,302) Accrued payrolls and employee benefits 14,138 30,142 13,626 Other accrued liabilities (31,065) 66,871 28,914 - --------------------------------------------------------------------------------------------------------- $(164,356) $ (25,777) $(63,393) - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING PRINCIPLES Principles of Consolidation--The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments representing ownership of 20% to 50% in affiliates and joint ventures are accounted for using the equity method. The Company's M/A-COM, Inc. subsidiary (See Note 4) changed its fiscal year-end in 1995 from the Saturday nearest September 30 to December 31 in order to be consistent with the rest of the companies' year-ends. In 1994, the Company's Asia/Pacific and Americas subsidiaries changed their fiscal year-ends from November 30 to December 31 for the same purpose. In accordance with guidelines of the Securities and Exchange Commission, only twelve months of income and expense for the affected companies were included in the Consolidated Statements of Income for 1995 and 1994. Results of operations associated with the additional months were recorded directly to retained earnings in each year and cash flow activity for these same periods was reflected as a single line item in the operating activities section of the Consolidated Statements of Cash Flows. Cash and Cash Equivalents--Cash and cash equivalents are comprised of cash in banks, time deposits, repurchase agreements and investments with original maturities of 91 days or less on their acquisition date. Investments--On January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). This standard requires that certain debt and equity securities be adjusted to market value at the end of each accounting period. Unrealized market value gains and losses are charged to earnings if the securities are traded for short-term profit. Otherwise, such unrealized gains and losses are charged or credited to a separate component of shareholders' equity. SFAS No. 115 was adopted prospectively, and had no impact on earnings. Management determines the proper classifications of investments in obligations with fixed maturities and marketable equity securities at the time of purchase and reevaluates such designations as of each balance sheet date. At December 31, 1995 and 1994, all securities covered by SFAS No. 115 were designated as available for sale. Accordingly, these securities are stated at fair value, with unrealized gains and losses reported in a separate component of shareholders' equity. Realized gains and losses on sales of investments, as determined on a specific identification basis, are included in the Consolidated Statements of Income. 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 which extend the lives of the related assets 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. Other Assets--The excess of cost over the fair value of assets acquired is amortized over periods not exceeding 15 years. In assessing the recoverability of goodwill, impairment is measured against the emergence and success of competing technologies. When factors indicate that goodwill should be evaluated for possible impairment, the Company uses an estimate of the related business's undiscounted cash flows over the remaining life of the goodwill to assess recoverability. Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 34 Environmental Costs--Environmental expenditures which relate to current operations are capitalized or charged to expense as appropriate. Future remedial expenses are accrued without regard to possible recoveries from third parties when their outcome appears probable and their potential liability can be reasonably estimated. Per Share Amounts--Per share amounts have been calculated using the weighted average number of shares outstanding during each period, adjusted for the impact of common stock equivalents using the Treasury Stock Method when the effect is dilutive. The weighted average number of shares outstanding used to compute per share data was 217,716,093 in 1995, 217,012,611 in 1994 and 216,628,525 in 1993. Future Accounting Changes--In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of" (SFAS No. 121). This statement requires recognition of impairment losses for long-lived assets whenever events or changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows associated with such assets. The measurement of the impairment losses to be recognized is to be based on the difference between the fair values and the carrying amounts of the assets. The statement also requires that long-lived assets held for sale be reported at the lower of carrying amount or fair value less cost to sell. SFAS No. 121 must be adopted by the Company in 1996 and such adoption is not expected to have a material effect on the financial position or results of operations of the Company. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") was issued in October 1995. This statement establishes a fair value based method of accounting for grants of equity instruments to employees or suppliers in return for goods or services. With respect to stock-based employee compensation arrangements, SFAS No. 123 permits entities to continue to apply the current accounting methods prescribed by APB Opinion No. 25; however, if the effect is significant, proforma disclosures of net income and earnings per share, determined as if the fair value based method had been applied in measuring compensation cost, are to be provided in the footnotes to the 1996 financial statements. The provisions of the new statement are not anticipated to have any material effect since the accounting for stock- based compensation arrangements will not be changed. 2. STOCK SPLIT On January 25, 1995, the Board of Directors authorized a two-for-one stock split that was distributed on March 2, 1995, to shareholders of record on February 6, 1995. In addition, authorized shares were increased from 350,000,000 to 700,000,000. All references in the financial statements to number of shares, per share amounts and market prices of the Company's common stock have been retroactively restated to reflect the increased number of common shares outstanding. 3. PROPERTY, PLANT AND EQUIPMENT At December 31, property, plant and equipment was comprised of the following:
(dollars in thousands) 1995 1994 ------------------------------------------------------------------------- Land $ 81,565 $ 66,135 Buildings and leasehold improvements 898,362 747,996 Machinery and equipment 3,003,591 2,546,700 Machines and tools with customers 368,508 352,829 ------------------------------------------------------------------------- $4,352,026 $3,713,660 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation expense was $348,216,000, $293,245,000 and $284,609,000 in 1995, 1994 and 1993, respectively.
4. MERGER WITH M/A-COM, INC. On June 30, 1995, M/A-COM, Inc. (M/A-COM) was merged with and into the Company through the issuance of 7.6 million shares of AMP common stock which were exchanged for all of the outstanding common shares of M/A-COM. The merger qualifies as a tax-free reorganization and was accounted for as a pooling-of-interests. Accordingly, the Company's financial statements have been restated to include the results of M/A-COM for all periods presented. As discussed in Note 1, prior to the merger, M/A-COM used a fiscal year ending on the Saturday nearest September 30. Accordingly, the restated financial statements combine the October 1, 1994 and October 2, 1993 financial statements of M/A-COM with the December 31, 1994 and 1993 financial statements of AMP, respectively. Net sales and the net loss of M/A-COM for the three-month period ended December 31, 1994 were $81.6 million and $5.4 million, respectively, with the net loss reflected as an adjustment to retained earnings effective January 1, 1995. Combined and separate results of AMP and M/A-COM during the periods preceding the merger were as follows (in thousands):
- ---------------------------------------------------------------------------------------- Six Months Ended June 30, 1995 (unaudited) AMP M/A-COM Adjustment Combined - ---------------------------- --------------------------------------------------- Sales $2,440 $192 $ -- $2,632 Net income (loss) 233 1 (31) 203 Fiscal Year 1994 - ---------------- Sales $4,027 $342 $ -- $4,369 Net income (loss) before cumulative effect of change in accounting principle 369 4 1 374 Cumulative effect of change in accounting principle -- 3 (3) -- - ---------------------------------------------------------------------------------------- Net income (loss) $ 369 $ 7 $ (2) $ 374 - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- Fiscal Year 1993 - ---------------- Sales $3,450 $340 $ -- $3,790 Net income (loss) before discontinued operations and cumulative effect of change in accounting principle 297 (23) 10 284 Discontinued operations, less income taxes -- 1 (1) -- Cumulative effect of change in accounting principle -- -- 33 33 - ---------------------------------------------------------------------------------------- Net income (loss) $ 297 $(22) $ 42 $ 317 - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
The combined financial results presented above include adjustments made to conform the accounting policies of the two companies, as well as transaction fees and one-time expenses associated with the merger. The primary adjustment affecting income was the restatement of M/A-COM's adoption of SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109") due to the reduction of the valuation allowance for deferred tax assets that were not expected to be realized by M/A-COM operating separately. M/A-COM adopted this accounting principle originally at the beginning of its fiscal year 1994; however, the timing of this adoption was changed to the beginning of fiscal year 1993 in order to conform with the timing of AMP's adoption. The effect of this adjustment is reflected as income from the cumulative effect of a change in accounting principle of $35 million and a $7 million reduction in the tax provision in fiscal year 1993 and a $1 million reduction in the tax provision in fiscal year 1994. Prior to the restatement for the M/A-COM merger, AMP's effect of adopting SFAS No. 109, a $2 million charge, was included in net income from operations. No intercompany transactions existed between the two companies during the periods presented. Transaction costs and one-time charges resulting from the merger of $48.7 million ($31 million net-of-tax) include expenses for investment banker and professional fees, severance related costs and charges to standardize the accounting practices of the companies. 36 5. SECURITIES AVAILABLE FOR SALE Securities available for sale at December 31, are summarized as follows:
December 31, 1995 Gross Gross Unrealized Unrealized Holding Holding Market (dollars in thousands) Cost Gains Losses Value - ----------------------------------------------------------------------------------- State and Municipal Securities-- Maturing in 1 year or less $ 2,800 $ 1 $ -- $ 2,801 Common Stock 23,027 32,369 -- 55,396 - ----------------------------------------------------------------------------------- $ 25,827 $32,370 $ -- $58,197 - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
December 31, 1994 Gross Gross Unrealized Unrealized Holding Holding Market (dollars in thousands) Cost Gains Losses Value - ----------------------------------------------------------------------------------- U. S. Government Securities-- Maturing in 1 year or less $ 1,987 $ -- $ -- $ 1,987 Maturing between 1 and 5 years 54,724 -- 1,777 52,947 State and Municipal Securities-- Maturing in 1 year or less 20,340 -- 1 20,339 Maturing between 1 and 5 years 8,475 -- 199 8,276 Commercial Paper 12,358 -- 329 12,029 Common Stock 21,595 39,535 -- 61,130 - ----------------------------------------------------------------------------------- $119,479 $39,535 $2,306 $156,708 - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
Differences between cost and market of $32,370,000 (less deferred taxes of $12,896,000) and $37,229,000 (less deferred taxes of $15,644,000) were credited to a separate component of shareholders' equity called "Net Unrealized Investment Gains" as of December 31, 1995 and 1994, respectively. Proceeds from sales of securities available for sale were approximately $127,186,000 and $249,098,000 for the years ended December 31, 1995 and 1994, respectively. Gross gains and gross losses on such sales were not significant. At December 31, 1995 and 1994, approximately $89,994,000 and $42,000,000 of securities available for sale with original maturities of 91 days or less were included in cash and cash equivalents. The market values of these securities approximate cost. 6. INVENTORIES At December 31, inventories were comprised of the following:
(dollars in thousands) 1995 1994 - ----------------------------------------------------------------------- Finished goods and work in process $411,504 $373,094 Purchased and manufactured parts 263,926 199,493 Raw materials 87,373 69,366 - ----------------------------------------------------------------------- $762,803 $641,953 - ----------------------------------------------------------------------- - -----------------------------------------------------------------------
7. LEASE COMMITMENTS The Company leases certain buildings and transportation and other equipment. Capital leases are not significant. Total rental expense under operating leases for the year ended December 31 was $79,978,000 in 1995, $67,564,000 in 1994 and $62,606,000 in 1993. Minimum rental commitments at December 31, 1995 under leases with initial terms in excess of one year were: 1996 -- $43,665,000 1999 -- $14,901,000 1997 -- $34,257,000 2000 -- $10,847,000 1988 -- $23,000,000 2001 and beyond -- $70,392,000 8. FINANCIAL INSTRUMENTS The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined commodity price and foreign currency risks. Commodities swap agreements are utilized to hedge anticipated purchases of certain metals used in the Company's manufacturing operations. Under these swap agreements, payments are made or received based on the differential between a specified price and the actual price of the metals. These contracts generally cover a one-year period and are accounted for as hedges, with all gains and losses recognized in cost of sales when the commodities are consumed. At December 31, 1995 and 1994, commodity contracts involving notional amounts of $1,400,000 and $52,000,000, respectively, were outstanding. These notional amounts do not represent amounts exchanged by the parties; rather, they are used as the basis to calculate the amounts due under the agreements. From time to time the Company and its subsidiaries utilize forward foreign currency exchange contracts to minimize the impact of currency movements, principally on intercompany royalties, inventory purchases and dividends denominated in currencies other than their functional currencies. The terms of these contracts are generally less than one year and they also are hedges of anticipated transactions. Gains and losses related to these agreements are recorded when the related transaction occurs. The purpose of the Company's hedging is to protect it from the risk that the eventual functional currency inflows resulting from the intercompany payments will be adversely affected by changes in exchange rates. The major currency exposures hedged by the Company include the German mark, the Japanese yen, the British pound, the Singapore dollar and the Mexican peso. At December 31, 1995 and 1994, the Company and its subsidiaries had forward foreign currency exchange contracts with aggregate contract amounts of approximately $66,000,000 and $95,000,000, respectively. On March 11, 1994, the Company entered into a foreign currency swap with a AAA-rated counterparty to hedge a portion of its net investment in its Japanese subsidiary. Under terms of the agreement, the Company will swap 15.9 billion yen for U.S. $150 million in ten years based on the exchange rate on the day the contract became effective. In addition, the contract provides for the Company to make semi-annual interest payments of 4.61% on the 15.9 billion yen, while receiving semi-annual interest payments of 6.71% on the U.S. $150 million. The Company has the unilateral right to unwind the swap early. Due to the fact that this contract is an effective hedge of an investment in a foreign entity, any gain or loss on the contract is recorded directly to cumulative translation adjustments. While it is not the Company's intention to terminate any of the above financial instruments, the fair values were estimated by obtaining quotes from brokers which represented the amounts that the Company would receive or pay if the agreements were terminated at the balance sheet dates. These fair values indicated that termination of the commodities swap agreements, the forward foreign currency exchange contracts and the foreign currency swap agreement at December 31, 1995 would have resulted in an $11,000 gain, a $4,900,000 gain and a $12,100,000 loss, respectively. Termination of these agreements at December 31, 1994 would have resulted in a $23,000,000 gain on the commodities contracts, a $3,900,000 gain on the forward foreign currency exchange contracts and a $21,300,000 loss on the foreign currency swap agreement. Due to the volatility of currency exchange rates and commodity prices, these estimated results may or may not be realized. 9. 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 $17,204,000 in 1995, $18,097,000 in 1994 and $19,594,000 in 1993. 10. RESEARCH AND DEVELOPMENT Research and development expenditures for the creation and application of new and improved products and processes for the year ended December 31 were $351,000,000 in 1995, $287,000,000 in 1994 and $277,000,000 in 1993. 38 11. DEBT At December 31, debt was comprised of the following:
1995 1994 - -------------------------------------------------------------------------------------------- Due Due Long Within Long Within (dollars in thousands) Term One Year Term One Year - -------------------------------------------------------------------------------------------- International bank loans, 5.4% weighted interest rate (1994--5.3%), repayable in varying amounts through 2013 $206,575 $ 26,715 $202,744 $ 15,666 Convertible subordinated debentures, 9.25% M/A-COM debt redeemed August 14, 1995 -- -- 65,836 -- Mortgages and other indebtedness, 7.0% weighted interest rate (1994--8.6%), repayable through 2010 5,910 15,156 10,263 9,956 International overdrafts and demand loans, 5.9% weighted interest rate (1994--6.5%) -- 276,298 -- 156,716 - -------------------------------------------------------------------------------------------- $212,485 $318,169 $278,843 $182,338 - -------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------
At December 31, 1995, the payment schedule of debt due after one year is as follows: $26,784,000 in 1997, $44,801,000 in 1998, $21,032,000 in 1999, $39,272,000 in 2000 and $80,596,000 in 2001 and beyond. In the fourth quarter of 1995, the Company established a commercial paper program for maximum borrowing of $200,000,000. In addition, an agreement for a $150,000,000 five-year revolving credit facility was signed with a group of U.S. banks primarily to back-up the commercial paper program. The facility fee is 6.25 basis points annually and interest rate options on the facility include: (1) the higher of the Federal funds rate plus 1/2 of 1% or the prime commercial lending rate of the lead bank, (2) LIBOR, or (3) rates determined as part of a competitive bidding process. This formal syndicated credit facility replaced certain existing uncommitted short-term facilities and has a minimum shareholders' equity requirement of approximately $2 billion. Neither of these funding sources has been used as of December 31, 1995. At December 31, 1995 and 1994, the fair values of the Company's short-term and long-term debt were not significantly different from the respective carrying values. 12. SHAREHOLDER RIGHTS PLAN On October 25, 1989, the Board of Directors adopted a 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 $87.50, 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 1/2 cent 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. 39 13. EMPLOYEE RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS Defined Benefit Plans--The Company has defined benefit pension plans for substantially all U.S. employees, excluding M/A-COM. Pension benefits are based on years of service and earnings near retirement. Assets of the plans are comprised principally of equity securities and fixed income investments. The U.S. plans include provisions 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. 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. Defined Contribution Plans--The Company also provides retirement benefits to U.S. employees through defined contribution plans. Employees working for AMP and certain other U.S. subsidiaries may elect to participate in the "Employee Savings and Thrift Plan," a defined contribution 401(k) plan, which has been established as a supplemental retirement program. Under this program the Company contributes 60 cents for each dollar contributed by an employee up to 4% of an employee's base pay. U.S. employees of M/A-COM may elect to participate in the "MERIT Plan of Benefits," a defined contribution 401(k) plan. Under this plan, M/A-COM contributes a certain percentage based on the employee's years of service (50%-100%) of each dollar contributed by an employee up to 6% of an employee's cash compensation. Assets of the defined contribution plans consist primarily of various mutual funds, a fixed income fund and AMP stock. Amounts charged to expense for contributions to these plans were $15,330,000, $13,641,000 and $13,103,000 for 1995, 1994 and 1993, respectively. 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. M/A-COM, Inc. Employee Stock Ownership Plan--M/A-COM had an Employee Stock Ownership Plan (ESOP) which enabled employees to accumulate shares of stock to supplement their retirement benefits. The discretionary contributions of the ESOP were made entirely by M/A-COM and ESOP share purchases were financed by a loan from the Company. On December 15, 1995, M/A-COM terminated the ESOP and made a final contribution in the amount of the outstanding loan balance of $2,274,000. All shares were allocated to the participants at December 31, 1995. Key economic assumptions used for defined benefit plans were:
U. S. Plans International Plans - ------------------------------------------------------------------------------------ 1995 1994 1995 1994 - ------------------------------------------------------------------------------------ Settlement rate-- January 1 8.50% 7.00% 5.75% 6.25% December 31 7.00% 8.50% 5.25% 5.75% Rate of increase in compensation levels 4.50% 4.00% 3.25% 4.00% Expected long-term rate of return 9.50% 9.50% 5.75% 6.25%
Components of net periodic pension cost for the year ended December 31 were:
U. S. Plans International Plans - ------------------------------------------------------------------------------------------------- (dollars in thousands) 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 23,539 $ 22,297 $ 17,787 $ 14,044 $ 13,980 $ 12,988 Interest cost on projected benefit obligation 42,188 38,580 35,058 14,922 12,765 13,293 Actual return on plan assets (126,967) 8,213 (69,507) (23,541) (10,126) (15,457) Net amortization and deferral 74,918 (55,187) 23,198 8,221 (3,308) 3,339 - ------------------------------------------------------------------------------------------------- Net periodic pension cost $ 13,678 $ 13,903 $ 6,536 $ 13,646 $ 13,311 $ 14,163 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
41 The funded status of these plans at December 31 was:
U. S. Plans International Plans - ------------------------------------------------------------------------------------------ (dollars in thousands) 1995 1994 1995 1994 - ------------------------------------------------------------------------------------------ Plan assets at fair value $617,103 $501,305 $265,258 $237,778 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Actuarial present value of benefit obligations: Vested benefits 494,089 354,380 192,981 173,070 Nonvested benefits 51,946 44,666 35,039 29,391 - ----------------------------------------------------------------------------------------- Accumulated benefit obligation 546,035 399,046 228,020 202,461 Additional benefits based on projected future salary increases 108,579 110,437 34,533 26,990 - ------------------------------------------------------------------------------------------ Projected benefit obligation $654,614 $509,483 $262,553 $229,451 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Plan assets greater (less) than projected benefit obligation $(37,511) $ (8,178) $ 2,705 $ 8,327 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Accrued liability at year-end (76,745) (69,408) (13,973) (11,601) Unrecognized net gain 28,726 59,528 30,219 33,261 Unrecognized prior service cost (9,326) (14,429) (1,514) (88) Unrecognized transition amount, net of amortization 19,834 16,131 (12,027) (13,245) - ------------------------------------------------------------------------------------------ Plan assets greater (less) than projected benefit obligation $(37,511) $ (8,178) $ 2,705 $ 8,327 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
Components of net periodic retiree medical cost for the year ended December 31 were:
(dollars in thousands) 1995 1994 1993 - ------------------------------------------------------------------------ Service cost - benefits earned during the period $1,595 $2,417 $1,957 Interest cost on accumulated postretirement benefit obligation 1,882 2,266 2,245 Net amortization and deferral 615 1,071 1,071 - ------------------------------------------------------------------------ Net periodic postretirement benefit $4,092 $5,754 $5,273 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------
The funded status of these retiree medical plans at December 31 was:
(dollars in thousands) 1995 1994 - --------------------------------------------------------------------------- Plan assets at fair value $ -- $ -- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Actuarial present value of benefit obligations: Retirees $ 8,748 $ 11,261 Employees eligible to retire 4,771 4,378 Employees not eligible to retire 12,989 14,551 - --------------------------------------------------------------------------- Accumulated postretirement benefit obligation $ 26,508 $ 30,190 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Plan assets less than accumulated postretirement benefit obligation $(26,508) $(30,190) - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Accrued liability at year-end $(17,284) $(12,116) Unrecognized net gain 8,982 1,203 Unrecognized transition amount, net of amortization (18,206) (19,277) - --------------------------------------------------------------------------- Plan assets less than accumulated postretirement benefit obligation $(26,508) $(30,190) - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
For disclosure purposes, the transition asset associated with the retiree medical benefits has been netted against the related accrued liability. Retiree medical benefits expense was computed using a medical cost trend rate of 11% graded to 5.5% in year 2002 and later. For each increase of 1% in the medical cost trend rate the benefit obligation would increase approximately $1,140,000 and annual expense would increase approximately $250,000. The settlement rate used to compute the obligation was 7.00% and 8.50% at December 31, 1995 and 1994, respectively. 14. STOCK AWARD PLANS Long-Term Equity Incentive Plans--In April 1993, the shareholders approved AMP's 1993 Long-Term Equity Incentive Plan (the "AMP Plan"). The AMP Plan, as amended in April 1995, provides that Stock Bonus Units ("SARs"), Incentive Stock Options ("ISOs"), Non-Qualified Stock Options ("NQSOs") and/or restricted stock may be issued to key employees. Awards of up to 10,000,000 shares of the Company's Common Stock may be made under this plan. The M/A-COM Long-Term Incentive Plan (the "M/A-COM Plan"), adopted in 1990, authorized 336,000 shares for the granting of ISOs, NQSOs, outside Directors' options, SARs and restricted stock. The M/A-COM Plan replaced all existing stock award plans but the awards outstanding under such existing plans were not affected. Subsequent to June 30, 1995, no awards will be made under the M/A-COM Plan. Stock Options--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. Generally, options granted under the AMP Plan since inception become exercisable on the third anniversary of the grant date. Currently, no options granted under the AMP Plan are exercisable until July 27, 1996. Options granted under the M/A-COM Plan become exercisable over a four-year period with 138,317 and 532,000 exercisable at December 31, 1995 and 1994, respectively. SARs, with an option price of $20.33, were issued in tandem with 294,000 of the stock options outstanding under the M/A-COM Plan at December 31, 1994. Based on past experience, the expressed intent of the two holders not to elect the SAR option, and the underlying economics to the holders, it was management's opinion that SARs would not be exercised, and therefore, no compensation expense had been recognized through December 31, 1994. However, as a result of the merger with and into AMP on June 30, 1995, the holders elected the SAR option for 196,729 of the tandem shares and exercised 97,271 options. The SAR elections were made primarily to pay personal income taxes resulting from the exercises, as well as the exercise price on the stock options. Compensation expense equal to the difference between the market price at June 30, 1995 and the exercise price amounting to $6,557,600 was recorded as part of the merger expenses. A summary of the status of the Company's stock option plans follows:
ISO's Average NQSO's Average Number Price Number Price of Shares Per Share of Shares Per Share - ----------------------------------------------------------------------------- Outstanding at 12/31/92 -- $ -- 780,321 $ 20.04 - ----------------------------------------------------------------------------- Granted 122,400 30.25 532,080 30.15 Exercised -- -- (92,082) 19.50 Cancelled -- -- (60,262) 20.46 - ----------------------------------------------------------------------------- Outstanding at 12/31/93 122,400 $30.25 1,160,057 $ 24.72 - ----------------------------------------------------------------------------- Granted 263,800 35.71 634,560 35.47 Exercised -- -- (69,264) 19.64 Cancelled (11,600) 34.19 (29,040) 28.84 - ----------------------------------------------------------------------------- Outstanding at 12/31/94 374,600 $33.98 1,696,313 $ 28.87 - ----------------------------------------------------------------------------- Granted 377,300 42.85 633,180 42.63 Exercised -- -- (282,846) 20.44 Cancelled (16,400) 37.87 (242,628) 21.57 - ----------------------------------------------------------------------------- Outstanding at 12/31/95 735,500 $38.44 1,804,019 $ 35.77 - ----------------------------------------------------------------------------- - -----------------------------------------------------------------------------
Stock Bonus Units--Stock Bonus Units awarded under the AMP Plan 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 159,500 shares would be distributed in the years 1996 through 2000 for Stock Bonus Units granted before and outstanding at December 31, 1995, based on the market price at that date. Stock Bonus Units awarded under the M/A-COM Plan of 56,000 were issued and outstanding at December 31, 1994. All of these units converted to shares during 1995 on a one-for-one basis upon the lapsing of certain restrictions. Currently, it is the Company's intention that no future grants of Stock Bonus Units will be made under either the AMP or the M/A-COM Plan. 42 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. Restricted Stock Plan--In April 1995, the Company's shareholders approved an amendment to the AMP Plan which provides for a restricted stock feature. This feature represents a fourth type of award under the AMP Plan which is available to key executives and is performance-based, linking vesting to attainment by the Company of pre-set average annual earnings growth targets. As of December 31, 1995, 87,100 shares have been awarded under the plan. Charges to income before income taxes for current and future distributions under the aforementioned plans for the year ended December 31 totaled $21,272,600 in 1995, $17,998,000 in 1994 and $12,194,000 in 1993. The M/A-COM, Inc. 1990 Restricted Treasury Stock Plan--This Plan reserved 560,000 shares of common stock for granting share allocations as an incentive to officers and key employees of M/A-COM. After receiving an allocation of restricted shares, a participant was awarded specified percentages of such share allocation on subsequent dates based on the achievement of performance targets. Vesting of the restricted shares awarded occurred over a three-year period with all granted share allocations ultimately awarded and vested at September 19, 2000, if the participant was still employed. However, due to the merger, all share allocations and restricted shares were awarded and/or vested on June 30, 1995. Deferred compensation had been recorded as a component of equity when the share allocations were granted based on the market price of the stock at that date, with deferred compensation amortized over the periods to be benefited. Upon the vesting of all share allocations outstanding and restricted stock awards, amounting to 405,160 shares at June 30, 1995, deferred compensation of $3,622,000 was expensed entirely. Deferred compensation amortization was $4,568,000, $1,640,000 and $2,026,000 in 1995, 1994 and 1993, respectively. No future grants will be made under this Plan. 15. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
(dollars in thousands For the 3 Months Ended except per share data) - --------------------------------------------------------------------------- March 31 June 30 September 30 December 31 - --------------------------------------------------------------------------- 1995 - -------------------- Net sales $1,295,769 $1,336,059 $1,297,413 $1,297,985 Gross income 420,912 448,341 413,285 404,973 Net income 105,315 97,518 110,722 113,779 Net income per share 48 cents 45 cents 51 cents 52 cents 1994 - -------------------- Net sales $ 985,243 $1,087,836 $1,105,175 $1,190,813 Gross income 329,556 373,687 378,383 403,256 Net income 80,620 96,396 95,144 101,630 Net income per share 37 cents 44 cents 44 cents 47 cents
The first quarter of 1995 and the year 1994 have been restated to reflect the merger with M/A-COM treated as a pooling-of-interests. Per share data for 1994 has been restated to reflect the 2-for-1 stock split on March 2, 1995. The second quarter of 1995 includes expenses associated with the merger with M/A-COM of $31 million net-of-tax, which reduced net income per share by 15 cents. 16. INCOME TAXES On January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting For Income Taxes" ("SFAS No. 109"). The cumulative effect of adopting SFAS No. 109 was $33,100,000 of income. This amount is reflected in the Consolidated Statement of Income for 1993 as the cumulative effect of a change in accounting principle. Provisions are made for estimated U.S. and foreign income taxes, less available tax credits and deductions, which may be incurred on the remittance of the Company's share of subsidiaries' undistributed earnings not deemed to be indefinitely invested. Taxes have not been provided on international subsidiaries' earnings of approximately $265 million at both December 31, 1995 and 1994. These earnings are deemed to be indefinitely reinvested. 43 Components of income tax expense for the year ended December 31 were:
(dollars in thousands) 1995 1994 1993 - --------------------------------------------------------------------------- U.S. Federal: Taxes currently payable $107,698 $129,236 $ 95,913 Deferred taxes 8,243 (36,760) (21,386) Foreign: Taxes currently payable 105,657 121,414 87,958 Deferred taxes 2,102 (2,968) (2,166) Other: Taxes currently payable 17,082 17,744 21,130 Deferred taxes (382) (3,644) (4,575) - --------------------------------------------------------------------------- $240,400 $225,022 $176,874 - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
At December 31, gross deferred tax assets and liabilities were:
(dollars in thousands) 1995 1994 - --------------------------------------------------------------------------- Gross deferred tax assets: Inventories $ 91,924 $ 92,008 Pensions 23,979 22,357 Bonus plans 16,461 15,794 Medical benefits 13,181 10,402 Accruals 31,301 31,174 NOL carryovers 44,619 32,448 Other 29,005 23,661 - --------------------------------------------------------------------------- $250,470 $227,844 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Gross deferred tax liabilities: Depreciation $ 66,195 $ 69,831 Undistributed earnings of subsidiaries 53,200 21,600 Unrealized investment gains 12,896 15,644 Other 26,904 19,520 - --------------------------------------------------------------------------- $159,195 $126,595 - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
The valuation allowances for deferred tax assets were not significant at December 31, 1995 and 1994. The Company's effective tax rate varied from the U.S. Federal income tax rate for the following reasons:
1995 1994 1993 - --------------------------------------------------------------------------- U.S. Federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 1.6 2.3 2.6 Foreign income taxes 0.6 1.5 2.7 Other items not individually significant (1.2) (1.2) (1.9) - --------------------------------------------------------------------------- Effective tax rate 36.0% 37.6% 38.4% - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
The Company has U.S. Federal net operating loss carryforwards related to the recently acquired M/A-COM and AMP-AKZO businesses amounting to approximatley $100 million at December 31, 1995. The net operating loss carryforwards expire primarily in 2004 to 2010. For the year ended December 31, income before income taxes, after allocation of eliminations, is as follows:
(dollars in thousands) 1995 1994 1993 - --------------------------------------------------------------------------- United States operations $395,126 $285,616 $253,343 International operations 272,608 313,196 207,880 - --------------------------------------------------------------------------- Worldwide income before income taxes $667,734 $598,812 $461,223 - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
Income tax payments were $243,500,000 in 1995, $190,025,000 in 1994, and $176,090,000 in 1993. 44 17. BUSINESS SEGMENTS AMP develops, manufactures and markets electrical, electronic and electro- optic connection products, interconnection systems and connector- intensive assemblies. The Company's customers include original equipment manufacturers and their subcontractors, utilities, government agencies, distributors and value-added resellers. Business is concentrated in one product area--electrical and electronic components. The operations of the Company 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 the year ended December 31 are:
(dollars in thousands) 1995 1994 1993 - ------------------------------------------------------------------------ Net sales to trade customers: United States $2,238,594 $1,955,329 $1,747,294 Europe 1,698,407 1,308,604 1,117,884 Asia/Pacific 1,059,095 892,085 759,822 Americas 231,130 213,049 165,476 - ------------------------------------------------------------------------ Total $5,227,226 $4,369,067 $3,790,476 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Intersegment sales: United States $ 482,962 $ 399,968 $ 346,601 Europe 64,688 49,274 37,105 Asia/Pacific 95,443 73,706 44,767 Americas 11,222 15,301 9,206 Eliminations (654,315) (538,249) (437,679) - ------------------------------------------------------------------------ Total $ -- $ -- $ -- - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Pretax income: United States $ 398,826 $ 300,173 $ 283,731 Europe 192,807 184,666 130,910 Asia/Pacific 74,305 112,302 75,224 Americas 11,096 21,797 2,126 Eliminations (9,300) (20,126) (30,768) - ------------------------------------------------------------------------ Total $ 667,734 $ 598,812 $ 461,223 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Identifiable assets: United States $ 2,676,394 $2,495,379 $2,235,201 Europe 1,135,606 956,351 703,448 Asia/Pacific 1,022,667 905,289 763,843 Americas 121,489 107,874 87,152 Eliminations (451,417) (372,347) (344,022) - ------------------------------------------------------------------------ Total $ 4,504,739 $4,092,546 $3,445,622 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------
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. Availability of remittances to the parent company is subject to exchange controls and other restrictions of the various countries. Foreign currency transaction net losses, after adjustment for income taxes to the extent appropriate, decreased net income by $5,525,000 in 1995, $4,452,000 in 1994, and $2,665,000 in 1993. 45 STATEMENT OF MANAGEMENT RESPONSIBILITY The financial statements and other financial information contained in this Annual Report are the responsibility of 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 judgments 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 INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of AMP Incorporated: We have audited the accompanying consolidated balance sheets of AMP Incorporated (a Pennsylvania Corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As explained in Note 16 to the financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes to conform with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Philadelphia, PA February 16, 1996 Arthur Andersen LLP 46 EX-21 5 LIST OF SUBSIDIARIES AMP Incorporated and subsidiaries EX.21 SUBSIDIARIES AND BRANCHES OF AMP INCORPORATED (all wholly owned and included in consolidated results) AMP Cable Assembly Systems, Inc. Wilmington, Delaware AMP Investments, Inc. Wilmington, Delaware Connectware, Inc. Richardson, Texas (Delaware, U.S.A.) M/A-COM, Inc. Lowell, Massachusetts The Whitaker Corporation Wilmington, Delaware AMP-AKZO Company Greenville, South Carolina (New York, U.S.A.) AMP-AKZO Corporation Newark, Delaware AMP of Canada, Ltd. Toronto, Canada (Delaware, U.S.A.) AMP S. A. Argentina C.I.Y.F. Buenos Aires, Argentina AMP do Brasil Ltda. Sao Paulo, Brazil AMP de Mexico, S.A. Mexico City, D.F. Mexico AMP Amermex S.A. de C.V. Hermosillo, Mexico AMP Osterreich Handelsgesellschaft m.b.H. Vienna, Austria AMP Belgium Brussels, Belgium (Branch of AMP-Holland B.V.) AMP Czech s.r.o. Brno, Czech Republic AMP Danmark Viby, Denmark (Branch of AMP-Holland B.V.) AMP Estonia AS Tallinn, Estonia AMP Finland Oy Helsinki, Finland AMP de France S.A. Paris, France SIMEL S.A. Gevrey-Chambertin, France AMP Export S.A.R.L. Pontoise, France AMP Deutschland G.m.b.H. Frankfurt, Germany Jitex Elektrovertr. G.m.b.H. Wuppertal, Germany AMP of Great Britain Limited London, England SIMEL (UK) Limited Chencester, Glos., England AMP Hungary Manufacturing Co. Ltd. Esztergom, Hungary AMP Hungary Trading Co. Ltd. Budapest, Hungary AMP Ireland Limited Dublin, Ireland AMP Interconnection Products Israel, Ltd. Haifa, Israel AMP Italia S.p.A. Torino, Italy AMP Italia Products S.p.A. San Salvo, Italy AMP-Holland B.V. 's-Hertogenbosch, The Netherlands AMP Norge A/S Oslo, Norway AMP Polska Sp.z.o.o. Warsaw, Poland AMP Portugal, Lda. Lisbon, Portugal AMP Slovenia Trading and Manufacturing Ltd. Ljubljana, Slovenia AMP Espanola, S.A. Barcelona, Spain SIMEL Iberica, S.A. Vizcaya, Spain AMP Products South Africa (Proprietary) Limited Johannesburg, South Africa AMP Svenska AB Stockholm, Sweden AMP (Schweiz) A.G. Steinach, Switzerland AMP (Schweiz) Produktions A.G. Steinach, Switzerland Decolletage S.A. St.-Maurice St.-Maurice, Switzerland AMP Shunde Connector, Ltd. Shunde, People's Republic of China Australian AMP Pty. Ltd. Sydney, Australia AMP Products Pacific Ltd. Hong Kong AMP India Private Limited Bangalore, India AMP Tools (India) Pvt. Ltd. Cochin, India AMP (Japan), Ltd. Tokyo, Japan AMP Technology Japan Ltd. Tokyo, Japan Carroll Touch International, Ltd. Tokyo, Japan (Delaware, U.S.A.) Businessland Japan Company, Ltd. Tokyo, Japan AMP Korea Limited Seoul, South Korea AMP Manufacturing Korea, Ltd. Seoul, South Korea AMP Products (Malaysia) Sdn. Bhd. Kuala Lumpur, Malaysia New Zealand AMP Ltd. Auckland, New Zealand AMP Philippines, Inc. Manila, Philippines AMP Singapore Pte. Ltd. Singapore AMP Manufacturing Singapore Pte., Ltd. Singapore AMP Taiwan B.V. Taipei, Taiwan (The Netherlands) AMP Manufacturing Taiwan, Ltd. Taipei, Taiwan AMP (Thailand) Limited Bangkok, Thailand AMP Elektrik-Elektronik Baglanti Sistemleri Ticaret Limited Sirketi Istanbul, Turkey JOINT VENTURES AMP Shanghai Ltd. Shanghai, Peoples Republic of China Building Technology Associates Wilmington, 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. EX-23 6 CONSENT OF 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 reports dated February 16, 1996 included in or 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, 33-65048 and 33-54277. /s/ Arthur Andersen LLP ------------------------ Arthur Andersen LLP Philadelphia, PA March 26, 1996 EX-27 7 FDS FOR 12-MOS 1995 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 1995 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1995 DEC-31-1995 212,538 58,197 1,011,460 0 762,803 2,277,908 4,352,026 2,413,760 4,504,739 1,266,093 0 79,580 0 0 2,688,448 4,504,739 5,227,226 5,227,226 3,539,715 3,539,715 0 0 36,847 667,734 240,400 427,334 0 0 0 427,334 1.96 1.96
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