-----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, L8wRwqi/H35RgAXAnp3bHeueIt1dzbQDjDxuhu0GNCpNZxRfVArk8qJ5KPe1keUZ W6QQ+gtv90MqfLYnVaaPzQ== 0000006164-97-000018.txt : 19970515 0000006164-97-000018.hdr.sgml : 19970515 ACCESSION NUMBER: 0000006164-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMP INC CENTRAL INDEX KEY: 0000006164 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 230332575 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04235 FILM NUMBER: 97604598 BUSINESS ADDRESS: STREET 1: P O 3608 CITY: HARRISBURG 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-Q 1 1ST QUARTER 1997 10-Q TEXT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (mark one) [XX] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1997 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 Charter) ******************************** Employer Identification No. 23-0332575 Harrisburg, Pennsylvania 17105-3608 (Address of Principal Executive Offices) (717) 564-0100 (Registrant's Telephone Number, Including Area Code) ******************************** 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 [ ]. The number of shares of AMP Common Stock (without Par Value) outstanding at May 12, 1997 was 219,634,530 (excluding shares held in the treasury of the Corporation all of which are issued but not outstanding and are not entitled to vote). Includes an Exhibit Index. AMP Incorporated & Subsidiaries PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Consolidated Statements of Income and the Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996, and the Consolidated Balance Sheets at March 31, 1997 and December 31, 1996, are presented below. See the notes to these condensed consolidated financial statements at the end thereof. AMP Incorporated & Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (dollars in thousands, except per share data) For the Three Months Ended March 31, 1997 1996 ---------- ----------- Net Sales .................... $1,392,867 $ 1,362,975 Cost of Sales ................ 990,170 932,585 ---------- ----------- Gross income ............. 402,697 430,390 Selling, General and Administrative Expenses ..... 242,028 245,429 ---------- ----------- Income from operations ... 160,669 184,961 Interest Expense ............. (8,098) (7,982) Other Income (Deductions), net (2,457) 3,561 ---------- ----------- Income before income taxes 150,114 180,540 Income Taxes ................. 48,786 64,092 ---------- ----------- Net Income Before Cumulative.. Effect of Accounting Changes $ 101,328 $ 116,448 Cumulative Effect of Accounting Changes (see Note 2)...... 15,450 Net Income.................... $ 116,778 $ 116,448 =========== =========== PER SHARE DATA Net Income Before Cumulative.. Effect of Accounting Changes 46 cents 53 cents Cumulative Effect of Accounting Changes (see Note 2)...... 7 cents Net Income.................... 53 cents 53 cents Cash Dividends................ 26 cents 25 cents Weighted average number of shares................... 219,931,654 218,762,121 =========== =========== AMP Incorporated & Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed and Unaudited) (dollars in thousands) For the Three Months Ended March 31, 1997 1996 --------- --------- Cash and Cash Equivalents at January 1 ............... $223,779 $212,538 Operating Activities: Net Income ..................................... 116,778 116,448 Noncash adjustments - Depreciation and amortization ............... 109,443 98,303 Cumulative effect of change in accounting for inventory (see Note 2) (22,889) -- Changes in operating assets and liabilities . (32,372) (87,714) Other, net ..................................... (5,078) 24,517 ------- --------- Cash provided by operating activities ....... 165,882 151,554 ======= ========= Investing Activities: Additions to property, plant and equipment ..... (120,956) (136,442) Purchase of subsidiary - Net of cash and cash equivalents acquired ... -- (2,000) Other, net ..................................... 16,059 (27,921) -------- --------- Cash used for investing activities ............. (104,897) (166,363) -------- --------- Financing Activities: Changes in short-term debt ..................... (13,136) 51,696 Additions to long-term debt .................... 19,071 1,312 Reductions of long-term debt ................... (9,302) (11,491) Purchases of treasury stock .................... -- (65) Dividends paid ................................. (57,039) (54,409) Other, net ..................................... -- 108 ------- --------- Cash used for financing activities .......... (60,406) (12,849) ------- --------- Effect of Exchange Rate Changes on Cash .............. (6,904) 930 ------- --------- Cash and Cash Equivalents at March 31 ................ 217,454 185,810 ======= ========= Changes in Operating Assets and Liabilities: Receivables .......................................... (71,560) (72,878) Inventories .......................................... (1,829) (41,373) Other current assets ................................. 6,729 (23,326) Payables, trade and other ............................ (13,180) (3,143) Accrued payrolls and benefits ........................ 22,578 35,361 Other accrued liabilities ............................ 24,890 17,645 ------- --------- (32,372) (87,714) ======= ========= Interest paid during the periods was approximately equal to amounts charged to expense. AMP Incorporated & Subsidiaries CONSOLIDATED BALANCE SHEETS (Condensed, Unaudited) (dollars in thousands) March 31, December 31, 1997 1996 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents ......... $ 217,454 $ 223,779 Securities available for sale ..... 21,798 27,971 Receivables ....................... 1,044,263 1,025,850 Inventories........................ 789,414 786,623 Other current assets............... 289,071 291,957 ---------- ---------- Total current assets............. 2,362,000 2,356,180 ---------- ---------- Property, Plant and Equipment ....... 4,619,122 4,690,819 Less - Accumulated depreciation ... 2,640,660 2,663,211 ---------- ---------- Property, plant and equipment, net .......................... 1,978,462 2,027,608 ---------- ---------- Investments and Other Assets ........ 312,249 301,917 ---------- ---------- TOTAL ASSETS ........................ $4,652,711 $4,685,705 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term debt ................... $ 385,342 $ 419,411 Payables, trade and other ......... 427,231 463,261 Accrued liabilities ............... 589,279 562,223 ---------- ---------- Total current liabilities ....... 1,401,852 1,444,895 Long-Term Debt ...................... 180,376 181,599 Other Liabilities and Deferred Credits .................. 279,724 269,313 ---------- ---------- Total liabilities ............... 1,861,952 1,895,807 Shareholders' Equity ................ 2,790,759 2,789,898 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................. $4,652,711 $4,685,705 ========== ========== AMP Incorporated & Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (March 31, 1997, Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report and Form 10-K. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. 2. ACCOUNTING CHANGES During the first quarter of 1997, the Company made two changes to the accounting practices used to develop its inventory standard costs. The first change was made to standardize globally the definition of capacity used to determine volume assumptions for overhead rates. The new definition more properly reflects the Company's objectives for plant and equipment utilization and provides for consistent measurements of AMP facilities. In an effort to provide increased focus on engineering efforts for both product development and manufacturing cost reductions, the Company also changed its inventory costing methodology to include manufacturing engineering costs in the inventory standard costs. Previously these costs were expensed in the period incurred and included in the cost of sales line on the Consolidated Statement of Income. The net benefit of the preceding changes in accounting for inventory of $15.5 million or $.07 per share was presented as a cumulative effect of accounting changes on the Consolidated Statement of Income for the three months ended March 31, 1997. In February of 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share". This statement changes the required methods used to calculate earnings per share data, harmonizing U.S. GAAP requirements with that of International Accounting Standard No. 33. The major change from the previous calculation is the disclosure of basic EPS, which is computed by dividing reported earnings by weighted average shares outstanding (without any adjustments for common stock equivalents), versus the current primary EPS calculation required by the superseded APB. Opinion No. 15. Fully diluted EPS, now called diluted EPS, is still required. This statement must be adopted by the Company in the fourth quarter of 1997 with restatement at that time of all prior periods presented. The effect on the Company's EPS as a result of this rule change is not expected to be significant. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First quarter results are closely in line with current analyst expectations. Although negatively impacted by currency changes, sales rose 2% to $1.39 billion from $1.36 billion in the year-earlier quarter, and were down only slightly from the record $1.40 billion in the fourth quarter of 1996. The strengthening of the U.S. dollar reduced sales $57 million from the year-earlier quarter and $40 million from the fourth quarter. Exchange rates staying at current levels the rest of this year would reduce second quarter sales by about $45 million and the full year by $190 million. Earnings were 53 cents per share, which includes 7 cents per share net one-time benefit from two accounting changes on inventory costing methodology that reflect our greater emphasis on increasing engineering productivity and capacity utilization. These changes are discussed in Note 2 to the condensed consolidated financial statements. The 53 cents per share, including the one-time 7 cents benefit noted above, was flat with the 53 cents per share in the year-earlier period. The 46 cents per share net income before the cummulative effect of accounting changes was up 15% from the 40 cents per share in the fourth quarter of 1996 - which was before a 58 cents per share ($195 million pre-tax) write-off for restructuring and other one-time charges that resulted in an 18 cents per share loss in the fourth quarter. Profit margins improved from their fourth quarter low. The effective tax rate declined from 34.5% for all of 1996 to 32.5% in the first quarter, which is the approximate rate expected for the entire year. Bookings were $1.43 billion, an increase from $1.37 billion in the fourth quarter 1996. Despite a $20 million negative currency effect, the order backlog increased by $38 million during the quarter to $1 billion. Sales in the U.S. (45% of the worldwide total) were up 5% over the year-earlier quarter with strongest growth in the computer and networking/premises wiring markets. Sales in all of the Americas were up 6%, with sales outside the U.S. up 16% and strongest growth in Argentina and Mexico. European sales (31% of the total) were up 2% in local currencies and down 6% in U.S. dollars. Sales growth was not as strong as had been forecasted because of less-than-expected economic growth and generally flat markets - particularly automotive. Best geographic growth was in Spain, Germany, and Northern Europe; best sales growth by markets was computers, communications, and consumer goods. Asia/Pacific sales (19% of the total) were up 17% in local currencies, better than expected, and up 8% in U.S. dollars. Strongest markets were communications equipment, computers, and consumer electronics. Sales growth improved significantly in Japan, with continued good growth throughout the region. Strongest growth on a global basis was in the consumer goods, computer, and communications markets. The pickup in connector demand from the personal computer and cellular phone markets that occurred in the fourth quarter has continued. The rate of connector price erosion in these markets and in our business generally is similar to last year. Capital expenditures during the first quarter were $121 million, down from $136 million in the year-earlier quarter. Total capital expenditures for 1997 are expected to be approximately $550 million, down from $592 million in 1996 and $713 million in 1995. Our restructuring actions are on schedule. We expect virtually all restructuring actions to be completed by the end of the third quarter. OUTLOOK - ------- We are encouraged that operating earnings have begun to recover. We expect second quarter and second half sales and operating earnings to grow over the first quarter. As previously indicated, we continue to expect our restructuring actions to result in savings at about a $50 million annualized rate when fully implemented later this year. We continue to pursue the same basic growth strategy - maintain connector leadership, diversify into related product/market sectors, and expand globally. We are reshaping AMP through restructuring, reorganization, diversification, and geographic expansion into a company that will be far better at pursuing the excellent opportunities we see ahead. We now have four global market-oriented business divisions that work with our product/technology-oriented business divisions and our traditional geographic organization. We expect to announce additional divisions later. We are continuing our worldwide move to 24-hour, 7-day week manufacturing operations to more fully utilize our facilities. We are managing facilities expansion, procurement, logistics, and other key functions on a more centralized, globally coordinated basis. We have increased significantly the proportion of new products in current sales. AMP is a company in transition to an organization that will have global focus on major markets with a far broader product, market and geographic base that will enable it to more fully participate in the pervasive growth of electrical and electronic equipment throughout the world. ORGANIZATIONAL CHANGES - ---------------------- Philippe Lemaitre, formerly an executive vice president and general manager at TRW, joined AMP in March in the newly created position of Corporate Vice President and Chief Technology Officer. He is succeeding Howard Peiffer, Vice President Global Technology, who will retire at the end of this year. Three long-time divisional vice presidents were elected Corporate Vice Presidents: Rudolf Gassner - President, AMP Global Personal Computer Division; Juergen W. Gromer - President, AMP Global Automotive Division; and Nazario Proietto - President, AMP Global Power and Utilities Division. Two new divisional vice presidents were appointed: Richard H. Kaleida - Global Procurement; and Linn S. Lightner - Global Engineering Manufacturing Assurance. Each will continue in his present position. Messrs. Kaleida's and Lightner's years of service are 16 and 34 respectively. Dennis Horowitz, who held the position of Corporate Vice President and President, Americas, tendered his resignation on April 25, 1997. James E. Marley, Chairman, assumed responsibility for management of the Americas region. DIVIDEND ACTION - --------------- On April 23, 1997, the Board of Directors declared a regular quarterly dividend of 26 cents per share, payable June 2, 1997 to shareholders of record May 5, 1997. The current indicated annual rate of $1.04 per share is up from $1.00 in 1996 and 92 cents in 1995 - and is the 44th consecutive annual increase. CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" - ------------------------------------------------------- Statements in this Report on Form 10-Q that are not strictly historical are "forward-looking" statements which should be considered as subject to the many uncertainties that exist in the company's operations and business environment. These uncertainties, which include economic and currency conditions, market demand and pricing, competitive and cost factors, and the like, are set forth in the AMP Report on Form 10-K for the year ended December 31, 1996 filed with the Securities and Exchange Commission on or about March 27, 1997. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS The Annual Meeting of Shareholders of AMP Incorporated was held on Wednesday, April 23, 1997 beginning at 10:30 a.m., local time, at the AMP Global Executive Leadership Center, 441 South Fortieth Street, Harrisburg, Pennsylvania. As of the record date (March 4, 1997) for the Annual Meeting, 219,613,121 shares of Common Stock were outstanding and entitled to vote. 190,426,273 shares, representing over 86% of the outstanding Common Stock eligible to vote, were represented at the Annual Meeting either in person or by proxy. * All of the directors of the Company, twelve in number, were elected at the Annual Meeting, each by an affirmative vote of at least 98.9% of the votes cast. The results of the vote tabulation for each director are as follows: Director Votes For Votes Withheld -------- --------- -------------- Dexter F. Baker ........ 188,379,706 2,046,567 Ralph D. DeNunzio ...... 188,422,051 2,004,222 Barbara H. Franklin .... 188,473,204 1,953,069 Joseph M. Hixon III .... 188,418,182 2,008,091 William J. Hudson, Jr... 188,439,848 1,986,425 Joseph M. Magliochetti.. 188,319,843 2,106,430 James E. Marley ........ 188,435,266 1,991,007 Harold A. McInnes ...... 188,356,185 2,070,088 Jerome J. Meyer ........ 188,493,831 1,932,442 John C. Morley ......... 188,424,370 2,001,903 Paul G. Schloemer ...... 188,383,158 2,043,115 Takeo Shiina ........... 188,458,199 1,968,074 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits -- Exhibit Number Description ------- ----------- 18 - Letter re. Change in Accounting Principles 27 - Financial Data Schedule (B) Reports on Form 8-K -- A Current Report on Form 8-K was filed by the Company on January 8, 1997. In Item 5 of the Report on Form 8-K the Company disclosed details about the Company's streamlining plans first announced in a December 31, 1996 press release and reported in a Report on Form 8-K dated December 31, 1996 and filed on January 2, 1997. The Company's streamlining efforts focus on discontinuing underperforming product lines and realigning manufacturing operations, primarily in the Company's Americas operations. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 14, 1997 AMP INCORPORATED (Registrant) By: /s/ W. J. Hudson __________________________________ William J. Hudson Chief Executive Officer and President By: /s/ William S. Urkiel __________________________________ William S. Urkiel Controller ** EXHIBIT INDEX ------------- Exhibit Number Description ------- ----------- 18 - Letter re. Change in Accounting Principles 27 - Financial Data Schedule EX-18 2 LETTER RE. CHANGE IN ACCOUNTING PRICIPLES AMP Incorporated May 12, 1997 470 Friendship Road Harrisburg, Pennsylvania 17111 Re: Form 10-Q Report for the quarter ended March 31, 1997. Gentlemen: This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice. We have been informed that, as of January 1, 1997, the Company changed its inventory costing methodology to include manufacturing engineering costs. Previously these costs were expensed by the Company as they were incurred. In addition, certain capacity assumptions used to determine inventory standard cost were modified. According to the management of the Company, these changes were made to more accurately state the value of inventory and to more properly reflect the Company's objectives for plant and equipment utilization. A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner. We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management. We have not audited the application of this change to the financial statements of any period subsequent to December 31, 1996. Further, we have not examined and do not express any opinion with respect to your financial statements for the three months ended March 31, 1997. Very truly yours, /s/ Arthur Andersen LLP EX-27 3 FDS FOR 3-MOS 1997 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 1997 FIRST QUARTER 10Q AND IS QUALIFIED BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 217,454 21,798 1,044,263 0 789,414 2,362,000 4,619,122 2,640,660 4,652,711 1,401,852 0 81,238 0 0 2,709,521 4,652,711 1,392,867 1,392,867 990,170 990,170 0 0 8,098 150,114 48,786 101,328 0 0 15,450 116,778 .53 .53
-----END PRIVACY-ENHANCED MESSAGE-----